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The week, Congressman Rick Boucher, a member of both the House of Representatives Commerce and Judiciary Committees, told an audience of broadcasters at the NAB Leadership Conference that they should accept that there will be a performance royalty for sound recordings used in their over-the-air programming and negotiate with the record companies about the amount of a such a royalty.  He suggested that broadcasters negotiate a deal on over-the-air royalties, and get a discount on Internet radio royalties.  Sound recordings are the recordings by a particular recording artist of a particular song.  These royalties would be in addition to the payments to the composers of the music that are already made by broadcasters through the royalties collected by ASCAP, BMI and SESAC.   Congressman Boucher heads the Commerce Committee subcommittee in charge of broadcast regulation, and he has been sympathetic to the concerns of Internet radio operators who have complained about the high royalty rates for the use of sound recordings.  Having the Congressman acknowledge that broadcasters needed to cut a deal demonstrated how seriously this issue is really being considered on Capitol Hill.

The NAB was quick to respond, issuing a press release, highlighting Congressional opposition to the Performance royalty (or performance tax as the NAB calls it) that has been shown by support for the Local Radio Freedom Act – an anti-performance royalty resolution that currently has over 150 Congressional supporters.  The press release also highlights the promotional benefits of radio airplay for musicians, citing many musicians who have thanked radio for launching and promoting their careers.   The controversy was also discussed in an article on Bloomberg.com.  In the article, the central issue of the whole controversy was highlighted.  If adopted, how much would the royalty be?  I was quoted on how the royalty could be very high for the industry (as we’ve written here, using past precedent, the royalty could exceed 20% of revenue for large music-intensive stations).  An RIAA spokesman responded by saying that broadcasters were being alarmists, and the royalty would be "reasonable."  But would it?Continue Reading Congressman Boucher to NAB – Accept Performance Royalty – How Much Would It Cost?

A few weeks ago, we wrote about just how outmoded the FCC’s prohibitions on the cross ownership of newspapers and broadcast stations were in an era when newspapers seem to be going out of business at an alarming rate.   We quoted a DC trade press reporter who had mused that the newspaper-broadcast cross-ownership rule could well…

In the last 5 days, the US Court of Appeals in Washington, DC has held two oral arguments on appeals from decisions of the Copyright Royalty Board – one from the Board’s decision on Internet Radio Royalties and the other on the royalties applicable to satellite radio.  The decisions were different in that, in the Internet Radio decision, the appellants (including the group known as the "Small Commercial Webcasters" that I represented in the case) challenged the Board’s decision, arguing that the rates that were arrived at were too high.  In contrast, at the second argument, SoundExchange was the appellant, arguing that the Board’s decision set royalties for satellite radio  that were too low.  But, in both arguments, an overriding question was whether the Judges on the CRB were constitutionally appointed and thus whether any decisions of the Board had any validity.  While the question was expected and specifically raised in the webcasting proceeding (see our post here when that issue was first raised), the discussion at the satellite radio argument was somewhat of a surprise, as the issue had not been raised by either party, and the Appeals Court judges were not even the same judges who had heard the Internet radio argument.  Yet one of the Judges raised the issue, unprompted by any party, by asking if the Copyright Royalty Judges were properly appointed and indirectly asking if their decision would have any validity if the constitutional issue was found to exist.

Will the Court decide the constitutionality issue, and what would it mean?  No one knows for sure.  One of the issues raised by the Court in the Internet radio case was whether the issue had been raised in a timely fashion.  In both cases, the possibility of requiring additional briefing on the issue was also raised by the Court, though no such briefing has been ordered – yet.  Even if the Court was to find that the Board was not properly appointed, there are questions as to whether the existing decisions should nevertheless be allowed to stand, while blocking new decisions until a new appointment scheme is found.  Alternatively, Congress might have to intervene to resolve the whole issue and, if it was to do that, would Congress simply ratify the current decision, or would there be new considerations that would affect any Congressional resolution?  The issue raises many questions, and we’ll just have to wait to see what the resolution will be.Continue Reading Two Court of Appeals Arguments on Sound Recording Music Royalty Rates – And the Real Question is Whether the Copyright Royalty Board is Constitutional

