The state of the audio industry will no doubt be a crucial consideration in the next Quadrennial Review of the FCC’s ownership rules, expected to start late this year or early next. But, before that Review begins, the FCC has been tasked by Congress to write a report on the state of competition in the audio marketplace. In order to gather information for that report to Congress, the FCC is seeking public comment on the state of the industry, asking questions about the state of completion for listeners and advertisers – questions which we summarized here. A summary of the request for comments on the “Status of Competition in the Marketplace for Delivery of Audio Programming” was published in the Federal Register today, setting the comment deadline for September 24, 2018, with reply comments due by October 9.

With this report being prepared just as the FCC is beginning to consider what issues to tackle in the Quadrennial Review, we cannot help but believe that the FCC’s findings won’t be taken into consideration in the Quadrennial Review. The initial document to be released in the Quadrennial Review will be a Notice of Proposed Rulemaking putting forth the FCC’s initial take on whether any of its ownership rules are no longer in the public interest and therefore need to be modified or eliminated. The radio rules have not been subject to any changes in a dozen years, when the FCC switched from using a contour methodology to using Nielsen Audio (then Arbitron) data to compute the number of stations in a rated market. The number of stations any party is able to own in any market has remained unchanged since 1996, though audio competition has clearly grown (see our article here). The facts gathered in this report, while meant for consumption by Congress in its consideration of various legislative matters, will also be the FCC’s most thorough look at the marketplace in which radio competes in 20 years and will likely inform the FCC’s judgement as to whether the radio ownership rules should be amended (see our article here summarizing the NAB’s proposal for changing the rules). Thus, broadcast companies interested in changes in the radio ownership rules should be thinking about providing information to the FCC about the state of competition in the audio marketplace by the September 24 deadline.

Two years ago, a District Court Judge, in a case brought against a broadcaster alleging that the broadcaster owed money under California state law for playing pre-1972 sound recordings, dismissed the suit finding that the broadcaster was playing digitized versions of those songs, created after 1972, which were covered under Federal copyright law (we wrote about that decision here). Yesterday, the US Court of Appeals for the Ninth Circuit issued its decision reversing the District Court’s opinion and sending the case back to the District Court for additional hearings. The Court of Appeals concluded, for several reasons, that there was likely insufficient creativity in the remastering of the pre-1972 sound recordings to make them new post-1972 copyrighted works and that, even if they were creative enough to merit copyright protection as a derivative work, that did not end the discussion, as portions of the original pre-1972 work were included in any new work and those portions themselves had to be licensed. The decision looks like a simple premise that digitization is no magic bullet to defeat pre-1972 sound recording claims, but there is much to unpack in this seemingly straightforward decision.

First, we need to provide a little background on the litigation over pre-1972 sound recordings. Federal law did not recognize a copyright in sound recordings until 1972. So while the underlying musical composition in a song was protected under Federal law, a recording by a particular band or singer was not. When these recordings were federalized, the Copyright Act explicitly left all rights regarding pre-1972 sound recordings in the hands of state law until 2067. For over 40 years, that quirk in copyright law did not seem to have much relevance, though some US digital music services did not pay royalties to SoundExchange for digital performances of those recordings as they were not covered by Section 114 of the Copyright Act (the section creating the statutory royalty for sound recordings). About 5 years ago, the singers Flo and Eddie (formerly of the 1960s band the Turtles) started bringing lawsuits throughout the country alleging that they were owed performance royalties under state law for these pre-1972 recordings from both digital and analog services (see our article here when the first suit was filed). In most states, those suits have been dismissed with courts finding that state law did not provide for a performance right in these pre-1972 recordings (see our articles about decisions in New York, Florida and Georgia reaching that conclusion). The issue in California, however, is still open. For a deeper dive into these issues, see our article here. Continue Reading Court of Appeals Finds That Digital Remasters of Pre-1972 Sound Recordings Likely Do Not Result in New Copyrighted Work That Would Bring These Songs under Federal Law – Reversing District Court Decision

Last week, the FCC released a Consent Decree where a broadcast company admitted to certain unauthorized transfers of several stations, even though actual control of the stations, for the most part, did not change. Stock of the company was transferred into a trust by the company’s shareholder without FCC approval, even though the shareholder continued to control the station until his death approximately a decade later. For this transfer, and another occasioned by the voting of the trust’s stock by his children after his death, the company agreed to pay $8,000 to the government and enter into a compliance plan to assure that no similar transfers occur in the future.

