A deal between Big Machine Records and a broadcaster, this time Entercom Communications, was announced at the NAB Radio Show giving the record company a royalty on the broadcaster’s revenue from over-the-air broadcasting in exchange for lower royalties on digital operations. This deal follows one announced by Clear Channel back in June. Talking to broadcasters around the country, many seem confused by the deals, not understanding why they were done, how they work, or what they accomplish. More than anything, many broadcasters fear that the deals will lead to a generally applicable royalty payable to sound recording copyright holders (i.e. the record companies) on over-the-air broadcasting.  Let’s start with an explanation of how these deals work. 

While the details of these deals are not public, a session at the NAB Radio Show shed a little more light on the subject.  The session also included a promise from a Clear Channel representative that more deals are on the way. Perhaps the biggest news was at least some indication of the parameters of the financial terms of the agreements, with the President of Big Machine saying, in response to the question of whether the deal was an agreement to pay 1% of over-the-air revenues in exchange for a 3% digital royalty, that these numbers were certainly in the ballpark. If those numbers are in fact accurate, the digital royalty is substantially smaller than that paid by most webcasters, where royalties computed on the usual per song per listener basis can range from 45% of revenue to several times the total revenue of most webcasters.  

Continue Reading A Deal Between Entercom and Big Machine Records To Give the Record Company a Royalty on Over-the-Air Broadcasting

How can political attack ads get away with taking out-of-context statements of the candidates that they are attacking, and twisting these statements to convey meanings that were never intended by the candidate who first uttered the words? And how can political ads take a single line of an incredibly complex piece of legislation and use that legislation to allege that a candidate has violated some core belief that the candidate espouses on the campaign trail? Do stations have liability for these attack ads, and must they react when the candidate being attacked asks that the ad be pulled? In the fourth of our series of political broadcasting refreshers (following those on lowest unit rates, equal opportunities, and reasonable access), we’ll address the question of the no censorship provision of the rules and what rights stations have to deal with the content of political ads.

Starting with the basics, the FCC rules (stemming from Section 315 of the Communications Act) prohibit broadcasters from censoring the content of advertising that is a “use” by a candidate. Essentially, that means that the broadcaster cannot reject an ad that is sponsored by the candidate or the candidate’s official campaign committee, if that ad has the recognizable voice or image of the candidate somewhere in the course of the ad. No matter how outrageous the statement of the candidate may be, the station cannot refuse to run the ad (with the limited instance of ads that are legally obscene or which otherwise may violate some Federal felony statute). So, even if an ad by a candidate may be totally untrue in claims made about the candidate’s opponent, or even if it could give rise to other civil liability (for instance if it is defamatory or a copyright violation), the station cannot refuse to run the ad.

Continue Reading Political Broadcasting Refresher Part 4 – No Censorship – How Can Candidates Get Away With Those Attack Ads?

The FCC has released its agenda for its September meeting, and it is an important one for television broadcasters. On the agenda for the meeting to be held this Friday, September 28, is a Notice of Proposed Rulemaking to seek comments on its proposals to implement the Congressional authority to hold incentive auctions to clear part of the television spectrum so that the spectrum can be used for wireless broadband purposes (see our summary of the legislative authority here). Obviously, this will decision will be important for the television industry, as well as for companies looking to deploy additional wireless broadband and those hoping to reach consumers using wireless broadband.

This proceeding will necessarily be very complex, as it will need to design a system that will take into account many moving parts. First, it will need to take bids from those television stations that are willing to turn in their licenses, or to share spectrum with another station or move to a VHF channel – all of which might qualify the station for compensation. While keeping these bids secret, the Commission must also take bids to buy the cleared spectrum from wireless companies.  The Commission needs to determine if enough money will be received from these bids to pay for stations to turn in their licenses, to repack the remaining TV stations into a smaller television band that will free some television channels to allow for a contiguous swath of spectrum that the wireless operators can use, to pay the auction costs, and to pay for certain public safety wireless uses that are to be subsidized by the auction proceeds. The Commission will also have to design a process for repacking TV stations into a smaller television band, in many ways replicating the process that the FCC went through when it compacted the TV spectrum during the digital transition.

Continue Reading FCC To Consider Incentive Auctions for TV Spectrum This Week

In recent days, we’ve been writing about political broadcasting topics in anticipation of the November election. We provided a refresher on the basics of lowest unit charges on Monday, and equal opportunities on Wednesday.  Today, we’ll look at reasonable access – how much time must stations sell to political candidates (or give to them if they would rather meet their obligations through free time, which few stations are willing to do). Reasonable access requires broadcasters to make reasonable amounts of time available to candidates for Federal office – in all classes and dayparts on all commercial broadcast stations (noncommercial stations were exempted by Congress about a decade ago when candidates started to demand free time on these stations). With the expected onslaught of political advertising coming up in most battleground states, stations fearful of having to devote all of their commercial time to election advertising wonder just how much time is reasonable?

