PAGENO="0001"
FINANCIAL INTEREST AND SYNDICATION RULES
HEARING
BEFORE THE
SUBCOMMITTEE ON TEI4ECOMM1IMCATIONS,
CONSTIMIER PROTECTION, AND FINANCE
OF THE
COMIMIITTEE ON ENERGY AND COMIM]~RCE
HOUSE OF REPRESENTATIVES
NINETY-EIGHTH CONGRESS
FIRST SESSION
ON
H.R. 2250
A BILL TO PROVIDE A MORATORIUM UNTIL JUNE 30, 1988, ON
CHANGES TO THE FEDERAL COMMUNICATIONS COMMISSION RULES
REGARDING NETWORK TELEVISION SYNDICATION, NETWORK TELEVI-
SION FINANCIAL INTERESTS, AND PRIME TIME ACCESS
JUNE 1 AND AUGUST 1, 1983
Serial No. 98-96
Printed for the use of the Committee on Energy and Commerce
O~,t~,2'1 ~)
U.S. GOVERNMENT PRINTING OFFICE
32-MOO WASHINGTON : 1984
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COMMI'11~EE ON ENERGY AND COMMERCE
JAMES H. SCHEUER, New York
RICHARD L OTTINGER, New York
HENRY A. WAXMAN, California
TIMOTHY E WIRTH, Colorado
PHILIP R. SHARP, Indiana
JAMES J. FLORIO, New Jersey
EDWARD J. MARKEY, Massachusetts
THOMAS A. LUKEN, Ohio
DOUG WALGREN, Pennsylvania
ALBERT GORE, JR., Tennessee
BARBARA A. MIKULSKI, Maryland
AL SWIFF, Washington
MICKEY LELAND, Texas
RICHARD C. SHELBY, Alabama
CARDISS COLLINS, Illinois
MIKE SYNAR, Oklahoma
W. J. "BILLY" TAUZIN, Louisiana
RON WYDEN, Oregon
RALPH M. HALL, Texas
DENNIS E. ECKART, Ohio
WAYNE DOWDY, Mississippi
BILL RICHARDSON, New Mexico
JIM SLATTERY, Kansas
GERRY SIKORSKI, Minnesota
JOHN BRYANT, Texas
JIM BATES, California
FRANK M. POTTER, Jr., Chief Counsel and Staff Director
SHARON E. DAVIS, Chief Clerk/Administrative Assistant
DONALD A. WATT, Printing Editor
ARNOLD I. HAVENS, Minority Counsel
SUBCOMMITTEE ON TELECOMMUNICATIONS, CONSUMER PROTECTION, AND FINANCE
TIMOTHY E. WIRTH, Colorado, Chairman
EDWARD J. MARKEY, Massachusetts MATTHEW J. RINALDO, New Jersey
AL SWIFF, Washington CARLOS J. MOORHEAD, California
CARDISS COLLINS, Illinois THOMAS J. TAUKE, Iowa
ALBERT GORE, JR., Tennessee MICHAEL G. OXLEY, Ohio
MICKEY LELAND, Texas JAMES T. BROYHILL, North Carolina
JOHN BRYANT~ Texas (Ex Officio)
JIM BATES, California
JAMES H. SCHEUER, New York
HENRY A. WAXMAN, California
JOHN D. DINGELL, Michigan
(Ex Officio)
DAVID K. AYLWARD, Chief Counsel/Staff Director
THOMAs A. ROGERS, Counsel
RODNEY JOYCE, Associate Minority Counsel
JOHN D. DINGELL, Michigan, Chairman
JAMES T. BROYHILL, North Carolina
NORMAN F. LENT, New York
EDWARD R MADIGAN., Illinois
CARLOS J. MOORHEAD, California
MATTHEW J. RINALDO, New Jersey
TOM CORCORAN, Illinois
WILLIAM E. DANNEMEYER, California
BOB WHITTAKER, Kansas
THOMAS J. TAUKE, Iowa
DON RITTER, Pennsylvania
DAN COATS, Indiana
THOMAS J. BLILEY, JR., Virginia
JACK FIELDS, Texas
MICHAEL G. OXLEY, Ohio
HOWARD C. NIELSON, Utah
(II)
PAGENO="0003"
CONTENTS
Hearings held on: Page
June 1, 1983 (Los Angeles, Calif.) 1
August 1, 1983 795
Text of H.R. 2250 4
Testimony of:
Asselin, Diane, president, Asselin Productions, Inc., and also on behalf of
Women in Film 659
Blumenthal, Mel D., executive vice president, MTM Enterprises, Inc 843
Bortz, Paul, consultant to American Broadcasting Companies, Inc 881
Carter, Terry, META-4 Productions 483
Casey, Bernie, POOBAB Productions (Los Angeles) 431
Cassara, Anthony B., president, Television Division, Golden West Broad-
cast 167
Colloff, Roger, vice president, Policy and Planning, CBS/Broadcast
Group 19, 810
`Dunham, Corydon B., executive vice president and general counsel, Na-
tional Broadcasting Co., Inc 17
Funkhouser, Robert, on behalf of Association of National Advertisers 166
Gurian, Naomi, executive director, Writers Guild of America 297
Hargrove, Ward, counsel, ABC Television Affiliates Association 885
Hooks, Robert, founder and chairman, National Alliance for Black Ad-
vancement in Communications 420
Lear, Norman, Embassy Productions and Tandem Productions, Inc 833
Ochoa, David, president, Buenavision Cable Co 767
Peters, Brook, Delbro Enterprises (Los Angeles) 425
Poitier, Sidney, Verdon-Dedric Prods., Inc 422
Price, Arthur, president, MGM Productions 440
Salhany, Lucille S., vice president, TV and Cable Programing, Taft
Broadcasting Co 887
Sanchez, Dolores, Eastern Group Publishing 778
Segelstein, Irwin, vice chairman of the board, National Broadcasting Co.,
Inc 816
Thomopoulos, Anthony D., president, ABC Entertainment, American
Broadcasting Co., Inc 465
Valenti, Jack, president, Motion Picture Association of America, Inc 28
Was, Joseph W., Jr., counsel, Committee Against Network Monopoly.... 466, 899
Additional material submitted for the record by:
American Broadcasting Co., Inc., letter, dated June 23, 1983, from Antho-
ny Thomopolos to Chairman Wirth, re additional information resulting
from hearing 794
Association of Independent Television Stations, Inc., letter, dated Septem-
ber 7, 1983, from James Hedlund to Thomas Rogers, re response to
questions to Tony Cassara of Golden West Television 394
National Broadcasting Co., Inc.:
Effect of retention of the financial interest and syndication rules on
competition between the broadcasting industry and pay cable 413
Letter, dated July 26, 1983, from Grant Tinker to Chairman Wirth,
re thoughts on the hearing and the financial interest and syndica-
tion rules 797
Response to questions of Chairman Timothy E. Wirth 403
Telecommunications, Consumer Protection, and Finance Subcommittee,
report on Hispanics in major television programs 10
(III)
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PAGENO="0005"
FINANCIAL INTEREST AND SYNDICATION
RULES
WEDNESDAY, JUNE 1, 1983
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON TELECOMMUNICATIONS,
CONSUMER PROTECTION, AND FINANCE,
Los Angeles, Cali/~
The subcommittee met, pursuant to call, at 8 a.m. in the
Museum of Science and Industry, 700 State Drive, Muses Armory
Section, Los Angeles, Calif., the Hon. Timothy E. Wirth (chairman)
presiding.
Mr. WIRTH. Come to order. I would like to thank you all for
coming.
Today, the Subcommittee on Telecommunications, Consumer
Protection, and Finance is holding further hearings on the broad
issue of diversity in television programing, and the immediate issue
of the Federal Communication Commission's proposal to repeal the
financial interest and syndication rules,
We are getting an early start this morning because we have a
large number of excellent witnesses to hear from on these impor-
tant issues.
The financial interest and syndication rules were adopted in the
early 1970's to address the problems posed by the overwhelming
dominance of the three commercial television networks, ABC, CBS,
and NBC. The FCC has initiated recently a rulemaking to repeal
the financial interest and syndication rules-rules which I strongly
believe continue to play a vital role in protecting the public inter-
est.
Congressman Waxman, along with Congressman Leland, and I
have introduced legislation, which would strip the FCC of authority
for a 5-year period to repeal the network financial interest, syndi-
cation, and prime time access rules. This bill addresses one of the
most fundamental communications policy questions that we as a
country face.
I have consistently stated that there are two fundamental com-
munications policy objectives, which must be addressed before all
others. The first is to promote and encourage competition in the
marketplace. The second is to provide the American public with
the widest possible diversity of programing sources.
The financial interest and syndk~ation rules have accomplished
and should be allowed to continue to accomplish both goals.
(1)
PAGENO="0006"
2
It is true that the video marketplace is becoming increasingly
competitive. At some point in the future, the networks, which
today clearly remain dominant as program buyers and distributors,
may no longer occupy such positions of dominance, and repeal of
these rules may then be justified.
However, in my judgment, the time for repeal of these rules is
clearly not now.
Information diversity is the cornerstone of the first amendment
and is a fundamental precondition of the robust marketplace of
ideas that must characterize a free and democratic society. This is
our most basic public interest goal. It must be protected, nurtured,
and promoted.
Whether it is by prohibiting AT&T from owning or controlling
information provided over its own monopoly transmission facilities
or whether it is through the presentation of conflicting viewpoints
under the Fairness Doctrine, regulation is often necessary to help
to insure our goal of diversity.
We are all aware of the contributions that the networks have
made to American television. Network news and much in network
entertainment have added significantly to the richness of the lives
of the American people. But the dominance of the networks, how-
ever, goes to the very heart of the issue of diversity of information
sources in a democratic society.
The financial interest and syndication rules have prompted di-
versity by assuring the viability of an independent production com-
munity, a community that is often little heard from in Washington.
So, today, we bring Washington to that community. Preserving
the unique and independent creative input of this Nation's writers,
directors, producers, and actors, free of total network editorial con-
trol, is also an extremely important aspect of the rules.
Such an ephemeral policy benefit does not lend itself to the hun-
dreds of pages of economic analysis that other issues have been
subjected. Yet, this might well be the most important component of
assuring program source diversity.
The rules have also fostered the development of strong, inde-
pendent broadcast outlets available to the public. Repeal of the
rules might well give the networks the ability to undermine the
growing competitive strength of the independent stations by ma-
nipulating their ability to obtain off-network shows.
Promoting video diversity also means assuring that the Nation's
diverse populace, especially its minority populations, receive satis-
factory levels of programing directed to their needs and interests.
We will focus on that issue this morning, as well.
Diversity of sources for programing, diversity in competition
amoung broadcast stations and diversity of creativity must be met
if the video marketplace is going to serve the best interests of the
public.
Preserving and encouraging such diversity is the focus of our
hearing this morning.
I would like to take this opportunity to commend the dedicated
efforts of my colleague who represents this great city, Congressman
Waxman, for his leadership on the financial interest rule issue. I
would like to also commend the leadership of Congressman Leland
for his tireless efforts aimed at addressing the very real, serious
PAGENO="0007"
3
problems presented by the television industry's inadequate pro-
graming directed to the needs and interests of the Nation's minori-
ty populations. Additionally, I want to commend Mr. Leland for his
efforts aimed at remedying the situation posed by the underrepre-
sentation of minorities within the telecommunications industry in
the areas of ownership and employment.
[The text of H.R. 2250 follows:]
PAGENO="0008"
4
I
98TH CONGRESS
1ST SESSION
To provide a moratorium until June 30, 1988, on changes to the Federal
Communications Commission rules regarding network television syndication,
network television financial interests, and prime time access.
