In a recent decision, the FCC adopted new rules for AM station proofs of performance that make the process much simpler.  We wrote about this proposal when it was advanced, here.  The order adopted a week ago allows stations installing new series fed AM directional antennas to avoid the time-consuming and expensive process of doing a full proof of performance, by instead using a computer modeling process plus a limited number of actual measurements.  Comments filed in the proceeding convinced the FCC that this process would be as accurate as the full proofs that had previously been required for new AM stations and for many changes to existing stations.  Providing this option to AM broadcasters should greatly simplify and expedite the process of completing AM construction and the licensing of such stations.

As part of this order, the FCC also asked for further comments to discuss whether the construction of communications towers – even those that do not otherwise fall under FCC jurisdiction because, for instance, they are too short to require tower registration which is primarily triggered by FAA considerations – near to AM directional towers should also be required to use this same computer methodology to determine the effect that new construction would have on the nearby AM station.  If so, would parties proposing such new construction have to notify nearby AM stations, or just some subset of AM operators (such as those that are themselves operating under program tests).  If notification is to be required, how much advance notification should be required?  Comments on this proposal are due 30 days after this order is published in the Federal Register. 

The Barack Obama Channel – a surprising concept to find on your satellite television dial. Yet there appears to in fact be such a channel, according to a columnist at Politico, who found that the Dish Network is dedicating a whole channel to Obama commercials run back to back. Has Dish owner Echostar decided to stake out a partisan position in this hotly contested election? No, instead, it appears that the Obama campaign has decided to purchase time on that channel to run their ads. Leaving aside the question of whether this is a wise expenditure of campaign funds, the question is raised – is this legal?

The answer appears that it is legal, as long as the McCain campaign is given equal opportunities to buy their own channel at a similar price. The Direct Broadcast Satellite (“DBS”) Companies – Dish and DIRECTV – are subject to the FCC’s political broadcasting rules in the same manner as broadcasters (rules more strict than those that apply to cable companies, as reasonable access requirements are imposed on DBS requiring that they sell reasonable amounts of commercial time to Federal candidates who may request it). Thus, the equal time or equal opportunities rule would apply to DBS.  Because of the equal opportunity obligations, the mere fact that only one candidate has decided to avail themselves of the opportunity to buy the time does not make it problematic. Dish just needs to maintain enough channel capacity to create a McCain channel should that campaign decide, at some point between now and the election, to spend its resources to buy a channel of its own. The Obama Channel is another in a seemingly never-ending stream of weird political broadcasting issues that have come up in this election season. Our coverage of some of the other issues that have come up this year can be found here, and our Political Broadcasting Guide, setting out many of the rules of the road for this election season, is available here.

We’ve previously written about the value of music in connection with the royalties to be paid by Internet Radio and the performance royalty (or "performance tax" as it’s labeled by the NAB) proposed for broadcasters. One of the questions that has always been raised in any debate about royalties, and one often dismissed by the record industry, is to what extent is there a promotional value of having music played on the radio or streamed by a webcaster.  In discussions of the broadcast performance royalty, record company representatives have suggested that, whether or not there is promotional value of the broadcast of music, that should have no impact on whether the royalty is paid. Instead, argue the record companies, the creator of music deserves to be paid whether or not there is some promotional value. The analogy is often made to sports teams – that the teams get promotional value by having their games broadcast but are nevertheless paid by stations for the rights to such games. The argument is that music should be no different. That contention, that the artist deserves to be paid whether or not there is promotional value may be tested in connection with what was once thought to be an unlikely source of promotional value for music – the video game Guitar Hero.

Guitar Hero, in its various versions released over the last few years, has proven to be a very effective tool for the promotion of music – with various classic rock bands experiencing significant sales growth whenever their songs are featured on a new version of the game. The use of a sound recording in a video game is not subject to any sort of statutory royalty – the game maker must receive a license negotiated with the copyright holder of the recording – usually the record company.  In previous editions of the game, Guitar Hero has paid for music rights. However, now that the game has proved its value in promoting the sale of music, the head of Activision, the company that owns the game, has suggested in a Wall Street Journal interview that it should be the record companies that are paying him to include the music in the game – and no doubt many artists would gladly do so for the promotional value they realize from the game. 

Continue Reading Will Guitar Hero Show the Promotional Value of Music and Change the Music Royalty Outlook?