This decision and two similar Consent Decrees entered into by public companies in recent months for, without prior FCC approval, moving station licenses among wholly-owned subsidiaries as part of corporate reorganizations (see decisions here and here), remind broadcasters that, if they are making any change in their ownership where the chain of control changes, even if actual control remains the same, they still need prior FCC approval. So putting controlling stock into a trust that the majority shareholder votes instead of holding it outright, or eliminating one company in a corporate ownership chain, or moving a license from one subsidiary company to another (or directly into the parent company), all require FCC approval before the change is made. These organizational changes, where control continues to reside in the same hands both before and after the change, are filed on an FCC Form 316 and can usually be approved by the FCC very quickly. While these changes may seem (and may in fact be) inconsequential in assessing who owns a broadcast company, the FCC (in broadcasting) still requires prior approval for such a change. Not securing that approval first may well, as in these recent cases, cost you in the long run through FCC fines, legal expenses, and the costs of instituting and administering a consent decree.

Common Frequency and Prometheus Radio Project have once again filed with the FCC a request to halt the processing of hundreds of still-pending FM translators from the last translator filing window. The pending applications are the last remaining application from the window which allowed AM stations to seek FM translators to rebroadcast their signals. The latest filing is an application for review of the FCC Media Bureau’s denial of the initial Informal Objection to the translator applications, and the Bureau’s subsequent denial of reconsideration of that action. The LPFM advocates have been arguing that these new translators will preclude opportunities for new LPFM stations and changes in existing LPFMs. As we wrote here, the Bureau’s denial of the initial petition was based on a number of factors, including that the advocates had not shown how any one of the hundreds of pending translator applications would have an impact on LPFM opportunities. Moreover, the FCC staff found that nothing in the Local Community Radio Act, which governs the relationship between LPFM stations and FM translators, mandates that every application in every window be reviewed for the its preclusive impact on future applications.

Reconsideration of the FCC staff’s decision was denied in July on procedural grounds, finding that the advocates had not shown that they were a party to all of these applications – and thus they had no standing to file a reconsideration request. In the just-filed application for review, the advocates challenge the procedural decision as well as the substantive findings that their initial objections had no merit. Yet their arguments still miss the fundamental unfairness of their blanket filing against hundreds of applications – many serving rural areas where there is no spectrum shortage – without any showing as to why any individual application should be denied. And they do not explain how any application for a translator or an LPFM would ever be processed if each had to show that any application for a new station in one service does not preclude a station in the other. Their contention that grant of these translators would cut off LPFM opportunities and thus violate the LCRA’s language requiring that LPFMs and FM translators be treated equally and that opportunities need to be provided for both, would seemingly also compel the dismissal of any future LPFM application that could cut off FM translator opportunities. If their position was adopted, seemingly no application for an LPFM or a translator could ever get processed. We will await the full FCC’s decision on this latest filing which, if recent history is any judge, may well come quickly.

FCC Chairman Ajit Pai, in a speech this week at the Michigan Association of Broadcasters Summer Convention (the text of the speech is available here), announced that he has circulated to the other Commissioners for review and approval a Notice of Proposed Rulemaking looking to make changes to AM interference standards. Specifically, he said that the NPRM would look at Class A AM interference standards. I was in the audience for the Chairman’s remarks, and audience reaction was muted – perhaps because so few people regularly use the term “Class A AM” when referring to what many call the “clear channel” stations – those big 50 kW AM stations that can often be heard halfway across the country at night because of their “skywave” service bouncing off the atmosphere to be received hundreds and sometimes thousands of miles from where the signal originates.

What to do about Class A AM stations was an issue teed up by the FCC in the AM Revitalization proceeding initiated several years ago (see our post here summarizing the issued raised by the FCC back in 2013). While these clear channel stations are enjoyed by listeners far from their own city of license (often bringing sports broadcasts to distant fans, or programs like the Grand Ole Opry that have become national institutions), the huge service areas of these stations does come at a cost to local service – as many lower powered AM stations operating on the same channel as these Class A stations have to either drastically reduce their power or cease operations all together during nighttime hours. While some AM licensees have received FM translators to fill in those service gaps, those translators do not bring listeners back to the AM band itself. So, in the Revitalization proceeding, the FCC asked for ideas as to what it should do with these stations – e.g. if it should advance proposals to reduce protection to the clear channel stations in order to allow more local AMs to increase their nighttime power. It appears that the NPRM announced by the Chairman on Tuesday will crystalize the comments received in response to the 2013 Notice into more specific proposals for action. Continue Reading More Action Appears to be Coming on AM Revitalization – Looking at Revising Interference Protection for Class A Clear Channel Stations

Last week, we wrote about legal issues for podcasters, and made the point that media companies should be making clear by contract or otherwise who owns the podcasts that their employees and independent contractors have created. This week, there was press coverage (see, for instance, the article here) about a law suit filed by a newspaper company against a former employee seeking ownership of a Twitter account used by the employee while at the newspaper and then taken by that employee to his new employer. The company claims that the Twitter account, covering a local college sports team, was property not of the employee, but of the newspaper – pointing out that the account had actually been started by a predecessor employee, and that the employee handbook gave all rights to intellectual property, trade secrets and other intangibles created by the employee during the course of his employment to the newspaper company. The fact that a lawsuit was filed must indicate that the former employee is not ready to accept the newspaper’s position on the subject. For readers of this blog, what it does is reiterate our suggestion last week that media companies make sure that it is clear, in legally binding documents, who owns intellectual property created by employees and contractors. And this should include not just podcasts, but webpages, blogs, and social media accounts and similar assets – all being important aspects of today’s relationship between media companies and their customers.

