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

While the FCC Commissioners are in Harrisburg, Pennsylvania today holding the third of the Commission’s promised six field hearings on multiple ownership, an interesting story was published yesterday, announcing an unofficial "town meeting" of consolidation critics in Columbus, Ohio on March 7.  While these unofficial meetings have become a staple of the broadcast landscape, they traditionally feature one or both of the FCC’s Democratic Commissioners.  What makes this upcoming hearing unique is that Commissioner McDowell, one of the Republican Commissioners, will also be in attendance.

Perhaps Commissioner McDowell is simply a fan of the ambiance of the Ohio state capital, but his attendance could signal something more.  The appearance of a Republican Commissioner at one of these events is rare.  Commissioner McDowell has established a bit of a reputation as an independent thinker, holding out from participation in the FCC’s consideration of the AT&T/Bell South merger despite intense pressure from his Republican colleagues to ignore what he perceived as a potential conflict that he had from previous employment, and reportedly showing reluctance to back the Chairman on television multicast must-carry rules.  Does his participation at this meeting signal anything on his position on the multiple ownership proceeding other than curiosity and open mindedness on his part?  Only time will tell.

By now, everyone knows that XM and Sirius have announced plans to merge into a single nationwide satellite radio service provider.  This plan is, of course, subject to approval of the FCC.  The NAB has announced plans to oppose the merger, and Congress today scheduled hearings on the matter, to be held next week.  The obvious issues to be considered by the Department of Justice and the FCC will be whether the merger will be anti-competitive and whether it will serve the public interest.  But there are numerous other legal issues, possibly affecting other FCC proceedings, that may well come out of the consideration of this merger.

For instance, the merger raises the question of whether satellite radio is a unique market that should not be allowed to consolidate into a monopoly, or whether there is a broader "market" for audio programming encompassing not only satellite radio, but also traditional over-the-air radio, iPods, Internet radio, and other forms of audio entertainment.  While the opponents of the merger may argue that satellite radio is a unique market, such a finding may affect the broadcast multiple ownership proceeding, where some broadcasters are advancing arguments similar to the satellite companies in hopes that the FCC will loosen multiple ownership restrictions. 

Another issue that seemingly will be raised by the merger is how important a la carte programming is to FCC Chairman Martin.  The Chairman has been pushing both satellite and cable television companies to allow consumers to purchase only the channels that they want rather than whole packages of channels.  He has argued that consumers could save money by buying only the channels that they want, and consumers could also avoid programing that they don’t want (like adult oriented content).  Service providers have countered that forcing the unbundling of program tiers will make it economically unfeasible to offer many of the more niche program channels.  Published reports indicate that part of the merger proposal to be advanced by the satellite companies may include a proposal for a la carte pricing.  Thus, this case may show how important the Chairman really believes such offerings are – and whether that offering may help tilt the public interest considerations in the proceeding.

Continue Reading XM and Sirius – The Issues Beyond the Issues

Today’s New York Times carried an article announcing that the Mitt Romney campaign is planning to run advertising spots for his Presidential campaign in five states – at least 10 months before the first contest for delegates to the Republican presidential nominating convention.  With this first purchase of political time in what promises to be a very active political advertising cycle, broadcasters need to be ready to meet the requirements of the FCC’s political broadcasting rules.

While the lowest unit rate provisions of the rules do not kick in until 45 days before a primary or 60 days before a general election, most of the other political rules apply as soon as you have a legally qualified candidate.  A candidate for President is legally qualified in every state for FCC purposes once he or she is qualified in 10 states.  So that may very well be soon, as some states have minimal requirements for qualification on the primary ballots.

Once a candidate is qualified, equal opportunities, reasonable access (for Federal candidates), no censorship, and public file obligations are applicable to all spots purchased by that client.  Disclosure requirements as to price and other terms for spot sales also are required, so stations should be getting their political disclosure statements dusted off, updated and ready for presentation when a political candidate’s campaign committee comes calling for spots.  It seems early to start thinking of political obligations for next year – but the time is already here.

Two interesting stories in major national newspapers highlight the attention that the content of broadcast programming is receiving from regulators – both at the FCC and in Congress.  One story, in the Washington Post, reveals a draft FCC report suggesting that the FCC could regulate violent programming in the same way that it regulates indecent programming, if Congress gives the FCC statutory authority to do so.  In another story, appearing in the Wall Street Journal, critics suggest restrictions on when ads for Viagra and other similar medications could be run on television.  That story also mentions pending legislation to restrict all consumer-directed advertising dealing with prescription drugs. 

Obviously, these proposals for regulation would strike hard at broadcasters – particularly television broadcasters.  Pharmaceutical advertising has become big business for TV companies.  Sure, we’ve probably all felt uncomfortable at times when a Viagra ad runs in a program we are watching with family members.  But should the government pass laws restricting the the advertising of legal products?  Should we shield viewers from information about these products?  In other contexts, the Supreme Court has struck down restrictions on liquor and legal gambling ads.  How would restrictions on legal drugs fair?

And we all know how well the FCC has done in setting out the limits on indecent programming.  Where would lines be drawn on violent programming?  How does one even define violent programming?  For instance, many of the most popular programs on television are medical programs (e.g. Grey’s Anatomy, ER, House).   All feature very detailed and sometimes disturbing visuals of medical procedures – though rarely are there detailed depictions of what most people would characterize as "violent" actions – shootings, stabbings, etc.  Would these medical shows fall under any restrictions?  And how would rules deal with broadcasts such as "Saving Private Ryan," which has already received a dispensation from the FCC for its indecent content which, in other programs, would have resulted in FCC fines.  Would its violent content also receive such a pass?

 

Continue Reading Violence and Viagra – More Content Regulation on the Way?

Trade press reports yesterday and today announced that the Clear Channel spin-off of a number of its small market radio properties is continuing, with bids due on February 23.  While this is not the end of the process, as the bids will have to be analyzed, and then the high bidders will have further diligence and bidding opportunities before any sale is complete, it does demonstrate that the process is moving forward, and that the 448 stations that Clear Channel plans to spin off will be sold later this year.  As has been announced, there may well be additional spin-offs of larger market stations that cannot be held by Clear Channel under the revised multiple ownership rules when and if its transfer of control to the private equity buyers takes place.  What impact will these sales have on the FCC’s on-going proceedings – particularly the multiple ownership proceeding?

Whenever media consolidation critics discuss the consolidation that has occurred over the last 10 years, one of the biggest issues is always the 1000 plus stations owned by Clear Channel.  If a significant number of those stations are divested, and some end up in the hands of new owners, how will the critics react?  While, as we have written here before, the multiple ownership proceeding is not one we expect to be resolved any time soon, these sales, and those that we have seen in recent weeks by of other large radio and television companies spinning off non-core stations in smaller markets,  may even reduce the pressure on the FCC to act on the multiple ownership proceeding – as more owners will have more opportunities to bid and perhaps buy broadcast stations.  Once again, a reason to conclude that we should not look for any decision in the multiple ownership proceeding any time soon.