The Advertising industry recently published self-regulation guidelines for "behavioral advertising," i.e. advertising that is targeted to the user based upon data regarding that user’s activities across various Web sites.  The Federal Trade Commission has been urging the industry to develop such standards for some time.  These practices have also attracted considerable attention on Capitol Hill.  To summarize the new guidelines, Davis Wright Tremaine has published an Advisory, summarizing the new guidelines.  You can find the advisory here. 

Any company engaging in any behavioral advertising on their websites, including broadcasters and other digital media companies, should pay attention to these guidelines.  As noted in the memo, Congress continues to consider other regulatory steps to govern such advertising.  The more effective industry self-regulation is, the less the need for government intervention. 

The US Court of Appeals for the District of Columbia Circuit today issued a decision basically upholding the royalty rates set by the Copyright Royalty Board due under Section 114 of the Copyright Act by satellite radio operators for the public performance of sound recordings.  The CRB decision, setting royalties for the years of 2007 to 2012, established rates that grew from 6% to 8% over the six year term. As we explained in our post, here, the Board looked at the the public interest factors set out by Section 801(b) of the Copyright Act, factors not applicable to Internet Radio royalties, in reaching the determination these royalties.  Particularly important was the factor which took into account the potential impact of the royalties on the stability of the businesses that would be subject to the royalty, resulting in a reduction of the perceived fair market value of the royalty from what the board determined to be about 13% of gross revenues to the 6-8% final royalty set by the Board.  The Court upheld the Board’s reasoning, rejecting SoundExchange’s challenge to the decision, though the Court did remand the case to the Board to decide the proper allocation of the royalty to the ephemeral rights covered by Section 112 of the Copyright Act.

What was perhaps most interesting about the Court’s decision was the concurring opinion of one of the three Judges, who stated that the fact that the Board’s judges were appointed by the Librarian of Congress, and not by the President, "raises a serious constitutional issue."   This was the same issue raised by Royalty Logic in challenging the constitutionality of the CRB in the webcasting proceeding (see our posts here and here).  The Judge concurred in the majority decision as none of the parties to the satellite radio case raised the constitutional issue, but this very question was squarely raised in the webcasting proceeding, and thus may well be resolved in the decision on that appeal.

Continue Reading Court Upholds Copyright Royalty Board Decision on Satellite Radio Royalties, But Questions Board’s Constitutionality

A settlement under the Webcaster Settlement Act of 2009 was signed today by SoundExchange and a group of webcasters that I represented in the Copyright Royalty Board proceeding to determine the royalty rates for the use of sound recordings by Internet Radio stations for the period from 2006-2010. This agreement is for “pureplay” webcasters, i.e. those that are willing to include their entire gross revenue in a percentage of revenue calculation to determine their royalties. As permitted under the terms of the WSA, this agreement not only reaches back to set rates different, and substantially lower, than those that were arrived at by the CRB for the period from 2006-2010, but also resolves the rates for 2011-2015, relieving webcasters who join the deal from having to litigate another CRB proceeding to set the rates for those years. 

While no deal arrived at under the circumstances in which these webcasters found themselves (a CRB decision that did not set any percentage of revenue royalty rate and would seemingly put these webcasters out of business, the prospect of a new CRB proceeding that would costs significant sums to litigate with no guarantee of success, and with the only other current option being the “microcasters” deal unilaterally advanced by SoundExchange that severely limited the amount of streaming that a webcaster could do and imposed significant “recapture provisions” in the event of a sale of the webcaster’s business) may not be ideal, the settlement does provide significant benefits over any other existing option for any webcaster who qualifies under its provisions. These deal points are set out below.

Continue Reading Pureplay Webcasters and SoundExchange Enter Into Deal Under Webcaster Settlement Act to Offer Internet Radio Royalty Rate Alternative for 2006-2015

In three cases released last week, the FCC made clear that its EEO rules, requiring wide dissemination of information about job opportunities at broadcast stations (and cable systems), are not satisfied by solely posting of information about openings on websites.  Instead, the Commission required that additional outreach efforts be undertaken in order to assure that the notice of the job opening reaches all groups within a  community.  The decisions pointed to the FCC’s 2003 Report and Order adopting the current rules which stated that the FCC did not feel that the Internet was sufficiently ubiquitous that they could feel comfortable with on-line postings being sufficient to reach all groups within a community.  In the recent decisions, the FCC staff said that they were not ready to change the determination of the 2003 Commission.