IN TIlE HOUSE OF REPRESENTATIVES
MARCH 22, 1983
Mr. WAXMAN (for himself, Mr. WIRTH, Mr. MOORHEAD, Mr. ROYBAL, Mr. PA-
NETTA, Mr. DOWNEY of New York, Mr. EDWARDS of California, Mr.
DIXON, Mr. PASEAYAN, Mr. MILLER of California, Mr. TORRES, Mrs.
SCHROEDER, Mr. LEVIK1S of California, Mrs. BOXRR, Mr. MYERS, Mr.
BOSCO, Mr. BEiuw~, Mr. FAZIO, Mr. LELAND, Mr. BURTON of California,
Mr. BEILENSON, Mr. GoRE, Mr. MARTINEZ, Mr. MINETA, Mr. HAWKINS,
Mr. SOLARZ, Mr. BROWN of California, Mr. BRYANT, Mr. SYNAR, Mr.
MATsm, Mr. DELLUMS, Mr. STARK, Mr. Russo, Mr. PATTERSON, Mr.
LEHMAN of California, Mr. FLORIO, Mr. DYMALLY, Mr. ENGLISH, Mr.
HEFTEL of Hawaii, and Mr. COELHO) introduced the following bill; which
was referred to the Committee on Energy and Commerce
A BILL
To provide a moratorium until June 30, 1988, on changes to
the Federal Communications Commission rules regarding
network television syndication, network television financial
interests, and prime time access.
1 Be it enacted by the Senate~ani1 Riiuse of Bepresenta-
2 tives of the United States of Americain =Congress assembled,
3 That, in order to maximize competition in the television
4 broadcasting marketplace and to promote diversity of pro-
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5
2
1 graming sources for the public, the Federal Communications
2 Commission shall not have authority to take any action
3 before July 1, 1988, to repeal, amend, or otherwise modify
4 the provisions or applicability of any of the following:
5 (1) section 73,658(j)(i) of title 47, Code of Federal
6 Regulations (commonly known as the "Syndication
7 Rule"; 23 F.C.C. 2d 382);
8 (2) section 73.658(j)(ii) of title 47, Code of Feder-
9 al Regulations (commonly known as the "Financial In-
10 terest Rule"; 23 F.C.C. 2d 382); and
11 (3) section 73.658(k) of title 47, Code of Federal
12 Regulations (commonly known as the "Prime Time
13 Access Rule"; 23 F.C.C. 2d 382).
0
PAGENO="0010"
6
Mr. WIRTH. I would like to ask my colleagues if they also have
any opening statement they might like to make. Congressman
Waxman.
Mr. WAXMAN. Thank you very much, Mr. Chairman.
I appreciate your holding this hearing today. It enables our sub-
committee to listen first hand to our Nation's most active creative
community. This morning we will hear not from ideological theo-
rists who speculate on what the impact will be if these rules are
changes, but from people who will live with the rules on a daily
basis and who best know the implications of repeal, not only for
the TV industry but for the vast viewing public.
If we fail, if we allow these rules to be changed and the Congress
sits back and permits the FCC unilaterally to change the industry
that affects so many millions of Americans, we will see more mo-
notonous, blander, less-inspired television than ever before.
The single greatest complaint against television is it is all the
same and it is all the same because basically we have three net-
works that compete for the vast video audience by giving the same
tried and true and bland formula that worked once before.
Exactly 6 months ago this subcommittee held a general FCC
oversight meeting with Chairman Fowler and the other members
of the Commission. At that time we questioned Chairman Fowler
as to why he wanted to change these rules. He claims to be a con-
servative politically and, of course, the conservatives have always
said "If something ain't broke, don't fix it." I saw no reason then
and I see no reason now why the FCC ought to be moving to
change these rules that have served us well over the past years.
But we in Congress are faced with the reality that the FCC may
make this change, which is one of the most important and signifi-
cant public policy changes that has been made in the television
broadcasting industry since the 1934 act.
Therefore, we have no choice but to act decisively to save the
rules. The bill I introduced last year, H.R. 7347, has now been su-
perceded by the current bill, H.R. 2250, and a consensus is slowly
emerging that this FCC must be stopped. Last year, my bill had no
cosponsors, but this year's bill already boasts around 100 cospon-
sors.
H.R. 2250's enthusiastic support stems from its reasonableness.
The bill recognizes the rapidly changing state of the broadcasting
industry. We do not prejudge the future. The bill only precludes
FCC action until 1988.
I think most people are now familiar with the diversity and com-
petition the rules have brought to television viewers. The dramatic
rise in the number of independent television stations across the
Nation has brought alternative programing choices to millions of
Americans.
That rapid growth from 73 stations in 1970 to 179 stations in
1982 has increased the independent's viewing audience share from
10 percent to 17 percent.
Similarly, the number of truly independent program producers,
the people who actually supply prime time programing has in-
creased by 26 percent. And the number of autonomous companies
distributing programs to the local independent television stations
has increased by 51 percent.
PAGENO="0011"
7
The only declining statistics the rules have brought are in adver-
tising costs. Advertising rates in television markets with strong in-
dependent television stations are much lower than in those mar-
kets with the weak or no independents.
So, who benefits from repeal? The networks. Not the television
industry, not the public, iiot the creative community, but three cor-
porations who already have a stranglehold on our major means of
communications. But while the FCC is busy helping the networks,
it should look at what repeal would do to the first amendment.
Shortly before his death, Supreme Court Justice William Douglas
worried about the first amendment's future. He noted in looking
ahead, "The days seem dark to me." As he said, "Great wealth con-
trols most of our news outlets. A society of the dialog as espoused
by the first amendment will be increasingly difficult to stimulate."
But Douglas also saw how to safeguard the first amendment. On
another occasion, he wrote, "We seek truth and in that search a
medley of voices is essential. That is why the first amendment is
our most precious inheritance. It gives equal time to my opponents,
as it gives to me."
Douglas understood that a diversity of sources is as fundamental
to the freedoms of speech and press as is government restraint. The
key question is: How diverse will our sources of information be?
There is one final and important point I must make. The contin-
ued stereotyping of women and minorities, the lack of employment
opportunities available to them in television broadcasting is shame-
ful. Fingers have been pointed at both the movie studios and the
networks and both are to blame, but pointing blame is not enough.
The situation must be changed.
Repeal of the rules will worsen the situation. The networks con-
tinue to enjoy a frightening concentration of power. Only a handful
of people make programing decisions that affect millions of Ameri-
cans, but that concentration of power breeds sameness. Imitation,
not innovation, becomes the yardstick for success. Old pat program
formulas come back in show after show.
The pat program formulas are successful if they bring big ratings
because these ratings bring advertising revenue and the most
sought-after reviewing audience is the 18 to 34 year old group. This
is a group that shops often. It is not made up of minorities or the
elderly and the networks are appealing to the audience, the 18 to
34 spenders, and to no one else, to them, who are of significance.
By allowing independent television stations to flourish, the rules
have brought a decentralization of programing. Now, local inde-
pendent television stations can feature special programing, as a
Boston station did for Black History month, to meet the needs of
its community. Minority producers don't have to settle on being
network employees. They can start their own companies, tailor
their programs to their own themes and not those of an advertising
formula.
The networks do not need tailormade rules to be changed in
order to prosper. No foreseeable growth of independents could
threaten network dominance. On the other hand, independent cre-
atc~rs and producers desperately need the current rules to be pro-
tected in order to survive and flourish.
PAGENO="0012"
8
Thank you, Mr. Chairman, for holding this hearing, for allowing
me to make this statement and to participate with you in what I
consider one of the most important issues before us in the Con-
gress.
Mr. WIRTH. Thank you very much, Mr. Waxman, and we appreci-
ate your hosting us in Los Angeles this morning.
Mr. Leland.
Mr. LELAND. Thank you, Mr. Chairman.
Mr. Chairman, I welcome this opportunity to participate in this
discussion on the financial interest and syndication rules and their
impact on the diversity of programing. This issue, diversity of pro-
graming and sources of information, is one about which I am very
deeply concerned and one which has received a great deal of the
subcommittee's attention in this Congress. Particularly under your
leadership, I am most pleased to be here for that purpose.
Let me preface my remarks by noting that while I am a cospon-
sor of legislation, which would establish a 5-year moratorium on
any effort by the Federal Communications Commission to repeal
the financial interest and syndication rules, I am also deeply con-
cerned with the record of both networks and production companies
with regard to the provision of diverse programing.
In particular, I have grave concerns about the level of participa-
tion of minorities in the industry and the image of minorities,
which television portrays. I regret, Mr. Chairman, to say that the
record of the television industry with regard to minorities is and
historically has been abysmal.
The tragedy is that this is valid when applied to the various as-
pects of the relationship between television and minorities. Televi-
sion has a poor record of gearing quality programing to minorities.
The industry has consistently failed to properly portray minorities.
The record of the television industry on employment opportunities
for minorities in acting, programing, production or managerial po-
sitions shows a clear lack of commitment to adequate minority in-
volvement.
This lack of commitment is also reflected in the level of opportu-
nities for minority owned or controlled production companies.
I am troubled, Mr. Chairman, by the realization that both net-
works and production companies have abrogated their responsibil-
ity to the minority community and to the general public by their
failure to depict minorities with accuracy. I refer here to the per-
sistence of stereotypical portrayals, which reinforce societal racism
and sexism.
It is sad to note that in 1983, more than 40 years after the birth
of the television industry, minorities are still portrayed with the
most blatant stereotypes. Talented black actors and actresses are
reduced to playing comics. Some examples are "Good Times," "The
Jeffersons,'T and "Different Strokes," for example, or maids,
"Gimme A Break," or loyal sidekicks, as in "Magnum P.1." and
"The Mississippi."
These roles are for the most part merely updates of the old Hol-
lywood characterizations of the happy, shuffling darkies, mammies,
pickinnies, and native guides.
What is worse, Mr. Chairman, there is no defense against this ac-
cusation. You have only to turn on your television set during prime
PAGENO="0013"
9
time to see how networks and production companies see minorities.
It strains credibility to suggest that those who make the decisions
at the networks and within the production companies put this stuff
on the air, but they really don't see minorities in that light.
The situation for Hispanic actors and actresses is no better. I
would suggest probably even worse. Where their services are used
by the television industry, Hispanics are also cast in stereotypical
roles or as service workers.
A recent survey by the League of United Latin American Citi-
zens confirms this. The LULAC study also revealed that nearly
half of the roles that went to Hispanics-and that is 9 out of 263-
were on one program, "Hill Street Blues," and only two of the nine
roles were regular, major parts, and only two of those roles were
still less than desirable in terms of major roles. Four of those nine
roles, which went to Hispanics, were minor roles as cooks or maids.
It is a record which unfortunately speaks for itself.
At this point, Mr. Chairman, I ask unanimous consent to insert
the LULAC survey in the record of this hearing.
Mr. WIRTH. Without objection.
[The survey referred to follows:]
PAGENO="0014"
10
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PAGENO="0015"
11
At the request of Mr. Tony Bonilla, Corpus Christi State
University students in Political Science 303, Contemporary Political
Analysis, agreed' to view television programs and record' the number of
Hispanics observed. This report deals with the methodology, findings,
and conclusion of this class project.
METHODOLOGY
This section deals with definitions and procedures used to insure
the scientific nature of this project.
The students and the professor had to agree on several decisions.
