Padden: Lose the Compulsory License

WASHINGTON — Preston Padden a former top News Corp. and The Walt Disney Co. executive now representing auction-interested TV stations as head of the Expanding Opportunities for Broadcasters Coalition, wants broadcasters to take aim at cable’s compulsory license, which is the blanket license that allows them to deliver out-of-market and in-market TV stations without negotiating separately for all of the content they contain.

The National Association of Broadcasters has indicated it may be ready to push for the elimination as well, at least of the distant-signal license.

Not surprisingly, cable operators represented don’t want the license to go away. Federal Communications Commission members are being asked to vote on a proposal by agency chairman Tom Wheeler to eliminate the syndicated exclusivity and network non-duplication rules, which prevent cable operators from importing TV-station network, syndicated and local programming in cases where that would duplicate in-market versions.

If the exclusivity rules are going to be excised, Padden said, the license needs to go too, though that would require action from a notoriously inactive Congress.

Multichannel News Washington bureau chief John Eggerton recently caught up with Padden, who explained why the two issues are linked and why their fates should be also. An edited transcript follows.

MCN:What’s wrong with the compulsory license?

Preston Padden: Simply stated, the cable and satellite compulsory license, which applies to all broadcast programs, makes broadcasters second-class copyright citizens.

MCN:How so?

PP: Cable networks, which are not subject to compulsory license, get paid under copyright amounts that make our retrans dollars look like chump change.

MCN:So, that blanket license is not an artificially low price versus a negotiation?

PP: Because cable operators and satellite operators have to pay full copyright for cable networks, those networks get vastly more money than we do.

Congress adopted the compulsory license when cable was a fledgling, struggling industry. And when they adopted it, the consensus agreement provided protections for broadcasters so this government license granted to cable did not trump the licenses broadcasters have to negotiate in the marketplace. Those protections were syndex and non-dupe. It is absolutely unthinkable to repeal syndex and network non-dupe without also repealing the underlying compulsory license.

MCN:Can you explain the consensus agreement?

PP: In 1971 I was a kid lawyer on the edge of the room as the cable, broadcast and movie industries struck the historic copyright and communications policy agreement. It had three parts. The copyright owners got the Copyright Act changed so that cable retransmission of programs was a performance. The cable industry got a compulsory copyright license, and the broadcasters got non-dupe and syndex. They were all part of one integrated agreement, and you can’t break syndex and non-dupe off from the compulsory license part.

MCN:Broadcasters have been fighting hard to keep syndex and non-dupe.

PP: The broadcast industry has been on a losing trajectory on these issues for a decade, and unless we change our strategy we are going to glide into oblivion.

MCN:Can you share your history with these rules? You helped get syndex reinstated by the FCC in the late 1980s when you headed the Association of Independent Television Stations [INTV].

PP: Right. When Charlie Ferris was chairman of the FCC, he was buddies with Ted Turner, who had his superstation (WTBS). And Ferris had enough guts to pick on independent stations by repealing syndex, but he did not have enough guts to pick on the network affiliates.

FCC chairman Dennis Patrick had the wisdom to restore syndex. He also led an FCC decision that called for the repeal of the compulsory copyright license. And that decision was the commission’s last word on the subject. So, right now, the FCC is on record in favor of repealing the compulsory copyright license.

It is that compulsory license that makes broadcasters second-class citizens and holds us back from being paid fairly for the value of our content.

MCN:You are arguing for getting rid of syndex and non-dupe, too.

PP: Because if you get rid of the compulsory license, you also don’t need retrans. Think about it. Cable channels get paid vastly more than us, and they don’t have retrans. How does that happen? It happens because they have full copyright rights. They are firstclass copyright citizens, and broadcasters are secondclass copyright citizens.

The broadcast industry should have been storming the Hill for the last decade trying to get rid of the compulsory license.

MCN:But they haven’t. Perhaps it is because you also link it to getting rid of retrans, which sounds like heresy.

PP: It is hard. Because it is going to require broadcasters to think differently and embrace a world different from the world they have known. But if they don’t, they’re going to die.

MCN:Should the FCC’s unanimous decision to eliminate the sports-blackout rules, which also backstopped contractual exclusivity, have been a signal the FCC would take aim at exclusivity rules?

PP: Yes. But the fact that the cable people got in the satellite bill a mandate for the FCC to weaken retrans was the clearest sign I’ve seen. Our team was only playing defense. And the Redskins will tell you, if you never have your offense on the field, you can’t win a game.

MCN:But won’t this make life a lot more complicated for everybody?

PP: Not at all.

MCN:Why not?

PP: When a syndicator or program owner sells a show to USA Network, they give USA the right to telecast the show and the right to sublicense the copyright to cable and satellite systems.

When they sell a show to broadcasters, they would use the same kind of form that gives it two licenses, the license to broadcast the show and the license to sublicense it to cable and satellite operators in their market.

Very simple. It happens every day for over 500 cable networks, and I don’t understand why it would not work equally as well for broadcasters.

But, to go back to the proceeding at the FCC now, it would be absolutely unthinkable to repeal syndex and network non-dupe unless the compulsory license also goes away. The compulsory license and syndex and non-dupe are ham and eggs. You can’t have one without the other.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.