Scalise Exactly Right On TV Bill

As the former President of an association of local TV Stations, former President of Network Distribution for Fox, former President of the ABC Television Network, former Executive VP of The Walt Disney Company and a former Law Professor, I write to strongly support House Majority Whip Steve Scalise’s Bill, The Next Generation Television Act.  This Bill gets it exactly right.  His Bill would repeal a steaming pile of outdated, conflicting and unnecessary government interventions into the market for distributing television programming.  Of all the critical functions for which we need the Federal Government, managing and pricing the distribution of TV programs is not one of them!  The Scalise Bill would enable perfectly capable market forces to assure that consumers have access to the widest possible array of television programming from the widest possible array of distribution platforms.  And it would be fair to all industry segments.

 

History

 

In the late 1960’s several Court cases held that Cable retransmission of the programs broadcast by TV Stations did not constitute a “performance” of those programs under the then extant 1909 Copyright Act.  The Supreme Court urged the Congress to write a new law. And the Congress urged the Broadcasters, Cable companies and Programmers to agree on a framework for a new law. In 1972, at an historic meeting where I was present (as a young Law Student), the three industry segments reached the “Consensus Agreement”.  A copy of that Consensus Agreement can be found as Appendix B to a 1992 Report Of The Copyright Office. https://www.copyright.gov/reports/cable-sat-licenses1992.pdf

 

In 1976 Congress adopted a new Copyright Act that made Cable retransmission of broadcast TV shows a “performance”.  But, because it was thought that it would be burdensome for then fledgling Cable systems to negotiate with myriad program owners, Cable was given a government granted compulsory copyright license.  And the FCC adopted numerous Regulations (including Network Non-Duplication and Syndicated Exclusivity) designed to ameliorate the market disrupting effect of the compulsory license.  Later, compulsory licensing was extended to the Satellite TV industry segment.

 

Note that a key feature of this issue that has persisted since the early 1970’s is that it straddles Copyright and Communications Policy issues.  That means that it straddles the jurisdiction of the Judiciary and the Commerce Committees.  [In one meeting on Capitol Hill in the early 1970’s I (a young law student) opined that we should not let Committee jurisdiction get in the way of doing what was right.  In a stern rebuke that I will never forget, then House Commerce Chair John Dingell informed me “There is no issue more important than the scope of the jurisdiction of the Committee on Energy And Commerce”.]

 

Shortly after the 1976 Act, Cable systems began carrying both broadcast TV Stations and hundreds of non-broadcast channels – channels like Discovery, History Channel, HBO, Showtime, etc.  Because compulsory licensing does NOT cover the hundreds of non-broadcast channels, their carriage is proof that the Cable operators CAN secure performance rights without the need for a compulsory license.

 

By 1992 Congress found that Cable systems were paying carriage fees to the non-broadcast channels but not to the Broadcasters and that this was unfair to the Broadcasters.  The simple way to fix this would have been to repeal the compulsory licenses as then suggested by The Copyright Office and by Fox Broadcasting Company where I was employed.  But the legislative vehicle moving through Congress was a Commerce Committee Bill.  So, instead of repealing the Copyright Act compulsory licenses, Congress simple layered over them a Communications Act Retransmission Consent right requiring Cable/Satellite operators to negotiate and pay for the right to use the Broadcast “signal” carrying the compulsorily licensed programs.  In effect, Congress giveth with the right hand and then taketh with the left, creating a huge government bureaucracy.  Cable/Satellite operators get the program rights through the compulsory license but must negotiate and pay for the “signal”.  It is a ridiculous “legal fiction” that the Cable/Satellite operators (and consumers) desire the signal – they want the programs!  What we have today is a direct product of the jurisdictional straddle that has haunted this issue forever.

 

It Is Passed Time To Undue This Mess

 

As Majority Whip Scalise correctly perceives, it is passed time to repeal this whole mess and to defer to market forces.  His Bill does so in an even-handed and fair way that is certain to enhance consumer welfare.  Below are some of the questions I have heard raised about his Bill and my responses.

 

Will It Work?

 

Some continue to argue that the compulsory licenses are necessary for Cable and Satellite operators to retransmit broadcast programs.  Honestly, that is just silly.  For decades Cable and Satellite have been clearing the rights to programs on non-broadcast channels without a compulsory license. The channel owner clears all the rights and then sublicenses them to the Cable/Satellite operator.  Clearing the rights for programs on Broadcast channels could work the same way.