First, viewing of programs began in the latter part of January, 1983,
with the overwhelming majority of the programs being viewed and coded
in February. Second, since resources, especially time, were limited,
we had to restrict the number of programs viewed. The first decision
was to attempt to view programs that were established and that also
enjoyed a certain level of popularity. Consequently, we decided to
restrict our evaluation of programs to those generally listed in the
top twenty of the publication, Br-oa~casting. Another decision was to
exclude programs that either involved special events, such as the
superbowl, a special series (`The Winds of War"), or involved a
variety of items, such as "Real People,' "60 Minutes."
As a result of these criteria, we restricted our programs to the
following seventeen listed in alphabetical order:
~ 1. Archie Bunker's Place
Dallas
~,ç" 3. Dukes of Hazard
4. Dynasty
~`5. Falcon Crest
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12
6. Fall Guy
7. Gloria
Hill Street Blues
9. Jeff ersons
10. Knots Landing
11. Love Boat
Magnum P.I~
~i13. Mash
J714. Newhart
1$~715.9to5
Simon & Simon
~17. Three's Company
All of these programs were viewed and coded by at least two
students. Any differences between the coders were reconciled in a
class discussion of the programinvolved. We would like to point out
that differences in coding were minor-~ To facilitate the coding
procedure, we developed a form which aided us in coding several
categories -
1. Race and Ethnicity
2. Sex
3. Acting role which must include some speaking (Major,.
Support, and Minor)
When a particular program was watched on different occasions, the
totals were added and then averaged for each program. For example, if
at least two coders watched Dallas on three, different dates, the
total number of actors was divided by three. We rounded off to the
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13
nearest whole number.
FINDINGS
44hen we added up the total number of actors for the 17 programs
chosen (see Table 1), we found that nine (9) out of 263 were Hispanic,
which is 3.4 percent of the total. However, if we left out Hill
Street Blues, the total was five (5) Hispanics out of 232, which is
2.2 percent. In short, one program accounted for 1.5 percent (4 out
of 263) of the total Hispanics viewed for the 17 programs chosen. In
other words, four (4) out of the total of nine (9) Hispanics observed
or 44.4 percent appeared on Hill Street Blues.
TABLE I
PERCENTAGE OF ACTORS ACCORDING TO SEX, ROLE, RACE AND ETHNICiTY
MALE (N=170) FEMALE (N=93)
MAJOR SUPPORT MINOR MAJOR SUPPORT MINOR
WHITE
17.5
19.4
20.5
13.3
BLACK
1.9
1.9
0
1.1
0.8
0.4
HISPANIC
0.4
0.8
1.1
0.0
-0
0.4
OTHER
0.4
0.4
0.4
0
0
0.0
.
(Total N263)
*
32-540 O-84--2
PAGENO="0018"
14
These total figures could be misleading, especially if one thinkt
that Hispanics had major acting roles. For example, we found one
major role for aHispanic in Hill Street Blues and in 9 to 5. In
addition, during the programs we watched, one Hispanic played a major
role in one program of Love Boat In other words, a Hispanic played a.
regular, ma3or role in only two of the 17 programs viewed. More
specifically, there were 92 actors classified as major; the percentage
for Hispanics was 2.2.
Four of the nine Hispanics played minor roles. Two were cooks on
Archie's Place, one was a maid on Dallas, and another appeared on Hill
Street Blues.
CONCLUSION
The 1980 census data indicate that approximately 6.4 percent of
the people in the United States classified themselves as `Spanish
origin.' One must remember that this percentage is not precise
because persons of `Spanish origin' may be of any race. In addition,
with estimates of the undocumented Hispanics, the total percentage for
this subgroup could be about ten (10).
One conclusion is that Hispanics were definitely underrepresented
in the 17 programs observed. Another is that Hispanics were further
underrepresented in major roles.
Finally, in terms of our perspective, we feel that we have
provided useful, valid information with limited resources. A more
exhaustive study, as done by Greenberg and BaptistaFerflafldez, would
probably reach the same conclusion as theirs, namely, that the
percentage of Hispanics lfl ALL programs is even smaller than what we
found&
PAGENO="0019"
15
Mr. LELAND. I enjoy comedy, Mr. Chairman, as do most other
members of the minority community. I dare not say that many
people in the Congressional Black Caucus, however, have not
turned their televisions on because they don't want to see these
roles portrayed by those people who would have jobs, but not neces-
sarily have any real substantial meaning to our community.
I appreciate the talents of the minority actors and actresses pres-
ently on television. In many cases, their comedic gifts are substan-
tial as is the public enjoyment of their craft. My concern is, howev-
er, that in the absence of a balanced depiction of minorities, the
comedic portrayal to which most minorities are relegated, has a
significant impact on how we are viewed by the nonminority popu-
lace.
I am also concerned about the impression the stereotypes create
in young, impressionable minds, black, brown, and white. The rich-
ness and vitality of the minority experience in America is rarely, if
ever, depicted on television.
Because of this omission, the American public is denied the op-
portunity to view realistic and socially meaningful programing, not
to mention the brilliant acting skills that the minorities bring to
programing.
It is clear to me, Mr. Chairman, that networks and production
companies must share the blame for this situation. Neither of them
has taken any action to correct the situation of which they have
long been aware. Recently, a formula used by one of the networks
in determining the viability of made-for-TV movies came to light.
One of the factors to be used in considering such movies was social
characterizations.
Under the formula, and I quote, "The highest weighting is to be
used for real people, whose life style is instantly recognizable by
the majority of the mass audience."
The formula further states, and again I quote, "All the basic al-
ternative weightings are reduced if any of the central characters
are other than white Americans."
It is no wonder minorities are all but invisible on television when
the networks use such clearly biased formulas in making program-
ing decisions.
Turning to the producers, we see a very similar pattern of atti-
tude and behavior. A confidential survey commissioned by the
Screen Actors Guild and the Alliance of Motion Picture and Televi-
sion Producers demonstrates that minorities receive considerably
smaller pieces of the casting pie than their nonminority counter-
parts.
The SAG survey covers all casting in motion pictures and dra-
matic, prime time television by production companies for the
period July 1981 through September 1982. The survey shows in
clear and unmistakable terms that black and Hispanic actors and
actresses are underrepresented in casting, particularly in compari-
son to their numbers in the general population and for the most
part are paid substantially less.
The vast majority, Mr. Chairman, of leading roles go to white
actors and actresses. I commend the SAG study and its specific
findings to you. It is an eyeopener to say the least. /
PAGENO="0020"
16
In recent months, Mr. Chairman, I have had a number of discus-
sions with representatives from the networks and the production
companies. Both have proven themselves, I regret to say, very
adept at finger pointing and blame shifting. The networks claim
the producers do not provide them with serious proposals or scripts
containing positive minority characterizations and have failed to
cast minorities in noncomedic, race-neutral roles.
The production companies, then, on the other hand, claim that
the networks reject their efforts to produce programing that casts
minorities in a realistic light and will only accept minority actors
and actresses in stereotypical roles.
Television, one of the prime educators of our young people and a
primary means by which information is communicated to much of
the American public must begin to take positive steps to more real-
istically portray the myriad roles minorities play in American life.
Both the networks and the production companies assert they are
best able to assure diversity in the production and distribution of
programing for commercial television.
Moreover, Mr. Chairman, the financial interest and syndication
rules will be a crucial deterrent to their ability to provide diverse
programing. But let me suggest to you, Mr. Chairman, that for me
and, I believe, a growing number of my colleagues in Congress,
their record calls into question their definition of diversity and
argues for a more substantial and relevant measurement of pro-
gram quality, one which reflects the need for proper portrayal of
the minority community in America.
I am glad we will have the opportunity today to discuss diversity
of programing and to determine what problems might stand in the
way of truly diverse programing and how such problems can be ad-
dressed.
I thank you, Mr. Chairman.
Mr. WIRTH. Thank you very much, Mr. Leland.
The First panel should now join us at the witness table. Let me
introduce the panelists in the order that we would like them to
participate. Mr. Cory Dunham, executive vice president and gener-
al counsel of the National Broadcasting Co.; Mr. Roger Colloff, vice
president for policy and planning, the CBS Broadcasting Group;
Mr. Jack Valenti, president of the Motion Picture Association of
America; Mr. Robert Funkhauser, vice president for advertising
and public relations, the Carnation Co.; Mr. Tony Cassara, presi-
dent of Golden West Television in Los Angeles; and Ms. Naomi
Gurian, executive director, also from Los Angeles.
While you are all taking your seats, let me again remind you of
the procedures of the subcommittee. We have three long panels
this morning. Each panel has six witnesses on it. As a result we
must proceed fairly quickly to hear from everyone.
Following the subcommittee's rules, I will give every witness 5
minutes in which to summarize his or her statement. Your full
statements will be included in the record, and we would ask you to
summarize those in 5 minutes. At the close of that 5 minute time, I
will let you know to conclude. We must get a great deal of material
into a short period of time.
Finally, I might note there have been questions as to how we de-
termined ~o have a hearing here. It has been my policy since I
PAGENO="0021"
17
have been chairman of the subcommittee over the last 2½ years
that when members of the subcommittee request hearings in par-
ticular geographic areas, that assuming that we can organize it and
fund it, that we would have such a hearing.
So, in the spirit of that consensus process, we scheduled this
hearing in Los Angeles on an issue that I have made very clear I
am concerned about. Mr. Waxman wanted to have it here and Mr.
Leland wanted to have a role as well.
There are 16 members of the subcommittee. At every hearing, we
ask all members of the subcommittee to attend. The three who are
here today are the only three who were either able or desirous of
attending this hearing.
With those opening comments, let us begin with Mr. Dunham's,
testimony. We are delighted to have you with us. You are no
stranger to the subcommittee or to the Congress.
Cory, thank you for being with us.
STATEMENTS OF CORYDON B. DUNHAM, EXECTIVE VICE PRESI-
DENT AND GENERAL COUNSEL, NATIONAL BROADCASTING
COMPANY, INC.; ROGER COLLOFF, VICE PRESIDENT, POLICY
AND PLANNING, CBS/BROADCAST GROUP; JACK VALENTI,
PRESIDENT, MOTION PICTURE ASSOCIATION OF AMERICA,
INC.; ROBERT FUNKHOUSER, ON BEHALF OF ASSOCIATION OF
NATIONAL ADVERTISERS; ANTHONY B. CASSARA, PRESIDENT,
TELEVISION DIVISION, GOLDEN WEST BROADCASTERS; AND
NAOMI GURIAN, EXECUTIVE DIRECTOR, WRITERS GUILD OF
AMERICA
Mr. DUNHAM. Thank you, Mr. Chairman. I am pleased to be able
to participate with you this morning.
My name is Corydon B. Dunham and I am executive vice presi-
dent and general counsel of NBC.
We believe that H.R. 2250 will not serve the public. The bill says
its purpose is to maximize competition and promote diversity of
program sources. These are fine objectives and we endorse them,
but this bill will not serve them.
By preventing the repeal of the financial interest and syndica-
tion rules, here is what H.R. 2250 will do. First, it would not pro-
mote diversity of program sources. Rather, it would continue to
limit diversity, as the rules have done for the past decade.
Second, it would not maximize competition. Rather, it would fur-
ther concentration in the major studios, which has already in-
creased under the rules.
Third, it would continue restraints against the development of
small, independent producers, including minority producers.
Fourth, it would handicap the ability of free television to buy
programs as the buying power of pay TV increases. This will hurt
the American public, particularly lower income groups, retired per-
sons and others who can least afford pay television.
Fifth, at a time of rapid change in the video marketplace, it
would strip the FCC of its authority to act for the public interest
and would compel the Commission to maintain rules that favor the
major producers, rather than to permit competition benefiting the
public at large.
