A decision that noncommercial broadcasters should note was released by the Commission last week. The decision was one that upheld a 2012 consent decree where, to resolve objections against the sale of a noncommercial radio station owned by the University of San Francisco, the Media Bureau imposed a fine of $50,000 for a pre-sale LMA which paid the licensee more than the costs of the operation of the station (we wrote about that case and a similar case resolved earlier this year, here). While last week’s decision did not tread any new ground, the fact that the full Commission upheld a determination that a $50,000 fine was an appropriate sanction for a noncommercial station that entered into an LMA that paid it more than its out-of-pocket expenses reinforces the importance of assessing the consideration paid to any noncommercial broadcaster for the sale of programming time on their stations. A noncommercial station can accept funds sufficient to reimburse it for the costs of its operations during the time that the program aired, but it cannot receive more than that reimbursement in the way of compensation for programming time.

As we wrote in January following the release by the FCC of a similar decision, with a similar fine, in another case where a noncommercial licensee was paid more than its expenses by an LMA programmer, the FCC does not want noncommercial stations to be looked at as revenue generating operations for their licensees. If the station is paid for programming, any payments should simply cover station expenses. Last week’s decision looked at other issues too.
Continue Reading FCC Upholds $50,000 Penalty for Noncommercial LMA Where Licensee Paid More than its Operational Expenses

A consent decree, requiring $50,000 payment to the FCC by the licensee and programmer of a noncommercial radio station, demonstrates two potential problem areas for broadcasters involved in LMA or Time Brokerage (TBA) arrangements.  First, for noncommercial licensees it makes clear that the programmer cannot be paying the licensee any more for the programming time on the station than the costs of operation of the station itself – the licensee cannot “profit” from the LMA payments and use money for other non-broadcast activities of the licensee.  Second, for any party engaged in an LMA, it is important for the licensee to maintain control over station operations – even if the bulk of the programming is coming from its LMA partner.

The lesson of this case for the noncommercial licensee is that an LMA can’t be looked at as a revenue-generating activity for the licensee.  In this case, the licensee received significant LMA payments that were about twice the amount of the actual costs of its operation of the station.  These excess payments were to be credited to the ultimate purchase price of the station should the programmer choose to exercise an option at the end of the LMA term.  However, these payments were apparently not characterized as option fees, but instead as LMA payments.
Continue Reading $50,000 Penalty for LMA Operations – No Payments in Excess of Expenses for Noncommercial Licensees, and a Reminder that Licensee Must Remain in Control