Last week, we reported on the FCC’s release of a Public Notice announcing the recomputation of new power levels for Pre-Sunrise and Post-Sunset Authority for AM stations.  These computations were done because of the change in Daylight Savings Time that goes into effect this weekend.  We’ve heard from clients, and saw in yesterday’s broadcast trade press, reports that these computations are incorrect for a number of stations – often finding interference to foreign stations where such interference should not be a concern.  While we understand that the FCC is recomputing these authorizations – if you haven’t checked the authority that you received last week, do so now, and let your Washington representatives know if you think that there is a problem, so that it can be fixed before the time change this weekend.

For weeks, there have been rumors that the FCC would soon settle allegations of payola against four of the nation’s largest radio operators.  According to an article in the New York Times, a settlement has in fact been reached – resulting in a $12.5 million fine.  Coming on the heels of the rumored $24 million settlement with Univision for violations of the children’s television rules, this may evidence a new "get tough" policy with rule violators by the FCC.

According to the Times article, the payola settlement agreement was reached at the same time as an agreement between these companies and the Association of Independent Music agreeing to devote substantial broadcast time to independent music.  The consent decree with the FCC also reportedly places a number of conditions on the broadcasters similar to those agreed to in consent decrees with then NY State Attorney General Eliot Spitzer.   We suggested a number of ways for broadcasters to avoid problems with the FCC rules dealing with payola issues in an advisory, here.  While payola has always been a serious issue – in fact one that could result in criminal time – the reported fines should make this a top-of-mind issue for all broadcasters.

As we wrote on Friday, the Copyright Royalty Board released to the parties their decision setting the sound recording music royalties for Internet radio for the years 2006-2010 – and the rates will be increasing significantly (absent success on appeal or in settlement discussions). The rates and appeal process are set out in our post on Friday.  The parties have until Monday, March 5 at noon, to request that the Board keep portions of the decision that contain confidential proprietary information out of the public record. Thus, the text of the decision is not yet public. Nevertheless, many parties are asking for more specific information about the decision and its impact. Certainly, when the decision is public, everyone will want to make their own judgments. But, until that time (which should be soon as the Board was careful to avoid using any significant amount of confidential information), I offer some observations about the decision (from my vantage point as a party who represented some of the webcasters involved in the proceeding), as well as thoughts on some of the questions that I have seen posted on various discussion boards this weekend.

First, it is essential to understand exactly what this decision covers. The Board’s decision covers only non-interactive webcasters operating pursuant to the statutory license. Our memo, here, discusses the statutory licensing scheme, and what a webcasting service must do to qualify to pay the royalties due under this statutory license. Essentially, a webcaster covered by this decision is one which 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 our memo).  Also, the webcaster cannot notify their listeners when any specific song will play. The decision does cover the Internet transmissions of the over-the-air content of most broadcast stations. 

The royalties are paid to SoundExchange – a nonprofit corporation with a Board made up of representatives of artists and the record companies. The royalties go to the copyright holders in Sound Recordings and the performers on those recordings ( the copyright holder is usually the record label. Royalties are split 50/50 – and the artist royalties are further divided 45% to the featured artist and 5% to any background musicians featured on the recording). 

The decision by the Board was the result of a long proceeding – which began in 2005. A summary of the proceeding can be found in our posting, here. Satellite radio also has to pay similar royalties, as do services that provide background music to businesses ("business establishment services"). Separate proceedings are underway to determine rates for these services.

With that background – here are some more thoughts on the decision – obviously in very summary form. The Board is charged with determining the royalty rates that would be determined by a willing buyer and a willing seller in a marketplace transaction. The Board was clear in the decision that it would look simply for evidence of what such a deal would be – it would not look at policy reasons why certain groups of webcasters (including small commercial webcasters or noncommercial webcasters) should get some special rate.

Continue Reading More on the Copyright Royalty Board Decision on Internet Radio Music Royalties

February 17, 2009 – the end of analog television.  When broadcast television stations cease their analog operations, making millions of television sets obsolete, will consumers be ready?  And how will Congress deal with the backlash if consumers are taken by surprise and their television reception disappears?  This week, these questions were being asked in Washington and elsewhere.

