We recently wrote about FCC issues that will be facing broadcasters in this new year. While broadcasters will no doubt be busy keeping track of what the FCC is up to, they also need to have their eyes on other government agencies, as there are numerous issues that may come from Congress and the other regulatory agencies in DC that could affect their bottom lines. So, with a watchful eye on the FCC for the issues we wrote about earlier in the month, what other issues should broadcasters be watching for from all of the other regulatory power centers in DC?
While this is an election year, and that makes many big pieces of legislation unlikely, the discussions that occur in 2014 on these issues may pave the way for action late in the year, or in 2015 after the new Congress is in place and before the Presidential election in 2016 commands everyone’s attention. Here are some of the issues of interest to broadcasters likely to be on the DC agenda in 2014:
Advertising tax reform: There is perhaps no issue so squarely aimed at the broadcaster’s bottom line than then potential for tax reform – specifically proposals to limit the deductibility of advertising. Some of the reform proposals already floated in Congress include proposals that would make only a portion of advertising buys deductible by the advertiser, with the rest to be amortized over time. Many broadcasters feel that some advertisers will have reduced advertising budgets if some of those budgets cannot be written off as deductible expenses in the year in which they are spent. Some economic theorists suggest that these fears are overblown, as businesses still need to get the word out about what they are doing. But, depending on how the law is written, other forms of promotion (and there are so many that now compete with traditional media), could siphon off more of broadcasting dollars. Perhaps one of the best advantages for broadcasters and advertisers in fighting such a proposal is that it is part of bigger tax reform legislation, and if there is one area where legislation could be most affected by the upcoming election, changing the tax code would be it. But expect that this will be on the agenda for years to come.
Communications Act Reform: In the past few months, there has been more and more discussion of comprehensive reform of the Communications Act. In fact, the leaders of the House of Representatives have asked for comments on some general reform issues. So far, the specific reform issues on the table only discuss procedural reforms, like allowing for more private discussions between Commissioners (not requiring that all their discussion take place at open meetings), and imposing a shot clock on many Commission decisions so that matters don’t linger unresolved. But any effort to reform the Act is likely to get caught up in other substantive issues. For instance, the Court of Appeals decision on “net neutrality” last week has already triggered calls from statutory reform from some quarters. These are big issues, so expect that Congress will only start on these issues this year, and that this might be a big issue that will evolve over the next few years.
Retransmission Consent: We hit this issue in our FCC review, and there is the potential that this may also be a Congressional issue, or at least one that is discussed in the Halls of Congress. Whenever there is a retransmission consent fight, Congress hears of it, and certain Congressmen have expressed concerns about constituents losing access to certain of their TV channel choices (though other Congressional representatives have expressed sympathy with the TV broadcasters position that this is a matter for private negotiation in which Congress should not be involved). Some MVPD representatives want reform, so expect the debate to continue this year.
Aereo: We’ve written about the Aereo case, and the recent decision of the Supreme Court to hear the appeal of the Second Circuit Court of Appeals order finding the service to be legal. The Supreme Court’s decision will help to clarify whether the service needs to get broadcaster approval (and to pay compensation) for the retransmission of a TV station’s signal on the Internet. If the broadcasters win, then the threat from Aereo and copycat services will end. If Aereo wins, expect to see legislation to undo the effects of the decision (just as was done when cable was found to not be a public performance of a TV signal back in the 1970s).
Music Royalties: As we recently wrote, the Copyright Royalty Board has begun the proceeding to set royalty rates for the public performance of sound recordings by webcasters – including broadcasters who simulcast their on-air programming over the Internet. While parties have time to try to reach voluntary deals and negotiate royalties, if no deals are reached, we can expect that the parties will put forward their royalty proposals in the Fall, and there will be litigation to decide those royalties in 2015 for 2016-2020.
In addition, broadcasters will continue to press their antitrust lawsuits against SESAC – with radio broadcasters having received an interesting preliminary ruling just before the holidays – finding that their antitrust suit had substantial merit, but declining to enjoin any SESAC rate increases, as such increases do not represent “irreparable harm” – a requirement for an injunction – as SESAC can always give refunds if, after a trial, they are determined to have acted improperly.
In yet another proceeding, in two cases at the end of the year involving Pandora, courts in BMI and ASCAP ratemaking cases ruled on the ability of major publishers to withdraw their catalog from these performing rights organizations for purposes of directly licensing digital services. We’ve written about the issues that withdrawal of publishers from the PROs could raise, here and here. The rules set by the Pandora cases were not models of clarity, and will likely be appealed, but look for resolution of these issues to potentially impact digital music royalties in the future.
Copyright Reform: We’ve written about the Copyright Green Paper and its attempt to put forward issues that should be considered in copyright reform legislation. Congress itself has also held hearings, looking at many issues including the immunity from liability of companies that allow user-generated content to be posted on their sites, and a reexamination of the statutory licenses used in various copyright contexts. The Chair of the House Judiciary Committee has also talked about broader reform on music copyrights. Watch for more talk on these issues this year, but probably no resolution.
Broadcast Performance Royalty: As part of both the Green Paper and the discussion of copyright reform, one issue that may come up is the potential for a sound recording performance royalty on broadcasters for their over-the-air broadcasts. We wrote about the bill introduced in 2013 to adopt the broadcast performance royalty. Its sponsor is no longer in Congress so this particular bill does not seem likely to move far in Congress. But watch for the issue to be brought up again, in a serious way, in 2015.
Advertising Issues: Senator Rockefeller, who has been very vocal on many broadcast issues, is to retire at the end of this Congressional term. He has been an advocate for laws addressing violent programming, limits on advertising unhealthy food and other advertising rules for broadcasters. Given that it is his last chance, some of these issues may arise again.
Advertising for e-cigarettes may also be in for regulation this year, as the FDA has been considering rules. Some think that these rules could limit what is beginning to be a source of revenue for broadcasters.
Conclusion: Every year brings new issues that broadcasters may have to worry about. We’ve discussed a few of those above – but you can bet that there are many that we haven’t listed. So pay attention to the issues as they arise, and be prepared to discuss those that may cause you problems with your Congressional representatives. Be ready!