Key Takeaways

  • A Local Marketing Agreement (LMA) allows one radio station to control programming, advertising, and operations of another without purchasing the license.
  • LMA radio deals often help broadcasters navigate FCC ownership limits, expand market reach, and bridge the gap before regulatory approval of a sale.
  • Public and noncommercial educational (NCE) broadcasters must be cautious: profit-making from LMAs is restricted, and any fees should reflect reimbursement of operational costs only.
  • The FCC closely monitors LMAs for potential violations, including excessive control, failure to comply with content obligations, or indirect attempts to bypass ownership caps.
  • Carefully drafted clauses—covering programming obligations, liability disclaimers, termination rights, and compliance duties—are critical for legal protection.

A local marketing agreement is a contract used in commercial radio that allows station owners to program and manage other stations without purchasing the license for that station. This type of agreement, often called an LMA, arose in the early 1990s to address the ownership restrictions under which companies could only own 12 radio stations nationally and only one AM and one FM station in each market. The LMA is a legal tool designed to maximize profits in a strict regulatory environment.

Regulatory agreements are timed in accordance with the owner's license renewal date and can range from one to six years. LMAs are often used to bridge the gap between entering into a sales contract for a radio station and final FCC approval of the sale, which can take several months and leaves both the buyer and seller in a risky limbo.

Public Radio Use

This type of agreement is also common in public radio. A 1994 video called "Positioning Your Radio Station by Randy Michaels" addresses the deregulation and subsequent explosion of new FM radio stations. As of 2015, the FCC recorded more than 6,600 commercial FM radio stations, more than 4,700 AM commercial stations, and more than 4,000 educational radio stations. In addition, they count more than 6,300 FM translators and boosters and more than 1,000 low power FM stations, for more than 22,800 total stations all in competition with satellite radio and streaming services.

FCC Oversight and Compliance Risks

While LMAs are legal and widely used in commercial and public broadcasting, they are subject to intense scrutiny from the Federal Communications Commission (FCC). The FCC evaluates these agreements not just on their terms but also on how they function in practice. If a broadcaster operating under an LMA exerts too much control over another station — for example, by influencing staffing, finances, or strategic decisions — the agency may treat the arrangement as an unauthorized transfer of control, which is a serious violation.

This regulatory risk is especially significant during license renewal periods. Even if a deal technically complies with existing rules, the FCC can still challenge it if the arrangement undermines the intent of ownership limits or public-interest obligations. Operators should therefore maintain clear documentation of responsibilities and ensure the licensee retains ultimate control over key decisions such as programming, personnel, and budgeting.

LMA Advantages and Disadvantages

Advantages of an LMA include:

  • The ability to transfer station operation without selling or buying a license.
  • The ability to step away from day-to-day station administration while maintaining overall control.
  • Providing an avenue to run a successful radio station while avoiding competing priorities and other organizational politics.

Disadvantages of this type of agreement include:

  • The licensee remains responsible for FCC regulatory compliance.
  • The management agreement can be terminated by the licensee if he or she does not approve of the programming provided.

To alleviate the impact of these disadvantages, it's important for the licensee and operator to maintain a strong ongoing relationship with open communication for an LMA arrangement to succeed.

Special Rules for Noncommercial Educational (NCE) Stations

For noncommercial educational (NCE) broadcasters, the FCC applies additional restrictions to LMA radio agreements. These stations are required to operate exclusively for educational and public service purposes and cannot pursue profit-making ventures. As a result, when an NCE station brokers airtime under an LMA, it may not charge more than the reimbursement of actual operating expenses. Any payment structure that generates surplus revenue risks violating federal law and jeopardizing the station’s license.

This means that NCE LMAs must be structured with extra care. Key considerations include:

  • Cost Transparency: All financial terms should clearly document how payments reflect actual operational expenses.
  • Programming Purpose: Content must align with the station’s educational mission, not commercial interests.
  • Public Accountability: Stations should retain ultimate authority over programming choices to meet public service obligations.

Failure to follow these requirements has led to enforcement actions and license challenges, underscoring the need for precise contract drafting and ongoing legal review.

Sample Clauses and Excerpts

A local marketing agreement should indicate that both parties are entering into an LMA, the date that the contract commences, and the station in question. State that the operator of the station will continue to comply with programming obligations, that the seller has no liability, and that the LMA can be terminated without warning if these terms are not met.

Best Practices for Drafting an LMA

To ensure compliance and minimize legal risks, carefully drafted local marketing agreements should include several key components:

  • Clear Division of Responsibilities: Specify which party controls programming, staffing, and advertising, while confirming that the licensee retains ultimate control.
  • Termination Clauses: Provide the licensee with the right to end the agreement immediately if programming violates FCC standards or other legal obligations.
  • Compliance Provisions: Require ongoing adherence to FCC rules, including public file requirements, content standards, and political advertising regulations.
  • Indemnification: Include protections for the licensee against claims resulting from the operator’s conduct.
  • Transparency in Payments: For NCE LMAs, explicitly state that payments are limited to reimbursing operating costs.

Additionally, both parties should regularly review the LMA and maintain thorough records of their activities. This documentation can be critical during FCC audits or license renewal proceedings.

Frequently Asked Questions

  1. What is an LMA in radio broadcasting?
    A Local Marketing Agreement (LMA) allows one station to control programming and operations of another without owning its license, often to expand market presence or prepare for a sale.
  2. Can a noncommercial station make money from an LMA?
    No. NCE broadcasters can only recover operating costs under an LMA. Any profit-generating structure risks violating FCC regulations.
  3. What happens if an LMA gives too much control to the operator?
    If the FCC determines that control has effectively transferred without approval, it may impose fines, revoke licenses, or deny renewal applications.
  4. Are LMAs temporary or long-term agreements?
    They can last from one to six years and are often timed with license renewal cycles. They may also serve as interim arrangements before a sale closes.
  5. What should be included in an LMA contract?
    Essential elements include control provisions, termination rights, compliance clauses, indemnification terms, and — for NCE stations — limits on payment structures.

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