 

What About OTT Streaming Services?

 

In recent years some have argued that Congress should extend compulsory licensing to online streaming services.  But those services are multiplying and flourishing without compulsory licensing. Netflix has grown like a colossus over the industry.  And many streaming services like Hulu and Direct Now carry BOTH Broadcast and non-broadcast programs without the need for compulsory licenses.  In fact these streaming services are simply more proof that there is no need for the compulsory licenses.

 

Will The Broadcasters Have To Pay More To License Programs?

 

Some Broadcasters have expressed the fear that they will have to pay higher license fees for programs if they need to secure the right to sublicense those programs to Cable/Satellite retransmitters.  I do not believe that will be the case.  Many of the programs on TV Stations are Network shows secured as part of a Network Affiliation agreement.  The Networks already charge the local Stations as much as the market will bear – some argue they charge too much. And Retransmission Consent fees have been acting as a proxy for copyright and routinely are split between the Network and the Station.  There is no evidence that any of this would change if we get rid of the “legal fiction” that that Cable/Satellite operators are paying for the “signal” rather than the programs.

 

One of my last jobs was with a large producer and distributor of television programs including programs sold to local TV Stations on a market-by-market basis (“syndicated” programs).  I asked the executive in charge of those syndicated sales whether local Stations would be charged more if the boilerplate license agreement was amended to include the right to sub-license the programs to local cable/satellite operators. After polling the sales representatives the executive answered “no” because the sales representatives currently sell the show to the highest bidder in the market and that dynamic would not change.

 

Would Copyright Be A Stronger Foundation For Broadcaster Retransmission Fees?

 

There is one bedrock principle in all of this – Broadcasters, just like non-broadcast channels, deserve to be paid by any retransmitter.  In my opinion Broadcasters should favor repealing the compulsory licenses.  There is a strong argument that copyright actually would give local TV Stations a stronger foundation for their second revenue stream.  Currently some Cable/Satellite operators have mounted a non-stop attack on the Communications Act Retransmission Consent fees charged by Broadcasters for their “signal”.  By contrast, pure copyright is bedrock Constitutional principle that is harder to argue against.  Local TV Stations would have an entire army of fellow copyright owners to help them defeat any effort to undermine basic copyright rights.  Simply stated, pure copyright is simply a stronger foundation to assure a continued second revenue stream for Broadcasters.

 

What About The Rights Of Program Owners?

 

This might be the easiest of all.  When a programmer goes to bed at night its first prayer is for the right to direct and control the exploitation of the programs it has created unfettered by government intervention.  The Scalise Bill is the answer to that prayer.  In any rational world, this Bill will have the vigorous and unqualified support of program owners.

 

A Caveat On Must-Carry

 

I very strongly support all of Majority Whip Scalise’s Bill dealing with repeal of compulsory licenses and associated Statutes and Regulations.  And, I support his continuation of Must-Carry for public Stations.  I express no opinion regarding the future of Must-Carry Regulations for commercial Stations, leaving to others to determine whether there are public policy reasons to continue those Regulations, at least for certain categories of Stations.  Repeal of compulsory licenses does not require repeal of Must-Carry.  Must-Carry Stations would need only certify that they had secured the right to sub-license the performance rights in the programs on their schedule.

 

The One Truly Unthinkable Course Of Action

 

As noted I strongly favor repeal of the compulsory licenses and all of the Statutes and Regulations that exist to ameliorate the market disrupting effect of the compulsory licenses – Retransmission Consent, Syndicated Exclusivity, Network Non-duplication, etc.  The one truly unthinkable action would be to leave the Compulsory Licenses in place but repeal any of those ameliorating Statutes and Regulations.

 

I have testified before Congress on these issues multiple times.  Links to two recent examples are below:

 

Testimony before the House Judiciary Committee, September 2013 – https://judiciary.house.gov/wp-content/uploads/2016/02/Padden-testimony-091013.pdf

 

 

Testimony before the Senate Commerce Committee, July 2012 – https://www.gpo.gov/fdsys/pkg/CHRG-112shrg86916/html/CHRG-112shrg86916.htm

 

Preston Padden

 

 

 

 

 

 

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