Broadcast Law is written by David Oxenford of Wiklinson Barker Knauer LLP and all areas of broadcast law. David Oxenford is an attorney representing radio and TV broadcasters and webcasters on regulatory, transactional and music licensing issues.
Recently, the Radio Music License Committee sent out a memo to broadcasters about a July 8, 2019 SoundExchange payment deadline for pre-1972 sound recordings. As with everything in copyright law, the issues surrounding pre-1972 sound recordings are complicated, and the RMLC notice, while seemingly straightforward, still resulted in our receiving lots of questions. These questions may have been compounded because of notices sent to broadcasters back in April about another filing deadline concerning these recordings which caused much consternation for what was, for most broadcasters, a matter of little concern. For most broadcasters, neither of these dates are of particular concern unless the broadcaster has been identifying pre-1972 sound recordings and not paying SoundExchange royalties when those songs are streamed, and we understand that most broadcasters have in fact been paying SoundExchange for these recordings. But let’s try to explain what is going on in a little more detail.
First, let’s look at the basics. Sound recordings (the recording of a particular band or singer performing a song) were originally not covered by federal copyright law. The law provided protections for “musical works” (i.e. the musical composition, the words and musical notes of the song), but the mere recording of that work was initially not seen as a creative work. It was thought of more as a mechanical rendering of the real creative work – the underlying song. So when recordings came to have real value in the first half of the last century, recording artists had to rely on state laws to prevent other people from making and distributing copies of their recordings. Laws against what we would refer to as bootlegging or pirating of recordings were passed in most states, and lawsuits against bootleggers would be brought under these state laws. It was not until 1972 that Congress, through an amendment to the Copyright Act, recognized that the recordings were themselves creative works entitled to copyright protection. But that amendment did not fully make all pre-existing recordings subject to the Copyright Act, instead leaving most sound recordings first recorded in the United States prior to the adoption of the amendment to the Act in February 1972 subject to state laws until 2067.
The 1972 amendment to the Copyright Act also did not create a public performance right in sound recordings. That meant that, when sound recordings were played to a public audience, the recording artist (or the owner of the copyright in that sound recording, usually the record label) did not get paid. Instead, as had been the case prior to 1972, only the composer of the underlying musical work (or the copyright holder of that composition – usually a publishing company) got paid, usually through a performing rights organization (also known as a PRO – ASCAP, BMI and SESAC until recent years when other PROs including GMR arose). It was not until 1995, and then again in a more definitive way in the Digital Millennium Copyright Act of 1998 (“DMCA”), that sound recordings received a federal performance right protection – but only for digital performances.
Royalties for non-interactive performances of sound recordings are paid to what is essentially a PRO for sound recordings – SoundExchange. Royalties for interactive performances of sound recordings must be directly negotiated with the copyright holder. See our articles here and here for an explanation of the difference between interactive and non-interactive performances. But, the DMCA established these payment requirements only for those recordings covered by Federal copyright law, thus excluding pre-1972 sound recordings (except for certain foreign pre-1972 recordings which, by international treaty, were brought under federal copyright protections).
So, when the DMCA created the public performance right for digital transmissions of a copyrighted sound recording, some contended that, as these pre-1972 works were not subject to the Copyright Act, they were not covered by the sound recording performance right. When the time came to pay SoundExchange for the digital performance right, some services counted the performances they had made of these oldies and did not pay the royalties on those songs.
However, most broadcasters and smaller webcasting services did not go through the trouble of determining which recordings were pre-1972 recordings and pulling them out of the computation of the number of performances reported to SoundExchange. Why not? Because most services found it to be too much trouble to subtract the pre-1972 recordings. It is difficult to determine the recording dates of many songs, and the international recordings brought under the Act by treaty made that computation even more confusing. Moreover, most broadcasters and webcasters use their streaming service providers to count performances through a system of matching through access to a station’s music scheduling software the song that is playing at a particular time with the number of listeners to the webcaster at the time. These counting systems usually did nothing to identify which songs were pre-1972 recordings and thus did not make it easy to exclude certain songs – whether pre-1972 or ones to which a service received a direct license. For the most part, it was only the very large webcasters who found it cost-effective to develop their own software systems to identify and count pre-1972 recordings and to exclude them from royalty payments.
