The Stephen Colbert Christmas Special begins with Colbert sitting at the piano, writing new Christmas songs.  Why?  He explains that, while he likes all of the old Christmas songs well enough, he’d only get royalties if he wrote the songs, so he’s writing his own.  In a few sentences, Colbert explains the system of broadcast royalties in the United States, and the source of the dispute over the broadcast performance royalty that took up much committee time in the last Congress, and is bound to return in the next Congress in 2009.  As Colbert explains, in the US, the composers get paid when their music is played on a broadcast station. These payments come from the the royalties that broadcast stations pay to ASCAP, BMI and SESAC, the performing rights organizations or "PROs" that represent the composers or the music publishing companies that hold the copyrights to those songs.   But, as Colbert points out, the performers do not get paid when they sing the song on the air.

We’ve written about the controversy about whether or not performers should get a royalty when a song that they perform but did not write, is played on the air.  But Colbert seems to have solved the problem about the performer not getting royalties when their songs are played on the air – simply by writing his own songs. And maybe we’ll be singing these songs at future Christmas parties, paying Colbert royalties, and at the same time explaining broadcast performance royalties to future generations.


Continue Reading Stephen Colbert’s Christmas Special Explains Broadcast Performance Royalties

The Webcaster Settlement Act, about which we write here, has been signed into law by President Bush, giving parties to the Internet Radio royalty dispute until February 15 to enter into a settlement and have it become effective, without the need for any public comment or any further government approvals.  Several recent articles have indicated that a settlement is close – for at least some of the webcasters.  In several recent statements, Tim Westergrin of Pandora has indicated that the webcasters in DiMA (the Digital Media Association), in their negotiations with SoundExchange and the record labels, were getting very close to results.  At a the Digital Music Conference held in Los Angeles last month, Jon Potter, the President of DiMA, seemed to echo that sentiment.  However, neither could state with absolute certainty when the deal would come, or what its terms would be, though in Westergrin’s comments at that conference, available here, he stated that webcasters probably would not be happy with the likely outcome of the settlement, implying that there would be a high rate that would be agreed to by the parties, though it would be one less than what the Copyright Royalty Board ordered (and one which would allow companies like his to survive).  However, he indicated that perhaps not all webcasters would be able to survive at the rate being discussed, and some might have to try to enter into their own agreements to fit other types of webcast operations.  In fact, the Webcasters Settlement Act is not limited to a single settlement, so various other parties who participated in the CRB proceeding – including broadcasters who stream their signals online, small commercial webcasters, and NPR and other noncommercial groups – could negotiate settlements as well, though there have not been any recent public statements that these negotiations were close to bearing fruit.

At a panel that I moderated at the CMJ Music Marathon later in October, which included a SoundExchange representative and a member of its Board, there was a suggestion that further settlements with groups other than DiMA might follow if and when the deal with the large webcasters is concluded.  This approach may make some sense as the copyright holders don’t want any deals that they cut with small webcasters or noncommercial parties that could affect their negotiations with larger webcasters, from whom the vast bulk of their revenues are derived.  Copyright holders naturally want to address the interests that will be the most lucrative.  However, this approach does put smaller parties, who are often most worried about potential liabilities and most sensitive to uncertainty, into a very uncomfortable position. As we’ve written before, the statutory license that is administered by SoundExchange was granted by Congress at least partially to make access to music possible, especially to smaller parties with little bargaining power and little ability to cut deals with thousands of copyright holders, which would be required without this license.  Yet these are the parties most in need of relief from the rates imposed by the Copyright Royalty Board, so we hope that the talks of future settlements in fact are accurate.


Continue Reading Is A Settlement on Internet Radio Royalties Near? Will All Webcasters Be Included and Will They Be Able to Afford It?

In the FCC’s recent Report and Order on Diversity, released earlier this year, the Commission announced new requirements for all broadcast station’s advertising sales contracts. The new FCC rule requires that all advertising contracts contain clauses ensuring that there is no discrimination based on race or gender in the sale of advertising time. This new requirement, which took effect in July, not only requires broadcasters to have these non-discrimination clauses in their advertising sales contracts, but will also require that broadcasters certify as to the existence of such clauses in their next license renewal application. Thus, to be sure that you can make such certifications, you must revise your advertising contracts to include a nondiscrimination provision, such as the one set out below, if you have not done so already. 

