Payola and Sponsorship Identification

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The MusicFirst coalition last week asked that the FCC investigate broadcast stations that allegedly cut back on playing the music of artists who back a broadcast performance royalty, and also those stations who have run spots on the air opposing the performance royalty without giving the supporters of the royalty an opportunity to respond.  While the NAB and many other observers have suggested that the filing is simply wrong on its facts, pointing for instance to the current chart-topping position of the Black Eyed Peas whose lead singer has been a vocal supporter of the royalty, it seems to me that there is an even more fundamental issue at stake here – the First Amendment rights of broadcasters.  What the petition is really saying is that the government should impose a requirement on broadcasters that they not speak out on an issue of fundamental importance to their industry.  The petition seems to argue that the rights of performers (and record labels) to seek money from broadcasters is of such importance that the First Amendment rights of broadcasters to speak out against that royalty should be abridged.

While the MusicFirst petition claims that it neither seeks to abridge the First Amendment rights of broadcasters nor to bring back the Fairness Doctrine, it is hard credit that claim.  After all, the petition goes directly to the heart of the broadcasters ability to speak out on the topic, and seems to want to mandate that broadcasters present the opposing side of the issue, the very purpose of the Fairness Doctrine.  As we’ve written, the Fairness Doctrine was abolished as an unconstitutional abridgment on the broadcaster’s First Amendment rights 20 years ago.  As an outgrowth of this decision, FCC and Court decisions concluded that broadcasters have the right to editorialize on controversial issues, free of any obligation to present opposing viewpoints.  What is it that makes this case different?Continue Reading MusicFirst’s Complaint to the FCC: The First Amendment and the Performance Royalty

A recent stir was created when a Midwestern television company was reported to have signed a contract with a state government agency, promising to market the agency and its programs throughout the state.  This promotion was to include a segment in the company’s televised news promoting the effects of the work of the agency.  Questions were immediately raised about whether this was prohibited by FCC rules.  But, when the news pieces ran, the company was very careful to state after these segments that they were sponsored by the station and the state agency.  As the FCC has no rules about what can be included in the "news" (and probably could not consistent with the First Amendment), the only real issue was one of sponsorship identification.  As the licensee did here, if the sponsor of the story is identified, making clear to the public who was attempting to persuade them on the issue addressed, there should be no FCC issues.

This is different from the issues that have arisen previously at the FCC, where there have been fines levied against television stations and cable systems for airing programming that was sponsored, but for which no sponsorship identification was provided (see our posts here and here).  This includes the video news release or VNR issues, where the FCC has fined stations for using news actualities provided by groups with a financial interest in the issue that was being addressed, but without identifying the fact that the material was provided by the interested parties.  Where a program addresses a controversial issue of public importance, the disclosure rules are more strict, requiring that the station not only disclose that it received money to air a story – but to also disclose anything that it got from the interested party – including tapes or scripts.Continue Reading Selling Stories In a Broadcast Station’s News Programs – Remember the Sponsorship Identification

Come the New Year, we all engage in speculation about what’s ahead in our chosen fields, so it’s time for us to look into our crystal ball to try to discern what Washington may have in store for broadcasters in 2009. With each new year, a new set of regulatory issues face the broadcaster from the powers-that-be in Washington. But this year, with a new Presidential administration, new chairs of the Congressional committees that regulate broadcasters, and with a new FCC on the way, the potential regulatory challenges may cause the broadcaster to look at the new year with more trepidation than usual. In a year when the digital television transition finally becomes a reality, and with a troubled economy and no election or Olympic dollars to ease the downturn, who wants to deal with new regulatory obstacles? Yet, there are potential changes that could affect virtually all phases of the broadcast operations for both radio and television stations – technical, programming, sales, and even the use of music – all of which may have a direct impact on a station’s bottom line that can’t be ignored. 