But, in the last few years, several pre-1972 artists began to sue these bigger services that had not paid for pre-1972 sound recordings, arguing that the artists had a right the be paid under state laws. Some of these artists even argued that broadcasters owed royalties for over-the-air performances of pre-1972 recordings under these state laws, even though there is no such right under federal copyright law. No state had a specific public performance law for these pre-1972 recordings, but the argument was made that such a right was somehow inherent in the state law – even though, by practice, royalties had never been paid. Most of these suits were unsuccessful (see for instance our articles on decisions in New York and Florida). But California courts initially found liability (see our article here) and the litigation is ongoing.
Efforts followed to amend federal law to bring these pre-1972 recordings under the sound recording performance royalty. One of these pending bills ended up being incorporated into the recently enacted Music Modernization Act. The MMA makes clear that these recordings are covered by the sound recording performance royalty, and it also establishes a staggered system for bringing the recordings fully under federal copyright laws. Since the adoption of the MMA, it is clear that SoundExchange must be paid for digital performances of pre-1972 sound recordings.
However, there was a recognition that some services had not been paying and that they might not be able to transition over to a payment system immediately upon the adoption of the MMA. The April filing deadline provided for services that still were not paying for pre-1972 recordings after the enactment of the MMA to avoid statutory royalties if they registered and paid those royalties upon receiving a demand from the copyright holder. Services that had been paying for these recordings for the most part did not receive a substantial benefit from this registration except to the extent that they might get a degree of protection if a service at some point in the future messed up and didn’t properly pay its royalties. However, there is no provision for copyright holders of post-1972 recordings having to give notice before suing a service behind in its payments, and those post-1972 copyright holders would be entitled to statutory damages. So the services that really benefitted from the April registration were those few digital services who were only playing pre-1972 recordings and not paying for them.
The new July date in the RMLC notice is for those webcasters who were not paying for digital performances of pre-1972 sound recordings prior to the enactment of the MMA. They can avoid claims for back royalties, including state law claims, by paying SoundExchange by July 8 for all their pre-1972 performances in the 3 years prior to the adoption of the MMA. For most broadcasters who had been paying for their streaming of pre-1972 sound recordings and were current in their royalty payments, there would appear to be nothing to true up in July. But for services who had been excluding the pre-1972 performances from their SoundExchange payments, they should true up by July 8 to avoid liability.
The MMA specifically applies all of the exceptions to sound recording royalty obligations to pre-1972 recordings. So over-the-air broadcasts of these recordings do not trigger a performance right, and performances in bars, restaurants, retail outlets, and other venues still do not trigger a performance royalty (though certain digital “business establishment services” providing music to these venues may have general royalty issues – see our article here about those royalties).
The enactment of the MMA and its provisions dealing with pre-1972 recordings, once fully implemented, should end our need to write about these issues. These songs will eventually be treated for most purposes like any post-1972 recordings. The MMA does, however, recognize that (especially for some of the older recordings) it may be difficult to determine who owns the copyrights to these recordings. The Copyright Office separately has several ongoing proceedings for claiming those rights. But, for broadcasters – pay your digital royalties for all that you stream, including the pre-1972 recordings, and if you were one of the few stations that had not been paying for these recordings prior to the adoption of the MMA, take care of your true-up for the prior 3 years prior to July 8. As always, check with your own legal counsel for more details and specific analysis on how these changes affect your operations in connection with these confusing issues.
Perhaps some of the most controversial areas in broadcast advertising are those surrounding the advertising of cannabis products. While many states claim to have legalized marijuana, either for medical or recreational purposes, the Federal government still considers its possession a felony, and has specific laws that criminalize the use of radio frequencies, the Internet, and publications to promote its use. At the same time, the Federal government has recently decriminalized the possession of various hemp products with less than .3% THC (the active ingredient in marijuana) in the 2018 Farm Act. This has led to an explosion in the sale of CBD products – even though the production of such products is, for the most part, to only be conducted after either the adoption of state laws approved by the US Department of Agriculture or under Federal rules that the USDA is supposed to approve – none of which has happened yet. With all these issues outstanding, I was recently asked to talk about the advertising issues surrounding these products before a continuing legal education seminar sponsored by the New York State Bar Association. The slides from my presentation are available here.
As we have advised broadcasters before, as they are Federal licensees, and marijuana is still a federally prohibited substance, there is substantial risk in running any advertising for products supposedly “legal” in the state in which they are being used. These ads are particularly of concern during the license renewal cycle that begins next month, as objections from anti-marijuana activists could put this issue directly before the FCC. Even though states may have adopted rules governing advertising for these products, the federal law still poses great risks for broadcast licensees – just as it does for other federally-regulated entities. That is one of the reasons that federally-chartered and insured banks have stayed away from taking deposits from marijuana-related businesses (a bill is presently pending in Congress to allow banks to take deposits, but its prospects are uncertain).