These new measures are intended to increase participation in the broadcast industry by businesses owned by women and minorities. The Commission was concerned that some advertising contracts include either explicit or implicit “no urban/no Spanish” dictates. Such contractual limitations, the Commission explained, may violate U.S. anti-discrimination laws by either presuming that certain minority groups cannot be persuaded to buy the advertiser’s product or service, or worse, intentionally minimizing the number African Americans or Hispanics patronizing advertisers’ businesses. 


Continue Reading FCC Rules Require Non-Discrimination Clauses in All Advertising Sales Contracts – Act Now to Avoid Trouble Later

The FCC this week issued fines to two broadcasters for issues in connection with the ownership of their stations – in one case the fine was issued simply because the broadcaster did timely not file three consecutive FCC Form 323 Biennial Ownership Reports .  In the second case, the fine was for not requesting FCC approval for a transfer of control of the licensee of the broadcast station.  These cases serve as a reminder that broadcast ownership is closely regulated by the FCC, that broadcasters need to report that ownership once every two years as required by the rules, and to seek approval before any change in control of any company that holds an FCC license.

The station that failed to file the three ownership reports was fined $6000.  As disclosed on the licensee’s license renewal application, the licensee had not filed 2001 and 2003 ownership reports at all, and filed the 2005 report late and did not put it in the station’s public inspection file.  Biennial Ownership Reports on FCC Form 323 must be filed by the licensees of AM, FM and TV station licensees once every two years, on the anniversary date of the filing of their license renewal applications by all licensees except where the licensee is an individual or a general partnership of natural persons (as opposed to a partnership that contains corporations or other business entities as partners).  We regularly send reminders to our clients about the filing of ownership reports.  For more details on the requirements for the biennial filing, see our advisory for reports that were due on August 1 here, and see our schedule of broadcast filing dates for the remainder of 2008 to see if your station has a biennial filing deadline this year). 


Continue Reading Fines for Broadcast Ownership Issues – Remember to File Biennial Ownership Reports and to Seek FCC Approval Before a Transfer of Control

decision by a US District Court in New York was just released, setting the rates to be paid to ASCAP for the use of their composers’ music by Yahoo!, AOL and Real Networks.  The decision set the ASCAP rates at 2.5% of the revenues that were received by these services in connection with the music portions of their websites.  These rates were set by the Court, acting as a rate court under the antitrust consent decree that was originally imposed on ASCAP in 1941.  Under the Consent Decree, if a new service and ASCAP cannot voluntarily agree to a rate for the use of the compositions represented by ASCAP, the rates will be set by the rate court.  The Court explained that they used a "willing buyer, willing seller" model to determine the rates that parties would have negotiated in a marketplace transaction  – essentially the same standard used by the Copyright Royalty Board in setting the rates to be paid to SoundExchange for the use of sound recordings by non-interactive webcasters (see our post here for details of the CRB decision).  The ASCAP decision, if nothing else, is interesting for the contrasts between many of the underlying assumptions of the Court in this rate-setting proceeding and the assumptions used by the Copyright Royalty Board in setting sound recording royalty rates.

First, some basics on this decision.  ASCAP represents the composers of music (as do BMI and SESAC) in connection with the public performance of any composition.  This decision covered all performances of music by these services – not just Internet radio type services.  Thus, on-demand streams (where a listener can pick the music that he or she wants to hear), music videos, music in user-generated content, karaoke type uses, and music in the background of news or other video programming, are all covered by the rate set in this decision.  Note that the decision does not cover downloads, presumably based on a prior court decision that concluded that downloads do not involve a public performance (see our post here).  In contrast, the CRB decision covered the use of the "sound recording" – the song as actually recorded by a particular artist – and covers only "non-interactive services," essentially Internet radio services where users cannot pick the music that they will be hearing.


Continue Reading Rate Court Determines ASCAP Fees for Large Webcasters – Some Interesting Contrasts with The Copyright Royalty Board Decision

The FCC Form 355 requiring "enhanced disclosure" by television stations was a frequent topic of discussion at this week’s NAB Convention in Las Vegas.  That form will require that television broadcasters report significant, detailed information about their programming, providing very detailed reports of the percentage of programming that they devote to news, public affairs, election programming, local programming, PSAs, independently produced programs and various other program categories, as well as specifics of each program that fits into these categories (see our detailed description of the requirements here).  Obviously, all broadcasters were concerned about how they would deal with the expense and time necessary to complete the forms, and the potential for complaints about the programming that such reports will generate.  At legal sessions by the American Bar Association Forum on Communications Law and the Federal Communications Bar Association, held in connection with the NAB Convention, it became very clear to me that the obligations imposed by these new rules are obligations adopted for absolutely no reason, as the Commission has not adopted any rules mandating specific amounts of the types of programming reported on the form.  In fact, one of the Commissioner’s legal assistants confirmed that, unless and until the FCC adopts such specific programming requirements, the Commission’s staff will not need to spend any time processing these forms.  Thus, if the form goes into effect, broadcasters will be forced to keep these records, and expend significant amounts of staff time and station resources necessary to complete the forms, for essentially no purpose.