PAGENO="0022"
18
In sum, H.R. 2250 has to be seen as anticompetitive. It is in es-
sence a studio protection bill, protection against competition. There
should be no doubt that the rules do not promote diversity and
they do increase concentration. This is the view of the FCC's inde-
pendent Network Inquiry Special Staff. It is the view of the De-
partment of Commerce. It is the view of the Federal Trade Com-
mission and it is the view of the Department of Justice.
The FCC with a specific authorization and financial support of
Congress has been examining these rules for more than 6 years.
The Commission has received extensive economic studies and com-
ments from every element of the industry and the public. Let me
cite just one key fact from the filing of the Federal Trade Commis-
sion.
The FTC found that before the rules, the MPAA members sup-
plied 27 percent of the networks' prime time schedules. Shortly
after the rules were adopted, that number rose to 58 percent. Most
of that increase was the result of large studios absorbing independ-
ent producers. So, you can see the rules have furthered concentra-
tion, not diversity of program sources.
Mr. Chairman, your letter asks specifically about minority pro-
ducers. We all know that new producers, including minority pro-
ducers, have difficulty in getting the financing to develop and
launch productions. Yet, as a matter of economics, the present
rules prevent the networks from providing the high-risk invest-
ment and financial support that these new producers need. So,
they must turn to the major producers who obviously are not inter-
ested in fostering competition against themselves from new inde-
pendent production houses.
It seems to me Congressman Leland's point is very well taken.
After 10 years of these rules, the number of minority independent
production houses is very, very few indeed.
Finally, let me turn to the arrival of pay TV as a radical new
force in television. Pay is already a serious competitor for televi-
sion programing. Its buying power, based on subscription revenues,
is increasing rapidly. This does pose a real danger to free televi-
sion. New theatrical movies already are seen first on pay.
Pay, obviously, would like to do the same with sports, with
series, and with other programs. Yet, these Government rules
handicap the networks in competing against pay TV in the pro-
gram marketplace and the transfer of talent and programing from
free to pay is already underway.
We do not believe the Government should favor pay over free.
Yet, this bill would inevitably do just that. This issue is of concern
to Americans, which is why so many low income, retired, minori-
ties, and unions oppose the rules.
They have been in effect for 10 years. They have restrained the
free marketplace, furthered more control by the major suppliers,
provided less opportunity for newcomers, decreased diversity of
program sources and now threaten the availability of programing
for free television.
This bill would compel the FCC to abort its present proceeding,
keep the rules and wait another 5 years before it could again ad-
dress these important public questions. It would then be well into
PAGENO="0023"
19
the next decade before any relief from these conditions could be
provided by future FCC actions.
Mr. Chairman, we believe the bill is not a good bill. It does not
serve the public
Mr. WIRTH. Thank you very much, Mr. Dunham, both for good
testimony and for starting us out within the 5 minutes exactly.
Mr. DUNHAM. Thank you.
Mr. WIRTH. Mr. Colloff.
STATEMENT OF ROGER D. COLLOFF
Mr. COLLOFF. Thank you, Mr. Chairman.
My name is Roger Colloff. I am vice president of policy and plan-
ning at CBS Broadcast Group and I would like to thank the sub-
committee for this opportunity to appear before you.
As the subcommittee is well aware, the FCC is now reexamining
the efficacy of the financial interest and syndication rules. In fact,
the FCC's pending rulemaking represents the culmination of a 5-
year effort designed to determine the best means of encouraging
competition and diversity in television.
That effort began with a $2 million, 2-year study by an independ-
ent special staff. Among other things, the staff found that the fi-
nancial interest and syndication rules had "largely failed to
achieve the Commission's stated objectives" and had actually in-
creased concentration in program supply.
The FCC under both Democratic and Republican administrations
has begun to implement a policy of encouraging new forms of com-
petition, while removing regulations which have hampered diversi-
ty and choice. As part of this effort, in 1982 the Commission began
its rulemaking proceeding in this matter.
CBS believes, based on a large body of empirical evidence, that a
strong public interest case exists for the repeal of the financial in-
terest and syndication rules. These public interest arguments go di-
rectly to the areas of the subcommittee's stated concerns: the qual-
ity and diversity of programing available to the American public.
Both quality and diversity are oft-used words and often take dif-
ferent meanings. By quality, I refer to the production values of a
television program, the values which have led the term "network
quality" to stand for the very highest standards in production
values.
By diversity, I refer to the number of sources of prime time en-
tertainment series programing available.
CBS believes that repeal of these rules would help increase both
the quality and diversity of television programing.
First, quality. The video landscape is changing rapidly. Program
offerings available to the view are increasing rapidly. This intensi-
fled competition for the viewer's attention is beneficial to the
public. However, if three participants in this market, the three net-
works, are handicapped by artificial rules from participating fully,
the quality of the offerings they present to the viewing public may
not keep pace with the competition.
As pay cable and other similar services proliferate, free, over-the-
air television networks should not be forced to hold down their ex-
penditures for program development and production because they
PAGENO="0024"
20
cannot participate in some of the upside rewards of off-network
rights to successful program series. No other participants in the
video marketplace operate under these rules. Unless the rules are
repealed, those restrictions will lead to a diminution of the avail-
able funds to invest in program production and, hence, a diminu-
tion of the quality of programing available to the over-the-air tele-
vision viewer.
Second, diversity. If the financial interest and syndication rules
are repealed, added network investment and independent program
development and production will help stimulate new, additional
sources of programing to the networks. The record before the FCC
is clear that the rules in question have led to a significant reduc-
tion in the number of sources of prime time entertainment series
programing, from 65 before the rules to 47 today.
The rules have led to a decrease of diversity and to an increase
in the concentration of program production by a few major produc-
tion companies, those companies fighting hardest to retain the
rules. If the rules were repealed, an increasing number of inde-
pendent production companies would gain access to three impor-
tant sources of financing for new series development, the three net-
works.
I would like to comment briefly on the interesting course of the
argument over these rules. The proponents of the rules, either im-
plicitly or explicitly, have abandoned the major structural under-
pinnings used by the FCC to promulgate the rules in 1970. Most
importantly, virtually all parties now agree that the networks do
not possess the buying power which was the Commission's funda-
mental reason for imposing the rules.
Without this network buying or monopsony power, the rationale
for barring network financial interests in programing, for barring
network syndication of first-run programing or made-for-television
movies, or for barring the foreign distribution of off-network pro-
graming all fall of their own weight. As representative of both the
MPAA and the Committee for Prudent Deregulation stated at the
FCC arguments in March, the only issue really left in this whole
debate is the so-called warehousing question.
I am sure you will hear a lot about warehousing today. Some of
the proponents of the warehousing have cited M*A*S*H as proving
how the financial interest and syndication rules really do work
well. They have argued that M*A*S*H appeared in syndication
during the network run only because the rules prevented CBS from
acquiring syndication rights. If CBS had those rights, the argument
goes, CBS surely would have warehoused the reruni of this success-
ful program.
In fact, M*A*S*H illustrates how the marketplace would operate
without the rules. M*A*S*H was a program licensed by CBS from
Twentieth Century-Fox before the rules went into effect. In its
original network license for the show in 1971, Fox retained all the
syndication rights. There was no syndication rule that prevented
CBS from acquiring these rights.
Rather, Fox would not give them up and CBS acceded to that
demand. CBS did acquire a 25-percent share of the off-network
profits from this series, but in 1975 had to give up that profit share
as the price for Fox's production of additional original episodes.
PAGENO="0025"
21
Thus, without the protection of the rules in question, Fox and
many local television stations to which M*A*S*H was syndicated,
were able to share in the enormous success of this program.
Thank you very much.
[Mr. Colloff's prepared statement follows:]
PAGENO="0026"
22
STATEMENT' ~F ROGER COLLOFF
VICE PRESIDENT, POLICY AND' PLANNING,
CBS/BROADCAST GROUP
I would like to thank the Subcommittee for the opportunity
to present CBS's views on the Financial Interest and Syndication
Rules.
As the Subcommittee is well aware, the FCC is now
re-examining the efficacy of these Rules. In fact, the FCC's
pending rule-making represents the culmination of a five-year
effort designed to determine the best means of encouraging
competition and diversity in television. That effort began with
a $2 million, two-year study by an Independent Special Staff.
That Study recommended a regulatory policy with two major
elements: first, changing the structure of the television
industry by encouraging new methods of program distribution,
and second, repealing a wide variety of anachronistic rules,
including the Financial Interest and Syndication Rules. In
particular, this FCC Network Inquiry Staff found that these
rules had "largely failed to achieve the Commission's stated
objectives" and had actually increased concentration in program
supply.
The FCC, under both Democratic and Republican administra-
tions, has begun to implement this policy of encouraging new
forms of competition, while removing regulations which have
hampered diversity and choice. As part of this effort, in 1982,
the FCC began its rule-making proceeding concerning the
Financial Interest and Syndication Rules. A massive record has
PAGENO="0027"
23
been compiled in this proceeding, including over 225 initial and
35 reply comments. 40 parties have expressed their views in
oral presentations. For its part, CBS has submitted the
analyses of a number of eminent economists, including Alfred
Kahn of Cornell University (and former Chairman of the CAB) and
Bruce Owen, former Chief Economist of the Antitrust Division of
the Department of Justice.
CBS believes, based on a large body of empirical evidence,
that a strong public interest case exists for the repeal of the
Financial Interest and Syndication Rules. These public interest
arguments go directly to the areas of the Subcommittee's stated
concerns: the quality and diversity of programming available to
the American public.
Both "quality" and "diversity" are oft-used words, and often
take different meanings. By "quality", I refer to the production
values of a television program, the values which have led the
term "network quality" to stand for the very highest standards
in production values. By "diversity," I refer to the number of
sources of prime time entertainment series programming availabLe.
CBS believes that repeal of the Financial Interest and
Syndication Rules would help increase both the quality and
diversity of television programming.
PAGENO="0028"
24
First, quality. The video landscape is changing rapidly.
Program offerings available to the viewer -- through basic cable,
pay cable, public television, videocassettes, videodiscs, and
similar technologies -- are increasing rapidly. This intensified
competition for the viewer's attention is beneficial to the
public. However, if three participants in this marketplace --
the three networks -- are handicapped by artificial rules from
participating fully, the quality of the offerings they present
to the viewing public may not keep pace with the competition.
As pay cable and other similar services proliferate, free,
over-the-air television networks should not be forced to hold
down their expenditures for program development and production
because they cannot participate in some of the upside rewards of
off-network rights to successful program series. No other
participants in the video marketplace operate under these
restrictions. Unless the rules are repealed, those restrictions
will lead to a diminution of the available funds to invest in
program production, and hence, a diminution of the quality of
programming available to the over-the-air television viewer.
Second, diversity. If the Financial Interest and
Syndication Rules are repealed, added network investment in
independent program development and production will help
stimulate new, additional sources of programming to the
networks. The record before the FCC is clear that the Rules in
PAGENO="0029"
25
question have led to a significant reduction in the number of
sources of prime time entertainment series programming -- from
65 before the rules to 47 today.
The Rules, clearly, have led to a decrease of diversity, and
to an increase in the concentration of program production by a
few major production companies, those companies fighting hardest
to retain the Rules. If the Rules were repealed, an increasing
number of independent production companies would gain access to
three important sources of financing for new series development
-- the three networks. This would aid considerably in increasing
the diversity of production sources which we believe u.ltimately
aids the American viewer.