With the digital conversion, one would think that television broadcasters have all the technical issues that they need for 2009. But the FCC’s recent adoption of its “White Spaces” order, authorizing the operation of unlicensed wireless devices on the TV channels, insures that there will be other issues to watch. The White Spaces decision will likely be appealed. While the appeal is going on, the FCC will have to work on the details of the order’s implementation, including approving operators of the database that is supposed to list all the stations that the new wireless devices will have to protect, as well as “type accepting” the devices themselves, essentially certifying that the devices can do what their backers claim – knowing where they are through the use of geolocation technology, “sniffing” out signals to protect, and communicating with the database to avoid interference with local television, land mobile radio, and wireless microphone signals.Continue Reading Gazing Into the Crystal Ball – The Outlook for Broadcast Regulation in 2009

According to numerous press articles, including this one in Multichannel News, the FCC has begun an investigation into several commentators on TV news programs to see if they were receiving payments or other consideration for presenting a particular viewpoint on military issues on which they were interviewed.  According to press reports, the FCC has…

In a recent article in Silicon Valley Insider, TargetSpot’s CEO, Doug Perlson, suggests that the financial savior of Internet Radio might be payola – taking money from record companies or artists to play their songs.  Putting aside any issues of the financial benefits of such a plan, and the creative and aesthetic issues that pay for play may raise, and since this is a blog written by lawyers, we’ll deal with the legal implications.  And as lawyers, we’re forced to play the spoilsport.  As set forth below, such a scheme can be done legally (just as it could be on terrestrial radio with the proper disclosures).  But, while there has been no legal enforcement of such activities, careful Internet radio operators would best be advised to be careful about just taking the money and playing songs, but instead should make some disclosure of the nature of the service that they are providing.

The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a "radio" service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.Continue Reading Payola on Internet Radio – Legal?

The FCC’s Notice of Inquiry and Notice of Proposed Rulemaking on Sponsorship Identification issues (which we summarized in our firm’s advisory and about which we wrote here), which deals with a host of issues including embedded advertising and product placement, was published in the Federal Register late last week, starting the clock on…

Last week, the FCC commenced its long anticipated proceeding to reexamine its sponsorship identification rules. This proceeding has been rumored for over six months, having appeared on an agenda for a Commission open meeting in December, only to be pulled from the agenda days before it was to have been voted on. The Commission has initiated this proceeding, to a great degree, at the urging of Commissioner Adelstein who has been vocal in his concerns that the broadcast and advertising industries, in adopting advertising techniques to respond to technological and marketplace changes, has been exposing the public to commercial messages without their knowledge.  One of the principal practices of concern to the Commission, though not the only one, is embedded advertising (as the Commission refers to product placement and product integration into the dialog and/or plot of a program). While many of the trade press reports have focused on embedded advertising, this proceeding is wide-ranging and important to the broadcast, cable and advertising industries. Comments on the proceeding will be due 60 days after its publication in the Federal Register, with replies 30 days later.   We have prepared an Advisory, summarizing the issues raised by the Commission in this proceeding, which can be found here.

According to trade press reports, this proceeding was initially planned as a Notice of Proposed Rulemaking (NPRM), which would have proposed rules which, after public comment, could have been immediately adopted. After significant lobbying from the advertising community, the Notice was released in two parts. First, there is a Notice of Inquiry (NOI), asking a series of questions about the current state of advertising on broadcast and cable outlets, and asking how the Commission should amend its rules to deal with new advertising techniques. Second, the Commission’s announcement contains an NPRM with respect to certain specific items, including proposing to clarify the type of sponsorship identification necessary in television advertising, the extension of the sponsorship identification rules beyond local origination cablecasting to cable network programming, and clarification of the rules with respect to live-read radio commercials. The specifics of the NOI and the NPRM are set forth in our Advisory. Continue Reading FCC Begins Investigation of Embedded Advertising and Sponsorship Identification

The FCC today adopted a Report on its Localism proceeding, accessing the evidence that it gathered in its three year long investigation of whether broadcasters were adequately serving the interests of their local communities.  We wrote long ago about some of the specific issues that the FCC was reviewing in this proceeding – everything from the public interest programming of broadcasters to their music selection process to their response to local emergencies.  Among the report’s conclusions were findings that not all broadcasters were adequately assessing the needs of their communities or serving the public interest through coverage of local news and other local events.  Because of these perceived weaknesses in broadcaster performance, the FCC adopted a Notice of Proposed Rulemaking, much as we expected in our post here, tentatively concluding that re-regulation of the broadcast industry was necessary, bringing back some form of ascertainment and some specific quantifiable requirements for public interest programming. 