The FCC leaves the determination as to what is “reasonable” to the reasonable discretion of the station, as long as access is provided to all classes and dayparts on the station.  The discretion, though, is to be exercised in coordination with the political candidates themselves. For Federal candidates, stations should not put up-front limits (e.g. in a political rate card or on a political disclosure statement) as to how many spots they will sell to any Federal candidate in any specified period of time. Instead, stations are supposed to engage in a give and take with the candidate, accessing the candidate’s needs and desires and weighing them against the needs of the station to provide advertising to other clients.  After hearing the needs of the candidates, it is up to the station to reach a determination as to what is reasonable. If stations give candidates at least some access to all classes and dayparts on their stations, even if it is not as much as the candidate wants, stations have traditionally been given the benefit of the doubt by the FCC.

Continue Reading Political Broadcasting Refresher Part 3 – Reasonable Access – How Much Advertising Time Must Be Sold to Candidates?

Do you want to start a new FM station?   In what seems to have become a yearly event, the FCC has released a list of 117 new FM channels to be auctioned (a list that also includes the proposed minimum bid for each channel). The FCC also issued a “freeze” on FM applications that could impact these channels. The auction itself is scheduled to begin on March 26, 2013. If the Commission follows the schedule used in the last FM auction, we should expect that the deadline for the "short-form" application to participate in the auction (which basically contains information about the ownership of the applicant and a list of the channels in which they are interested) will be due in early 2013, likely sometime between January 1 and January 15, 2013. The upfront payment of the necessary minimum bids would then likely be due around February 20, 2013.

The channels in this auction on which new stations can be built are spread all across the country. Many are located in large western states, including multiple channels in California, Oklahoma, Arizona and Texas, among other states. If you are interested in starting a station from scratch, look through this list of channels to see if there are opportunities for a construction permit for a new station in an area of interest. If you find something that you might consider, you need to start your due diligence on each channel now, as any bidder is responsible for insuring that the channel for which they are bidding can be built and will serve the audience that you expect. If you win the auction and decide that you can’t really find a transmitter site, then you may well be on the hook for the full amount of the bid even if you don’t build the station. And, if you are successful in the auction, you will have to have an available transmitter site to specify in your "long-form" application submitted about a month after the end of the auction – an application that will specify all of the technical details of the new station. So look at zoning issues, FAA considerations, coverage questions, and even whether technical details like the rural radio order limiting move-ins of FM stations from rural to more urban areas, may limit the potential economic value of the channel in which you are interested.

Continue Reading FCC Announces Auction for 117 New FM Channels – And Freezes Certain FM Applications that Could Affect Those Channels

Now that we are in the political window, we’re doing a series on the basics of the FCC’s political broadcasting rules. On Monday, we covered lowest unit charges. Today’s topic is equal opportunities. Many think of this as a straight-forward issue – just requiring that you provide equal time to competing candidates. But the nuances are what makes equal opportunities much more complicated.

At its most basic level, stations are supposed to treat competing candidates in the same way. Most people think of the issues arising to the extent that stations need to give time to all candidates for an office when they give any candidate air time. In most cases, the free airtime given by stations is not an issue, as there are many programs and appearances by candidates that are exempt from equal time. For instance, the appearance of a candidate in a regularly scheduled bona fide news or news interview program, or in on-the-spot coverage of a news event, is exempt from equal time. As we’ve written before many times (e.g. here and here), that exemption has been broadened to include any program on a station that is editorially under the control of the station, that does not use time for a partisan purpose (but uses some good faith quasi-journalist or newsworthiness discretion as to who to include in the program), and which regularly covers issues in the station’s service area. The exemption has been interpreted to include programs as diverse as Entertainment Tonight, The Howard Stern Show, and Phil Donahue. For most station, any program that features talk (whether it be a radio morning show or a local TV program), and which from time to time interviews newsmakers, can also interview candidates without having to deal with equal time issues. Thus, concerns about giving free equal time usually only arise when a candidate appears in some scripted entertainment program (like in the days that Ronald Reagan and Arnold Schwarzenegger movies were pulled from TV stations whenever they ran for office), or perhaps in a sports program (though the recent appearances of Presidential candidates in football pre-game shows demonstrates that, even in some sports programs, the interview of a candidate may not give rise to any equal time issue). But there are other places that the equal opportunities doctrine is still important.