I would like to comment briefly on the interesting course of
the argument over these Rules. The proponents of the Rules,
either implicitly or explicitly, have abandoned the major
structural underpinnings used by the FCC to promulgate the Rifles
in 1970. Most importantly, virtually all parties now agree that
the networks do not possess the monopsony (buying) power which
was the Commission's fundamental reason for imposing the rules.
Without this network monopsony power, the rationale for barring
network financial interests in programming, for barring network,
syndication of first-run programming or made-for-television
movies, or for barring the foreign distribution of off-network
programming all fall of their own weight. As representatives of
PAGENO="0030"
26
both the MPAA and the Committee for Prudent Deregulation stated
at the FCC arguments in March, the only issue really left in
this whole debate is the so-called "warehousing" argument.
I'm sure you will hear much more about warehousing today.
Some of the proponents of the "warehousing" argument have cited
M*A*S*H as proving how the Financial Interest and Syndication
Rules really do work well. They have argued that M*A*S*H
appeared in syndicatiou during the network run only because the
rules prevented CBS from acquiring syndication rights. If CBS
had those rights, the argument goes, CBS surely would have
warehoused the reruns of this successful program.
In fact, M*A*S*H illustrates how the marketplace would
operate without the rules. M*A*S*H was a program licensed by
CBS from Twentieth Century-Fox before the Rules went into
effect. In its original network license for the show in 1971,
Fox retained all of the syndication rights. There was no
Syndication Rule that prevented CBS from acquiring these
rights. Rather, Fox would not give them up, and CBS acceded to
this demand. CBS did acquire a 257. share of the off-network
profits from this series. But in 1975, CBS had to give up that
257. profit share as the price for Fox's production of additional
original episodes. Thus, without the protection of the Rules in
question, Fox and many local television stations to which
PAGENO="0031"
27
M*A*S*H was syndicated, were able to share in the enormous
success of this program.
Finally, one further comment responding to a specific
question of the Subcommittee. We believe that the Rules have
little, if any, direct impact on the production and distribution
of programming aimed at specific groups of viewers such as
minorities and children. However, repeal of the Rules will tend
to enlarge the opportunities for new, independent production
companies, some of which hopefully will be minority-owned or
minority-program oriented. Therefore, the positive effect which
repeal could have on minority and children's programming may
result indirectly from increasing the diversity of production
sources generally.
Again, I would like to thank the Subcommittee for allowing
me the opportunity to set forth CBS's firmly-held view that
repeal of these Rules will increase both the quality and
diversity of television programming, and thereby serve the
overall public interest.
PAGENO="0032"
28
Mr. WIRTH. Thank you, Mr. Colloff.
Mr. Valenti.
STATEMENT OF JACK VALENTI
Mr. VALENTI. First, I want to say as I listened to Mr. Dunham
and Mr. Colloff, I was reminded of Socrates trial in which he told
his jury that his accusers' arguments were so persuasive, they
almost convinced him. However, he said, "I must tell my jury that
not a word of what they said was true."
And when Mr. Dunham talks about minorities and how terrible
it is and the networks want to help, it is such a comic triumph. I
think it ought to be filmed and put on NBC's prime time programs
because it is an egregious stretching of the truth and we will make
more note of that later.
But I want to say when the networks forced this issue onto the
agenda of the FCC with the cooperation of Chairman Fowler, they
engaged in a collaborative illusion and they know it. It was a fanta-
sy woven out of their zeal for more profits with only a casual nod
to the public interest and I want to demolish the networks' case.
You can do it very easily, Mr. Chairman, by simply asking some
questions that they cannot answer.
Question No. 1: What is the public interest that causes the aban-
donment of this rule? And I will answer that by saying there is
none. There is no public interest. The public interest is enduringly
linked to the continuance of competition in this marketplace. If
you abandon this rule, there is no competition and the reason why
is without competition, the marketplace shrivels, advertising costs
rise, three giants command the landscape and alternative choices
for public viewing shrink.
The second question is will the repeal of this rule increase or de-
crease competition in the marketplace? The answer is, of course, it
won't. If this rule is repealed, these three networks will totally, ab-
solutely, finally, and fatally dominate this landscape.
Every independent producer and every independent syndicator is
going out of business and they all know that. That is not competi-
tion.
The real target of the networks, however, is obscured in their
thick meandering filings in this case. The real target is the inde-
pendent television station caught right in the cross hairs of the gun
sights of the networks -because they know that the independent sta-
tions with popular, off-network shows are cutting their affiliates
ratings. It goes right to their bone and they bleed easily over it.
Does anyone really believe that if the network controlled pro-
graming and controlled syndication that they would be licensing
these popular shows to independent stations so the affiliates' rat-
ings could recede and stutter? Does anyone really believe that?
And when intelligent people claim that the antitrust laws are
`going to protect the producers and the syndicators, even the net-
work executives are a bit bemused, because they know that justice
is raw and scarred when it is dragged through all this "dragons
and dungeons" maze of interplay between networks and their pro-
ducers.
PAGENO="0033"
29
Even the Justice Department lawyers readily testified there was
no way to police this arena.
Now, No. 3, if the rule is working, who the devil wants to have it
changed? It is the networks that want to have it changed and
except for the affiliates who live under the big brother scrutiny of
these network Grendels, everybody else is opposed to changing the
rules, independent stations, independent programers, syndicators,
children's programers, national advertisers. They are all opposed.
The networks stand alone. Don't you find that a bit curious?
Moreoverwith, when these gentlemen claim that pay cable is the
big enemy, they themselves are now involved in almost every
phase of this new technology they have so professed to fear. And
the final bit of irony is that CBS has climbed into bed with the one
enemy they say is whittling their good fortunes, HBO and pay
cable. In other words, with a gall that is fascinating to observe, the
networks are insisting that they be allowed to compete with the
new technology that they are now are already absorbing.
And, finally, are the networks in dire straits? I am not going to
bore you with details. They are there on the financial pages. NBC
just the other day, as Mr. Dunham knows, said their profits went
to $110 million from $48 million the year before and they expect it
to go even higher. I have attached to my statement, Mr. Thornton
Bradshaw's comments on how strong they are going to be.
Now, the final question: Is it true the networks take all the risk
that they so unabashedly and repeatedly claim? And the answer is
"Hell, no, they don't." They make money on "dead pilots", pilots
that they disown as series. They put them on the air, Mr. Chair-
man, and they get advertising revenues that recoup their license
fee and more.
But the poor sappy producer, he is stuck with the deficit financ-
ing. He has no place to recoup. He is dead. The network's argu-
ment is barren of reality and they know it. Moreover, if they want
a financial interest in the program, every producer in Hollywood
would be glad to trade them 5 percent financial interest, which is
really a kickback to the networks, and we know that, if the net-
works would give an equal share of their advertising revenues on
the programs that they have a financial interest in.
I assure you Mr. Colloff would sooner jump off of CBS's Back
Rock than give up $1 of advertising revenues and, yet, the net-
works have the chutzpah to implore the FCC to force producers to
give to them what they have inflexibly resolved never to give to
producers.
And my final statement: Why consider a rule change when this
rule is one of the few Government interventions in the market-
place, Mr. Leland, that is working, that is working easily and well.
It has proved itself for 12 years and it is working cost effectively in
the public interest.
There is no reason to change except the networks roar for more
profits.
[Testimony resumes on p. 166.]
[Mr. Valenti's prepared statement follows:]
32-540 O-84--~
PAGENO="0034"
30
Oral Presentation by jack Valenti, President
Motion Picture Association of America, Inc.
in Support of H.R. 2250 before the Sub-Corrrnittee on
Telecorrrnunications, Consumer Protection, & Finance
of the Corrrnittee on Energy & Corrrnerce
U.S. House of Representatives
Los Angeles, June 1, 1983
There is one question that must be answered for it stands
supreme above all other questions that infest this debate.
That question is: \M-LAT IS THE PUBLIC INTEREST IN THIS
ISSUE?
The public interest is indispensably linked to the
continuance of competition in the marketplace. Without
competition the market shrivels, the giants corrinand the
television landscape, advertising costs rise, alternative choices
of free television entertainment shrink.
Therefore, it is an act of public policy which cannot be
omitted to make absolutely sure that competition exists, that it
is alive and well, that there are alternate prograrrrning sources
and alternate non-network affiliated stations available.
It is the public's interest, the public's needs, and the
public's reaction to what it views that is paramount. All else
is transient and of meager worth.
Safeguarding the public interest is the ultimate
objective of this congressional conmittee. It ought to be the
goal of the Federal ConTnunications Comnission.
PAGENO="0035"
31
That brings us to the next question: WILL THE REPEAL OF
THE F INANCIAL INTEREST AND SYNDiCATION RULE DECREASE OR INCREASE
COMPETITION IN THE TELEVISION PROGRA~ING MARKET?
The answer is: If the rule is repealed, the three
networks will totally, absolutely, completely dominate all
television prograr~ming in prime time, and fringe time. No sane
observer of the real world of television suggests otherwise.
There are only three buyers of prime time nation-wide television
prograrrming. Only three. There is no open marketplace where a
creative producer can shop around for a prime time slot for what
he has produced. If he can't get licensed by one of the three
networks, he is out of business.
Moreover, the real target of the networks lies veiled and
obscured by their thick meandering files in this case. Their
real target is the independent television station. According to
FCC data, in 1972, two years after the Rule was created, there
were only 73 independent TV stations in 38 markets. In September
1982, 10 years later, the FCC reported that the number of
independents had soared to 179 stations in 86 markets. This
dramatic increase in the number of independents is crystal-clear
evidence of the fact that such stations have flourished in this
competitive testing -- thanks in large measure to the
availability of prograrrming the public wants to see and
advertisers want to sponsor. The networks recoil under the
skillful barrage of counter-prograrrrning broadcast by independent
PAGENO="0036"
32
stations. Does anyone believe that if the networks controlled
all prograrrrning they would allow popular programs to be licensed
by independents, so that the ratings of network programs on their
affiliates and their owned stations would stutter and recede?
Does anyone really believe that?
When intelligent people who are not in the daily
television tangle suggest that anti-trust laws could protect
producers and independent TV stations, the network executives can
be pardoned for being amused for they know and we know justice is
rude and scarred when it has been run through the "dragons and
dungeons" maze of television interplay. There is no way that the
lustice Department can police the arena, as 3ustice Department
lawyers readily testified at the FCC hearings on March 14.
Anot her que s t ion: IF THE RULE IS WORKING, THEN V*IO WANTS
IT CHANGED AND ~iY?
The networks want the rule changed. And except for
affiliates, who live under the Big Brother scrutiny of their
network Grendels, and whose rating fortunes are being besieged
and assaulted by independent TV stations, the networks have no
allies. None. Producers, small and large; prograrrrners, small
and large; syndicators, small and large; independent TV stations;
childrens prograrrrning producers; large national advertisers, and
the list goes on --- all are opposed to any change.
PAGENO="0037"
33
In a taunting parody of truth the networks cry, with
enlarging anguish, that they must have more profits in order to
compete with "the new technology". To listen to the networks
argue this is to witness a collaborative illusion. The
trajectory of their claim falters considerably when you examine
the networks' headlong rush into the new technology. With their
vast resources they will soon come to dominate all the new
corrrnunications wizardy just as they have for years been made
proof against intrusions into their prime-time television
domain. The three networks are now involved in one way or
another in:
DBS High Dc fin i t i onTV
Vi deotex Cable pr ogr anmi~g
MDS p r o g r arrmir~g. Cab 1 e owner s
videodisc, tape and computer pro4~cIt~
~y cable sery~ç~ Home tftping servi~çç
Low Powe!~]'i Sateiiite~pr~g~11~ dis~)1~ti~O!~
Movie product ion.