The FCC today released another Public Notice announcing the random audit of the EEO performance of a number of broadcast stations – listing both radio and television stations that have to respond, with stations spread throughout the country.  The FCC has promised to annually audit 5% of all broadcast licensees to assess their compliance with the FCC’s EEO rules.  These rules require the wide dissemination of information about job openings at their stations and "supplemental efforts" to educate their communities about employment opportunities at broadcast stations, even in the absence of employment openings.  The FCC’s audit letter requires the submission of two years worth of the Annual Public File reports that stations prepare each year on the anniversary date of the filing of their license renewal applications.  These reports are placed in the station’s public file and posted on their websites (if they have websites).  The FCC’s public notice about this audit emphasizes the requirement for posting the Annual Report on a station’s website, perhaps confirming rumors that we have heard about the FCC’s staffers browsing station websites to look for these reports.

Stations are given until May 4 to complete the audit responses and submit them to the Commission.  Note that information needs to be supplied not just for the station named on the list, but also for all other stations in the same "station employment unit," i.e. a group of stations under common control, that serve the same general geographic area, and which have at least one common employee.  As recent audits have led to significant FCC fines (see our story here about fines issues just before the holidays), broadcasters who are listed on this audit list should take care in preparing their responses.  The audit notice should also remind other licensees who are lucky enough to avoid having been selected for inclusion on this audit list to review their EEO programs for FCC compliance purposes, as they could very well find themselves not so fortunate when the next FCC audit is announced.Continue Reading FCC Launches New Round of EEO Audits – Highlights the Requirment for Posting Annual Report on Station’s Website

We reported on the settlement under the Webcaster Settlement Act between the NAB and SoundExchange on Internet Radio Royalties. As provided in the Webcaster Settlement Act, that settlement has now been published in the Federal Register, and thus it is available for broadcasters who are streaming their signal on the Internet, or who are streaming other programming on the Internet, to claim coverage under that settlement. To do so, broadcasters who are already streaming must file a notice of Intent to Rely on this settlement, available here, with SoundExchange, by April 2, 2009 – thirty days after the Federal Register publication occurred. Broadcasters who are not now streaming, but who start in the future, must file the election notice within 30 days of the start of their streaming, or they will be bound by the rates established by the Copyright Royalty Board in their 2007 decision (see our post here). The publication sets out several other details of the settlement, set forth below.

The rates: The rates, which represent some savings under the CRB rate for the years between 2007 and 2011, are set forth below.  These rates are "per performance", meaning that the rate is paid on a per song, per listener basis.  If you play 10 songs in an hour, and each song is heard by 10 people, you have 100 performances.  There are companies that provide services to track and report on performances.  See our post, here, for details.  There are also limited exceptions to the full "per performance" reporting, summarized below.  The rates under this agreement are as follows:

 

2006 ……………………………….. $0.0008

2007 ……………………………….. 0.0011

2008 ……………………………….. 0.0014

2009 ……………………………….. 0.0015

2010 ……………………………….. 0.0016

2011 ……………………………….. 0.0017

2012 ……………………………….. 0.0020

2013 ……………………………….. 0.0022

2014 ……………………………….. 0.0023

   2015 ……………………………….. 0.0025Continue Reading Details of the Broadcaster SoundExchange Settlement on Webcasting Royalties

In the last two weeks, we have seen Capitol Hill rallies by the Free Radio Alliance, opposing what they term the “performance tax” on radio, and yesterday by the Music First Coalition, trying to persuade Congress to adopt a performance royalty on the use of sound recordings for the over-the-air signal of broadcast stations. We’ve written about the theories as to why a performance royalty on sound recordings should or should not be paid by broadcasters, but one question that now seems to be gaining more significance is the most practical of all questions – if a performance royalty is adopted, how would broadcasters pay for it?

