“Ad” vs. “Underwriting”

The trend over the past decade in Austin at public station KUT has been fewer donors, larger donations. Response from the bean counters: hiring rainmakers, companies that specialize in attracting corporate donations. The effect has been, as so aptly put by saveKUTaustin member Jody Lazo, to build an overpass to the “landed gentry,” the “underwriters” purveying items such as luxury cars, and jettisoning the “public” whose support has been declining. So when does “underwriting” become “advertising”?

As this has come into question more often in the age of corporate underwriting, what follows is an explanation from radio-info.com discussion board on what the basic rules are for underwriting, from “aaronread”:

Crafting legal underwriting scripts is as much an art as it is a science. If you want to get into it, I suggest you read up extensively at the FCC’s site on the issue and also listen a lot to your local NPR affiliate to get a feel for what the national spots (mostly voiced in Frank Tavares’ distinctively neutral voice) say in their scripts.

For reference, here are the key tenets:

  • The biggest and most vague is that underwriting cannot be promotional, merely informative.  Exactly what this means is roundly up for debate, but a good place to start is to avoid superlatives at all costs. Also remember that saying something factual is still considered promotional if it’s to distinguish the sponsor from other sponsors in the same field and imply that the sponsor is better.  For example, a grocery store that says its been in business for 30 years is to imply that its longevity makes it better than other grocery stores. Thus, it is considered promotional.
  • If no consideration is involved, it’s not underwriting and thus exempt from these rules. However, consideration can take many, many forms other than money. This is why it’s virtually impossible for a non-comm station to broadcast live from a for-profit venue like a restaurant, nightclub or music hall.
  • If the organization involved is a non-profit, then the underwriting rules do not apply. However, as a station is it unwise to have different rules for non-profits and for-profits . . . it’s confusing to your listeners and to your sponsors.
  • The FCC has stated, in a roundabout way, that they don’t see how an underwriting spot that’s longer than 30 seconds could not be promotional. So your spots must be less than 30 seconds.
  • In underwriting, there can never be a call to action. This is the biggie, and leads to the most “verbal gymnastics.” This rule is why you hear the phrase “more info at” instead of “call this number” or “visit us online at.”
  • In underwriting, there cannot be any inducement to buy, sell or lease. This means no information about sales/discounts, special offers, free giveaways, etc.
  • In underwriting, there can never be any mention of prices. This includes interest rates, savings, value or related info to price.

One big issue with underwriting is slogans. The prime example is “Get Met, It Pays.”  That’s clearly a call to action, but it’s also a long-time identifying slogan for Met Life insurance. The FCC has been somewhat unclear on this — they’ve nailed people for violating the rules in situations like this, but a lot of stations have also done it for years and not been hassled. YMMV.

Oh, and this should be obvious, but IANAL. Use any info I provide at your own risk!

Again from “amfmxm”:

More huge potential non-profit categories . . . where the underwriting restrictions don’t apply.

State/regional/local convention & visitors bureaus, symphony orchestras, opera organizations, community theatre, festivals, concerts presented by civic organizations, state/county/municipal governments, school districts, (most) hospitals, clinics, chambers of commerce, (many) nursing homes… public TV stations (for radio underwriting)… public radio stations (for TV underwriting)…

No restrictions. Just get a dub from the commercial station. It’s legal.

And one note from “techie2” in regards to a topic current in Austin, where the public radio station is taking over the running of the Cactus Café, a local folk institution on the University of Texas campus:

[T]he way I read the rules there is no way to do any sort of remotes at a business location, period.

And finally this word from “amfmxm,” an old hand in public radio:

Over-reliance on CPB funding first opened up this Pandora’s box. Over-reliance on membership funding kept public radio programming frozen in time (and still does in isolated cases) out of fear that the Big Spenders will stop writing checks if “Performance Today” (as an example) is moved from 9 AM to 10 AM, or — God forbid — cancelled.

From the inside I saw NPR’s corporate support (underwriting) revenues shoot through the roof during the “internet bubble” only to crash back to earth when the boom went bust. While things were booming I watched the organization spend every dime as quickly as it came in (or before it came in) and kept thinking “I sure wish they would treat this revenue as ‘gravy’ and operate more frugally” — but, of course, they didn’t. And it came crashing in on them.

Just as in commercial media, or any other business or organization for that matter, some common sense must be factored into any financial operating plan.

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One Response

  1. Good post, as always ! And some great sleuthing on a very slippery subject. Good to know there’s some concise information available out there other than the actual FCC guidelines which always seemed open to many interpretations. And it helped to clarify why slogans are not considered “promotional.” I believe that the Lexus underwriting spots here in Austin use their slogan “The relentless pursuit of perfection” or some such thing. Obviously promotional but I guess it slips thru the cracks OK.
    But I still have one lingering question. Is the money spent on underwriting also tax deductible, just as individual donations are ? I know that on donations if you accept one of the promotional gifts, CDs, tote bags, etc, then you are supposed to deduct the value of the gift from your tax deduction. So would underwriting costs be totally deductible, thus giving the donor an ad spot and a tax break or would they have to deduct the fair value of a 30 second spot ? If they’re getting a full deduction and the underwriting spot that’s a pretty sweet deal.

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