Continue Reading Political Broadcasting Update Part 2 – Equal Opportunities

In a decision issued last week, the FCC’s Enforcement Bureau once again made clear that stations will be given no slack if they don’t announce on the air all of the material terms of a contest – even the specifics of changes in prizes to be awarded over a long period of time. In this decision, the FCC imposed a $4000 fine on a radio station for a contest called “Who Said That,” where the station broadcast a clip of a celebrity saying something, and gave prizes to listeners who identified the celebrity. The fine was triggered by the last clip in the series, broadcast in 2007, that was not correctly identified for 20 months. Through the summer of 2008, the station continued to broadcast the contest rules, but apparently stopped broadcasting them except when prompted by a listener from summer 2008 through September 2009, when the prize was finally awarded, . The failure to announce the rules during this time period, and the failure to announce that prizes had changed during this time, led to the $4000 fine.

The Commission faulted the licensee for not updating the on-air announcement of the list of the prizes to be awarded. The licensee argued that there was no material violation as, when certain prizes became unavailable (e.g. tickets to concert that occurred during the period when the prize remain unawarded), the station substituted prizes of equal value. But the failure to announce the substitutions, or even that substitutions would be made, was seen by the FCC as a violation of Section 73.1216 of the rules.

Continue Reading $4000 FCC Fine for Not Updating Material Terms of Broadcast Contest in On-Air Announcements

Now that the Democratic and Republican conventions are over and the candidates begin the final sprint to the November 6 elections, the political broadcasting season goes into overdrive. Effective last Friday, lowest unit rates are in effect. In this year which will probably break all records for political spending, is your station ready to comply with all of the political rules? We thought that we’d provide a series of articles on some of the basics of the FCC political broadcasting rules, to make sure that your station is prepared to deal with the most common issues that arise in a political season.  Today, as the lowest unit charges have just kicked in, we’ll hit some of the common questions that we get about these rates.  In coming days, we’ll address other areas of the FCC’s political rules.

Essentially, lowest unit charges guarantee that, in the 45 days before a primary and the 60 days before a general election, candidates get the lowest rate  in any class of advertising time for a spot in that class that is then running on the station. Candidates get the benefit of all volume discounts without having to buy in volume – i.e. the candidate gets the same rate for buying one spot as your most favored advertiser gets for buying hundreds of spots of the same class.  But there are so many other aspects to the lowest unit rates, and stations need to be sure that they get these rules right.

Continue Reading Political Broadcasting Reminder Part 1 – The Basics of Lowest Unit Charges

A $4000 fine was levied by the FCC on an FM station owner who failed to file an application for license after completing construction of changes authorized by a construction permit, finally submitting the license applicaiton about 4 years after that permit had expired. When a broadcaster receives a construction permit authorizing technical changes in a station’s facilities, in most cases, it has three years to complete construction. Upon the completion of construction, the licensee must file an application for a license (on FCC Form 302 for commercial stations) certifying that the station was constructed as authorized. In this case, when the license application was finally submitted long after the permit expired, the application stated that construction had in fact been completed within the three year period set out in the construction permit.  So the applicant requested retroactive approval of that license, relying on past FCC cases where license applications filed after the end of the construction period were nevertheless granted where the applicant could show that construction had been completed during the period set out in the construction permit.

The FCC decided in this case that a waiver was not appropriate given the time that expired between the expiration of the permit and the filing of the license application. While gaps of a few days or even a few weeks between the expiration of the permit and the filing of the license application are excusable, the Commission concluded that a four year gap was just too much to excuse – not the minor error that can be forgiven without a fine. Waiting four years to file a license application was deemed to be too much to forgive – so the question was whether a fine was appropriate and, if so, how much.

Continue Reading $4000 Fine for Station That Forgets to File License Application After Completing Construction of Modified Facilities

This past weekend saw the passing of one of the great advocates for broadcasters in the last few decades – Ann Arnold, the President of the Texas Association of Broadcasters. Ann has headed the TAB for over 20 years, in the process making it one of the premier state broadcast associations. But Ann was more than just an association head – she also was a fierce defender of broadcasters and the service they provide to their listeners. Under her leadership, the TAB has fought against governmental attempts to over-regulate broadcasters, while also being very aggressive in promoting the role of broadcasters in getting important information out to their communities. Ann had been a nationwide leader in efforts to improve the EAS system, recognizing that broadcasters needed a working system to alert their audiences to impending threats. The TAB also was a leader in promoting a journalist shield law, helping broadcasters and other news outlets to protect vital sources.

I worked with Ann for over 20 years, and consider her to be a true friend – one who will be missed both personally and professionally. She was a central presence at all TAB events, right up to the most recent TAB annual convention held in August in Austin. Ann was there from the early morning breakfasts to the late-evening banquets, always surrounded by people seeking counsel or just a hug and a smile – which Ann could always be counted on to provide. 

Continue Reading An Industry Giant Passes – Ann Arnold of the Texas Association of Broadcasters