Update – February 25, 2009 – The change in fees did not become effective as planned – see our post here

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Months ago, the FCC announced that the fees paid by broadcasters (and other services) for the processing of applications and other filings would be going up.  It was only recently that the notice was published

Yesterday, we briefly wrote about the FCC’s release of a notice summarizing the process that television stations need to follow as they transition to digital under the newly extended DTV conversion date.  In yesterday’s post, we promised a more detailed memo summarizing the requirements that the FCC has set out.  That advisory is now available here

The battle over the broadcast performance royalty has begun anew, with the introduction of legislation to impose a performance royalty for the use of sound recordings on broadcast stations.  This royalty would be in addition to the royalties paid to ASCAP, BMI and SESAC (which go to compensate composers of music), as this royalty would be paid to the performers of the music (and the copyright holders in the recorded performance – usually the record companies).  The statement released by the sponsors of the bill cites numerous reasons for its adoption – including the facts that most other countries have such a royalty, that satellite and Internet radio have to pay the royalty, and that it will support musicians who otherwise do not get compensated for the use of their copyrighted material.  The NAB has countered with a letter from its CEO David Rehr, arguing that musicians do in fact get  compensation through the promotional value that they get from the exposure of their music on broadcast stations.  The 50 state broadcast associations also sent a resolution to Congress, taking issue with the premises of the sponsors – citing the differences in the broadcast systems of the US and that of other countries where there is a performance royalty, and arguing that broadcasting is different from the digital services who have a greater potential for substitution for the purchase of music.  What does this bill provide?

The bill introduced this year are very similar to the legislation proposed last year (which we summarized here); legislation that passed the House Judiciary Committee but never made it to the full House, nor to the Senate.  Some of the provisions of this year’s version include:

  • Expansion of the public performance right applicable to sound recordings from digital transmissions to any transmission
  • Royalties for FCC-licensed noncommercial stations would be a flat $1000 per year
  • Royalties for commercial stations making less than $1.25 million in annual gross revenues would pay a flat $5000 per year.  There is no definition of what constitutes "gross revenues," and how a per station revenue figure could be computed in situations where stations are parts of broadcast clusters
  • Excludes royalties in connection with the use of music at religious services or assemblies and where the use of music is "incidental."  Incidental uses have been defined by Copyright Royalty Board regulations as being the use of "brief" portions of songs in transitions in and out of programs, or the brief use of music in news programs, or the use in the background of a commercial where the commercial is less than 60 seconds – all where an entire sound recording is not used and where the use is less than 30 seconds long
  • Allows for a per program license for stations that are primarily talk
  • Establishes that the rates established for sound recordings shall not have an adverse effect on the public performance right in compositions (i.e. they can’t be used as justification for lowering the ASCAP, BMI and SESAC rates)
  • Requires that 1% of any fees paid by a digital music service (such as a webcaster, or satellite radio operator) for the direct licensing of music by a copyright owner (usually the record company) be deposited with the American Federation of Musicians to be distributed to non-featured performers (background musicians), while the distribution of any fees to the featured performer be governed by the contract between the performer and record company
  • Requires that any 50% of any fees paid by a radio station for direct licensing of music be paid to the agent for collection of fees (i.e. SoundExchange) for distribution in the same manner that the statutory license fees are distributed (45% to the featured performer, 2.5% to background musicians, and 2.5% to background vocalists)


Continue Reading Broadcast Performance Royalty Battle Begins Anew – Bills Introduced in the House and Senate

The House of Representatives, after a fairly contentious debate, today passed the Bill extending the termination date for analog service by full-power TV stations, extending the Digital Television deadline until June 12.  By that date, all full-power stations will need to complete the transition to digital so that, on June 13, there will be no

As we wrote on Friday, the Senate has passed the Bill that would extend from February 17 to June 12 the deadline for full-power television stations to transition to digital operations.  This leaves the House of Representatives to once again consider the matter – supposedly in committee on Tuesday and perhaps by vote of the full House as early as Wednesday.  In preparation for that consideration, there have been conflicting letters released by Congressmen supporting the bill and those who are oppose.  The opponents claim that the ability of TV stations to transition before the end date, an option that was important to Senate Republicans who unanamously supported the extension of the transition date, may not in reality exist.  The supporters of the bill point to the over 1.85 million people who are on the waiting list for the $40 coupons to be applied against the cost of DTV converters to allow analog televisions to receive digital signals after the transition.  What do these letters add to the debate?

The Republican Congressmen leading the charge against the delay of the transition suggest in their letter that the ability of TV stations to transition before an extended June 12 DTV deadline is largely illusory, as they imply that most stations cannot transition until the last day because of interference concerns.  They have asked the FCC to immediately provide information about how many stations would be precluded from a transition until June 12 if the date is extended.  From our experience, while there are some stations that need to delay their DTV transition until some other station has changed channels, we would be surprised if most stations are precluded from doing so.  Many stations are simply going to continue on the channels on which they are currently operating their DTV transitional facilities.  Thus, if they are already operating their DTV stations on their post-transition channel, by definition they are not suffering from any preclusive interference issues.  And the vast majority of the remaining stations are planning to operate after the transition on their current analog channel which itself, in most cases, is free from interference as the analog operation would have in most cases precluded other stations on interfering channels from operating in too close a proximity to the area served by the station.   We are aware of many stations ready to transition early even if the deadline is extended until June 12, and we would think that these stations had reviewed their situations before deciding to do so, and would have been aware of interference concerns in preparation for their February 17 changeover.  In some cases they may have coordinated an early change with any station that would have presented an interference issue.  Thus, we would be surprised if the FCC report prepared for these Congressmen finds a great number of stations that will be forced to wait until June 12 to do their digital conversion even if they are inclined to make the change early.