CBS has just gone into partnership with Home Box Office
and Columbia Pictures to create a new movie studio, called Tn-
Star. In a direct frontal assault on our beliefs, CBS has
climbed into bed with the enemy they accuse of withering their
good fortunes, HBO and pay cable!
PAGENO="0038"
34
In other words, the networks with gall that is almost
fascinating to o'bserve insist they must be allowed to make more
profits to compete with technology they are already absorbing!
So we must ask the next question: ARE THE NETWDRXS IN
DIRE STRAITS?
It must be lamentable to the networks that they have to
present one face to the FCC to unleash them from a rule that
worked effectively in the public interest for 13 years, and
another face to security analysts and stockholders whose good
favor they seek to keep their stock price high.
What they say to stockholders and security analysts is
this:
On May 4, 1983, Thornton Bradshaw, chairman of RCA
(parent of NBC) said: "the three major television networks would
be very, very strong in 1990" . . . "the three networks would
continue to be the basis for entertainment and information in the
U.S." . . . (he has) "lost his previous optimism about the great
dream of 100 channels on cable TV systems" . . . "I don't believe
in 100 channels anymore."
On May 19, 1983, Grant Tinker, chairman of NBC reported
NBC's profits increased to $110 million last year, from $48
million in 1981, and expects 1983 profits to be even higher. One
proof of this was the 1/2 billion price paid by NBC for baseball
rights for the next five years.
PAGENO="0039"
35.
CBS Research Group figures proclaim the durable dominance
of network audiences by estimating a 70% network audience share
in 1990, which in absolute numbers is larger than their audience
today I
From 1970 to 1981, network revenues increased 312% and
network profits soared 550%. At the same time, the consumer
price index for that same period went up only 134%. Wall Street
reports that high ratings have pushed CBS stock to new highs.
ABC set new viewing records for WINDS OF WAR and THE THORN BIRDS.
Now, the final question: IS IT TRUE THAT THE NETW)RKS
TAKE ALL THE RISKS AS THEY HAVE REPEATEDLY CLAIMED?
The answer is NO. Producers have figures which clearly
give the lie to this argument. The networks very seldom pay a
license fee that recoups production investment by independent
producers. Moreover, the networks make money even on dead
pilots! Pilots which the networks turn down as series are aired
on the network one, two times and advertising revenues return the
license fee -- and more -- so that with material the networks
disown they retrieve their investment and make money. But not
the producer. He is stuck with deficit financing he cannot
recoup.
The networks' "risk argument" is barren of reality and
they know it. Moreover, if the networks want to take a financial
interest in programs they air, the producers would be pleased to
PAGENO="0040"
36
trade them financial interest for an equal share of advertising
revenues. You may wager safely the networks would sooner fling
themselves off cBS' Black Rock than give up one dollar of
advertising revenue yet they implore the FCC to give them from
producers what they themselves are inflexibly resolved never to
give to producers.
With the public interest and competition safeguarded,
with no public interest reason to change the rule, with no
network allies except affiliates coerced by Big Brother networks,
with network profits rising, ever rising, with independent TV
stations competing handily with the giant networks under the
rule, with national advertisers plainly stating that without
independent TV stations' growing audiences advertising costs
would ascend quickly (to the public detriment), with the networks
plunging into all the new delivery systems, why this rush to
incomplete judgment? Why consider a rule change when it is one
of the few government interventions in the marketplace to work so
well, so easily, so cost effectively, to the benefit of the
viewing American public? Why?
H.R. 2250 is a sane answer to a bizarre reach by the
networks. Hold the rule in place. Let the marketplace give its
signal if ever there comes a time for change.
So far the only sound that is heard is the networks
clanging a hollow gong.
PAGENO="0041"
37
T}LE WASHINGTON POST Wednesday, May 4, 1983
T~I~A
flL/~ UflaLflflafl D~CO~flA3S
More Bullish on Networks
By Robert Ricci
Rciiter
BURBANK, Calif., May 3-RCA
Corp. Chairman Thornton Braclshaw
predicted today that the three major
television networks would be `very,
very strong in 1990."
Bradshaw said he had lost his pre.
vious optimism about the "great
dream of 100 channels" on cable
* television systems by the end of the
decade.
* "I don't believe in a hundred
channels anymore," the head of
RCA, which owns the National
Broadcasting Co., told a news conS
ference before RCA's annual meet*
ing here.
Bradshaw said there would be no
room for eight movie channels, eight
news channels and eight sports chan~s
nels.
"There is not going to be room for
all this narrow kind of broadcasting,"
he said.
He said the three networks would
* continue to he the basis for enter-
tainment and information in the
United States.
There is a basic Americ3n culture
and the networks are supplying that
basic American culture, and they're
going to get better and better at it,'
he said.
Bradshaw said NBC was neither
in serious trouble nor was it up for
sale.
"We are not considering and have
not considered selling NBC-that I
make as a definitive statement," he
`said when asked to comment on per.
sistent rumors.
Bradshaw also said RCA did not
expect the imminent sale of its Hertz
Corp. subsidiary, which the company
had been attempting to dispose of
for the past year and a half.
He said RCA was still determined
not to sell the car-rental company
"for less than it's worth to us.'
He gave no figures for the com-
pany's value, but said Hertz was
"making money" and controlled 38
percent of the automobile-truck
rental market.
PAGENO="0042"
Q
U
Networks Are t}~e New Media
CBS DES
HDTV
*Videotext
Cab'e programming
* MDS prograrnmLng
* Cable ownership
* Movie production
* Video disc, tape, computer products
ABC * Cable news seMce
* Pay cable servke
* Home taping seMce
* Cable program joint ventures
Video tape and disc products
NBC (RCA) *DBS
* Satellite program distribution
* Pay cab'e service
* Video disc and tape hard~s'are and
software
*LPTV
* Videotext
PAGENO="0043"
PRIME `rIME SHARES OF THE VIEWING AUDIENCE IN 1990
Network Affiliates . 70%
Pay Cable * 11%
Basic Cable (Non-Broadcast) 5%
Indepe~idents, Including Superstations and
Non-Commercial (PBS) Television Stations *. .
(CBS/Broadcast Group:"The Road to 1990")
PAGENO="0044"
cBs ESTIMATES OF ADVERTISING REVENUES -1990
Television Networks $15 Billion to $20 Billion
Television Stations $18 Bill:ion
Cable"Networks"/Systems $936 Million to $2 Billion
* 0
(Source: "The Video Marketplace in 1990")
PAGENO="0045"
41
Networks Remain Dominant.
and Prosperous
* Network audience still at 80% or better
* Revenues: +312 percent, 1970 to 1981
* Profits: + 550 percent, 1970 to 1980
* Network profits doable as percent of TV indusny
(11% in 1970; 20% in 1980)
PAGENO="0046"
42
BEFORE THE
~rbrraI mmu t~uu~ ~ummt5atrni
WASHINGTON, D, C, 20554
In the Matter of
Amendment of 47 CFR S73.658(j); ) BC Docket No. 82-345
The Syndication and Financial
Interest Rule
COMMENTS OF THE MOTION PI~PURE
ASSOCIATION OF AMERICA, INC.
The Motion Picture Association of America, Inc. (MPA.A), by
its attorneys, hereby files these initial comments concerning the
issues set forth in the Notice of Proposed Rulemaking (NPR) issued
July 21, 1982, in the captioned docket. MPAA strenuously opposes
repeal or diminution of the syndication and financial interest
rule. MPAA submits that the rule has served the viewing public
by providing programming diversity through increased availability
of off-network series. These series have been the mainstay of the
growing strength of independent stations throughout the country.
Partial or full repeal of the rule will give the networks effective
control over the release of series into the syndication market as
well as over the terms, prices, and conditions charged for these
series. Such control will eviscerate the healthy and competitive
sales of series programming that has grown since adoption of the
rule.
PRELIMINp~RY STATEMENT -:
Primarily, the rule affects television series which are first
exhibited by the networks and then are sold in off-network
PAGENO="0047"
43
syndication. Syndication of these series is based upon the network
exhibition lasting long enough so that a requisite number of
episodes are produced. Equally important, the network run promotes
viewer identity and loyalty with the series and its characters,
thereby improving the series' chances for success in syndication.
No alternative to the network exists for providing the exposure
and the financial backing required to develop high quality series
programming that appeals to broad segments of the viewing public.
This is true even though the networks have lower ratings and shares
in some time periods as compared to their previous highs. The
absolute numbers of viewers reached and delivered by the netwOrks
year after year is still several times larger than the next best
alternative .Y
These realities give the networks a dominant position in the
production of television series. If anything, the networks' role
has become stronger under two recent changes: fewer episodes are
purchased in each option year, thus increasing the time involved
in obtaining sufficient episodes; and, all but the highest ranked
series are quickly withdrawn from their network run when their
ratings fall. So long as the networks stand at the head of and
control the funnel through which programs must pass before being
made available for syndication, they will dominate the entire
process. While it is true that some syndicated programs most
1/ ABC and CBS each have reached $2 billion in television revenues
with NBC close behind. Broadcastir~g 24 January 1983, p. 42. In
contrast, independent stations in total have yet to reach the $2
billion mark. Id, p. 66.
PAGENO="0048"
44
notably game, variety, and talk shows -- have been successful in
first-run syndication, these are the exceptions.
No other realistic buyers for television series exist besides
the networks. To the best of our knowledge, no cable service
-- pay or basic -- has offered to provide the necessary financial
backing to develop a full-fledged, sustained television series.
The few bids for series by pay cable have been directed to proven
programs for a limited number of episodes. These can hardly be
characterized as offering any real alternative to the development
of series that has been done by the networks for many years. Even
with cable penetration at 35% today, cable does not have the
financial wherewithal tO provide a competing market for series
production and development. Perhaps in several years if penetration
increases enough to attract substantial advertising dollars to
cable, an alternative delivery system could possibly develop. That
day is, however, far in the future, and cannot be substituted for
today's realities.
The Commission has chosen to ignore the networks' control
over the process in seeking repeal of the rule. Networks have
been, are, and will be the only buyers for first-run entertainment
television series. On the other hand, the NPR accepts without
comment the Special Staff's claim that "[n]o new outlets or viewing
options are encouraged by this rule." (NPR, ¶31.) This claim
ignores the tremendous growth of independent stations since passage
of the rule. This growth is directly related to passage of the
rule: the mainstay of independent stations' schedules and revenues
has been the availability of recent, popular off-network syndicated
PAGENO="0049"
45
series. The Commission need only look at early fringe schedules
this day part is generally the highest revenue producing period
for independents to see the heavy reliance on off-network series
to deliver large audiences.
The effectiveness of independent stations in
counterprogramming with syndicated series has offered iirsnediate
program diversity. The high ratings and shares achieved by these
programs on independents indicate conclusively that viewer
interests are being met by strong alternatives to the programming
broadcast by affiliates. Another indication of the appeal of
independents is found in the widespread retransmission of distant
independent signals by cable systems which suggests that the
programming available has been judged by cable as a valuable
alternative or addition to what is available over-the-air.
As independents grow stronger through increased advertising
revenues obtained as a result of the large audiences for of f-
network series, they are able to provide even more service to their
corrununities. In this way, they can and do serve as new outlets
for programs and ideas that might not otherwise be available in
the marketplace. Further, because independent stations provide
an already established group of stations which can deliver the
audience (and, hence, advertising revenues), they offer potential
support for the more ambitious first-run syndication efforts.
This, too, will increase the program options available to viewers.
As greater support for first-run programming is offered, producers
will be willing and able to take greater chances in providing new
programming.
