Opinion ID: 427192
Heading Depth: 3
Heading Rank: 2

Heading: NAB's Claim Regarding Commercial Radio Broadcasters

Text: 86 Although cable systems generally are associated with the importation of distant television signals, many cable systems are equipped to import distant radio signals as well; the 1976 Copyright Act clearly authorizes the Tribunal to use the Fund to compensate nonnetwork programming consisting exclusively of [distant] aural signals. 17 U.S.C. Sec. 111(d)(4)(C) (Supp. V 1981). In its 1979 Decision, however, the Tribunal concluded that it had been unable to discern any significant marketplace value or benefit from distant commercial radio carriage, 47 Fed.Reg. 9,894 (1982), and hence made no award to commercial radio broadcasters. On appeal, NAB contends that this non-award (1) is unsupported by substantial evidence, and (2) cannot be reconciled with the Tribunal's 0.25% Phase I award to NPR and with the Tribunal's Phase I award to the Music Claimants for the performance of copyrighted music on distant radio signals. While we find much of NAB's claim overstated, the apparent inconsistency of the Tribunal's treatment of Music and NAB forces us to remand the case to the Tribunal either for re-distribution or for an improved explanation of its non-award to NAB. 87 At the outset, we reject NAB's contention that its non-award is unsupported by substantial evidence. Although NAB introduced evidence which attempted to demonstrate the benefit of radio carriage to cable, see, e.g., JA 1349 (cable systems typically charge separately for radio service), there is substantial evidence in the record to support the Tribunal's conclusion that commercial radio's value in the cable marketplace is sufficiently de minimis as not to warrant an award, see, e.g., Testimony of Mr. Hall, Storer Cable Executive, Tr. 2567-71 (Storer Cable does not even attempt to ascertain the number of FM radio connections); Testimony of Mr. Abrams, Radio Programming Expert, Tr. 2708, JA 1389 (cable carriage of radio signals as of this point is not a significant factor in the radio broadcasting industry). The mere fact that the Tribunal relied on testimony (notably that of Mr. Frank Mankiewicz, then-President of NPR) which surmised that there might be some appeal to distant commercial radio signals, 47 Fed.Reg. 9,894 (1982), does not suffice to establish for NAB affirmative evidence, under the Tribunal's allocational criteria, mandating an award. 88 We also reject NAB's contention that the Tribunal's non-award to commercial radio is necessarily inconsistent with the 0.25% Phase I award to NPR. As the Tribunal explained, NPRis a producer and syndicator of innovative, distinctive and quality radio programming that is transmitted by a number of cable systems as a distant signal. As with our review of the PBS claim, some customary guides to judging the marketplace value of program product are not useful. The record supports a finding that the programming has a special appeal, which justifies an award. 89 47 Fed.Reg. 9,894 (1982). There is substantial evidence for the Tribunal's conclusion that NPR's programming is of a distinctive quality, see, e.g., Summary of NPR's Evidentiary Position, 47 Fed.Reg. 9,887 (1982) (NPR receives 100 times more awards than commercial radio), and for its conclusion that the quality of NPR's programming has special appeal to cable subscribers, see, e.g., Affidavit of Janice Hill, NPR Deputy General Counsel, JA 64-66 (summarizing NPR's exhibits of letters of support to NPR from distant cable listeners). Given these documented differences in quality between commercial and public radio, we find the Tribunal's exceedingly small 0.25% award to NPR to be within a zone of reasonableness bounded, on the one hand, by the record evidence of NPR's quality and, on the other, by the record evidence of radio's generically de minimis value in the cable marketplace. The miniscule award to NPR is not necessarily inconsistent with the de minimis value of radio generally. 90 We have difficulty, however, in reconciling the Tribunal's award to the Music Claimants with its non-award to commercial radio broadcasters. Although the Tribunal did not specify how much of Music's 4.25% Phase I award was meant to reflect the use of copyrighted music on retransmitted radio, as opposed to television, signals, the Tribunal made clear that some of Music's award was intended to compensate copyright holders for the use of their music on radio: 91 We find in the record in the cases of several parties sufficient evidence for use to include in our award to Music some compensation for the significant performance of copyrighted music on distant radio signals. The useful evidence on this issue is based on time, and even within that standard the record is not clear.... However, the total of copyrighted music is such as to warrant an award to Music. 