Last week, FCC Commissioner Michael O’Rielly was in the news for sending a letter to the major record labels asking for information about their practices in paying broadcast stations for airing the label’s music.  The letter follows correspondence last year between the Commissioner and the RIAA (the Recording Industry’s trade group) asking for similar information, which the RIAA claimed that it did not have.  This process began after a Rolling Stone magazine article suggested that “payola” was still a common practice in the broadcast industry.  These actions, and the press reports that followed, raise a couple of interesting questions including what the FCC rules are on payola, and how broadcast practices compare to those of online companies.

The Communications Act prohibits the practice of “payola” by requiring, in Section 317, that when any content is aired on a station in exchange for anything of value, the station must disclose that “consideration” has been paid by the person or entity that pays for the consideration.  Thus, “payola” arises when a broadcast station employee or contractor receives or is promised anything of value in return for putting any content on the air, and that payment is not disclosed to the public.  Payola usually occurs when someone makes a gift or payment to a person involved in station programming (i.e., station employees, program producers, program suppliers) in exchange for favorable on-air exposure of a product or service.  While the term “payola” is most often associated with the receipt by a station announcer or music director of money, trips or other value for playing songs on the station, the same prohibition applies whenever any station programming personnel receive anything of value in exchange for airing any content where a sponsorship identification is not broadcast.  For examples of fines for airing programming for which consideration was received without acknowledging the receipt of valuable consideration, outside the context of music, see our articles here, here and here
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The Pureplay Webcasters settlement agreement, which we summarized here, was published in the Federal Register on Friday, starting the 30 day clock running for the election of the deal by existing webcasters.  While this deal offers better per performance rates to large webcasters than offered by the rates established by the Copyright Royalty Board, and higher permissible listening levels to Small Commercial Pureplay webcasters than allowed under the Microcaster deal, this option still is not for everyone.  For larger webcasters, there is a minimum fee of 25% of total revenue, so companies with multiple lines of business will not want to opt into the deal.  For smaller webcasters, the fees are higher than under the Microcaster deal, including a $25,000 minimum yearly fee, and there are per performance rates that are charged when the webcaster offers services that are "syndicated," i.e. played through a website other than that of the webcaster itself.  So electing this deal is right only for larger "small pureplay" webcasters who have revenues over $250,000 (where they will be paying royalties in excess of the $25,000 minimum fee under any deal) and those entities nearing the audience caps of the Microcaster deal.  Nevertheless, for those webcasters who fit within the constraints of the deal, it offers benefits over the other existing options.  The opt-in date set by the deal is August 17, 2009.  The forms to opt into the the Small Pureplay webcasters agreement are here.  The forms for larger Pureplay webcasters are here

Note that this is just one of many options available to webcasters, each tailored to webcasters of specific types.  Noncommercial webcasters associated with NPR or the Corporation for Public Broadcasting have their own deal, where essentially CPB pays the royalties.  See our description of this deal, hereStreaming done by broadcasters, who would not want to take the "pureplay" deal as their broadcast revenues would be subject to the royalties, have their own settlement agreement, which we described here and here, setting out per performance rates different than those arrived at by the CRB.  Small commercial webcasters can elect the "Microcaster" deal, which we described here.  And for those entities that don’t fit under any of these categories, they will have to pay the CRB rates, which we described here and here.  The Radio and Internet Newsletter recently ran a good, basic summary of these alternatives, here.  Note that there still is another two week period where, under the Webcaster Settlement Act of 2009, agreements can be reached with SoundExchange by other webcaster groups to potentially pay rates that are different from any of those agreed to so far.


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