Articles Posted in Sponsorship ID & Payola/Plugola

Published on:

Having spent a good portion of last week on the road and on conference calls talking about the latest Performance Tax developments, I heard a lot from broadcasters on the subject. For those blissfully unaware of this legislative battle, the recording industry has been seeking a financial parachute from broadcasters to help slow the rate of its descent into an economic abyss. The irony of course is that if illegal music downloads on the Internet are what has caused the recording industry’s plunge, reaching out to drag broadcasters into the abyss with them merely weakens an ally in the battle to protect content from illegal distribution over the Internet.

Famously dubbed a performance “tax” by broadcasters, the legislation sought by the recording industry would require broadcasters to pay royalties to the recording industry for playing music on-air. Beyond the obvious short term benefit of royalty checks from broadcasters that choose to retain a music-based format, the recording industry hopes the passage of a U.S. law requiring such royalties for broadcasts in the U.S. will cause foreign countries to release royalties already being collected for airplay of U.S. artists in those countries. Unfortunately, because most of the record companies are now foreign-owned, much of that money, along with royalties paid by U.S. broadcasters, would wind up in foreign hands, undercutting any argument for this “found money” being an economic benefit in the U.S. All of the royalty funds would come from the U.S., but only a portion of those funds would stay in the U.S. However, one would hope that at least some of those royalties, if they do come to pass, would actually reach the U.S. artists responsible for creating the music that the recording industry has been selling and reselling to us over the years.

Broadcasters have been successful in blocking Performance Tax legislation because of good grass roots efforts to remind Congress that radio promotes the sale of music at no charge to the record labels or to the artists that have ridden radio airplay to fame (and whose records and concert tickets continue to sell because of radio airplay). The long, sordid history of payola — the record labels’ efforts to curry airplay via cash and other payments to radio station programmers — supports broadcasters’ proposition that the “value” of radio airplay exceeds any “costs” it imposes on the recording industry.

It was therefore with great surprise that many radio broadcasters heard last week that negotiating teams for the two industries were floating a multi-part proposal to resolve the legislative impasse — a compromise that would require, for the first time, that artist (as opposed to songwriter) royalties be collected on broadcast airplay of music. While the proposal has some attractive features for broadcasters (most importantly the inclusion of FM receiving chips in cellphones), I got an earful from broadcasters absolutely incensed at the notion of promoting music and concert sales, and then being charged for doing it.

If any member of Congress thinks that “radio promotes music sales” is just a broadcaster talking point for meetings, encountering a broadcaster last week would have decisively corrected that impression. Some broadcasters I talked to had such a visceral reaction to the very concept of such payments that it didn’t matter to them what the beneficial points of the proposal were. For them, it was as if someone had told them to “pay the ransom to the kidnappers and hope for the best.” Some appreciated that it could be the pragmatic thing to do to put the issue behind them, but still found the very concept reprehensible. To be sure, there is money involved and that can sway a person’s thinking. However, a number of the broadcasters I spoke with were so fundamentally opposed to the concept that they would reject the idea even if other parts of the proposal actually resulted in more money coming in from the proposal than going out.

I understand that perspective, but lawyers are trained to assess the options, and to assist their clients in choosing the best option for that client. Often, but not always, the “best” option is the one most economically beneficial to the client. Here, some broadcasters are not interested in the economics, but in the unfairness of being forced to pay a performance royalty as any part of the package. Despite that, all broadcasters should give the compromise proposal a careful look, if only to sharpen their understanding of the numerous issues in play and how they might affect the future of radio broadcasting. There are any number of reasons why the proposal might not gain momentum, or even be possible given the dynamics of Washington, and I hope to address those in a future post. For now, radio broadcasters should suppress the instinct to reflexively ignore it, and instead talk to their colleagues and counsel about the issues this proposal raises for their future, and for the future of their industry.