Of course, public interest advocates will argue that the forms will allow the Commission to assess the station’s operation in the public interest, and will allow the public to complain about failures of stations to serve local needs.  But, as in a recent license renewal case we wrote about here, the Commission rejected a Petition to Deny against a station based on its alleged failure to do much local public affairs programming as, without specific quantitative program requirements, the Commission cannot punish a station for not doing specific amounts of particular programming. If the Commission adheres to this precedent, it will not be able to fine stations for the information that they put on the Form 355, but only for not filing it or not completing it accurately.  Thus, unless the Commission adopts specific programming requirements, the form will be nothing more than a paperwork trap for the unwary or overburdened broadcaster.  And, as is usually the case with such obligations, the burden will fall hardest on the small broadcaster who does not the staff and resources to devote to otherwise unnecessary paperwork.


Continue Reading FCC Form 355 – A Form Without a Reason?

Under the compulsory license for the use of sound recordings – the license which allows Internet radio services to use all legally recorded sound recordings by paying a royalty set by the Copyright Royalty Board – the designated collection agency can, once each year, audit a licensee to assess its compliance with the royalty requirements.  Under the law, when the collective decides to audit a company, it must notify the Copyright Royalty Board, who then gives public notice of the fact that an audit is to take place.  The Copyright Royalty Board has just announced that SoundExchange has decided to audit Last.FM.  Based on a number of public statements, SoundExchange has been citing Last.FM as an example of problems with royalties – contending that Last.FM had paid royalties of only a couple of thousand dollars a year, under the Small Webcasters Settlement Act, just before selling out to CBS for over $200 million.  Given SoundExchange’s tough talk about Last.FM, this notice of an audit is not surprising.  SoundExchange’s focus on this company illustrates the difficulty of valuing music use, and the different perceptions of music users and copyright holders as to what that value should be.

 In past years, SoundExchange has audited a number of webcasters – usually large webcasters.  As SoundExchange must bear the cost of the audit unless a significant underpayment is discovered, it is unlikely that more than a few companies will be audited each year.  However, as SoundExchange has made such a big deal of Last.FM, with witnesses on performance royalty issues mentioning it at Congressional hearings, and representatives mentioning it on various industry conferences (including SoundExchange President John Simson’s reference to the company on a panel on which we jointly appeared at Canadian Music Week earlier this month), many expected that an audit would be forthcoming.


Continue Reading SoundExchange to Audit Internet Radio Royalty Payments of Last.FM – What is the Value of Music?

In two decisions released this week by the FCC, here and here, two large broadcast group owners were admonished for failures to comply with the FCC’s EEO rules. In both cases, failures to widely disseminate information about job openings in one market were discovered by the FCC in the course of random EEO audits that selected these stations for review. In both cases, the Commission determined that the violations were serious, and imposed reporting conditions (essentially subjecting the stations to an FCC audit of their EEO annual public file reports every year for the next 3 years). And in each case, the FCC would have fined the stations for their violations, but the Commission moved too slow, as in both cases, license renewals were granted between the time of the violations and the EEO audit.  Under provisions of the Communications Act, the Commission cannot fine a station for action that occurred during a prior renewal term – so the grant of the renewals cut off the possibility of a fine in these cases.

These actions highlight the importance of complying with the Commission’s EEO rules, which we have summarized in our EEO Guide, here. In particular, in both cases, the station groups had not widely disseminated information about job openings, as required by the rules. Wide dissemination requires the use of recruitment sources designed to reach all groups within a community to allow their members to learn about the job openings at the station. The Commission’s aim is to bring into the broadcast workforce employees representing diverse groups within a community rather than hiring all their employees from traditional broadcast sources.  In these cases, the stations had used only corporate websites, on-air announcements, and word of mouth recruiting. No outside sources, or sources reasonably likely to reach the entire community, were used by the broadcasters, hence the admonition and the reporting conditions. 


