Community Broadcasters are being asked to comment on new guidelines which spell out the ACMA’s approach to profit making enterprises. The draft Community Broadcasting Not–for–Profit Guidelines are causing consternation for some community broadcasters, who feel that the ACMA may become too heavy-handed and legalistic if the guidelines go through as written, while others see the document as a necessary clarification of the rules.

Third party program makers who sell their own sponsorship, then buy-up air time and put their show to air with the sole purpose of making money for themselves will be left exposed by the guidelines, which make it clear that this practice is not acceptable. Most community broadcasters will see this as an opportunity to clear out potentially problematical programs from their schedule, although stations which rely on income from outsourced programming may start to get worried about where replacement funds will come from.

A more contentious area of potential difficulty thrown up by the draft guidelines includes what could be seen to be an unacceptable level of interference with a licencee’s mnagement prerogatives. Stations run by universities or educational institutions could be most affected by this, and are specifically singled out in the draft guidelines, which say:

“Particular care should be taken where the licensee’s broadcasting service is only part of its operations. An example of this is where the licensee is a university that provides educational services.

A licensee needs to distinguish between the broadcasting service it is licensed to provide and any broader operations it might have, particularly where revenue is being generated and distributed. In these circumstances, the ACMA recommends that the licensee consider setting up a separate corporate entity or a separate board of management as an effective means of ensuring that decision-making in relation to the broadcasting service is independent from any such broader operations.”

The status of community radio licence holders is a historical mish-mash of different entities such as associations, companies, cooperatives and clubs, some of which may unnecessarily fall foul of the wording of the document if it is interpreted too legalistically.

The document makes it clear that stations are allowed to make a “surplus” but the important thing is how they use that “surplus.” If the station puts its book-profit back into infrastructure, station improvements, training or other legitimate items which benefit the community station, then there will be no problem. However, stations which pretend to be not-for-profit, but pay their staff unrealistically high salaries, will be deemed to be making a profit and could find themselves in trouble.

But what is a legitimate surplus? And just how much is a “modest” surplus?

Some stations would be glad of a few hundred dollars surplus at the end of the financial year, while others are used to carrying over tens of thousands of dollars from one financial year to another because they are well run or they are saving up over a few years to make capital improvements. The draft guidelines say:

“The licensee can use the broadcasting service to generate revenue in accordance with the Act, and can have a modest surplus so long as such surplus is used for the continued operation of the broadcasting service and is not distributed for personal use among persons who are involved in the management or operation of the broadcasting service.”

The draft guidelines also use the words “large operating surplus,” but how large is large and who decides?

While the prohibition on excessive staff salaries makes sense, and is generally accepted by those in the sector who are there for genuine reasons, there are worries about an outside body such as ACMA interfering in the legitimate financial decisions of a board of directors which is properly running the affairs of the licence holding entity.

Several efficient and well run boards which follow the rules, but also manage to generate good returns, have told radioinfo they are angry about the implication that just because they make money they are somehow doing the wrong thing. This sentence in the guidelines particularly gets their goolies: “By generating a large operating surplus, it is questionable whether the licensee has provided the broadcasting service for community purposes.”

Less contentious are guidelines in another section, which give good sensible advice about entering into commercial arrangements without properly understanding the implications for compliance with the licence condition.

For a licensee planning to enter into commercial agreements, there are some best practice suggestions in the draft, including:

• good record keeping, that is, making sure agreements are in writing, signed by an authorised person and copies kept are easily retrievable;
• making sure all decision-making complies with the organisation’s constitution, the corporate governance requirements in the community broadcasting codes of practice and the relevant legislation under which the licensee is incorporated;
• being certain about the actual amount of revenue and surplus that is expected to be generated through the agreement;
• being certain of how any money received by an external party will be used (for example, production costs, salaries), and taking reasonable steps to try to ensure that the external party is not intending to use the broadcasting service as part of its profit-making enterprise; and
• ensuring that when entering into a commercial arrangement, the licensee does not jeopardise compliance with the licence condition and that it is able to continue to provide the service for community purposes.

While the best practice guidelines make sense, the use of the wording saying they “ought to be implemented” may again be too prescriptive to allow boards to make their own decisions if the guidelines are followed too legalistically by the regulator.

Other guidelines in the draft seem clear and straightforward, offering good examples of what is and is not allowed, such as:

Airtime payments:

“Payment for access to airtime is commonly referred to as an airtime access fee, paid to a licensee by an individual or group wishing to access airtime on a licensee’s service. The service usually publishes a schedule of fees, which may contain a standard fee or have a range of fees for peak and non-peak periods or concessions for students and seniors… As the Act does not specifically provide for the sale of airtime on community radio, it is important that licensees enter into this type of arrangement with caution and in a transparent manner.”

Agents:

“Agreements with agents to procure sponsorship for the broadcasting service can be a good way to outsource this legitimate revenue-generation activity. However, care must be taken in such arrangements to ensure that the broadcasting service is the main beneficiary of such sponsorship. The licensee must be the recipient of the revenue generated, with the agent being paid only a commission or fee based on a comparable market rate.”

Promotional arrangements

“Community broadcasting licensees enter into a range of different commercial arrangements to generate revenue for their services… such as the production and sale of CDs; the merchandising of branded clothing; the setting up and maintenance of station websites; the publication of monthly or quarterly newsletters; and the sponsorship of events, such as dance parties and concerts… Licensees should take care when entering into such arrangements, including consideration of the appropriate use of the station logo, as well as copyright and royalty arrangements, to ensure that the service is not operated for profit or as part of a profit-making enterprise.”

The ACMA is encouraging broadcasters to discuss all the issues that may arise from the draft. As well as encouraging individual submissions, ACMA will have formal discussions with the CBAA and will host a discussion on the guidelines at this year’s CBAA Conference. Submissions are due by the beginning of November. Click here for submission details, and click the link below for a full copy of the draft guidelines.

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