While recent press reports talk about the growth of Internet Radio and the increasing presence of terrestrial radio companies on the net, the amount of the music royalties that will have to be paid by Internet radio companies for the 2006-2010 period remains unresolved.  The trial phase of the proceeding to set the rates, held before the Copyright Royalty Board, is now completed, and the upcoming decision of the Board may have a profound impact on the economics of the Internet radio industry.  Final briefs in the case were filed with the Board in December, and an oral argument was held on Thursday, December 21.  With the completion of the argument, the decision is now in the Board’s hands, and the amount of the royalties for the use of the sound recordings will be decided by the Board on or before March 4. 

In the on-line world, and in most digital communications channels other than over-the-air digital broadcasts, a royalty for the use of the "sound recording" (the actual recording made by a particular artist) must be paid in addition to the royalty for the use of the composition (i.e. the underlying words and music) that is paid to ASCAP, BMI and SESAC.  Our summary of the royalty rates that Internet radio stations should currently be paying can be found on our firm’s website, here.  As we make clear in that memo, the rates that are currently being paid expired at the end of 2005, so the rates that are adopted in the current proceeding will be retroactive to January 1, 2006.

The proceeding to determine the new rates has been underway for more than a year.  Written cases were filed by the parties in October 2005.  Discovery, including depositions and document discovery, took place in the early part of 2006.  A trial began in May and lasted through the first week in August, with a rebuttal phase that ended the week after Thanksgiving.

Continue Reading Copyright Royalty Board to Decide Internet Radio Music Royalties By March 4

This article is no longer available. For more information on this topic, see FCC Releases New EAS Manuals Explaining Obligations for Broadcasters and Video Providers 

The FCC Order announcing a simplification of the procedures for changing cities of licenses of radio stations, and the modification of procedures for amending the FM Table of Allotments, was published in the Federal Register today.  Thus, the new rules will become effective in 30 days, on January 19.  The freeze on FM allotment changes that has been in place for the last year and a half will be lifted on that date.

Substantial questions remain about how these new rules will be implemented in practice.  Informal conversations with FCC staffers have indicated that further explanations of the procedures may be forthcoming.  Issues in the new rules include the fact that only 4 stations may be changed in any single, interrelated filing, which may hamper some of the larger, more complicated facilities changes that have become common over the last few years – and which allow many stations to improve their facilities through interrelated changes. 

There are also issues with city of license changes for noncommercial FM stations, as the new rules as written limit city of license changes to situations where the 1 mv/m contour of the station when moved would overlap with some part of the 1 mv/m service area of the station as currently licensed.  In other services, the limits are that the move must be mutually exclusive with the present facilities (e.g. the interfering and protected contours of the stations would overlap). 

Continue Reading New City of License Change Rules Effective January 19

In an Order released today, the FCC extended the time for filing reply comments in its multiple ownership proceeding to January 16.  Those comments were initially due later this week.

The extension came in response to a seemingly reasonable request filed by Media General, asking that the comment deadline be extended until after the FCC issues the results of the studies that it is conducting on various issues associated with the proceeding, assessing the impact of media consolidation on the public interest.  Seemingly, that would make sense – to give the parties the opportunity to comment on the findings of these studies and what impact these findings would have on the issues at stake in this proceeding.  But the Commission denied that request, but nevertheless extended the filing period until January 16.

No doubt, even though the comment date was not extended, comments will still be filed on the studies – though they may have to be submitted as "ex parte" filings – informal comments that can be submitted throughout the course of the proceeding, even after the formal comment deadlines have passed.

The FCC released its Public Notice setting out the agenda for its next meeting to be held on December 20.  Included on the agenda is a Report and Order and Further Notice of Proposed Rulemaking on video franchising reform.  According to press reports, the FCC’s consideration may include timelines requiring local franchise authorities to act quickly on requests for new franchises, limits on franchise fees and build-out requirements, and perhaps some requirements that cable programming be made available to new franchisees.  If adopted, these rules may hasten the introduction of cable television-like services by the telephone companies. 

TV broadcasters are very anxiously watching this proceeding, as well as similar reform measures proceeding in many states and on Capitol Hill, as many believe that the existence of competing multichannel video providers give broadcasters more leverage in retransmission consent agreement negotiations.  Already, where broadcasters have tried to hold out for some consideration in retransmission negotiations, the existence of DirecTV and the Dish Network have often become crucial places to direct viewers for their network TV service if that service is taken off a cable system when retransmission consent negotiations break down.  Having more multi-channel video competitors as outlets for its programming may make a television station more bold in holding out in cable retransmission consent negotiations.  More competitors may also make cable systems more reluctant to take the chance of losing a network affiliate because the system refuses to pay consideration in return for retransmission consent.  Thus, the FCC’s actions this coming week, while having nothing to do directly with television stations, may nevertheless be very important to their future. 

While you may not be able to say the "F-word" on broadcast TV, you can on cable TV.  And apparently they will – as the Court of Appeals has agreed to televise the oral arguments on the appeals of the FCC fines levied against Fox for broadcast of the Billboard Music Awards and NBC for its airing of the Golden Globes.  Both of these fines arose because the broadcasts featured one of those words that you’re not supposed to say on TV.  The Court granted permission for C-Span to broadcast next week’s oral arguments in these cases.

However, broadcast TV seems, so far, unwilling to take the risk.  According to a Broadcasting and Cable report, no broadcast network has asked C-Span for the rights to rebroadcast their coverage.  Perhaps, until these decisions are released, the broadcasters fear that a Court of Appeals oral argument will somehow be mistaken by the FCC for something that "describes or depicts sexual or excretory functions."  As one who has participated in Court of Appeals arguments, that mistake would seem highly unlikely, but the FCC’s policy seems to fine first and ask questions later.  So, with the concern of FCC action restraining the broadcast networks, the 15% of the country without access to cable or satellite television in their homes will be safe from exposure to this potentially profane court argument. 

Today’s news in the broadcast business seems to be that Google, which has been announcing for months that it was going to start selling broadcast advertising time – may actually now be selling that advertising.  Stories this week, like those in CNet or in the Washington Post, focused on the test marketing of radio ads by Google in a few radio markets.  While many in radio debate the business wisdom of an on-line auction of broadcast advertising time, the arrival of the electronic marketplace seems to arrived.  But is the FCC ready for this development?

We’ve written before about the impact of on-line sales on political broadcasting rules, and our take on how these ads should be treated, but the FCC has not yet given any definitive guidance on their treatment for lowest unit rate purposes.  Does the fact that an on-line advertiser does not know the identity of the specific station on which he is buying advertising mean that the ad should not be counted when the station tries to figure its lowest unit rate?  Or does the ad need to be packaged with ads on other stations to qualify  as a "network spot" exempt from lowest unit rate considerations on individual stations?  Or will the FCC give all on-line ad purchases a pass from such consideration?  Perhaps by the time that political spots for the 2008 election start running (probably in less than a year for some Presidential candidates), these issues will be resolved.