Continue Reading What a Difference A Renewal Makes – FCC Admonishes Two Broadcasters for EEO Violations, Fines Would Have Followed if Renewals Had Not Recently Been Granted

As we wrote earlier this week, the FCC is to consider at its meeting next Tuesday a Report on the results of its "Localism" proceeding, and a Notice of Proposed Rulemaking seeking public comment on the findings contained in the Report.  From rumors going around Washington today, that Notice may ask for comments on tentative findings that would roll back of much of the broadcast deregulation of the last 25 years.   Rumors are that the Commission will be issuing "tentative conclusions" determining that the FCC should re-impose specific ascertainment requirements of some sort (requiring that broadcasters regularly meet with specific types of community leaders to get their input on station programming).  Also, the Commission will tentatively conclude that there should be quantitative programming requirements – that each station do a specific amount of local programming and perhaps specific amounts of news, public affairs other types of programs each week. If a licensee does not meet the requirements, the station’s license renewal application would not be granted routinely by the FCC’s staff, but instead would be subject to an additional level of scrutiny by the full Commission. The Commission is also apparently proposing that it return to the old rules that all stations have a manned main studio during all hours of operation. There is reportedly also a proposal that stations report to the FCC about how they decide what music they play.

Staring in the early 1980s, the FCC did away with many of the specific, detailed programming requirements that had previously bound broadcasters.  These requirements were quite burdensome, especially for small stations and stations in small markets with limited staffs.  Rather than spending their time on broadcast operations, station staff had to make sure that their operations met programming standards imposed from Washington, dictating the government’s ideas of what was good for the station’s audience, even if the station might feel, because of its format or the demographics of its audience that a particular type of programming did not serve the needs of its community.  In the mid-1980s, the FCC concluded that these rules were no longer necessary, as it was concluded that there was enough media diversity that the marketplace would dictate that broadcasters serve their audiences with appropriate content that met the needs of that audience as, if they did not, some other broadcaster would.  The economic incentive of the fear of the loss of audience to a competitor who better served the public was deemed enough to insure that the broadcaster acted responsibly.
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Continue Reading Moving Forward Back to 1980 – The FCC Set to Conclude that Specific Public Interest Obigations are Required for Broadcasters

In an unusually contentious FCC meeting, the FCC adopted rules that promote Low Power FM ("LPFM") stations seemingly to the detriment of FM translators and improvements in the facilities of full-power FM stations.  While no formal text of the decision has yet been released, the Commission did release a Public Notice summarizing its action.  However, given the lack of detail contained in the Notice as to some of the decisions – including capping at 10 the number of translator applications from the 2003 FM translator window that one entity can continue to process and the adoption of an interim policy that would preclude the processing of full-power FM applications that created interference that could not be resolved to an existing LPFM station – it appears that the Press Release was written before these final details were determined.  And given that the two Republican Commissioners dissented from aspects of this order supported by their Chairman (and also dissented on certain cable items considered later in the meeting), one wonders about the process that resulted in the Republican chairman of the FCC voting with the two Democratic Commissioners on an item that in many respects favors LPFM stations to the detriment of existing broadcast operators.

In any event, specific decisions mentioned in today’s meeting include:

  • Treating changes in the Board of Directors of an LPFM station as minor ownership changes that  can be quickly approved by the FCC
  • Allowing the sale of LPFM stations from one non-profit entity to another
  • Tightening rules requiring local programming on these stations
  • Maintaining requirements that LPFM stations must be locally owned, and limiting groups to ownership of only one station
  • Limiting applicants in the 2003 FM translator window to processing only 10 pending applications each, and requiring that they decide which 10 applications to prosecute before any settlement window opens (the two Republican Commissioners favored allowing applicants to continue to process up to 50 applications)
  • Adopting an interim policy requiring that full-power FM stations that are improving their facilities in such a way that their improvement would interfere with an LPFM station to work with the LPFM to find a way to eliminate or minimize the interference.  If no resolution could be found, the full-power station’s application would not be processed (which we have expressed concerns about before)
  • Urging that Congress repeal the ban on the FCC making any changes that would eliminate protections for full power stations from third-adjacent channel interference from LPFMs


Continue Reading FCC Meeting Adopts Rules Favoring LPFM, Restricting Translator Applications, and Possibly Impeding Full Service FM Station Upgrades