Washington Post 2008 Annual Report Download - page 32

Some commercial broadcast stations use third-party brokers to sell otherwise unused commercial inventory at below-market
prices. The FCC is considering a request that it declare that such sales, when made through Internet brokers, do not affect
the calculation of a broadcast station’s lowest unit charge for advertising, which stations must offer to candidates for
public office during election periods. An adverse ruling could adversely affect the Company’s ability to obtain revenue
from unused inventory.
Broadcast Indecency. In 2007, the FCC amended its rules to increase the maximum monetary forfeiture for the
broadcast of indecent programming from $32,500 per occurrence to $325,000 per occurrence. In June 2007, the U.S.
Court of Appeals for the Second Circuit issued a decision vacating certain of the FCC’s proposed forfeitures for the
broadcast of so-called “fleeting expletives,” which the FCC had found were indecent. The court concluded that the FCC
had failed to articulate a reasoned basis for its decisions and remanded the relevant cases to the FCC for further
consideration. The FCC appealed the Second Circuit’s decision to the U.S. Supreme Court, which has not yet issued its
decision. In addition, the U.S. Court of Appeals for the Third Circuit found that the FCC acted improperly when it
imposed monetary forfeitures in connection with CBS’s 2004 broadcast of a musical performance during the Super Bowl
halftime show, which the FCC also had found to be indecent. The FCC has asked the U.S. Supreme Court to consider its
appeal of that decision, but has asked the Court not to grant its request until it issues its decision in the “fleeting
expletives” case, described above. The FCC’s request is pending. Particularly in light of the increase in forfeiture amounts,
the resolution of this litigation could affect the risks associated with operation of the Company’s broadcast television
stations.
It is not generally the FCC’s policy to notify licensees when it receives indecency complaints regarding their broadcasts
before it issues a formal Letter of Inquiry or takes other enforcement action. As a result, the FCC may have received
complaints of which the Company is not aware alleging that one or more of the Company’s stations broadcast indecent
material. The Company was notified on January 25, 2008 that the FCC had proposed a monetary forfeiture against
station KSAT, along with 51 other television stations, in connection with the station’s broadcast of an allegedly indecent
scene in an episode of the drama “NYPD Blue.” KSAT, along with the other affected ABC affiliates, has appealed the
FCC’s decision. The case is pending before the U.S. Court of Appeals for the Second Circuit.
Sponsorship Identification. During 2006 and 2007, a media watchdog group filed a series of complaints at the FCC
alleging that various broadcast stations and cable channels violated the FCC’s sponsorship identification rules by
broadcasting material provided to them by a third party without disclosing the source of the material. The FCC issued
Letters of Inquiry to three Company-owned stations that had been named in the complaints. Specifically, Company-owned
station WJXT was named in the first complaint, along with 76 other broadcast stations, and Company-owned stations
WKMG and WPLG were named in the second complaint, along with 44 other stations.
In September 2007, the FCC released two decisions proposing monetary forfeitures against a cable operator in
connection with a series of news broadcasts identified in the complaints. These decisions do not directly affect the
Company, but they are relevant because the FCC typically uses similar standards to evaluate alleged sponsorship
identification violations by broadcast stations and cable operators. The FCC’s investigations concerning the three
Company stations are pending. It is not possible to predict what further actions (if any) the FCC may take in response to
the complaints.
The FCC is conducting proceedings concerning various matters in addition to those described in this section. The outcome
of these FCC proceedings and other matters described in this section could adversely affect the profitability of the
Company’s television broadcasting operations.
Magazine Publishing
Newsweek, Inc.
Newsweek, Inc. publishes Newsweek, a weekly global forward-looking news and ideas magazine and its digital
platform, Newsweek.com.Newsweek is published domestically and internationally. The domestic edition of Newsweek
includes more than 100 different geographic or demographic editions that carry substantially identical news and feature
material, but enable advertisers to direct messages to specific market areas or demographic groups. Newsweek is sold
through subscription mail order sales derived from a number of sources, principally direct-mail promotion, as well as
online and on newsstands. Newsweek’s published advertising rates are based on its average weekly circulation rate
base and are competitive with those of the other publications in its category. It currently delivers an average weekly rate
base of 2,600,000 copies, which will continue through the first half of 2009. Newsweek recently announced plans to
reduce its domestic rate base to 1,500,000 copies by January 2010, reflecting a shift in focus to a different
demographic that is closer to its core base of loyal subscribers. This demographic consists of a group of subscribers who
are more highly educated, who have demonstrated a high level of interest in news and ideas and who have higher
20 THE WASHINGTON POST COMPANY