What does this mean on a practical level?  The decisions hold that simply using internal station sources plus on-line postings (in one case website postings plus some combination of walk-ins, industry referrals, and internal postings; in another case  the use of the station’s website, plus employee referrals) were insufficient to assure wide dissemination.  To avoid getting caught in this trap, broadcasters must use some other traditional outreach services (e.g. employment agencies, community groups, educational institutions, and the local newspapers) to assure that they meet the Commission’s wide dissemination requirements. 

Continue Reading On-line Recruitment Not Sufficient EEO Outreach for the FCC

 

This week, the FCC announced that it will begin accepting applications for new digital-only LPTV and translator stations in rural areas as of August 25, 2009. Beginning on that date, the FCC will also begin to accept applications for major changes to existing analog and digital LPTV and TV translators in rural areas, and applications for digital companion channels (DCCs) for existing analog stations in rural areas. By "rural areas", the FCC means stations that specify a transmitter site that is located more than 75 miles away from the reference coordinates of the 100 U.S. cities listed in the FCC’s Public Notice. Applications for new analog facilities will not be accepted. This filing opportunity will be on a first-come, first-served processing basis, and mutually exclusive proposals will be resolved by auction.  A copy of the FCC’s Public Notice is available here.

While this window is for new stations, major changes, and DCCs in rural areas, prior to that date all existing LPTV, TV translator, and Class A television stations may wish to review their present options for converting to DTV. The Commission’s Public Notice reminds existing stations that they may file an application for on-channel digital conversion (i.e. flash-cut) at any time. In order to retain processing priority, existing stations are encouraged to file flash-cut applications prior to August 25th, and certainly by January 25, 2010, at which point the FCC will open the door for new digital licensing opportunities on a nationwide first-come, first-served, as discussed below. 

Continue Reading Filing Opportunity for LPTV and Translator Stations in Rural Areas Commences August 25th; Nationwide Window Opens Jan. 25, 2010

The FCC today adopted an Order revising its rules to permit the rebroadcast of AM radio stations on FM translator stations.  A copy of the Order is available here.  By this Order, the FCC formally adopted the interim policy that it has experimented with in the past year and a half since the release of the Notice of Proposed Rule Making in this proceeding.  The Commission acknowledged that the interim rule has worked well and that allowing AM stations the same flexibility to use FM translators to enhance their service is in the public interest. 

Per today’s Order:  "Specifically, AM broadcast stations will be allowed to use currently authorized FM translator stations (i.e., those now licensed or authorized in construction permits that have not expired) to rebroadcast their AM signals, provided that no portion of the 60 dBu contour of any such FM translator station extends beyond the smaller of: (a) a 25-mile radius from the AM transmitter site; or (b) the 2 mV/m daytime contour of the AM station. In addition, AM broadcast licensees with Class D facilities will be allowed to originate programming on such FM translators during periods when their AM station is not operating."

Several things to note:

First, "currently authorized FM translators" means translator stations with licenses or permits in effect as of May 1st, 2009.  As expected, there is no opportunity to seek authorization for new FM translators, and by extension, there was no need for the FCC to address the issue of priorities between LPFM stations and FM translators (which the FCC says it will address in the pending LPFM rule making).  So this rule change simply allows existing FM translator stations to rebroadcast AM stations.

Continue Reading FCC Adopts Rules Permitting AM Rebroadcasts on FM Translators

When the Low Power FM service was first authorized, it was as a "secondary service," though a recent court decision shows how that secondary status is becoming less and less a reality.  A secondary service is traditionally one that can be allotted where there are no other uses for a particular frequency, and which is subject to being bumped off the spectrum should there be another demand for that spectrum by a "primary" user.  LPFM stations were originally supposed to provide service to areas between full-power FM radio stations, and to be bumped off the air if there was a new FM station authorized or a change in the frequency or power of an existing station.  A decision of the Court of Appeals released earlier this month , upholding an FCC order giving more protections to LPFM stations, puts this secondary service into question.

