The Presidential election in 2008 seemingly has a record number of candidates who will apparently have a record amount of money to spend on political advertising.  One would think that broadcasters would be celebrating their likely share of this spending.  While broadcasters will no doubt be the recipients of much political spending, the timing of this election’s early primaries may also present problems – as political advertising will be running during the broadcasters’ busiest advertising season – the period between Thanksgiving and Christmas.  Many of the largest states are now planning a primary in early February, meaning that the lowest unit rate window for political advertising, which begins 45 days before a primary or caucus, will become effective the weekend before Christmas.  And for those states with earlier contests (Iowa, New Hampshire, Nevada and South Carolina), the lowest unit rate period will be in effect for much of December.

Of potentially more concern will be the fact that candidates will be entitled to reasonable access to the airwaves even before the lowest unit rate periods begin.  Under FCC rules and policies, once a candidate is legally qualified to be on a ballot in a state (or for President, once he or she is qualified in ten states, the candidate is qualified in every state), the candidate is entitled to reasonable access to all "classes and dayparts" of advertising time offered by a station.  While the determination of how much time is reasonable is in the discretion of a station, that discretion is not absolute.  Stations must provide at least some time in all dayparts to all qualified candidates for President who request such time, so this may put a strain on commercial inventory in the pre-Christmas period in many states with hotly contested Presidential primaries or caucuses.

Continue Reading Early Presidential Primaries May Present Christmas Season Problems for Broadcasters

Today’s Los Angeles Times contains an article about FCC Chairman Kevin Martin’s policy of holding a series of open hearings on possible changes to the FCC’s multiple ownership rules.  The article contrasts this policy to that of previous Chairman Michael Powell, who held only one hearing and was criticized by many "public interest" groups for a lack of openness in the proceeding when the 2003 ownership proceeding loosened the ownership rules in several respects.  The article notes that times have changed in many respects – that many companies previously interested in a relaxation of the rules now no longer care – citing divestitures of Disney/ABC and CBS of broadcast holdings in recent months.  Of course, the Tribune Company may still have newspaper-broadcast cross ownership issues that need to be resolved (particularly as grandfathering issues may well come to the forefront as the company seeks FCC approval for its planned transfer of control), and other newspaper companies have similar interests.  The article does not mention the other area where many broadcasters are still very interested in regulatory relief – the extension of TV duopoly into smaller markets where the economics of TV station operation, and the increased costs of the digital conversion, have caused many to desire a relaxation of the prohibitions against owning more than one TV station in these markets.

The other issue not addressed by the article is the timing of any decision on the ownership rules.  While the Commission has committed to the public hearings, they are supposed to continue for the remainder of 2007, thus putting any decision off until 2008.  And will the FCC want to risk a possibly controversial decision in a Presidential election year?  We think not – so a decision postponed until after the election may well be one decided by a different Commission. 

 

Last Monday, briefs were filed by the parties addressing the motions seeking rehearing of the Copyright Royalty Board’s decision to dramatically raise the royalty rates paid for the use of a sound recording on an Internet radio station.  In its briefs opposing each of the webcasters’ rehearing motions, SoundExchange took a very aggressive position challenging the very right of the webcasters to raise their rehearing points.  Following the filing, SoundExchange issued another press release, quoting its President John Simson, "just because you don’ like the outcome of a fairly played game doesn’t mean that you should ask the referee to order the game to be replayed."  In fact, what the webcasters are really doing is asking for an instant replay review of an alleged winning touchdown.  Webcasters are arguing that the "officials" were mistaken in their initial determination, including arguments that the principal basis of the CRB decision, reliance on a SoundExchange expert witness who derived a model for determining what the royalties for noninteractive Internet radio should be based on what parties pay for music use in the interactive marketplace, was a fundamentally flawed model contradicted by one of SoundExchange’s own expert witnesses in the satellite radio royalty proceeding which is currently underway. 