We also wrote extensively about broadcast advertising for CBD products, and how those are in even a greyer area – as there is no blanket federal prohibition against possession of CBD, and there is at least theoretically some legally produced CBD that was grown for experimental and research purposes under the 2014 Farm Act. So, theoretically, some CBD may have been legally produced though such production was not expected to be for widespread commercial exploitation, but even if a CBD product was legally produced, it is subject to substantial promotional restrictions under FDA and FTC rules (see our article here). With these concerns, and rules to come from both the USDA and the FDA on these products, ads remain risky and must be scrutinized on many levels – including under state law where, in many states, the rules governing these products are murky at best and potentially ban their sale (see this recent NY Times article about local prosecutions of CBD sellers).
This makes advertising – especially on broadcast stations – a matter than needs close scrutiny. As we always advise on this kind of controversial issue, talk to your own counsel about these issues and be sure that you are fully informed about the risks of any such advertising. The money from the ads may be enticing, but the risks could easily outweigh those short-term benefits.
Last week, the US Department of Health and Human Services (HHS) adopted a new rule mandating, at some point later this year after Paperwork Reduction Act approval, that prescription drug advertising on TV contain certain price information. Specifically, HHS will require TV ads for prescription drugs covered by Medicare or Medicaid to include the list price for a month’s supply or for the usual course of therapy, if that price is $35 or more. While some advertising groups argue that this requirement is an unconstitutional infringement on free speech (see this article from the ANA – the Association of National Advertisers), assuming that the rule goes into effect as planned, what effect will the rule have on TV?
Most importantly, the new rules do not impose obligations on TV stations themselves. Instead, the rule looks to the Lanham Act for enforcement. As noted in the HHS rulemaking order, that means that the primary means of enforcement will be by one drug manufacturer suing another for failing to meet the new guidelines under Lanham Act provisions governing false and misleading advertising. Thus, it appears that TV stations themselves will not be principally in the line of regulatory fire on this issue. But, as with any other government-mandated advertising disclosure, broadcasters should be aware of their clients’ obligations to make sure that clients are not putting themselves at risk, and be sure that in any production done for an advertiser, the ads are placed appropriately and presented against a contrasting background for sufficient duration, and in a size and font style that allows the information to be read easily. So far, the rules have not been extended to radio or online, but HHS says that they will monitor advertising to see if future additions are warranted. Obviously, check with your own counsel for more details on this new requirement – and be prepared when one more disclosure likely comes your way later this year.
Looking for a brief explanation of the online public inspection file and Quarterly Issues Programs List, and how they will be viewed in connection with the upcoming license renewal cycle – including the potential fines for violations of the rules? The Indiana Broadcasters has just released this video of me discussing those issues available here.
We have written in more depth about these issues, including our discussion of the importance of the online public file for the renewal process (here and here), the importance of Quarterly Issues Programs lists (here) and the required content of the online public file (here and here). With the license renewal filing process starting for radio stations in June (see the schedule of filing for stations, which is done on a state by state basis, here) and for TV a year later, these obligations, while basic, are very important. So if you have questions about these issues, check out these resources, and contact your own legal advisor for more information.
At its open meeting yesterday, the FCC largely adopted the draft order on changes to its processes for resolving complaints about interference from FM translators to existing FM stations. Its final Report and Order adopting the new rules was released after the meeting yesterday. The general guidelines that we detailed in our summary of the draft order were adopted – so that complaints will generally be considered only when they are from within a primary station’s 45 dBu contour (with a potential for consideration of complaints from outside that contour through a waiver process, where the complaining station shows that there is a significant pocket of listeners outside that contour), and only when a threshold number of bona fide listener complaints have been filed. When a sufficient number of complaints have been filed, the FCC will ask the operator of the translator to either resolve all complaints by resolving the interference complaints of each of the complaining listeners or by working with the operator of the pre-existing station. If no resolution can be worked out, the parties to the dispute are to engage a third party consulting engineer. FCC will make the final determination whether the interference has been resolved based on information provided by the third-party engineer. If the interference is not resolved to the satisfaction of FCC staff, a translator can be ordered off the air.
