The Copyright Royalty Board today denied the Motions for Rehearing of their decision raising the royalty rate for the use of sound recordings on Internet radio stations for 2006-2010.  The Board found that the Rehearing requests did not demonstrate that there was any manifest error in the initial decision, and did not introduce any new evidence that could not have been introduced in the original hearings.  Finding that these standards for rehearing were not met, the motions were all denied.  The Board decision was brief, not addressing in any specifics the issues raised in the rehearing motions. 

The Board did, however, decide to issue two clarifications to its decision.  It decided that, for administrative convenience, they would permit royalties for a transition period to be paid on an aggregate tuning hour basis for 2006 and 2007.  For 2006, the ATH rate would be $.0123 per hour for Internet-only webcasters, $.0092 per hour for broadcasters who stream their over-the-air music programming, and $.0011 for broadcast stations which use only incidental music (e.g. news/talk and sports stations).  For 2007, those rates would rise to $.0169 for Internet-only webcasters, $.0127 for the simulcast of a terrestrial broadcast station’s signal for a music station, and $.0014 for the simulcast of a talk radio station.  These numbers appear to assume 11.5 songs per hour for broadcasters, and 15.4 songs per hour for Internet-only stations.

Continue Reading Copyright Royalty Board Denies Rehearing Motions – Next Stop, Court of Appeals

The FCC today issued a Public Notice announcing that it has approved four consent decrees settling its investigation into possible payola violations by several large radio broadcasters.  A copy of the public notice summarizing the action is available here, and copies of the full consent decrees can be found on www.fcc.gov.   

CBS Radio, Citadel Broadcasting Corporation, Clear Channel Communications, Inc. and Entercom Communications Corp. each entered into a consent decree with the Commission to end the FCC’s investigation into possible violations of the payola rules for failing to provide the required sponsorship identification related to material broadcast on the stations.  In addition to making a combined contribution of $12.5 million to the U.S. Treasury, the broadcasters agreed to implement certain business reforms and compliance measures, such as:

  • Prohibiting stations and employees from exchanging airtime for cash or items of value except under certain circumstances;
  • Placing limits on gifts, concert tickets, and other valuable items from record labels to company stations or employees;
  • Appointing compliance officers who will be responsible for monitoring and reporting company performance under the consent decrees; and
  • Providing regular training to programming personnel on payola restrictions.

The consent decrees contain a fair amount of detail regarding the documentation and monitoring that will be required by these stations under these agreements, as well as new details regarding the interaction between radio stations and record promoters.  We are preparing a full summary of the consent decrees, along with an analysis of the impact these orders may have on broadcast radio, so check back early next week. 

The FCC has just released a Public Notice providing guidance on various situations that may arise under the new simplified processing rules for changes in the city of license of AM and FM stations. These clarifications had been promised for many months, ever since the new rules became effective in mid-January.  The Public Notice sets out a number of scenarios as to when a broadcast station may change its channel or make a change in a city of license by using a Form 301 application, be processed on a first-come, first serve basis, not subject to competing applications, and when a more lengthy process must be used, requiring public notice and comment and the opportunity for counterproposals, before the change can be made. 

For those who have been involved in the filing of these applications since the January 19 effective date of the rules, and who have informally discussed these processes with the FCC, there are few if any major revelations in the Public Notice.  Essentially, city of license changes can be made on an application where the proposal moves a station from one city to another, when no new station could be located at the second city because of the licensed facilities of the station.  One clarification that had been discussed with the staff in preparation for applications already on file, and confirmed by this notice, is the fact that the new rules allow the change of channel of an existing station, at its current city of license, to a nonadjacent channel (one which is not precluded by the current station operation), using a Form 301 application, as long as there is no upgrade in facilities of the station.  Thus, a station could move from 92.1 to 105.3 (if it works under the FCC’s technical standards), without any sort of notice and comment or competing proposal.  In some cases, the station could use this process to change channels, then file an upgrade application on the new channel, and complete a non-adjacent channel upgrade through a two step process never subject to formal comment or counterproposals. 

Even for those without applications currently pending, this public notice is worth reading, as it may give the broadcaster ideas of possible changes that can be made to improve the facilities of its stations.

We have written much on the Copyright Royalty Board decision on Internet Radio Royalties, and have received many questions and comments on the decision.  To try to put all of the answers in one place, we have put together a comprehensive memo on the decision.  The entire memo can be found here. 

In the memo, we provide a background of the case, a summary of the decision, a discussion of what comes next, and answers to some commonly asked questions.  Those questions follow here, but for a full understanding of the case, we urge you to read the complete memo. 

 To whom does the decision apply? The Board’s decision covers only non-interactive webcasters operating pursuant to the statutory license. Essentially, a webcaster covered by this decision is one that operates like a radio station – where no listener can dictate which artists or songs he or she will hear (some limited degree of consumer influence is permitted, but a webcaster must comply with the restrictions set out in the Copyright statute). These restrictions forbid prior notification to the listeners of when any specific song will play, and restrict the number of songs by a specific artist that can be played. For more information on these restrictions, see our memo on Internet Radio – The Basics of Music Royalty Obligations.

Does the decision cover broadcasters who stream on the Internet? Yes, the decision does cover the Internet transmissions of the over-the-air content of broadcast stations.

Continue Reading Copyright Royalty Board Decision on Music Royalties – Clarifying the Confusion

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.