Published on:

Topics include:

  • FCC Imposes a Reduced $17,500 Fine on Wyoming Commercial AM/FM Station Combo for Multiple Violations
  • Pennsylvania TV Station Fined $32,000 for Violating FCC’s Sponsorship ID Rule
  • Licensee Fined $13,000 for Antenna Structure Violations
  • FCC Fines California Noncommercial FM Station $9,000 for Failure to Properly Maintain a Public Inspection File

FCC Imposes a Reduced $17,500 Fine on Wyoming Commercial AM/FM Station Combo for Multiple Violations
The FCC has released a Forfeiture Order asserting that the licensee of a Wyoming AM/FM station combination failed to maintain an operational EAS system, failed to consistently prepare and include programs/issues lists in its public inspection file, and failed to operate a wireless radio service station from its authorized location. Specifically, the FCC’s Order cited Sections 11.35, 11.52(d), 11.61(a), 73.3526(e)(12), 1.903(a), 1.929 and 74.532(e) of the FCC’s Rules, which require broadcasters to use common EAS protocols, ensure operability of EAS equipment, conduct regular tests of a station’s EAS system to ensure such operability, prepare and include quarterly programs/issues reports in the public inspection file, and operate wireless radio service facilities as specified in their current authorizations.

Continue reading →

Published on:

August 2009
The volatile combination of broadcast employees concerned about their income and job security, and cash-strapped businesses looking for cheap and effective ways to promote themselves in difficult economic times, creates an unusually fertile ground for payola and plugola violations. Complicating matters are state efforts to prohibit “payola” activities that are legal under federal payola law. Even being accused of payola can be devastating to a broadcaster, and stations must be extremely diligent in uncovering and preventing payola and plugola violations.

Payola is the undisclosed acceptance of, or agreement to accept, anything of value in return for on-air promotion of a product or service. It is forbidden by Sections 317 and 507 of the Communications Act of 1934, and by Sections 73.1212 (broadcast) and 76.1615 (cable) of the FCC’s Rules. Its sibling, Plugola, occurs when someone responsible for program selection promotes on-air a venture in which he or she has a financial interest without disclosing that interest to the station licensee and to the public. A payola or plugola violation by an employee usually results in the employer violating the FCC’s sponsorship identification rule as well.

Continue reading →

Published on:

7/16/2009
As the sources of content available to the public proliferate, attracting and retaining an audience grows more challenging. A common strategy is to use provocative or “attention-getting” on-air elements to increase station awareness among media-saturated listeners and viewers. However, stations must be mindful of the numerous legal restrictions on content, particularly given that illegal on-air content can garner fines as high as $325,000 per violation. In addition, certain types of illegal on-air content can subject a broadcaster to civil and criminal liability, as well as loss of its license.

Introduction
Familiarity with the FCC’s rules regarding on-air content is not optional for on-air talent, station programmers or station management. In most cases, editorial judgments made in advance, especially in the case of syndicated or pre-recorded programming, can prevent illegal content from reaching the air. It is therefore important that those involved in airing broadcast programming be up-to-date on the boundary lines that the FCC and the courts have drawn to distinguish legal from illegal on-air content.

Continue reading →

Published on:

4/13/2007
The FCC today released four Orders adopting Consent Decrees with CBS Radio, Citadel Broadcasting Corporation (“Citadel”), Clear Channel Communications, Inc. (“Clear Channel”), and Entercom Communications Corp. (“Entercom”). Pursuant to the Consent Decrees, the broadcasters agreed to pay a combined $12.5 million to close investigations into possible violations of the FCC’s sponsorship identification rules. Specifically, the Consent Decrees resolved allegations that the broadcasters may have accepted cash or other consideration from record labels in exchange for airplay of artists from those labels without disclosing those arrangements, a practice commonly referred to as “payola.”

Continue reading →

Published on:

November 2006
On November 14, 2006, FCC Commissioner Adelstein issued a statement commending The Center for Media Democracy and Free Press for its continued study regarding video news releases (VNRs). The Commission has described VNRs as “essentially prepackaged news stories, that may use actors to play reporters and include suggested scripts to introduce the stories.” This advisory briefly outlines the current law regarding the broadcast of VNRs and alerts broadcasters to the need for caution in this area.

Continue reading →