Radio Deregulation: Has It Served Citizens and Musicians?

This report is an historical, structural, statistical and public survey analysis of the effects of the 1996 Telecommunications Act on musicians and citizens.Each week, radio reaches nearly 95 percent of the U.S. population over the age of 12 (see Chapter 5, p. 69). But more importantly, radio uses a frequency spectrum owned, ultimately, by the American public. Because the federal government manages this spectrum on citizens' behalf, the Federal Communications Commission (FCC) has a clear mandate to enact policies that balance the rights of citizens with the legitimate interests of broadcasters.Radio has changed drastically since the 1996 Telecommunications Act eliminated a cap on nationwide station ownership and increased the number of stations one entity could own in a single market. This legislation sparked an unprecedented period of ownership consolidation in the industry with significant and adverse effects on musicians and citizens

Sequential Musical Creation and Sample Licensing

All musical creation builds on previous works. But using fragments of existing musical works in a new work can often constitute copyright infringement. Copyright law, in cases like Bridgeport Music v. Dimension Films (6th Cir. 2005), has recently increased its restrictions on musicians who wish to engage in sampling, defined as the practice of using other creators\u27 sound recordings to create new music. The paper describes a model of copyright holders\u27 and samplers\u27 incentives to create in light of the need to negotiate licenses for sample-based works to avoid violating copyright law. Even in the absence of traditional transaction costs or royalty stacking, a distinct kind of inefficiency emerges. Green and Scotchmer (1995) have shown that, in the patent context, bargaining may not divide the profit from the sample-based derivative work between upstream and downstream creators in a way that provides both groups with sufficient incentives to create. This paper builds on and extends Green and Scotchmer\u27s theory by showing that innovation occurring in sequence presents a reciprocal problem. Both upstream and downstream creators have incentive constraints; pure theory cannot say which incentive constraint is less likely to be satisfied. This problem is exacerbated in the sample-licensing context because ex ante agreements are not usually possible. An optimal system for regulating sequential creation would account for the incentives of both upstream and downstream creators, to the benefit of both groups and the public. Congress and the courts have probably failed to achieve this balance, since the economic analysis of courts (especially the Sixth Circuit) has focused mainly on upstream creators\u27 incentives

Valuing Control

Control over property is valuable in and of itself. Scholars have not fully recognized or explored that straightforward premise, which has profound implications for the economic analysis of property rights. A party to a property dispute may actually prefer liability-rule protection for an entitlement resting with the other party to liability-rule protection for an entitlement resting with her. This Article presents a novel economic model that determines the conditions under which that is the case—by taking account of how parties value control. The model suggests new opportunities for policymakers to resolve conflicts and to develop better information about property disputes through policy experiments. The Article provides recommendations for implementing this new approach and suggests applications in the areas of copyright, trademark, patent, and privacy law

False Premises, False Promises: A Quantitative History of Ownership Consolidation in the Radio Industry

On December 13, 2006, FMC publicly released its report documenting the effects of radio station ownership consolidation on musicians and the public.Data in the report shows that station ownership consolidation at the national and local levels has led to fewer choices in radio programming and harmed the listening public and those working in the music and media industries, including DJs, programmers and musicians

Sequential Musical Creation and Sample Licensing

All musical creation builds on previous works. But using fragments of existing musical works in a new work can often constitute copyright infringement. Copyright law, in cases like Bridgeport Music v. Dimension Films (6th Cir. 2005), has recently increased its restrictions on musicians who wish to engage in sampling, defined as the practice of using other creators\u27 sound recordings to create new music. The paper describes a model of copyright holders\u27 and samplers\u27 incentives to create in light of the need to negotiate licenses for sample-based works to avoid violating copyright law. Even in the absence of traditional transaction costs or royalty stacking, a distinct kind of inefficiency emerges. Green and Scotchmer (1995) have shown that, in the patent context, bargaining may not divide the profit from the sample-based derivative work between upstream and downstream creators in a way that provides both groups with sufficient incentives to create. This paper builds on and extends Green and Scotchmer\u27s theory by showing that innovation occurring in sequence presents a reciprocal problem. Both upstream and downstream creators have incentive constraints; pure theory cannot say which incentive constraint is less likely to be satisfied. This problem is exacerbated in the sample-licensing context because ex ante agreements are not usually possible. An optimal system for regulating sequential creation would account for the incentives of both upstream and downstream creators, to the benefit of both groups and the public. Congress and the courts have probably failed to achieve this balance, since the economic analysis of courts (especially the Sixth Circuit) has focused mainly on upstream creators\u27 incentives