We’ve written much about the FCC Localism proceeding and the potential for some resolution of that proceeding in the near term. At the NAB Radio Show, held the week before last, FCC Chairman Kevin Martin suggested that broadcasters should voluntarily agree on a localism plan before there is any change in the administration at the FCC, suggesting that a future FCC may be less willing to compromise than the current one. Of course, a voluntary plan does not mean a code of conduct that broadcasters could unilaterally adopt and voluntarily agree to abide by, but instead it appears to be a request for standards that are voluntarily agreed to by broadcasters and then turned into some version of mandatory rules by the FCC. In a recent article in TV Newsday, some details of what the Chairman would like to see, and what he has apparently suggested to several state broadcast associations, are set out.

According to the article, a significant piece of the Commissioner’s suggested plan would include a requirement (or an option) for broadcasters to meet a mandatory localism obligation by funding investigative journalism conducted by journalism schools at various universities throughout the country. Apparently, stations that funded such journalism, or which aired the stories produced, would get some sort of localism credit. But what would this mean, and how would it impact broadcasters?

Continue Reading FCC Seeks Solution on Localism – What’s Being Requested?

Both the House and the Senate have now approved the Webcaster Settlement Act of 2008, which will become law when it is signed by the President. Just what does this bill do? It does not announce a settlement of the contentious Internet Radio royalty dispute, about which we have extensively written here. It does not change the standard for judging Internet radio royalties, as had been proposed in the Internet Radio Equality Act, introduced last year and now seemingly dead in the waning days of this Congress, and in the Perform Act, about which we wrote here (the IREA and the Perform Act proposed different standards – the first more favorable to webcasters and the second more favorable to SoundExchange). These issues will seemingly be left to be disputed in a future Congress. Instead, the Webcaster Settlement Act seems to only adopt a simplified process for the approval of settlements that may be reached by the parties on or before February 15, 2009 – a settlement process that had been previously used in the Small Webcaster Settlement Act (the language of which this bill amends).

What is the significance of these new settlement processes? Under current law, any settlement between any group of webcasters and SoundExchange could only be binding on the entire universe of sound recording copyright holders if that settlement was approved by the Copyright Royalty Board. If an agreement is not binding on all copyright holders, then the reason for the statutory royalty – being able to pay one entity and get access to all the music in the world – would not be met.  The current procedures for approving settlements seem to contemplate such settlements only before a decision on royalties is reached by the CRB.   While some have speculated that the Court of Appeals that is currently considering the CRB appeal could remand the case to the CRB to effectuate a settlement and force the CRB to address it, that is by no means certain. For instance, the large webcasters, through their organization DiMA, reached a settlement with SoundExchange to cap minimum fees at $50,000 per webcaster. In their briefs filed with the Court of Appeals, both DiMA and SoundExchange have asked the Court to remand that aspect of the case to the CRB for adoption – yet that request has been opposed by the Department of Justice acting on behalf of the CRB. Thus, voluntary settlements may not be easy to obtain.

Continue Reading Webcaster Settlement Act – What Does It Mean?

Today’s announcement from John McCain that he is suspending his Presidential campaign to work on issues dealing with the economic bailout, and that he will not participate in Friday’s scheduled Presidential debate if the bailout package has not been enacted, raises an interesting question about the application of the FCC’s equal opportunities rules.  If Barack Obama were to appear at the debate and answer questions, and that appearance was televised, would the stations that carried the debates later be subject to a claim for equal opportunities by the McCain campaign?  Under FCC precedent, the answer would be "yes."  Debates are exempt from equal opportunities because they constitute on-the-spot coverage of a bona fide news event – one of the exemptions from equal opportunities specified in the Communications Act.  However, as we’ve written before, debates were not always considered exempt and, at one time, if all candidates (including all minor party candidates) were not included in the debate, any excluded candidate could demand equal time.  Thus, debates rarely occurred.  In the 1970s, the FCC loosened the rules to permit debates to be covered as news events, even if minor party candidates were excluded, without triggering equal opportunities obligations – if there were reasonable, objective criteria used to determine which candidates could participate.  However, in doing so, the FCC concluded that, if only one candidate showed up for a debate, it was not a true debate, and thus not exempt from the equal opportunities doctrine.