32-540 O-84--4
PAGENO="0050"
46
MPAA disagrees with two major premises of the NPR. First,
contrary to the ~ no realistic alternative is apparent for the
continuation of network financing and exhibition of television
series. Alternative delivery systems are not in the same league,
let alone the same ballpark, as the networks in terms of financial
backing or audience delivery. Second, the growth and strength of
independent stations which parallel adoption and implementation
of the rule and which rests upon substantial revenues from of f-
network series, has opened new viewing outlets and options
throughout the country. Rather than warranting repeal of the rule,
these factors strongly support its continuation. The primary
purpose of the rule, to lessen the dominance of the networks, is
necessary today and can be accomplished while at the same time
opening new viewing opportunities.
ARGUMENT
1. The Total Context Of Program Development Must Be Judged
When Assessing Competition
The Commission posits two assumptions as possible reasons for
repealing the rule: (1) the producers "are themselves powerful
actors" and, therefore, there is less need to protect them from
undue influence (NPR, ¶39); and, (2) the rule may no longer promote
competition because it unnecessarily restrains the networks'
abilities to compete (NPR, ¶42). Both assumptions reflect a naive
impression of the network distribution industry as one where free
market bargaining and competition applies. In assessing the
importance of the rule, the composition of the industry as a whole
PAGENO="0051"
47
should be considered because it shows domination by the networks.
Given the unequal bargaining strength of the networks, the
protection of the rule Is necessary to check further dominance.
First-run program production and development for series is
currently and will remain almost exclusively in the network arena.
Alternative delivery systems have neither the necessary resources
nor sufficent audience levels to sustain production for the type
of series programs found on the networks. Syndication of series
has not been successful other than in sales to television stations.
No alternative delivery system buys syndicated series on a regular
basis. Cable, which is the strongest of these alternatives, relies
largely on the retransmission of over-the-air television stations
for basic services and on movies and special sports and other
events for pay serivces. First run programming on cable has focused
on news, health, sports, performing arts, and music services,
rather than on development of new sources of entertainment series.
Other delivery systems are so small or still in the development
stage and, therefore, cannot be considered to provide any realistic
support for series program development.
The networks have established both methods of distributing,
promoting, and selling advertising on new series, as well as the
audiences to provide the necessary viewer interest and support to
sustain the continued development of new series. The networks are
aware of their position as the only game in town, andhave used it
to exact extremely favorable concessions from producers. It is
only in the areas of syndication and financial interest, where the
PAGENO="0052"
48
Commission has restricted the networks entry, that the producers
are able to retain any control over the process.
The NPR's assumptions that producers are "powerful actors"
in program production is not supported by the record. While it
is true that some larger producers have greater financial resources
than some smaller producers, the fact remains that the networks
have an overwhelming superiority in the contractual process. This
overwhelming superiority is evidenced clearly by the absolute
uniformity with which the same contractual conditions are imposed
by the networks on both larger and smaller producers. It is shown
also by the payments under these contracts which require many
producers to deficit finance and which do not provide for increased
payments to reflect the increased value of successful series. The
striking similarity of terms and conditions in network contracts
suggests very strongly that the only powerful actors in the
marketplace are the networks.
As the Commission is well aware, producers have been attempting
without success for many years to seek removal of option,
exclusivity, and spin-off clauses from the network contracts.
Notwithstanding these efforts, the Staff Report indicates that
these clauses were found in virtually all contracts ("Network
Program Supply Contracts", pp. 162 - 226, Preliminary Special Staff
Report, June 1980). If producers were the powerful actors assumed
by the Commission, it could reasonably be expected that a number
of the contracts would exclude these clauses. Instead, the degree
of similarity and uniformity of all networks' contractual clauses
supports a conclusion that the networks hold the decisive hand.
PAGENO="0053"
49
The superiority of the networks' bargaining power can be seen
also by the requirement that production be deficit financed by the
producer throughout the network run. The producer must bear front-
end development costs associated with the production; if the series
is cancelled early, as most are, the producer does not recover
these costs. A producer of a successful series will realize only
token increases in contractual payments over the remaining years
of the option period. These token payments, which are in the range
of 5% per annum, have generally been inadequate to cover the annual
inflationary Increases in cost, let alone to cover increased
compensation often demanded by talent on a hit series.2/ As the
program increases in popularity and attains higher audience
ratings, the producer's costs will be higher than the additional
revenues it gains from the increased audience. (Special Staff
Preliminary Report, An Analysis of Television Program Productio~t,
Acquisition arid Distribution June, 1980, Tables 20 and 21 pp. 373
- 74 (hereinafter "Staff Report"). The contracts make no provision
for the producers to share any profits from the added advertising
revenues gained by a hit series, thus allowing the networks to
capture all the profits.
Any increased payments that the producers obtain during the
option period come in the form of "relief" which the producer must
beg from the networks. "Relief" when granted, allows producers
2/ MPAA's analysis using the Special Staff's figures shows that
the payments to producers averaged about 55% - 60% of the 1977
advertising revenues generated by series programs. See MPAA
Comments in Docket No. 21049, filed September 16, 1980, at p. 10.
PAGENO="0054"
50
to track some of the increased costs that cannot be covered by the
token increases in annual payments under the contract. In most
cases relief is extracted at an additional cost to the producer,
the common concession being an extension of the option period
(Staff Report, 218). Again, were producers the powerful actors
assumed by the Commission, it would be unlikely that they would
be willing to accept these types of provisions in their contracts.
The lack of bargaining strength on the producers' side is
shown also by the parallel terms found in all three networks'
contracts. Both the Special Staff and the Antitrust Division found
that the contract terms of the networks were very similar, if not
identical, in virtually every important aspect. This parallelism
precludes producers from seeking a better deal at a different
network when they are unsatisfied with what has been offered.
There are no better deals, only more of the same.
All these factors suggest that the metworks have overwhelming
superiority during the bargaining. The same terms are offered to
all producers, large and small. The similarity of terms and the
uniformity of their application is strong evidence that the only
"powerful actors" are the networks. They have successfully used
their position at the gateway to development of series programs
to dictate the terms to be exacted from the producers. As shown,
many provisions exacted are antithetical to the producers' best
interests and unnecessarily restrict the availability of the
programs.
These facts of the bargaining process are important here
because they show that the networks have maintained a position
PAGENO="0055"
51
which is clearly superior to the position of any producer. The
only check to the networks using their power to exact even further
concessions has been Commission-imposed rules. The need for such
protection has not diminished or changed. It is not only likely,
but almost a virtual certainty, that the networks, if the rule is
repealed, will gain control quickly and effectively over
syndication because the producer will have no option but to sell
its rights to a network. Competition between buyer.s is not present
at this stage of program development and, therefore, marketing
forces cannot and do not operate freely to assign risks and rewards
in an orderly fashion. The Commission's rule has limited the
networks' dominance in one area, and thus opened syndication to
new buyers and sellers. Repeal of the rule would eliminate the
open competition currently present in syndication of off-network
series by allowing the networks to exert their overwhelming
superiority to gain control over this stage of program distribution.
2. R~pealofTheRuleCannot8eJustifiedAspromotingCompetition
Adoption of the syndication and financial interest rule has
~treq~iired the Commission to supervise or toénforce the rule's
strictures. By adopting a flat prohibition against the networks
gaining these rights, the Commission provided a framework within
which all parties have since negotiated. The regulatory burden
has been minimal because the rule is self-policing. Thus repeal
cannotb~ justified as reducing regulatory burden. The Commission
has turned, instead, to justifications alleging the lack of a
continued need for protection of producers, which was refuted in
PAGENO="0056"
52
our first argument, and to alleged, unproven, and, we believe,
fanciful claims of stifled competition in first-run series
development because the networks can't compete for syndication
profits.
The Commission suggests that "the rule establishes an'1
imbalance in the ability of networks and nonnetwork oiztlets to
compete for the products of independent producers." (NPR, ¶17).J
This is sheer sophistry. The networks are the sole buyers on a
continuous basis for the exhibition rights to first-run
entertainment series as a result of their tremendous capital
revenues and their ability to deliver very, large audience. No
other delivery system. can be expected to challenge the networks
as buyers of series. The Commission' s claim of a possible imbalance
against the networks rests entirely upon a theorized, hypothetical
competitor who has yet to appear in real life. Moreover, when the
necessary assumptions are made to postulate the hypothetical
competitor, it becomes apparent that such a competitor could be in
a position to compete only some time in the future after a series
of very favorable breaks. .~/
Moreover, the risks faced by the networks in buying syndicated
series rights for network exhibition are minimal, and thus have
little, if any, effect on the networks' ability to continue to
compete for new products in this market. MPAA, in its September
3/ If competing on a par with the networks were a relatively easy
thing to do7 it could be expected that many new entrants would
already be successfully competiting, given the enormous rewards
to be realized. The fact that no new entrants have appeared or
been successful suggests the overwhelming obstacles.
PAGENO="0057"
.53
16, 1980 comments in Docket No. 21049 responding to the Staff
Report, showed, based on the Special Staff's numbers and assumptions
concerning the networks' purchasing practices and costs (Staff
Report, 61 - 62), that if the networks lost their ~ti~ investment
in program development including the time value of the money used,
the loss would amount to less than 3.5% of their annual advertising
revenues (MPP~A Comments, 17 - 20). Under the more realistic, but
still unlikely, scenario that the entire investment In 10% of the
scripts is lost, the networks' outlay would amount to approximately
1% of their annual revenues from advertising. This inconsequential
risk factor does not suggest that the networks need additional
incentive, in the form of possible syndication revenues, to compete
successfully for new series programs. Quite clearly, these possible
risks are not now at a level which can seriously impair the networks'
rate of return. The networks can continue, as they have since the
rule was adopted, to show impressive, and entirely just and
reasonable, rates of return for their series program acquisition
efforts.
The Commission's theorized imbalance is made of whole cloth.
No competition exists to the networks' purchase of series nor coulá~
be expected to exist for several years under the most favorable 1
assumptions. The networks are burdened very little by the.
development of series, and have and will continue to earn acceptable'
rates of return without repeal of the rule. Further, the Commission
has no authority to base its decisions on the return earned by the
networks. The only imbalance is caused by the
PAGENO="0058"
`54
overwhelming superiority of the networks which allows them to
control virtually every aspect of series development.
The Commission uses as a second justification that retentio~\
of the rule "could result in a disservice to the public interest
by limiting hearty competition in the provision of alternative]
forms of programming." (NPR, ¶42.) The only realistic alternative
delivery system for series to the viewing public is off-network
syndication. The Commission's possible "disservice" justification
assumes that hearty competition in off-network syndication can
only result by allowing entry to the networks. Nothing could be
further from the truth.
The chief benefit of the rule has been opening off-network
syndication to many new buyers and sellers. These new entrants
and the competition they have spurred have resulted in widescale
program diversity to the viewing public. From any viewpoint, of f-
network syndication since adoption of the rule must be characterized
as one of "hearty competition." There are many, many syndicators,
from very small operations to very large ones, which now offer a
variety of deals to producers in return for syndication rights.
On the buying side, the influx of new independent stations has
created new opportunities for syndicated series to be broadcast
and available in new time slots and in new markets. Because so~_\
many players are participating, because movement is flexible,
because the rewards are great, and because no one player or group
can dominate, off-network syndication of series is extremely
responsive to individual situations. As a result, off-network
series are more widely available at prices that reflect full value
PAGENO="0059"
55
to those who produced the series and those who use the series.
Producers and television stations are free to choose from a large
number of syndicators who have introduced and marketed a gre~J
variety of off-network series.