As in the case of the Multiple Ownership order adopted today (summarized here), the full text of the FCC Report and the Notice of Proposed Rulemaking has not been released.  Instead, only a short Public Notice, and the statements of the Commissioners at the meeting, are available to determine what was done.  From these notices, it appears that three tentative conclusions were reached.  They are, as follows:

  • More Low Power TV stations should be able to get Class A status, meaning that they are no longer a secondary service that can be "bumped" by a new full power television station or by changes to the facilities of a full-power station
  • Each licensee should be required to establish a community advisory board made up of specific groups of community leaders, with whom the station would meet on a regular basis to assess the needs of the community
  • The FCC’s license renewal standards should contain specific quantitative requirements for public service programming

While these may sound like noble decisions, there are many details and much history that the Commission needs to address before these proposals become final FCC rules.Continue Reading FCC Adopts Localism Report and Starts Rulemaking to Consider Adopting New Public Interest Obligations for Broadcasters

The FCC has released its agenda for its December 18 meeting – and it promises to be one of the most important,and potentially most contentious, in recent memory.  On the agenda is the Commission’s long awaited decision on the Chairman’s broadcast multiple ownership plan relaxing broadcast-newspaper cross-ownership rules (see our summary here).  Also, the FCC will consider a Further Notice of Proposed Rulemaking on Localism issues (pending issues summarized here) following the conclusion of its nationwide hearings on the topic, as well as an Order and Further Notice of Proposed Rulemaking on initiatives to encourage broadcast ownership by minorities and other new entrants (summary here).  For cable companies, the Commission has scheduled a proposed order on national ownership limits.  And, in addition to all these issues on ownership matters, the FCC will also consider revising its sponsorship identification rules to determine if new rules need to be adopted to cover "embedded advertising", i.e. product placement in broadcast programs.  All told, these rules could result in fundamental changes in the media landscape.

The broadcast ownership items, dealing with broadcast-newspaper cross-ownership, localism and diversity initiatives, all grow out of the Commission’s attempts to change the broadcast ownership rules in 2003.  That attempt was largely rejected by the Third Circuit Court of Appeals, which remanded most of the rules back to the FCC for further consideration, including considerations about their impact on minority ownership.  The localism proceeding was also an outgrowth of that proceeding, started as an attempt by the Commission to deal with consolidation critics who felt that the public had been shut out of the process of determining the rules in 2003, and claiming that big media was neglecting the needs and interests of local audiences.Continue Reading FCC Meeting Agenda for December 18 – Potentially One of the Most Important in Recent Memory – Multiple Ownership, Localism, Minority Ownership, Product Placement and Cable TV National Ownership Caps

The FCC has taken the unusual step of issuing a Notice of Apparent Liability, i.e. an announcement that it has fined a broadcaster, against two TV station owners for failing to provide a sponsorship identification for political material sponsored by another Federal agency–the Department of Education ("DOE").  The proposed fines for these two broadcasters totaled over $70,000.  In connection with the same broadcasts, the Commission also issued a citation against the producer of the programs for failing to include a disclosure of the sponsor of the programs, warning that company that it would be fined if it were to engage in such activity in the future, even though the entity was not an FCC licensee.  These actions demonstrate the concern of the Commission over programs that attempt to influence the public, particularly those dealing with controversial issues of public importance, where those who have paid to do the convincing are not evident to the public.

These cases all stem from programs associated with conservative political commentator Armstrong Williams, who was paid by DOE to promote the controversial No Child Left Behind Act ("NCLBA") supported by the current administration.  He did so on two television programs:  his own show, titled "The Right Side with Armstrong Williams" and on "America’s Black Forum," where he appeared as a guest.  These shows were aired by various television stations without any sponsorship identification to indicate that Williams was paid by DOE to promote NCLBA on the air.

In one case, the television broadcaster received $100 per broadcast for airing Right Side, but failed to reveal that it had received any consideration.  The broadcaster claimed that the consideration received was "nominal," which is generally an exception to the sponsorship ID requirement.  However, the FCC noted that the exception for "nominal" consideration applies only to "service or property" and not to "money," holding that receipt of any money, even if only a small sum, triggers the requirement for sponsorship identification.Continue Reading FCC Proposes Fines for Political Sponsorship ID Violations