Last week, we wrote about FCC changes to its EAS rules, including the adoption (not yet effective) of a requirement that a broadcast station report to the FCC when they broadcast a false EAS alert. In the order adopting that requirement and other changes to EAS practices, the FCC also issued a Further Notice of Proposed Rulemaking, suggesting other EAS changes to deal with false alerts – including asking if it should create a more detailed reporting system for false alerts, whether state EAS plans should be required to be amended to add procedures for dealing with false alerts, and looking for details about the delivery of wireless alerts to cell phones and other mobile devices. The Further Notice has now been published in the Federal Register. Comment dates on the Further Notice are due by September 10, and replies by October 9.

In an Order released earlier this week, the FCC’s Enforcement Bureau imposed a $12,000 fine on the licensee of an FM translator in California because FCC inspections revealed that the translator was operating above its licensed power. The FCC found that the station was operating with a Transmitter Power Output of 7.5 watts, yielding an Effective Radiated Power of 33.7 watts, when the station was only licensed for .005 watts TPO and 10 watts ERP. While the licensee argued that the higher transmitter power output was necessary to achieve its authorized ERP, the FCC rejected that argument as a translator’s TPO is specifically set by its license and limited under the FCC’s rules, and to exceed the authorized TPO requires the grant of a construction permit or, at the very least, grant of an STA – neither of which had been sought by the licensee.

With so many new translators coming on the air, it is important for operators to remember to limit TPO to what is specified in a license. The power output cannot exceed 105% of what is authorized on the license (See Section 74.1235(e) of the FCC Rules). Full-power non-directional FM stations, on the other hand, can generally change TPO and transmission line without prior FCC approval as long as the change does not result in changes to authorized ERP (and even some ERP changes are permitted without a construction permit application – see Section 73.1690 for details), with the licensee only having to file an application for license on Form 302 after the changes have been made. But translators need approval to change TPO before it is done. Given the scrutiny now being placed on FM interference (see our article here about the FCC’s current proceeding to determine how to resolve complaints about translator interference), and the size of the fine issued in this case, translator operators should be sure that they know the rules and review their operations to make sure that these operations comply with the rules.

At its meeting last week, the FCC adopted a Report and Order creating an incubator program to incentivize existing broadcasters to assist new entrants to get into broadcast ownership. The FCC in its order last year relaxing TV local ownership rules and abolishing the newspaper-broadcast cross-ownership rule had agreed to adopt an incubator program (see our articles here and here). In fact, the US Court of Appeals for the Third Circuit, which is reviewing the FCC’s ownership order, stayed the processing of that appeal to await the rules on the incubator program (see our article here), as the Court has previously indicated that considerations of how changes in the ownership rules affect new entrants is part of its analysis of the justification for such changes. What rules did the FCC adopt?

The FCC will encourage an existing broadcaster who successfully incubates a new entrant into broadcasting by giving them a “presumptive waiver” of the ownership rules. To understand what this means requires looking at several questions including (1) what services does the existing broadcaster have to provide to qualify for the credit; (2) which new entrants qualify for incubation; (3) what is a successful incubation; and (4) what does the presumptive waiver provide to the broadcaster providing the incubation services. Let’s look at each of these questions. Continue Reading FCC Adopts Incubator Program To Assist New Radio Owners – What Does it Provide?

Last week, I spoke at Podcast Movement 2018 – a large conference of podcasters held in Philadelphia. My presentation, Legal Issues In Podcasting – What Broadcasters Need to Know, was part of the Broadcasters Meet Podcasters Track. The slides from my presentation are available here. In the presentation, I discussed copyright issues, including some of the music rights issues discussed in my articles here and here, making clear that broadcaster’s current music licenses from ASCAP, BMI, SESAC and even SoundExchange don’t provide them the rights to use music in podcasts. Instead, those rights need to be cleared directly with the holders of the copyrights in both the underlying musical compositions as well as in any sound recording of the song used in the podcast.

I also discussed how, when podcasters are delivering advertising messages, they need to make clear that the messages are sponsored. We have written about the FTC’s requirements that when someone is paid to promote a product online, they need to disclose that the promotion was sponsored. See our articles here and here. Also discussed, and covered in the slides, were issues about defamation and invasion of privacy (and how concerns like these can become more serious in a podcast than in a broadcast as a broadcast is ephemeral – once the broadcast is over, it is gone – but a podcast tends to be permanent, providing evidence of any content that may be of legal concern). I also touched on privacy and security issues. One topic not covered in the slides, but suggested to me by a podcaster at a reception earlier at the conference, was the question of who owns the podcast. Continue Reading A Presentation on Legal Issues for Podcasters – Who Owns What?