 The recording industry and some Congressional supporters have argued in the past that, if the royalty was adopted, stations could simply raise their advertising rates to get the money to pay for the royalty. While we’ve always questioned that assumption (as, if broadcasters could get more money for their advertising spots, why wouldn’t they be doing so now simply to maximize revenues?), that question is even harder to answer in today’s radio environment. With the current recession, radio is reporting sales declines of as much as 20% from the prior year. Layoffs are hitting stations in almost every market. In this environment, it is difficult to imagine how any significant royalty could be paid by broadcasters without eating into their fundamental ability to serve the public – and perhaps to threaten the very existence of many music-intensive stations. And the structure of the royalty, as proposed in the pending legislation, makes the question of affordability even harder to address.Continue Reading Rallies on Capitol Hill on the Performance Royalty – Who Will Pay?

In a decision released this week, the FCC granted the application of an FM station for license renewal, denying petitions filed by two former employees who contended that the station had violated a number of FCC rules.  After the FCC inspected the station and found only a few minor issues with the station’s public file…

The FCC today issued two fines to stations who violated the FCC’s rule against airing phone calls for which permission had not been received before the call was either taped for broadcast or aired live.  We’ve written about other fines for the violation of this rule, Section 73.1206, many times (see here, here, and here).  What was interesting about the new cases is that they made clear that a station needs to get permission to record or broadcast the phone call even before the person at the other end of the line says "hello."  

In one case, the station was broadcasting using a tape delay.  The station placed a call to a local restaurant and, when the person at the other end of the line said hello, the station DJ informed the restaurant employee that he was being broadcast and asked if that was OK.  The person responded "yep."  But he changed his mind later in the call.  The station claimed that, had the person not given permission, the tape delay would have allowed the call to be dumped but, as permission was given, the station continued to run with the conversation on the air. The FCC found that insufficient, as permission had not been received prior to the person saying hello.  The second case was much more straightforward – a wake up call by the station to a randomly selected phone number.  While the station immediately informed the person who answered the phone that the call was on the air – that did not happen until the recipient of the call had already said hello.  In the first case, the fine was $6000 – in the second, $3200.Continue Reading More Fines for Stations That Broadcast Telephone Conversations Without Prior Permission – Permission After “Hello” Is Too Late

In three recent cases, the FCC revisited the issue of broadcast contest rules – fining stations for not following the rules that they set out for on-air contests, and reiterating that the full rules of any contest need to be aired on the station (see our previous post on this issue here).  The most recent case also made clear that a broadcast station’s contests that may be primarily conducted on its web site are still subject to the FCC’s rules if any mention of the contest is made on the broadcast station.  Thus, even though the contest itself may be conducted on the website, with entries being made there and prizes being first announced on the site, if the station uses its broadcast signal to direct people to the site to participate in the contest or otherwise promote it, the broadcaster must announce all of the rules on the air.

In one case, a listener called a station with what she believed to be the correct answer to a question that needed to be answered to win a prize.  The listener gave the answer, only to be asked a second unexpected question that she did not answer correctly.  The next day, she heard another listener call in, answer the original question in the same way that she did – and win the prize without ever even being asked the second question.  When the first listener complained, station employees agreed that the second question was not part of the rules, but did nothing to correct their mistake until after the listener filed her complaint with the FCC.  The Commission fined the station $4000 for failing to follow the contest rules and for failing to fully publicize all of the material terms of the contest on the air. Continue Reading Broadcast Station Contests – Announce the Full Contest Rules and Follow Them

Last week, we wrote about how the Fairness Doctrine was applied before it was declared unconstitutional by the FCC in the late 1980s. When we wrote that entry, it seemed as if the whole battle over whether or not it would be reinstated was a tempest in a teapot. Conservative commentators were fretting over the re-imposition, while liberals were complaining that the conservatives were making up issues. But what a difference a week makes.

Perhaps it is the verbal jousting that is going on between the political parties over the influence of Rush Limbaugh that has reignited the talk of the return of the Doctrine, but this week it has surprisingly been back on the front burner  – in force. Senator Debbie Stabenow from Michigan said on a radio show that the positions taken by talk radio were unfair and unbalanced and that “fairness” shouldn’t be too much to ask (listen to her on-air remarks) . When prompted by the host as to whether there would be Congressional hearings or legislation, the Senator said that it would certainly be something that Congress would consider.Continue Reading Fairness Doctrine (Part 2) – Will It Return? And What’s Wrong With Fairness?