Watch Out for Fixed-Spot Package Buys

Some TV stations are receiving requests from advertising agencies and advertisers to buy long-term packages running through next fall’s election cycle that typically include (1) non-preemptible spots; (2) sponsorships or “mentions”; and often (3) ads on the station’s website.  Stations are being told that selling these packages will not affect their lowest unit charge (LUC) during the election windows and will protect the advertiser from being preempted by candidate spots.

The argument these agencies and advertisers advance is that, since sponsorships and mentions cannot, as a practical matter, be sold to candidates because they cannot incorporate an adequate sponsorship identification, and stations are not required to sell website ads to candidates, they could not qualify to purchase a similar package.

Thus, the argument goes, the prices for the various elements of the package would not affect a station’s calculation of its LUC and the commercial advertisers who buy this package would be protected against preemption by candidates.

Both of these assumptions are false.

As informal discussions with the FCC’s staff confirm, this approach will not be effective in protecting stations’ political rates and may in fact harm stations that take these offers. Stations are, of course, free to offer commercial advertisers fixed-time spots at any rate they choose, whether separately or as part of a package.

The FCC ruled in 1992, however, that candidates do not have to purchase all of the elements in a station’s package plan to get the benefit of the package rate. Instead, stations are required to place a value on each element in the package and, if the rate in the package establishes the station’s LUC for a particular class of time, to disclose that rate to candidates.

The fact that some parts of a package could not be sold to candidates does not relieve stations from placing a value on the parts of the package that candidates could purchase. Nor does the package necessarily protect the spot from being preempted if a station faces reasonable access and equal opportunities obligations that could not be met while protecting these spots.

Even if these packages are only available now, long in advance of the election, FCC staff has expressed growing concern about station sales practices that provide benefits that effectively are only available to long-term commercial advertisers, pointing out that candidates are supposed to be placed on an equal footing with a station’s most-favored advertiser.

In this situation, stations that sell these long-term packages will have to make a good-faith judgment about the value of the fixed-time spots, and if that rate is less than the station’s normal rate for a fixed spot or if they otherwise do not sell fixed spots to commercial advertisers, to disclose to candidates the availability of fixed spots at that rate.  If that rate is at or near the station’s rate for preemptible spots, candidates would have a strong incentive to purchase those fixed spots.

Stations in states with competitive races, which normally sell time on a preemptible basis with rates floating with demand, may, if they sell these package deals now, see that rate structure damaged as candidates instead buy low-priced fixed spots.

The FCC recognizes that stations can take the needs of commercial advertisers into consideration in determining how much time to sell to candidates, and that is a more effective way to protect the interests of long-term advertisers than these package plans.

Jack Goodman is a Washington communications attorney. He served as general counsel of the National Association of Broadcasters and has spoken about political broadcasting rules to numerous groups. He can be reached at jack@jackngoodman.com.