What would this mean if a station was to cover a debate where Obama showed and McCain did not?  If the McCain campaign were to timely request equal opportunities, stations would have to provide to McCain time equal to the amount of time that Obama appeared on screen, and McCain could do anything with that time that he wanted – he would not have to answer questions from the debate moderator.  Thus, traditionally, if only one candidate shows up for a scheduled debate that is supposed to be broadcast, the debate (or at least the broadcast) is canceled.

Continue Reading If John McCain Doesn’t Show Up, Would Equal Opportunites Issues Prevent the Debate from Going On?

Tomorrow’s FCC meeting was to consider the proposal to allow AM stations to use FM translators on a permanent basis (see our post here).  However, it is not going to happen – the FCC released a Public Notice today removing that item from the agenda for tomorrow’s meeting.  While a number of other items were also withdrawn from the agenda, most of them were decisions on specific cases which are not routinely decided at open meetings, and most of these matters were decided on circulation (i.e. voted on by the Commissioners without a meeting).  Two more general items, one dealing with a simplification of AM proof of performance procedures and another with requests for reconsideration of the FCC’s noncommercial comparative standards, have also been decided on circulation (and we will report on these decisions when the decisions are released).  But the item on FM translators for AM stations was pulled from the agenda, and has apparently not been decided by the FCC.

Rumors that this item would be pulled circulated last week at the NAB Radio Show.  We have always expressed concerns that this item would be held up by pressure put on the FCC by LPFM advocates who fear more demand for FM translators from AM stations will make it harder for LPFM applicants to find open channels.  We have no idea if this is in fact the reason for the deletion of the item from tomorrow’s agenda, and will have to wait to see when the matter reappears for final consideration.

Today, the National Music Publishers Association ("NMPA"), DiMA, the RIAA and other music publishing groups issued a press release announcing a settlement of certain aspects of the current Copyright Royalty Board proceeding to determine the royalties due under Section 115 of the Copyright Act for the mechanical royalty for the reproduction and distribution of the musical work (i.e. the composition – the words and music of a song).  According to the Press Release issued by the parties, this agreement covers interactive streaming and limited-time downloads, setting a royalty of 10.5% of revenue, less any amounts due for performance royalties (to ASCAP, BMI and SESAC, which also reimburse composers of music).  While many press reports (at least some of which have already been pulled) have concluded that this is a settlement of the Internet Radio royalties proceeding – that is wrong.  The Internet radio royalty proceeding involves Section 114, not Section 115, of the Copyright Act.  Section 114 deals with a royalty paid to the performers, not the composers.  Section 114 compensates performers and the copyright holders in the performance for the public performance of their works, not for the mechanical royalty for reproduction and distribution covered by Section 115.  And Section 114 covers non-interactive streaming – where users cannot dictate the songs that they want to hear – unlike the services, on-demand streams and limited time downloads, involved in this settlement which allow users to select the songs that they want to hear.  So don’t believe what you read – the Internet radio royalties are still very much a subject of dispute, and services like Pandora are not yet saved by any sort of settlement. 

According to the press release, the one benefit to Internet radio under this agreement is that the parties conclude that there is no royalty due to the music publishers for any copies made in the transmission of non-interactive streaming.  The Copyright Office recently began a proceeding to ask if such royalties were due (about which we wrote here).  So, even  were the Copyright Office to determine that there was a Digital Phonorecord Delivery (a "DPD") made during the Internet radio streaming process, at least for the length of this agreement (assuming that it is approved by the Copyright Royalty Board), no royalty will be assessed.  We will write more about this settlement once we have seen the full terms – but wanted to post this notice to alert readers that, contrary to press reports, the Internet Radio proceeding has not been settled. 

David Oxenford spoke to the South Dakota Broadcasters Annual Convention at Keystone, South Dakota on September 29, 2008.  He addressed issues including the FCC localism and sponsorship identification proceedings, the digital television transition, the broadcast performance royalty and FCC enforcement issues. 

At the Radio and Records Convention, held in conjunction with the NAB Radio Show in Austin, Texas on September 18, David Oxenford spoke on a panel about the issue of whether a performance royalty should be paid by broadcasters for their over-the-air use of sound recordings.  Also on the panel were Dennis Wharton (NAB Executive Vice President for Media Relations), Ann Chaitovitz (Executive Director of the Future of Music Coalition) and musician Matt Nathanson.