Continue Reading Will the House Pass the DTV Extension? – Dueling Congressional Letters Take Opposing Positions

While it seems like we just finished the election season, it seems like there is always an election somewhere.  We are still getting calls about municipal and other state and local elections that are underway.  And broadcasters need to remember that these elections, like the Federal elections that we’ve just been through, are subject to the FCC’s equal time (or "equal opportunities") rule.  The requirement that lowest unit rates be applied in the 45 days before a primary and 60 days before a general election also apply to these elections.  "Reasonable access," however, does not apply to state and local candidates – meaning that stations can refuse to take advertising for state and local elections (unlike for Federal elections where candidates must be given the right to buy spots in all classes and dayparts on a station), as long as all candidates for the same office are treated in the same way. So stations can take ads for State Senate candidates, and refuse to take ads for city council, or restrict those ads to overnight hours, as long as all candidates who are running against each other are treated in the same way.

One issue that arises surprisingly often is the issue of the station employee who runs for local office.  An employee who appears on the air, and who decides to become a candidate for public office, will give rise to a station obligation to give equal opportunities to other candidates for that same office – free time equal to the amount of time that the employee’s recognizable voice or likeness appeared on the air.  While a station can take the employee off the air to avoid obligations for equal opportunities, there are other options for a station.  See our post here on some of those options.

Continue Reading Reminder: Equal Time and Lowest Unit Rate Rules Apply to State and Municipal Elections

The oral argument on the Webcasting appeal of the March 2007 Copyright Royalty Board decision setting Internet radio sound recording royalty rates for 2006-2010 has now been set for March 19.  So, if no settlement under the Webcaster Settlement Act (about which we wrote here) is reached before the February 15 deadline set out

Last week, the FCC issued several fines to noncommercial broadcasters who had underwriting announcements that sounded too commercial.  In these decisions, the Commission found that the stations had broadcast promotional announcements for commercial businesses – and those announcements did not conform to the FCC’s rules requiring that announcements acknowledging contributions to noncommercial stations cannot contain qualitative claims about the sponsor, nor can they contain "calls to action" suggesting that listeners patronize the sponsor.  These cases also raised an interesting issue in that the promotional announcements that exceeded FCC limits were not in programming produced by the station, but instead in programs produced by outside parties who received the compensation that led to the announcement.  The FCC found that there was liability for the spots that were too promotional even though the station itself had received no compensation for the airing of that spot.

The rules for underwriting announcements on noncommercial stations (including Low Power FM stations) limit these announcements to ones that identify sponsors, but do not overtly promote their businesses.   Underwriting announcements can identify the sponsor, say what the business of the sponsor is, and give a location (seemingly including a website address).  But the announcements cannot do anything that would specifically encourage patronage of the sponsor’s business.  They cannot contain a "call to action" (e.g. they cannot say "visit Joe’s hardware on Main Street" or "Call Mary’s Insurance Company today").  They cannot contain any qualitative statements about the sponsors products or services (e.g. they cannot say "delicious food", "the best service", or "a friendly and knowledgeable staff" ).  The underwriting announcements cannot contain price information about products sold by a sponsor.  In one of the cases decided this week, the Commission also stated that the announcements cannot be too long, as that in and of itself makes the spot seem overly promotional and was more than was necessary to identify the sponsor and the business that the sponsor was in.  The spot that was criticized was approximately 60 seconds in length. 

Continue Reading FCC Fines for Noncommercial Stations Having Underwriting Announcements That Were Too Commercial – Even Where the Station Received No Money

The FCC last week issued a decision that should make Buyers think twice in determining how sales of broadcast stations are concluded – especially in the days of $325,000 potential fines for indecency violations.  In the case decided last week, the Commission concluded that the licensee of a broadcast station was liable for fines for violations

The Copyright Royalty Board today published a notice in the Federal Register announcing the start of its next proceeding to set the royalties to be paid by Internet radio operators for the performance rights to use "sound recordings" (a particular recording of a song as performed by a particular performer) pursuant to the statutory royalty.  As we’ve written extensively on this blog, the statutory royalty allows an Internet radio station to use any publicly released recording of a song without the permission of the copyright owner (usually the record company) or the artist who is recorded, as long as the station’s owner pays the royalty – currently collected by SoundExchange.  In 2007, the Copyright Royalty Board set the royalties for 2006-2010, a decision which prompted much controversy and is still under appeal.  In the Notice released today, the CRB set February 4 as the deadline for filing a Petition to Participate in the proceeding to set the royalties for the next 5 year period.

The 2006-2010 royalties are currently the subject of negotiations as the parties to the last proceeding attempt to come to a voluntary settlement to set royalties that are different than those established by the CRB decision.  The Webcasting Settlement Act (which we summarized here) gives webcasters until February 15 to reach an agreement as to rates that would become an alternative to the rates that the CRB established.  The Act also permits parties to reach deals that are available not only for the 2006-2010 period, but also allows the deals to cover the period from 2011-2016.  Thus, theoretically, webcasters could all reach agreements with SoundExchange to establish rates that cover the next royalty period, obviating the need for the proceeding of which the CRB just gave notice.  But, as is so often the case, those settlements may not be reached (if they are) until the last minute – so parties may need to file their Petitions to Participate before they know whether a settlement has been achieved.

Continue Reading Here We Go Again – Copyright Royalty Board Announces Date for Filing to Particpate in Proceeding to Set Webcasting Royalties for 2011-2015