92 47 Fed.Reg. 9,894 (1982). While, viewed in isolation, we find no fault with the Tribunal's reliance on Music's time evidence, we find the Tribunal's award to Music fairly inexplicable in light of the Tribunal's position, in explaining its non-award to NAB, that radio retransmission by cable (which presumably includes retransmission of radio's music) has virtually no marketable value whatsoever. The mere fact that Music introduced evidence indicating that approximately 70% of the total time of commercial FM radio stations is occupied by music, see Tr. 2708-10, JA 146, does not seem to warrant an award given the Tribunal's conclusion, vis-a-vis NAB, that it had been unable to discern any marketplace value for all (100%) of distant commercial radio carriage, 47 Fed.Reg. 9,894 (1982). Contrariwise, the Tribunal's award to Music suggests that its non-award to NAB was arbitrary. 93 On appeal, counsel for the Tribunal suggests that an award for the musical content of radio signals is not inconsistent with the denial of an award for the format of a rock-and-roll or country-and-western station. Tribunal Brief at 39 (emphasis added). Whatever the merits of this distinction, it constitutes the sort of post-hoc rationalization on which the defensibility of the Tribunal's distributions cannot depend: 94 [A] reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis. 95 SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947). As we read the Tribunal's Decision, it denied an award to commercial radio broadcasters because it was unable to discern any marketplace value to distant commercial radio carriage in toto, and not because it failed to discern any value to the formatting element of a radio signal. Indeed, we are not even certain that the Tribunal would subscribe to its counsel's post-hoc suggestion. The Tribunal expressly concurred in PBS's assessment of the commercial radio evidence, 47 Fed.Reg. 9,894 & n. 494, and PBS gave particular weight to the testimony of Mr. Lee Abrams, a commercial radio analyst, see PBS Proposed Findings of Fact at 100, reprinted in JA 159-60. Included in Mr. Abrams' testimony, however, was his belief that the format element of a radio signal was more important than the music element: 96 Radio stations play records. The same records are available to all radio stations. Why is it, then, that some stations succeed in attracting and appealing to many listeners and others fail? The answer is formatting. Formatting is the pre-planning and control of all elements of a radio station's presentation so as to create a consistent and unified sound. 97 Tr. 2610-11, JA 1358-59 (emphasis added). Moreover, the context of the Tribunal's only specific reference to format--in a quotation from Mr. Frank Mankiewicz--does not readily lend itself to a distinction between Music Claimants and commercial broadcasters. Mr. Mankiewicz testified: 98 [I]t is difficult to imagine the appeal in community 'A' of an additional top 40 station whose signal is b[r]ought from community 'B'. Since commercial radio stations, with very few exceptions, are using one of five, or, perhaps, at the most, six formats which are present in every commercial market, our feeling is that the appeal of an imported commercial station signal is very limited. 99 47 Fed.Reg. 9,894 (1982). As we indicated in NAB v. CRT, Mr. Mankiewicz's allusion to the ubiquity of recorded music may provide an adequate basis on which to deny an award to commercial radio claimants in general. See 675 F.2d at 379-80 (reviewing 1978 Determination in which Tribunal made no award to either the music or format elements of retransmitted radio signals). But Mr. Mankiewicz's testimony provides a questionable basis on which to foreclose broadcasters from an award because of the ubiquity of their formatting while simultaneously granting an award to the Music Claimants because their ubiquitous music was played 70% of the time. See also NPR Intervenor Brief at 9; NAB Reply Brief at 13-14 (indicating that 15% of commercial radio stations, constituting more than four times the number of NPR stations, provide relatively uncommon program formats). 100 Although it may well be that the Tribunal can adequately explain its different treatment of the Music and commercial broadcasting radio claimants, the inadequate state of its present explanation requires us to set aside its radio award to Music and non-award to NAB as arbitrary. Accordingly, we remand these aspects of the Tribunal's Decision to the agency.