New York State Budget – Some Provisions will Affect Broadcasters

We are still in the process of going through the NY State Budget. The legislative text is over a thousand pages. The Budget is voted on separately in the March/April time frame. Over the years more “non-budget related” issues get added to the budget process.  The Governor uses the process as a vehicle to move his legislative priorities.  While a number of the legislative proposals affect business in general (including broadcasters), we are focusing first on issues that could have a direct impact on local stations.  Here are some of the major issues:

No Advertising Taxes – Despite a $6 billion budget gap, there are no proposed taxes on advertising.  This is a positive step.

We note however that there is a separate bill, S.6102 that would impose a 5% tax on gross income on every corporation which derives income from the data individuals share with such corporations.  This bill is NOT part of the budget.  Obviously, such a tax could completely upend our digital businesses.  Moreover, it is not clear whether this would apply to Nielsen data.  In any case, while the bill is not part of the budget process, we are keeping a close watch.

Vaping – Bans Broadcast Advertising and Places Restrictions on Print and Social Media

The Governor’s Budget contains express language banning advertisements for vaping on broadcasting.  This would apply to all vaping products, not just flavored products.  The proposed law would also significantly restrict advertising in print and social media.  Vaping advertisements could appear only in “adult publications.”  In this case an “adult publication” is defined as 1) publication in which people under 21 comprise no more that 15% of the audience and is accessed by no more than 2 million of people under 21.  So the concept of an “adult publication” is not limited to those magazines with brown wrappers behind the counter.  Under this definition, the NY Times may be considered to be an “adult publication”.  More importantly, it may encompass our websites.

As you know both NY State and the FDA are clamping down on the VAPING industry.  As with cigarette advertising, we are concerned that broadcasting is being singled out.  Such discrimination may have significant First Amendment issues. We are going to follow this issue closely.

Marijuana – Advertising Legal Marijuana Products

The Governor intends to legalize recreational marijuana as part of the budget process.  While the legislation does not ban marijuana advertising, it imposes very strict regulations.

At the outset, the new law creates a new Board that will regulate medical and recreational marijuana as well as CBD products in New York.  As drafted “anyone” who violates the new law or the regulations enacted by the new board may be subject to fines. Generally this should mean marijuana growers, distributors and retailers.

From our standpoint, the issue is whether it imposes liability on broadcasters from airing an advertisement that violates any of the rules.  From this perspective the advertising rules become very important.

Under the new law, advertising cannot be directed at people under 21 years of age.  Moreover advertising may not

  • Be false or deceptive
  • Promote or depict consumption
  • Be designed in any way to appeal to children or other minors
  • Be in the form of an unsolicited Internet pop-up
  • Make medical claims or promoted adult use cannabis for medical or wellness
  • Promote or implement discounts

The primary focus of all advertising is to educate lawful cannabis consumers about the availability of regulated adult use cannabis.  Advertising cannot be directed to solely promote cannabis use.

The fundamental restriction is to avoid any advertising that appeals to anyone under 21 years of age or at “at risk” populations.  Specifically broadcast, cable print and digital communications:

  • Can only be placed where audience is reasonably expected to be 21 year of age or older
  • Determined by reliable up-to-date audience composition data
  • Burden of proof is on party that paid for the ad or “facilitated” the advertisement

As drafted the language raises several concerns.  First, the Board is given broad discretion to regulate and even prohibit some forms of advertising.  This language could lead to restrictive rules that effectively eliminate marijuana advertisements.  For example, with respect to the age requirement “what does reasonably expected to be in the audience” mean.  We have lived with a similar voluntary formulation for alcohol ads which generally state that 71.6% of the audience must be 21 years of age or older.  It is not clear these standards will be adopted by the new Board.

Second, the burden of proving audience composition is on the purchaser of the advertisements or the entity that “facilitates” the advertisement.  How do you prove audience numbers in small markets with no ratings services?

Third, there is the issue of liability.  Under the law anyone who violates the rules can be fined.  The rules are placed on the entity purchasing the advertisement as well as those who “facilitate” the advertisement?  Are we facilitators under the proposed law?  If so, are we subject to liability in New York if we air an advertisement that violates the rules?

There are a number of issues that need to be clarified. Thus while the new law contemplates some form of advertising, we need to make sure the regulations that will be adopted by the Board do not effectively eliminate advertising opportunities.

GIG Economy – Freelance Reporters and Stringers

As noted previously, the Governor proposed to include new labor rules governing those who work for firms such as UBER and Lyft.  Today these workers are considered to be “independent contractors.”  The unions want these individual and those who work in similar industries to be classified as “employees’ and not independent contractors. California adopted similar legislation last year.  Known as AB5 the California legislation is extremely broad.   Under the California law, stringers, free-lance journalists and new photographers would have to become employees.

Fortunately, the Governor appears to have stepped back somewhat.  The legislative language in the budget would create a task force to report back to the Governor with recommendations by May.  The governor would then introduce new legislation.  If the Task Force cannot reach a decision, the budget bill authorizes the NY Department of Labor to craft regulations.

The legislation has also narrowed its focus.  As currently drafted it does not appear that stringers, free-lance journalists, videographers or new photographers will fall within the scope of the new law.  Of course it is always possible that the Task Force and perhaps the Department of Labor will want to expand the classifications.  At this point, however, this should not have a significant impact on broadcasting.  Nonetheless we will keep close watch on this issue throughout the legislative session.

 

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