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In a recent decision, the FCC adopted new rules for AM station proofs of performance that make the process much simpler.  We wrote about this proposal when it was advanced, here.  The order adopted a week ago allows stations installing new series fed AM directional antennas to avoid the time-consuming and expensive process of…

We’ve previously written about the value of music in connection with the royalties to be paid by Internet Radio and the performance royalty (or "performance tax" as it’s labeled by the NAB) proposed for broadcasters. One of the questions that has always been raised in any debate about royalties, and one often dismissed by the record industry, is to what extent is there a promotional value of having music played on the radio or streamed by a webcaster.  In discussions of the broadcast performance royalty, record company representatives have suggested that, whether or not there is promotional value of the broadcast of music, that should have no impact on whether the royalty is paid. Instead, argue the record companies, the creator of music deserves to be paid whether or not there is some promotional value. The analogy is often made to sports teams – that the teams get promotional value by having their games broadcast but are nevertheless paid by stations for the rights to such games. The argument is that music should be no different. That contention, that the artist deserves to be paid whether or not there is promotional value may be tested in connection with what was once thought to be an unlikely source of promotional value for music – the video game Guitar Hero.

Guitar Hero, in its various versions released over the last few years, has proven to be a very effective tool for the promotion of music – with various classic rock bands experiencing significant sales growth whenever their songs are featured on a new version of the game. The use of a sound recording in a video game is not subject to any sort of statutory royalty – the game maker must receive a license negotiated with the copyright holder of the recording – usually the record company.  In previous editions of the game, Guitar Hero has paid for music rights. However, now that the game has proved its value in promoting the sale of music, the head of Activision, the company that owns the game, has suggested in a Wall Street Journal interview that it should be the record companies that are paying him to include the music in the game – and no doubt many artists would gladly do so for the promotional value they realize from the game. Continue Reading Will Guitar Hero Show the Promotional Value of Music and Change the Music Royalty Outlook?

We’ve written much about the FCC Localism proceeding and the potential for some resolution of that proceeding in the near term. At the NAB Radio Show, held the week before last, FCC Chairman Kevin Martin suggested that broadcasters should voluntarily agree on a localism plan before there is any change in the administration at the FCC, suggesting that a future FCC may be less willing to compromise than the current one. Of course, a voluntary plan does not mean a code of conduct that broadcasters could unilaterally adopt and voluntarily agree to abide by, but instead it appears to be a request for standards that are voluntarily agreed to by broadcasters and then turned into some version of mandatory rules by the FCC. In a recent article in TV Newsday, some details of what the Chairman would like to see, and what he has apparently suggested to several state broadcast associations, are set out.

According to the article, a significant piece of the Commissioner’s suggested plan would include a requirement (or an option) for broadcasters to meet a mandatory localism obligation by funding investigative journalism conducted by journalism schools at various universities throughout the country. Apparently, stations that funded such journalism, or which aired the stories produced, would get some sort of localism credit. But what would this mean, and how would it impact broadcasters?Continue Reading FCC Seeks Solution on Localism – What’s Being Requested?

Both the House and the Senate have now approved the Webcaster Settlement Act of 2008, which will become law when it is signed by the President. Just what does this bill do? It does not announce a settlement of the contentious Internet Radio royalty dispute, about which we have extensively written here. It does not change the standard for judging Internet radio royalties, as had been proposed in the Internet Radio Equality Act, introduced last year and now seemingly dead in the waning days of this Congress, and in the Perform Act, about which we wrote here (the IREA and the Perform Act proposed different standards – the first more favorable to webcasters and the second more favorable to SoundExchange). These issues will seemingly be left to be disputed in a future Congress. Instead, the Webcaster Settlement Act seems to only adopt a simplified process for the approval of settlements that may be reached by the parties on or before February 15, 2009 – a settlement process that had been previously used in the Small Webcaster Settlement Act (the language of which this bill amends).

What is the significance of these new settlement processes? Under current law, any settlement between any group of webcasters and SoundExchange could only be binding on the entire universe of sound recording copyright holders if that settlement was approved by the Copyright Royalty Board. If an agreement is not binding on all copyright holders, then the reason for the statutory royalty – being able to pay one entity and get access to all the music in the world – would not be met.  The current procedures for approving settlements seem to contemplate such settlements only before a decision on royalties is reached by the CRB.   While some have speculated that the Court of Appeals that is currently considering the CRB appeal could remand the case to the CRB to effectuate a settlement and force the CRB to address it, that is by no means certain. For instance, the large webcasters, through their organization DiMA, reached a settlement with SoundExchange to cap minimum fees at $50,000 per webcaster. In their briefs filed with the Court of Appeals, both DiMA and SoundExchange have asked the Court to remand that aspect of the case to the CRB for adoption – yet that request has been opposed by the Department of Justice acting on behalf of the CRB. Thus, voluntary settlements may not be easy to obtain.Continue Reading Webcaster Settlement Act – What Does It Mean?