Valuing Control

Control over property is valuable in and of itself. Scholars have not fully recognized or explored that straightforward premise, which has profound implications for the economic analysis of property rights. A party to a property dispute may actually prefer liability-rule protection for an entitlement resting with the other party to liability-rule protection for an entitlement resting with her. This Article presents a novel economic model that determines the conditions under which that is the case—by taking account of how parties value control. The model suggests new opportunities for policymakers to resolve conflicts and to develop better information about property disputes through policy experiments. The Article provides recommendations for implementing this new approach and suggests applications in the areas of copyright, trademark, patent, and privacy law

FCC Regulation and Increased Ownership Concentration in the Radio Industry

In 1996, Congress increased the limits on how many radio stations one firm can own within a single radio market. To enforce these limits, the FCC used an idiosyncratic method of defining radio markets, based on the complex geometry of the signal contour patterns of radio stations\u27 broadcasts. Using a unique geographic data set, this paper provides the first calculations of the pre- and post-1996 limits on local radio ownership as actually implemented by the FCC. The limits are surprisingly permissive and vary considerably from city to city. While the limits were seldom binding on radio firms, I find a strong correlation between the 1996 increase in the limits and the increase in ownership concentration over the following five years. I use this correlation and the variation in the limits as a natural experiment in increased concentration to study the effects of concentration on various radio-market outcomes. The paper\u27s estimates can contribute to an assessment of the FCC\u27s quasi-antitrust regime for radio and suggest that concentration has a positive effect on advertising revenue and the variety of programming formats but no effect on listenership. Finally, the paper lays the groundwork for future research that will use the FCC\u27s implementation of local radio ownership limits as a case study in the administrative process

Choosing between the Necessity and Public Interest Standards in FCC Review of Media Ownership Rules

Section 202(h) of the Telecommunications Act of 1996, as amended, directs the Federal Communications Commission ( FCC ) to review its media ownership rules every four years. But the statute contains an ambiguity regarding the standard of review that the FCC must apply during such proceedings. To retain a particular media ownership regulation, must the FCC merely show that the regulation advances one of the FCC\u27s three public-interest goals for media: competition, diversity, and localism-applying a public interest standard? Or must the FCC meet the higher burden of demonstrating that the regulation is also indispensable for maintaining competition, diversity, or localism at some threshold level-applying a necessity standard? The answer to this procedural question has important substantive consequences for media policy. But, despite recent case law on the issue, the controversy over the standard of review can recur with each FCC media-ownership proceeding. Furthermore, neither canons of construction nor legislative history settle the ambiguous nature of section 202(h). But the analysis of previous appellate courts, as well as several policy considerations like facilitating cost benefit analysis and ameliorating agency capture, suggest that the FCC and the courts should apply a public-interest standard until Congress acts to clarify section 202(h)

FCC Regulation and Increased Ownership Concentration in the Radio Industry

In 1996, Congress increased the limits on how many radio stations one firm can own within a single radio market. To enforce these limits, the FCC used an idiosyncratic method of defining radio markets, based on the complex geometry of the signal contour patterns of radio stations\u27 broadcasts. Using a unique geographic data set, this paper provides the first calculations of the pre- and post-1996 limits on local radio ownership as actually implemented by the FCC. The limits are surprisingly permissive and vary considerably from city to city. While the limits were seldom binding on radio firms, I find a strong correlation between the 1996 increase in the limits and the increase in ownership concentration over the following five years. I use this correlation and the variation in the limits as a natural experiment in increased concentration to study the effects of concentration on various radio-market outcomes. The paper\u27s estimates can contribute to an assessment of the FCC\u27s quasi-antitrust regime for radio and suggest that concentration has a positive effect on advertising revenue and the variety of programming formats but no effect on listenership. Finally, the paper lays the groundwork for future research that will use the FCC\u27s implementation of local radio ownership limits as a case study in the administrative process

Non-Infringing Uses in Digital Sampling: The Role of Fair Use and the de Minimis Threshold in Sample Clearance Reform

In this book excerpt, the authors address the role of two major legal exceptions to copyright protection in the music industry’s practices surrounding digital sampling. Although the United States law on the books requires a balance between the interests of copyright owners and sampling musicians, the business practice has been to mandate licensing in almost every instance. Despite this hurdle to a more balanced approach to sampling, the authors discuss several benefits that might come through doctrinal or statutory reforms, or even through developing best practices for claiming fair use