Krasnow - ABCs of LMAs

ABCs OF LMAs: A SHORT COURSE

ON FCC POLICIES

Erwin G. Krasnow, Esq.

THE LAW IN A NUTSHELL

Here’s a two-sentence summary of the law governing Local Marketing Agreements (LMAs):* (1) the licensee must retain control over all aspects of station operation, especially the areas of finances, personnel, and programming, and (2) a licensee’s time brokerage of any other broadcast station in the same market for more than 15 percent of the brokered station’s weekly broadcast hours results in counting the brokered station toward the brokering licensee’s ownership limits.

The determination concerning compliance with the FCC’s radio ownership rules should be made prior to entering into an LMA.

CONTRACT PROVISIONS

Do’s:

Include provisions which make clear that:

Licensee retains the right, without limitation, to suspend, cancel or reject any

programs or commercials

Licensee retains the right to preempt any program for another program

deemed to be of greater national, regional, or local interest or importance; in

case of an emergency; or to comply with federal, state, or local laws.

Licensee shall be solely responsible for maintaining the station logs and

political and public inspection files, receiving and responding to telephone

inquiries related to station operations, broadcasting proper station

identification announcements, and complying with other FCC rules.

Licensee shall be responsible for the salaries, taxes, insurance, and related

costs of its own employees and station operation.

Licensee shall be responsible for payment of costs associated with operating

the transmitter and antennas.

Licensee shall oversee, and take ultimate responsibility for, the broker’s

advertising and programs practices with respect to the provision of equal

opportunities, lowest unit charge and reasonable access, and other

requirements contained in the FCC’s political rules.

Don’ts:

Don’t omit any of the above provisions.

Avoid provisions which provide that:

Licensee shall pay an excessive amount of money as liquidated damages in

the event it terminates the agreement.

Broker shall be responsible for purchasing new equipment and making

repairs to the existing equipment.

Broker shall be responsible for expenses related to the Licensee’s studio and

broadcast transmitter (e.g., tower and studio rent, utilities, telephone, property

taxes, etc.).

POST-CONTRACT SUGGESTIONS FOR THE LICENSEE

Maintain during regular business hours, Monday through Friday, at the

station’s main studio a “meaningful management and staff” presence (defined

by the FCC as at least one management employee and one staff employee).

Make sure the station complies with all of the FCC’s political broadcasting

rules (equal time, reasonable access, lowest unit charge, sponsorship

identification).

Prepare the quarterly issues/programs reports.

Maintain the public inspection file in good order.

Make sure the station’s programming responds to the needs of its community

of license (it is recommended that the licensee take responsibility for

producing and airing some issue-responsive public affairs programming and

public service announcements, especially if the broker fails to do so).

Document efforts to oversee station operations and retain written records of

when programming of the broker has been rejected or preempted.

Continue to maintain control over station finances (e.g., payment from the

licensee’s bank account of salaries, insurance, taxes, rent, utilities, etc.).

Make sure that all station personnel (including broker’s employees)

understand that the licensee is the owner of the station and is legally

responsible for all operational, financial, programming and FCC rule

compliance affecting the station.

File with the FCC reports (e.g., Biennual Ownership Report) and applications

(e.g., facilities changes, renewal applications) and pay Regulatory Fees.

Establish procedures (e.g., regular meetings and review sessions) to make

sure the broker complies with provisions of the agreement pertaining to licensee control.

POTHOLES AND PITFALLS

Complaints by competitor stations alleging anticompetitive conduct and

violation of state and/or federal antitrust laws.

Complaints filed with the FCC alleging an unauthorized transfer of control

(potential imposition of forfeitures and institution of license revocation

proceedings).

Post-termination problems (e.g., rebuilding of programming and sales staffs,

valuation issues for prospective purchasers).

Stay alert for any new “rules of the road” adopted by the FCC and/or Congress.

*The phrase LMA frequently does not adequately describe the myriad arrangements whereby a licensee sells a block of programming time and/or commercial avails to a third party. These arrangements have also been referred to as time brokerage agreements, local marketing agreements, bulk time sales agreements, joint ventures, local management agreements, local network agreements, local programming and sales agreements and leasing agreements (a term viewed with disfavor by the FCC).

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