The Commission recently issued an Order fining a Kansas broadcaster $4000 in connection with a station contest – "Guess What is in the Santa Sack."  The licensee was faulted for not giving away the prize to someone who correctly guessed what was in the sack, and for also for not broadcasting the rules of the content on the air.  Obviously, a broadcaster must comply with its contest rules and give away a prize as promised.  In fact, as the winner had to complain to the FCC in order to get her prize, broadcasters should know that, when a listener complains, they should investigate immediately, give away the prize if warranted, and avoid the FCC fine that might result if the listener does not get satisfaction and has to ask for the FCC’s involvement.  This case also reminds broadcasters that the material terms of any contest must be announced on the air on a periodic basis.

According to the FCC rules, "material terms" include those factors which define the operation of the contest and which how a listener can participate in the contest. Although the material terms may vary  depending upon the exact nature of the contest, they will generally include: how to enter or participate; eligibility restrictions; entry deadline dates; whether prizes can be won; when prizes can be won; the extent, nature and value of prizes; the basis for valuation of prizes; time and means of selection of winners; and/or tie-breaking procedures.   The broadcaster can make a good faith judgment as to how often the terms need to be broadcast .  They do not need to be broadcast every time the contest is mentioned, but should be aired often enough so that listeners can become familiar with the rules.  The complete rules should also be readily available to listeners.  We suggest that they be on the station’s website, and hard copies should also be available at the main studio and at the business locations of any principal sponsors where contest entries can be made.  As we’ve written before, this is the year of the contest gone wrong, so broadcasters must be vigilant to avoid legal problems. 

This week, the FCC released its Order on Video Franchising Requirements, setting out rules that require that municipalities timely process requests by companies for local franchises for multi-channel video systems to compete with existing cable systems.  For details of this ruling and the issues to be resolved in a Further rulemaking proceeding, you can read our firm’s advisory summarizing this Commission decision.  We wrote about the significance of this ruling in December.

This article is no longer available. For more information on this topic, see FCC Issues Emergency Communications Reminders to Broadcasters and Other Communications Entities in the Path of Hurricane Sandy 

 

Continue Reading FCC Enters Into $18,000 Consent Decree With Television Station for Not Presenting Visual Presentation of Emergency Information

Following the recent Copyright Royalty Board decision, about which we have written several times this week, many individuals and companies have asked what can be done either to reverse the decision, or to operate in a world where the decision becomes effective.   While it is much too early to access all of the options, I thought that I would outline some of the possibilities.

First, Petitions for Rehearing of the Decision can be filed by the parties to the case within 15 days of the release of the decision – by March 19.   As such a Petition asks the Board to determine that the conclusions it reached after several months of deliberation were wrong, this is an uphill battle. There is, however, a much greater possibility that the Board will clarify some of the more onerous ambiguities of the decision – such as the issue of what constitutes a "channel" or "station" to which the minimum fee attaches. 

 After Petitions for Rehearing are dealt with, the Library of Congress must publish the decision in the Federal Register. Within 30 days of such publication, parties can appeal the case to the United States Court of Appeals for the District of Columbia. The filing of a Notice of Appeal by that deadline merely starts the appellate process. The Court will establish a schedule for the case – setting dates for the filing of full legal briefs and responses to those briefs. The Court will have an oral argument after the briefs are filed. A decision will follow. In appellate cases, this process can easily take a year to complete.   In order to overturn the decision, the court must find that the decision was arbitrary and capricious – in essence that, when presented with the facts, no there was no reasonable way for the decision to turn out the way it did.  This is a high standard that must be achieved, but not one so high that appeals are never successful.  So there is always hope.

 

Continue Reading What Next for Internet Radio In Light of the Copyright Royalty Board Decision

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?