Today, the National Music Publishers Association ("NMPA"), DiMA, the RIAA and other music publishing groups issued a press release announcing a settlement of certain aspects of the current Copyright Royalty Board proceeding to determine the royalties due under Section 115 of the Copyright Act for the mechanical royalty for the reproduction and distribution…

In a recent article in Silicon Valley Insider, TargetSpot’s CEO, Doug Perlson, suggests that the financial savior of Internet Radio might be payola – taking money from record companies or artists to play their songs.  Putting aside any issues of the financial benefits of such a plan, and the creative and aesthetic issues that pay for play may raise, and since this is a blog written by lawyers, we’ll deal with the legal implications.  And as lawyers, we’re forced to play the spoilsport.  As set forth below, such a scheme can be done legally (just as it could be on terrestrial radio with the proper disclosures).  But, while there has been no legal enforcement of such activities, careful Internet radio operators would best be advised to be careful about just taking the money and playing songs, but instead should make some disclosure of the nature of the service that they are providing.

The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a "radio" service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.Continue Reading Payola on Internet Radio – Legal?

A recent proposal to increase the power levels at which HD Radio stations operate – to improve coverage and, perhaps more importantly, building penetration so that people can receive digital channels inside buildings – has been the subject of a cautionary study released by National Public Radio.  That study was summarized in a story in the NPR magazine Current (an executive summary can be found here, and the entire 280 page study is here).  The study agrees that an increase in power suggested by the recent proposal would increase HD Radio coverage and significantly increase building penetration, but it would do so only at the cost of causing interference to existing analog stations – in some cases significant interference.  Such interference would be especially troublesome in receivers in cars, where radio broadcasters have long concentrated some of their most important programming to capture people in the place where competing entertainment options are most limited.   

The NPR study does suggest that there could be ways to limit the interference using directional antennas or lessening power but using digital boosters that could be tuned slightly off-center on their frequencies to protect adjacent channel stations.  HD radio operates on the sides of a station’s analog channel (thus its original name – "IBOC" for In-Band On-Channel), thus potentially causing interference to adjacent channel stations.  By suppressing the signal on the side of the signal nearest to the adjacent channel station and sending the digital bits out of the other side of the channel, some of this interference could be minimized.  Yet systems capable of such protections have not yet been fully developed.Continue Reading NPR Study Suggests Concerns With Increase in HD Radio Power

The FCC recently issued a Notice of Inquiry, asking if it should consider mandating that XM Sirius receivers also be able to receive HD Radio or to play material from other audio sources.  This proceeding was promised as part of the FCC’s approval of the XM-Sirius merger, as a potential way of ensuring that competition in the audio entertainment marketplace remained robust after the merger.  While the Commission required that XM Sirius allow manufacturers to build receivers that could incorporate HD Radio or other audio entertainment technologies (e.g. MP3 player, Internet connectivity, etc), it did not require that any receiver contain such technology.  This proceeding asks if any sort of requirement along these lines should be adopted.  It also seeks information generally about the audio entertainment marketplace.

Specific questions posed by the FCC in this proceeding include:

  • Would a mandate promote lower prices and more choices for consumers of audio entertainment?
  • Should it be expected that audio devices with multiple audio entertainment capabilities will be developed without an FCC mandate?
  • Would an XM Sirius radio with HD Radio capability promote dissemination of state-level EAS messages?
  • How well has HD Radio been developing on its own?
  • Would multi-function devices facilitate the development of HD Radio?
  • Are such devices necessary for the development of HD Radio?
  • What other public interest benefits, if any, would result from such a combinations?
  • What technological issues would there be in multifunction devices (e.g. manufacturing cost, battery life, size and weight, interference, etc.)?
  • If a requirement was adopted, how long would any required phase-in period need to be?
  • Should any requirement cover all radios, or just certain types (e.g. in-car, portables, home receivers, etc)?
  • Does the FCC have the authority to adopt any such mandate?