 At the NAB Broadcast Leadership meetings in Washington held this week, Congressman John Dingell expressed his concerns that the National Telecommunications and Information Administration (NTIA) is late in releasing guidelines for the government program that they are administering to provide subsidies to the public so that they can buy converter boxes to allow analog television sets to receive digital signals.  An article in Multichannel News gives further details on the Congressman’s comments, and provides a history of the converter box program.  The article states that the $1.5 billion allocated to the program is half what is necessary to convert the 73 million analog sets that are estimated to exist.  However, it makes the point that as digital sets are sold, the need for the converter boxes may decrease, and assumption that "the country will need to deal with a massive analog-equipment-legacy problem could turn out to be incorrect."

While that may be the case, an article in the February 28 Portals column in the Wall Street Journal (subscription required to read the article) makes one wonder how ready the consumer really will be for the transition deadline.  That article cites a study by the Leichtman Research Group which found that half of the 24 million homes with HDTV sets don’t watch HDTV because they haven’t subscribed to the necessary service from a multichannel video provider, or don’t know that they can pick up HDTV signals over the air.  About half the the viewers who are not watching HDTV don’t even know it – thinking that because they bought the set, they should automatically have HDTV pictures.  This same kind of confusion no doubt exists with respect to the DTV transition.   

Continue Reading Digital Television Takes Over in Less Than Two Years – Will the Public Be Ready?

The Copyright Royalty Board decision on the royalties for to be paid by Internet Radio stations for streaming music during the years 2006-2010 was released to the participants in the proceeding today.  And the rates are going up significantly over the next few years.  More importantly, especially for smaller entities, there are no royalty rates based on a percentage of revenue as were in effect for small webcasters under the Small Webcasters Settlement Act.  Instead, all royalties are given as a per performance number, i.e. a payment for each song every time a listener hears that song

In a 100 page decision, the Board essentially adopted the royalty rate advanced by SoundExchange (the collective that receives the royalties and distributes the money to copyright holders and performers) in the litigation.  It denied all proposals for a percentage of revenue royalty (including a proposal that SoundExchange itself advanced).  The Board also rejected any premium for streams received by a wireless service, as SoundExchange had suggested.

The rates set by the Board for commercial webcasters, including broadcasters retransmitting their over-the-air signals on the Internet, are as follows:

2006 – $.0008 per performance

2007 – $.0011 per performance

2008 – $.0014 per performance

2009 – $.0018 per performance

2010 – $.0019 per performance

The minimum fee is $500 per channel per year. There is no clear definition of what a "channel" is for services that make up individualized playlists for listeners.

Continue Reading Copyright Royalty Board Releases Decision – Rates are Going Up Significantly

At yesterday’s NAB Leadership Conference in Washington, FCC Commissioner Robert McDowell stated that he thought that broadcasters would be pleased with the outcome of the Commission’s action on the NAB proposal to allow AM stations to use FM translators to fill in holes in their coverage, or to provide nighttime coverage for daytime stations.  The Commissioner said that the proposal was working its way through the FCC.  While he would not commit to a date when action could be expected, he thought something should come out soon.  In the interim, the FCC has granted at least one AM Station Temporary Authority to use an FM translator to rebroadcast its signal – apparently as a result of a Congressional request. 

We wrote, here, about the NAB proposal when it was first advanced back in August.  Broadcasters then had hopes for quick FCC action.  While it is good news that the FCC seems to be moving on the NAB proposal, broadcasters should not think that relief for all AM stations is coming soon.  Instead, the FCC will simply release a Notice of Proposed Rulemaking, opening a formal comment window in which parties can state their support for the proposal.  There may be others who oppose the proposal – particularly the supporters of Low Power FM stations.  Given that the FCC already has an open proceeding dealing with the relationship between FM translators and LPFM stations, the proposal to give AM operators FM translators will have to be linked in some way to this other proceeding.  And, were the FCC to decide that LPFM stations have a priority over FM translators, any victory for AM stations might be hollow, as LPFM stations could preclude the operation of many FM translators.

Continue Reading McDowell: Broadcasters Will Likely Be Pleased by FCC Action on FM Translators for AM Stations – But One AM Doesn’t Wait

As we’ve written before, when Congress passed a new law extending Daylight Savings Time, AM stations that adjust power levels at sunrise and sunset would be affected.  Today, the FCC took action to adjust to those differences by announcing changes in Pre-Sunrise (PSRA) and Post-Sunset (PSSA) authority for all AM stations that have such authority.  Effective March 11, the first day of Daylight Savings Time under the new law, all stations with PSRA or PSSA have to begin operating with new parameters announced by the FCC today.