SoundExchange spent much of its briefs challenging the right of the webcasters to raise their arguments – claiming that the webcasters should have raised their arguments at an earlier stage of the proceeding, that the webcasters’ arguments lacked supporting evidence, and even suggesting that the Broadcasters had breached the "protective order" in the satellite radio proceeding against the use of confidential material when the Broadcasters offered the evidence of the conflicting expert in the satellite radio proceeding.  Each of the webcasting parties amplified their arguments about various aspects of the decision – small webcasters suggesting that the Board should have recognized an "opt-in" category of webcasters who would pay royalties based on a percentage of their total revenue (avoiding many of the issues that the Board found with trying to compute a percentage of revenue for an entity that had multiple business lines), all webcasters challenging the $500 minimum fee per channel, and each arguing that there needed to be an aggregate tuning hour metric on which to compute royalties.  And, as set forth above, most interestingly, there was a fundamental issue raised by the Broadcasters, who discovered that a witness presented by SoundExchange in the CRB proceeding involving the royalties for satellite radio contradicted the premises of the SoundExchange expert in this proceeding on which the Board placed its greatest reliance in reaching its decision.

 

Continue Reading Briefs Filed With Copyright Royalty Board on Internet Radio Royalty Rehearing – SoundExchange Cries Foul

The FCC announced that it will open a window for new noncommercial FM stations and major changes in noncommercial stations – with all applications to be filed between October 12 and October 19.  This is the first filing window to be opened for new noncommercial stations in almost 7 years, so the demand for these channels will no doubt be high.  The FCC’s Public Notice just announces that the window will open, but does not provide any specifics – which are promised in a later public notice.

There are many issues that will need to be discussed in any subsequent notice.  First, the Notice released today indicates that the window will cover applications for stations in the noncommercial reserved band  – between 88.1 and 91.9 on the FM band.  However, since the last noncommercial window, the FCC has also reserved a number of allotted channels in the commercial band for noncommercial use – and these do not appear to be covered by the window notice.

Also, there have been discussions of the possibility of limiting applicants to a certain number of applications, or taking other actions to restrict the number of applications for these channels.  With the new point system adopted by the FCC since the last filing window, local applicants are favored over national groups that may file applications – so if applications are limited, these national groups may well be effectively foreclosed from obtaining any channels in the window, as the choice of  a limited number of channels may end up forcing these applicants to pick channels where there are local applicants who will prevail in any point system analysis.

We will see how this window develops in the coming months. 

The Sacramento radio contest gone wrong, which led to the death of a contestant, will apparently not lead to any criminal liability for the station or its employees, according to press reports including one in the San Francisco Chronicle, here.  However, as the standards for a criminal prosecution are higher than those for a finding of civil liability, this may not be the last that we hear about this contest.  A complaint is also pending before the FCC about the matter.

We wrote about some of the problems that can arise with contests, here.  Stations should be careful planning and executing any contest.  A company planning a contest should research state law, to be sure that everything is being done is in compliance with all local requirements, and any necessary registrations are filed or local permits obtained.  The rules of the contest must be spelled out, anticipating every eventuality to the extent possible, carefully followed, and publicized (including the requirement for FCC licensees that the principal rules be broadcast on air – see our post here).  And, of course, try to anticipate the participants’ possible actions while trying to participate, and avoid situations where the contest could create any dangerous situations.  In this day and age, there is much to consider in planning a simple contest in a manner that avoids potential liability.

Effective on Monday, April 2, the Washington DC office of Davis Wright Tremaine LLP that was located at 1500 K Street has changed locations.  We are joining our colleagues from the law firm that was formerly known as Cole Raywid & Braverman, and moving into their office at the following address:

Davis Wright Tremaine LLP, 1919 Pennsylvania Avenue NW, Suite 200, Washington, D.C. 20006-3402

New phone numbers for our broadcast attorneys will also be in place starting on Monday.  Those include the following new direct dial numbers:

David Oxenford  202-973-4256            Robert Corn-Revere  202-973-4225

David Silverman  202-973-4200           Bryan McGinnis  202-973-4285

Ronald London  202-973-4235              Brendan Holland  202-973-4244 

Karen Ross  202-973-4269                    Amber Husbands  202-973-4219

The main office number is 202-973-4200.  The fax is 202-973-4499.

Please update your contact information, as calling the old phone numbers will just give you a recording. 

The FCC yesterday released a Public Notice announcing that the new Form 340 – Application for Construction Permit for Noncommercial Station – has been approved and is now effective.  This is the revised form that allows noncommercial FM stations operating in the educational reserved band to file for city of license changes as minor changes, rather than having to wait for major change filing windows – which historically have been rare for noncommercial operators.  So, noncommercial FM licensees who have been contemplating city of license changes – or commercial licensees looking at noncommercial city of license changes to "back fill" for their own proposed city of license change applications – are now free to file. 