The Court decision upheld the Commission’s decision, about which we wrote here, determining that waivers of second adjacent channel interference limitations between LPFM and full power stations should be permitted to help preserve LPFM service.  In addition, the Court upheld the FCC’s process in adopting a new "interim" policy which provides that, where an LPFM is providing 8 hours a day of local programming and would be knocked off the air by an upgrade or city of license change of a full-power station, the LPFM station could apply for a waiver of its secondary status, and there would be a rebuttable presumption in favor of such a waiver.  If the waiver is granted, the LPFM station would be preserved, and the application of the full-power station dismissed.  Thus, effectively, LPFM would no longer be secondary, but instead will have assumed a primary, protected status.

Continue Reading LPFM – When a Secondary Service Becomes Primary

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

The US Senate yesterday passed the Webcaster Settlement Act of 2009, following House passage 10 days ago.  Once the Act receives the signature of President Obama, the law will go into effect, and give webcasting groups and the recording industry 30 days to reach a settlement (or settlements) on Internet radio music royalties for the use of sound recordings.  While the parties did not need the Act to reach settlements for the period of 2011-2015, which is subject to a new royalty proceeding which is now in its early stages, the WSA extension was necessary to cover royalties for the period of 2006-2010, which are covered by the Copyright Royalty Board decision released in 2007.  Without this extension, the rates in effect under the CRB decision (or the rates agreed to under settlements with broadcasters, certain very small webcasters and NPR, and announced earlier this year as authorized by the Webcaster Settlement Act of 2008 ) would have to be paid for that period absent a successful outcome of the currently pending appeal. 

Several groups which participated in the last CRB proceeding have yet to reach settlements, including the "Small Commercial Webcasters" (the independent pureplay webcasting companies), the large webcasters associated with the Digital Media Association, and noncommercial webcasting groups not affiliated with NPR.  In the only statement made on the floor of the Senate before the unanimous approval of the Act, Senator Leahy, the Chair of the Judiciary Committee, cited the controversy over the rates set by the CRB decision, and stated that it was preferable that the parties involved in the case reach an agreement rather than having new rates imposed by the government (see his statement here).  With the passage of this act, the parties now have that opportunity to reach a settlement of the royalties reaching back to 2006. We will see what settlements are announced during the upcoming 30 day period.

In recent months, SESAC has been writing letters to broadcasters who are streaming their signals on the Internet, asking for royalties for the performance of SESAC music on their websites.  More than one broadcaster has asked me why they have any obligation to SESAC when they are already paying SoundExchange for the music that they stream.  In fact, SoundExchange and SESAC are paid for different rights, and thus the payments to SoundExchange have no impact on the obligations that are owed to SESAC.  SESAC, along with ASCAP and BMI, represent the composers of music in collecting royalties for the public performance of their compositions.  SoundExchange, on the other hand, represents the performers of the music (and the copyright holders in those performances – usually the record companies).  In the online digital world, the SoundExchange fees cover the public performance of these recordings by particular performers (referred to as "sound recordings").  For an Internet radio company, or the online stream of a terrestrial radio station, payments must be made for both the composition and the sound recording. 

To illustrate the difference between the two rights, let’s look at an example.  On a CD released a few years ago, singer Madeleine Peyroux did a cover version of the Bob Dylan song "You’re Gonna Make Me Lonesome When You Go."  For that song, the public performance of the composition (i.e. Dylan’s words and music) is licensed through SESAC.  The actual "sound recording" of Peyroux’s version of the song would be licensed through SoundExchange, with the royalties being split between Peyroux and her record label (with backing singers and musicians receiving a small share of the SoundExchange royalty). 

Continue Reading SoundExchange Fees Don’t Cover SESAC Obligations