The biggest change from the draft order is in the number of complaints necessary to sustain a complaint in bigger markets. In the draft order, the Commission proposed that a station with millions of people in its protected service area might need as many as 65 listener complaints to sustain an interference objection. The Order adopted yesterday changed that tentative decision and instead capped the number of listener complaints that were needed to support an interference claim at 25 for stations with over 2 million people in their protected contour. The FCC also made clear that listeners cannot be offered payment or other inducement for submitting a complaint. Finally, the Commission decided that it would resolve all complaints in 90 days unless there was a compelling reason for more time. Once the FCC has determined that an appropriate number of interference complaints have been filed, it will notify the parties of that fact, and provide intermediate deadlines for submission of a remediation plan or other benchmarks as appropriate. If nothing is resolved in 90 days, and there are no unusual circumstances warranting more time, the FCC may order the offending translator off the air at the end of that period.
These rules become effective 60 days after Federal Register publication, except for information collection requirements, which seemingly include most of the requirements for filing complaints. These portions of the order do not become effective until approved by the Office of Management and Budget after a Paperwork Reduction Act review. So it may be several months before this new resolution process becomes fully effective. Nevertheless, it appears that the FCC has taken action to try to bring order to a process that, at the current time, can seemingly drag on forever.
The FCC tomorrow will hold a public forum on Electronic Newsroom Technique (ENT) of captioning live TV programming tomorrow from 1 PM to 4:45 PM Eastern Time (see the agenda here). The forum will be available for viewing online (go to the FCC webpage here for information about connecting). This forum may provide a good refresher for stations still using ENT to caption live programming to make sure that they are providing the quality captioning that the FCC expects as outlined in its orders on captioning quality that went into effect on June 30, 2014.
We wrote about some of the goals of the captioning quality proceeding here. The FCC itself has released a good compliance guide, which reminds broadcasters that TV stations that are not Top 25 market affiliates of the Top 4 TV networks can still rely on ENT, but they must be sure that the captions accurately convey what is being said by those speaking during on-air live or near live programing. Specifically, the compliance guide notes these FCC requirements to insure that the ENT captions reflect what is being said on the air:
In-studio produced news, sports, weather, and entertainment programming will be scripted.
For weather interstitials where there may be multiple segments within a news program, weather information explaining the visual information on the screen and conveying forecast information will be scripted, although the scripts may not precisely track the words used on air.
Pre-produced programming shall be scripted (to the extent technically feasible).
If live interviews , live on-the scene, or breaking news segments are not scripted, stations will supplement them with crawls, textual information, or other means (to the extent technically feasible).
The station will provide training to all news staff on scripting for improving ENT.
The station will appoint an “ENT Coordinator” accountable for compliance.
Stations still relying on ENT to meet their captioning responsibilities should review tomorrow’s discussion either live or when it is archived to assure that they are meeting all their responsibilities in following these FCC rules.
The FCC this week released a Public Notice soliciting comments on the request of Univision, which owns US radio and TV stations, to have foreign ownership that exceeds 50%. As we wrote here, the FCC previously permitted foreign ownership of up to 49% of the company. With a restructuring of its investors, the company is now seeking permission for foreign investors to own up to 70% of the company. As we have written here and here, the FCC will permit foreign investors to own a interests above 25% in companies that control licensees of US broadcast stations. But any such ownership first must be reviewed by the FCC and other government agencies to insure that there are not national security issues. Once approved, in the absence of any extraordinary circumstances, the FCC will allow an approved foreign investor to acquire interests in more stations in the US, and to increase their interest in a company to the extent provided that, if they have not been previously approved in a controlling position, they will need specific approval for such ownership. Here, as the foreign investors had previously been approved in a non-controlling position, further Commission approval of the ownership of more than a 50% interest in the company was required.
While substantial foreign investment in US broadcasting companies is not commonplace, more and more transactions have been approved in recent years (see, for instance, our articles here and here) as the FCC appears to have become comfortable to the notion that investors from many foreign countries pose no threat to the public interest.
With the June 3 filing deadline fast approaching for license renewals for radio stations in Maryland, DC, Virginia and West Virginia, stations (including FM translators and LPFMs) licensed to any community in any of those states should be beginning to prepare their applications. As we wrote here, the FCC forms should be available next week, so once May 1 rolls around, early birds in those states can start to file their renewal applications and the accompanying EEO program report. These stations should also be running their pre-filing license renewal announcements on the 1st and 16th of May. Radio stations in the next renewal group, stations in North and South Carolina, should be prepared to begin their license renewal pre-filing announcements in June – so in May they should be recording and scheduling that announcement to run for the first time on June 1 (see this article on pre-filing announcements for more information).