Commercial FM operators have been free to file city of license changes as minor changes since January 19.  Many such applications have been filed, and they are being quickly processed by the FCC. For details about the new city-of-license-change procedure, see our posts here and here. 

In a recent press release, Clear Channel Communications announced an agreement with mSpot Radio to provide the programming of over 100 Clear Channel radio stations to mobile phone users.  Interestingly, this announcement comes in he thick of the battle over the new royalty rates for the streaming of music on the Internet.  In recent pleadings seeking rehearing of  the decision of the Copyright Royalty Board setting those rates, SoundExchange (the collective that collects the royalties on behalf of Copyright owners and musicians) raised only one issue.  The sole issue on which SoundExchange requested clarification was whether the royalties that were recently adopted would apply to mobile phone transmissions of programming containing music. 

A brave move in light of the current royalty decision – one perhaps reflecting the desire to have radio programming everywhere a listener wants it, or one that foresees revenues from the wireless phone companies compensating the parties for the costs involved.  It will be interesting to see how this roll out of radio stations on mobile phones progresses.

The FCC yesterday approved the sale of the stock of Univision Communications to a consortium of private equity companies.  In order to approve the deal, the FCC agreed to a $24 million dollar payment to the US Treasury by Univision as part of a consent decree for alleged violations of the children’s television rules.  The consent decree, attached to the FCC decision on the sale, while providing for one of the largest fines ever paid to the FCC, provides little guidance to broadcasters on what constitutes educational and informational programming directed to children, the source of the violation found by the FCC. But the separate Statement of Commissioner Copps raises a new issue – one he looks for the FCC to study and report on – the effect of private equity and debt on the ability of broadcasters to operate in the public interest. 

The Copps opinion suggests that the debt incurred in connection with acquisitions by private equity companies may impair the ability of broadcast stations to operate in the public interest, as money needed for operations is instead funneled into debt repayment.  Of course, private equity firms are not the first owners of broadcast companies to incur debt, nor is there any evidence that I have seen that private equity companies which own broadcast companies have proportionally more debt than other broadcast owners.  What would the FCC hope to accomplish through such an investigation?  I can’t see the FCC evaluating each transaction that comes before it to determine if the proposed debt structure would be too much of a burden on the operations of a station.  Nor could I foresee the FCC putting broadcast ownership restrictions on certain classes of otherwise qualified potential broadcast owners.

Continue Reading Follow the Money and Find the Public Interest?

Two press releases on the Internet radio music royalty controversy were issued late last week from groups appealing to musicians  – and they couldn’t have been more different in tone.  The Future of Music Coalition, a group dedicated to voicing the opinions of musicians and citizens on Washington policy decisions regarding copyright and technology issues, released a well considered  position statement finding that webcasters – especially small commercial webcasters and noncommercial entities – "represent a rich and diverse set of listening opportunities" which provide opportunities for musicians by exposing listeners to music that is not heard elsewhere.  FMC suggests that multiple tiers of licensing are necessary so that all kinds of webcasters can continue to exist (unlike the one size fits all scheme adopted by the Copyright Royalty Board).  FMC urges SoundExchange and the webcasters to come to a settlement that will preserve webcasting while fairly compensating musicians.

By contrast, SoundExchange argues in its press release that some webcasters are acting in bad faith in arguing that the rates are too high – and are "engaged in a campaign of misinformation about the process, the decision itself, and the impact of the decision on the participants."  The Press Release itself is subtitled "Suggests Some Webcasters Not Telling the Truth About the Royalty Process."  The release promises an attached summary of the Board’s decision but, at the time of this posting, that summary was not apparent on the SoundExchange website.  The only misrepresentation cited by SoundExchange is the claim by webcasters that the process which arrived at the rates was unfair.  However, as pointed out by editor Kurt Hanson (a client of mine in this proceeding) on the Radio and Internet Newsletter site, here, a decision that overlooks its real world effects can fairly be characterized as being unfair.  Information about the real economics of the industry, which SoundExchange may not have appreciated, demonstrates that unfairness.

Continue Reading A Tale of Two Press Releases – Who Is A Musician to Believe?