That last issue, the FCC statutory authority to adopt rules in this area, is a general question considered in several other recent FCC proceedings (for instance, see out post here).  Just because the FCC might think that something is a good idea does not mean that it can adopt rules in an area.  Rules requiring that equipment manufacturers take certain actions have run into problems in the Court of Appeals in the recent past as the FCC has only limited jurisdiction over such manufacturers, so any mandate here will need careful justification or perhaps even a specific statutory mandate.Continue Reading FCC Begins Inquiry on Mandate for HD Radio on XM Sirius Receivers

Last week, the FCC released a Public Notice asking for comments on whether it should begin a Section 403 investigation into the use of Arbitron’s Portable People Meter ("PPM").  A coalition of broadcast groups, the "PPM Coalition," principally comprised of broadcasters providing service to minority communities, sought the investigation as a way of delaying the implementation of the PPM technology next month in a number of large broadcast markets.  In their request, which can be found on the Minority Media and Telecommunications Council website, the PPM Coalition argues that the investigation is justified based on the Commission’s objectives (and various administrative and legislative mandates) to improve minority ownership in broadcasting.  The PPM Coalition contends that methodology problems in PPM implementation result in artificially low ratings for minority owned stations.  These parties argue that, if the system is implemented, a number of minority-programmed stations will disappear.  Arbitron has argued that the Commission does not have the jurisdiction to regulate ratings services (who are obviously not FCC licensees) or the methodology that they use.  Comments on the request for an investigatory hearing are due on September 24, and replies on October 6 (two days before the PPM system is to be implemented in eight markets).

Section 403 of the Communications Act gives the Federal Communications Commission the power to conduct investigations of any complaint of any violation of its rules or of provisions of the Communications Act, or to explore any other matter relating to the provisions of the Act.  Such investigations are often conducted before an Administrative Law Judge, but can be conducted before the Commission itself, and allow the FCC to use full discovery techniques (e.g. document production requests and depositions) and to conduct an evidenciary hearing.  In the past, the process was used much more frequently.  It has been used both to investigate specific complaints of possible misconduct by individual licensees, and to conduct broader inquiries into business practices in a regulated industry to decide if FCC regulation was necessary.  For instance, in the 1960s, there was an investigation into network practices to determine if those practices required FCC action to regulate the network-affiliate relationship.  In recent years, the power has been rarely used, and when used has tended to relate to specific allegations of misconduct to determine if the FCC should bring some sort of enforcement action against a regulated entity.Continue Reading FCC Seeks Comment on Whether to Begin Investigation of Arbitron PPM – How Far Does FCC Regulatory Power Extend?

The Digital Television conversion has allowed the FCC to reclaim significant portions of the TV spectrum for wireless and public safety uses – television channels above 51 will no longer be used for broadcast TV at the end of the analog to digital transition.  But, as part of the FCC’s Diversity proceeding (see our post here), a proposal dealing with the other end of the TV spectrum is being considered – whether to remove Channels 5 and 6 from the television band and instead use these channels for FM radio.  These channels are adjacent to the lower end of the FM band.  Because of this adjacency, the existence of TV Channel 6 in a market can limit the use of the lowest end of the FM band (used for Noncommercial Educational stations) to avoid interference to the TV station.  Similarly, Channel 6’s audio can be heard on many FM radio receivers, a fact that has recently been used by some LPTV operators to use their stations to deliver an audio service that can be received by FM radios (see our post on this subject).  In comments filed in the Diversity proceeding, parties have taken positions all across the spectrum – from television operators who have opposed using the channel for anything but television, to those suggesting that the channels be entirely cleared of television users and turned into a digital radio service.  Proposals also suggest using the band for LPFM operations, and even for clearing the AM band by assigning AM operators to this band to commence new digital operations.

In comments that our firm submitted on behalf of a group of noncommercial FM radio licensees who also rebroadcast their signals on a number of FM translator stations, we suggested that Channel 6 could provide a home for LPFM operations, instead of trying to squeeze those stations into the existing FM band.  There are currently proposals to squeeze more LPFM stations into the FM band by supplanting some FM translators (see our summary of some of those proposals here).  In these comments in the Diversity proceeding, we pointed out that, as there are currently radios on the market that receive 87.9, 87.7 and even 87.5, using these three channels for LPFM service would provide an immediate home to these stations, and far more opportunity for than LPFM would have in the already congested FM band.  These opportunities would exist even in most of the largest radio markets in the country, except in the handful of markets where a Channel 6 television station will continue to operate after the digital transition.  By adopting this proposal, the service that would be provided by FM translators would not be threatened. Continue Reading What to Do With TV Channels 5 and 6 – Proposals to Turn Them Over to Radio Services