While May is one of those months with no other regularly scheduled regulatory filing deadlines, it is full of other FCC deadlines including comment dates in several proceedings of importance to broadcasters. In addition, broadcasters in Arizona, Idaho, Maryland, Michigan, Nevada, New Mexico, Ohio, Utah, Virginia, West Virginia, Wyoming, and the District of Columbia that are part of an Employment Unit with 5 or more full-time employees should also be preparing to add to their online public inspection file their Annual EEO Public File Report – due to be added to their files by June 1.
One of the FCC proceedings with comment dates in May is the proposal to allow AM broadcasters to, at their option, convert to full-time digital operations. We wrote about that proposal here and here. Comments on the initial Petition for Rulemaking are due on May 13. While the FCC is now just seeking preliminary comments on this proposal (they have not yet issued a formal Notice of Proposed Rulemaking with specifics on proposed actions), filings on or before May 13 are important to let the FCC know whether there really are broadcasters interested in converting their AM stations to all-digital operations. So if you have an interest, file your comments in the proceeding by the upcoming deadline.
As we wrote yesterday, the FCC is also looking for updated information from operators of C Band earth stations as to the uses they are making of the 3.7 to 4.2 GHz band. Those updates are due on May 28.
Reply comments on the FCC’s latest Quadrennial Review of its ownership rules are also due in May. Comments in this proceeding, about which we wrote here, deal primarily with the possibility of changes in the local radio ownership rules. The FCC is also considering providing more definition as to when they will allow the common ownership of two of the top 4 TV stations in any market, and also at whether one party could own 2 of the top 4 broadcast TV networks. Comments on various ownership diversity proposals are also out for comment. Comments in the proceeding are due by April 29, with replies due on May 29.
Comments in the proceeding looking at changes to the rules governing the applications for and processing of new noncommercial FM and LPFM stations are due on May 20. The FCC is looking at changes in the information noncommercial applicants need to supply when filing for new stations, and other changes in dealing with NCE and LPFM construction permits once granted. For more information on this proceeding, see our article here.
At the May 9 FCC open meeting, the Commission will be considering its proposal on how to resolve interference complaints about new FM translator facilities by full-power FM stations. We wrote about the FCC’s draft order in this proceeding here. The FCC will also be considering a Notice of Proposed Rulemaking (here) on this year’s regulatory fees – likely to be paid in August or September. Under this proposal, some broadcast fees, particularly for radio, will be going up. Comments will be due at a later date after the NPRM is adopted.
We should also be on the lookout for dates for the commencement of filing of reimbursement requests by LPTV, TV translators and FM radio stations affected by the incentive auction. We wrote about the FCC’s order adopting rules for this reimbursement here.
All in all, it is a very busy month for broadcast regulatory activities. As always, these are just the regulatory dates that we have thought to highlight for the month. Check with your own advisors for other dates that may affect your station operations. And check out our Broadcasters Regulatory Calendar for dates that will be coming up in future months.
Earlier this month, the FCC released a Public Notice announcing that companies that are licensees, or have otherwise registered their fixed C Band satellite earth stations in the 3.7 to 4.2 GHz band, must certify the accuracy of the information on file with the FCC by May 28, 2019. Operators of fixed earth stations who filed registrations last year between April 19 and October 31 using the simplified process that the FCC allowed during that period are exempted from this updating process (see our posts here and here on last year’s window). However, registrants and licensees of transportable or temporary fixed earth stations, including those registered last year, have additional required registration requirements during this same window. These filings will be considered by the Commission in connection with their consideration of expanded uses of this spectrum. So broadcasters with earth stations in this band should familiarize themselves with this new filing requirement, and be sure to file, if required, by the May 28 deadline.
The FCC this week released a Public Notice announcing that it was making available information about all bidders in the TV incentive auction – including information about TV stations who had bid to surrender their licenses in the auction and were unsuccessful in those bids. The FCC had promised to keep that information confidential for two years after the conclusion of the auction. Proving how time really does fly, that two year period has now run its course since the FCC released its Incentive Auction closing notice. So if you are interested in the stations willing to surrender their licenses who were not selected in the auction, that information is available on the Auctions section of the FCC website, here.