Any station operating with such authority should check the FCC Public Notice, and follow the link set out in that notice, to receive their new operating authority.  Stations should print out their new authorizations from that site, post the new PSSA or PSRA with their other operating licenses, and place a copy of the new authorization in their Public File with all of their other authorizations.  As all old PSSA and PSRA authorizations will be void as of March 11, stations should be sure to check this site and obtain their new authorizations and make sure that they are operating with the proper operating power.  With the FCC’s recent propensity to fine stations which are not in full compliance with the FCC rules and their authorizations, stations don’t want to take the risk of not operating in compliance with these new standards.

At the NAB Broadcast Leadership Conference in Washington today, Congressman Ed Markey, Chairman of the House of Representatives Telecommunications and Internet Subcommittee of the Energy and Commerce Committee, announced that the subcommittee would hold hearings on the state of radio.  These hearings would examine not only over-the-air radio, but also Internet radio, HD radio, satellite radio and other related businesses.  This comprehensive review seems to be different from the previously announced hearing by the new Congressional task force on antitrust issues which had announced plans to review the proposed XM-Sirius merger.

While Congressional hearings often lead to nothing other than an airing of the issues and information for future legislative efforts, they do indicate areas of interest that could eventually mature into Congressional legislative proposals.  A comprehensive hearing on radio issues could end up providing Congress with the information that could send it in several directions – perhaps weighing in on multiple ownership issues or on the digital radio transition, and could even prompt Congress to review any action taken on Internet radio royalties.  As we’ve written before, the Copyright Royalty Board is expected to release its ruling on the royalties for 2006-2010 in the next week.  The direction of this Congressional hearing, when it occurs, will be worth watching.

$24 Million is enough to get anyone’s attention – and a fine in that amount should wake up all television broadcasters who have grown complacent about the FCC’s enforcement of its regulations requiring television stations to broadcast three hours of weekly educational and informational programming directed to children.  According to a report in the New York Times, the FCC is expected to announce that it has agreed to a settlement with Univision that would result in a payment of that amount as a way of resolving complaints against the network’s stations about whether a claimed educational program qualified as educational and informational programming directed to children.   The settlement agreeing to pay this fine will also clear the way for the grant of the application seeking approval of the pending sale of Univision.  According to the Times report, this fine is many time higher than the highest fine ever issued by the FCC – a $9 million fine against Quest.  Certainly it dwarfs any fine for violation of children’s television rules.  The highest fine that I can recall is one that was in excess of $200,000 for several hundred violations of the FCC rules limiting the amount of advertising permitted during programming directed to children.

While many complaints have been filed in the past against television stations alleging that programs claimed as educational and informational were not sufficiently serious to warrant that label, few stations have been fined for violations of the rule, at least partially because the FCC’s standards are ambiguous.  Programming need not be strictly educational to qualify, but instead must contribute to the educational and informational needs of children, "including the child’s intellectual/cognitive or social/emotional needs."  A child is defined as anyone age 16 and under.  As programming that meets the social and emotional needs of a child of 16 may be hard to differentiate from programming directed to adults, the lines are not easy to draw.

The Univision programming at issue involved a telenovella – in essence a Spanish soap opera – about 11 year old twin sisters separated at birth who find each other and swap identities.  According to the Times report, the FCC was not convinced that the complex plot with intertwined stories provided by this program could be followed by children.  I find this reasoning hard to believe as a parent of a teenager who has had no problem following the plot of Lost and similar television programs with complex intertwined subplots – most often explaining to me what is going on.  In fact, last year there was even a book, Everything Bad is Good For You,  which argued that the complex plots now common in television programs and video games helped develop children’s cognitive abilities.  Look here for a link to many of the discussions of this book.

The Commission also apparently looked to the fact that much of the commercial matter broadcast in the program was adult-directed, undercutting the claim that the children’s educational and informational was a "significant purpose" of the program, as required by the rules.

Continue Reading A $24 Million Lesson on Children’s Educational Programming