Current, ~off-network syndication provides the maximum
opportunities for free competition which serves the viewer's
interests best. Not only are a wide number of programs available
at all times, but they are readily accessible should sufficient
interest warrant their purchase. Independent stations have
capitalized on their ability to counterprogram effectively with
off-network series, particularly in the early fringe daypart.
Their success in these efforts reflects viewer interest. With
several stations available over the air in most markets (NPR, ¶33),
and each station airing different programs throughout the day, the
viewing public has a degree of diversity that has not previously
been experienced in broadcast television. Equally important, the
wide availability of programs is fulfilling the needs of substantial
segments of the viewing public. Public acceptance of and interest
in off-network syndicated series has given new independents strong
ratings in local markets. While some of the shifts may result in
decreased ratings for the networks, the shifts are directly
attributable to the viewers' choices, which is exactly the interest
the Commission should promote. This hearty competition for the
viewing public exists in large part because producers are not
stifled in syndication by contractual limits set out the outset of
a series' development.
PAGENO="0060"
56
Whether the hearty competition would remain once the rule is
repealed is problematical because of the network's competing
ownership positions. Assuming that the networks acted rationally
to maximize the opportunities available, it would be likely that
a network would analyze its entire position before making any
business judgments on program delivery, whether first-run or
syndication. This analysis involves, among other things, the
interest and profits in continued network exhibition, the ownership
of 0 & 0 stations, the affiliate relationships, and the state of
the syndication market; these factors can be weighted on a national
basis or on a local basis or some combination.
As rational investors, the networks will seek to maximize
their overall position by considering these and other factors,
which may be in conflict. Continued network exhibition strength~\
may depend upon limiting or avoiding the syndication market for
several years. Protecting an 0 & 0 may require making no sale in a
big-city market even though significant syndication revenues /
otherwise would result. Maintaining affiliate relationships may/
require that syndicated series be offered first or only to the!
affiliated station in a market. Finally, the networks may determin
that their large holdings in syndicated series would be maximize
by tine release sales, rather than by introduction of all series
concurrently.
MPAA does not claim that the networks will always act in a
certain manner, other than the rational one of maximizing their
own interests. What we do claim is that the networks have important
competing interests which can and would warrant limiting program
PAGENO="0061"
57
availability to the detriment of the viewing public. Today, buyers
and sellers of off-network series respond entirely on viewer
interest by gearing prices and availability to their perceptions
of how viewers will respond to a series. Networks, with their
built-in competing interests, would not rationally be expected to
decide solely on grounds of viewer Interest. The probable result
would be a constriction in availability to the detriment of the
viewing public. Moving from a responsible situation to one that
is less responsive is not an adequate ground for repeal of the rule.
3. Retention of the Rule Will Not Increase Concentration
In Program Production
The Special Staff's and the Commission's inability to deal
with obvious realities is shown by the claims that networks will
continue their minimal payments for network exhibition if the rule
is retained and that retention of the rule "could increase
concentration in the program supply market by limiting involvement
only to those entities large enough to bear the great risks
involved." (NP~, ~13O.) These two claims go together with the
premise that the minimal network payments will lead to limited
involvement by fewer entities. The premise is refuted by the fact
that networks now pay the lowest possible amounts for series without
obtaining syndication or financial intrest rights. Further
reductions for a "loss" of rights that the networks don't possess
would be unwarranted, as well as economically counterproductive.
More important, the conclusion that retention of the rule
will increase concentration because of the great risks has been
PAGENO="0062"
58
totally invalidated by the historical experience since passage of
the rule. During these years, concentration in program production
has not occurred; movement in and out of production by parties has
been relatively easy and constant. Many small ccmpanies at the
time of the rule's enactment have borne the great risks, and have
used their successes in syndication to improve their position.
Program production has been consistently marked by "great risk"
in the forms of a high failure rate during the network run and
deficit financing. The possibility of syndication revenues has
been strong enough, however, to induce new investors and entrants
into the market. This incentive will be lost if the rule is repealed.
Assigning the risk function for syndication to the networks
will, at best, lead to rather modest increased revenues during the
network run, and nothing thereafter. It is doubtful that these
increased revenues from the networks will match the revenues that
could be obtained in syndication. This, by itself, would reduce
the incentive to enter program production. Because the majority
of new series can be expected to fail before reaching syndication,
the value of syndication rights at the pil~t stage (when the network
contract is reached) is either nonexistent or worth a pittance.
It can be expected that the amounts paid by the networks would be
valued accordingly; the resulting minimal payments received by the
producers would, in turn, lessen the incentive to enter program
production.
The question on this issue is: will new entrants be likely
to move into a situation where the full extent of their possible
PAGENO="0063"
59
-18-
rewards will be judged when the series has no proven record and
is expected to be unsuccessful? The answer is obvious, yet this
is the probable scenario facing series producers if the rule is
repealed. Contrary to the Special Staff's assertions, Small
producers have been shown to be willing to take the "great risks"
involved where they have control over the rewards available in
syndication. This incentive is lost entirely when the only reward
is a modest increase in network license fees. It is more likely
that many producers, large and small, will see no advantage in
entering such a low yield investment. Producers, like other
entrepreneurs who risk their money on individual ideas, are more
likely to enter a situation where they retain sane control and
where their successes will be rewarded. Network domination of the
syndication rights to series, which will occur without the rule,
would destroy these incentives with a result of fewer entrants
into program production. The record since passage of the rule
shows that entry has been fluid for small entrants. This obvious
reality indicates conclusively that the rule has not led to
concentration and, therefore, repeal is not warranted on this
ground.
CONCLUSION
The reasons listed in the NPR for a change in the rule do not
support partial or whole repeal. The rule serves a useful function
which has directly benefitted the viewing public by increasing the
number and availability of off-network series in syndication. In
these circumstances, !`~AA urges the Commission to retain the rule. \
Respectfully submitted,
TEE MOTION PIOTURE ASSOCIATION
OF AMERICA, INC.
Arthur Schemer
Of Counsel: _____________________________
Dennis Lane
Fritz Attaway Wilner & Schemer
Motion Picture Association 1200 New Hampshire Avenue, N.W.
of America, Inc. Suite 300
1600 Eye Street, N.W. Washington, D.C. 20036
Washington, D.C. 20006 (202)861-7800
Its Attorneys
January 26, 1983
PAGENO="0064"
60
BEFORE THE
Federal Communications Commission
WASHINGTON, D. C.
In the Matter of:
Amendment of 47 C.F.R. S 73.658(j); ) BC Docket No. 82-345
the Syndication and Financial
Interest Rule
To: The Commission
COMMENTS OF PARAMOUNT
PICTURES CORPORATION
Paramount Pictures Corporation ("Paramount"), by its
attorneys and pursuant to Section 1.415 of the Rules of the
Federal Communications Commission, hereby submits its Comments in
opposition to the proposal of the Commission in the above-
captioned proceeding to repeal the financial interest and
syndication rules. See Notice of Proposed Rule Makiflg, BC Docket
No. 82-345, FCC 82-300 (released July 21, 1982) ("Notice"). 1/
I. Introduction
Paramount is vehemently opposed to the Commission's
proposal to repeal the financial interest and syndication rules.
1/ Paramount is also a member of the Committee for Prudent
Deregulation, a broadly-based coalition of independent producers,
artists, syndicators, independent television stations, adver-
tisers, and others that has been formed to address in broad terms
the crucial need to maintain the financial interest and syndica-
tion rules at this time. Paramount generally supports the
comprehensive comments being filed in this proceeding by the
Committee. However, we write separately here to explain the
particular importance of the rules to program suppliers such as
ourselves.
PAGENO="0065"
61
In fact, we respectfully question how the need for these rules
could even be in doubt, let alone how the FCC could unfairly
place the burden on those who would retain the rules to
demonstrate why the status quo should not be changed.
The financial interest and syndication rules provide
the only check on the dominant position of the three major
broadcast networks in the television program market. Because of
the rules, program suppliers such as Paramount have at least some
safeguard in their negotiations with the monopsonistic cartel
that controls access to every American home. We therefore have
been able to recapture revenues that permit us for the first time
to develop high quality programming for the more risky first-run
syndication market. And because of the rules Paramount and other
program suppliers finally have been able to offer attractive
syndicated programming on a timely basis, and independent
television stations have been able to take advantage of such
programming to come into their own as meaningful competitors to
the networks and their affiliates.
It is not surprising that the networks object to the
financial interest and syndication rules so strongly, for the
rules remain as two of the few significant restrictions
preventing them from exercising the full extent of their dominant
market power. However, we submit that for that very reason it is
vital that the rules remain in place. Speaking for itself,
32-540 0-84--S
PAGENO="0066"
62
Paramount has no doubt as to the consequences that would follow
if the rules were eliminated. The networks would force us to
give up the lion's share of the syndication rights of the
programming we create as a condition for their ordering and
subsequently broadcasting that programming -- just as they did
until the rules were adopted. They thereby would deny us the
funds to support our first-run syndication efforts. And further-
more, the networks would prohibit us from selling our off-network
programming until long after that programming had any significant
audience appeal -- again, just as they did before the rules were
adopted. The newly-achieved ability of the independent stations
to compete with the networks would be eliminated.
Triese results are easy to foresee; they reflect the
common-sense business judgments of the networks, who will use
their unique access to American homes to maximize profits at the
expense of their suppliers and their would-be competitors. The
networks themselves admit that they would pursue these goals.
Indeed, the networks would be likely to exercise their market
power even more anticompetitively than in the past. At least
prior to 1970 the networks had reason to show some restraint for
fear that the government would restrict their programming
activities if they were overly aggressive. The FCC nevertheless
promulgated the limited rules at issue here. However, if the
rules are repealed the networks reasonably will conclude that the
PAGENO="0067"
63
government no longer cares how they exploit their market. They
will push for every penny they can get.
Paramount does not object to such marketplace activi-
ties when the marketplace is competitive. Indeed, we already
compete with the three networks in many areas, including home
video entertainment (through the sale of videocassettes and
discs), advertiser-supported cable programming (through our one-
third ownership interest in the "USA Network"), and pay cable
programming (through our pending acquisition of interests in "The
Movie Channel" and "Showtime"). We have not sought FCC pro-
tection in these ventures, nor do we believe that we deserve it.
Where the networks have no bottleneck control, and we therefore
are able to bring our product to market, we strongly believe that
government regulation is inappropriate. We work hard to produce
programming that audiences prefer, take our profits when we are
successful, and accept our losses when we are not. We have
chosen to participate in an extremely risky industry, but we
believe that we can survive and prosper in free competition by
creating a better product.
But Paramount faces an entirely different situation in
the commercial television market. Paramount and other program
producers simply do not have any significant avenue by-which we
can distribute television programming to natiOnal audiences
other than that provided by the three major networks. The FCC
PAGENO="0068"
64
created this bottleneck thirty years ago when it assigned
television channels in such a way as to permit only three
networks to develop. The bottleneck continues today.
Particularly given its role as the designer of an allocation
scheme that ordains that the networks be dominant in national
television, it is the responsibility of the FCC to prevent the
networks from exerôising that dominant position in an
anticompetitive fashion..
Frankly, Paramount is confused as to why the FCC has
chosen to devote its limited resources to a reconsideration of
the financial interest and syndication rules. The Commission
speaks of ending a "decade-long debate," 2/ but there has been no
such "debate." The facts that led the Commission to promulgate
the rules in 1970 never have been in serious dispute. Indeed,
as we discuss in more detail below, see infra at 11-13, the FCC's
findings were later confirmed by separate investigations into
network programming abuses conducted by the United States
Department of Justice. The facts developed by the Justice
Department left no room for significant "debate" over the need to
restrain the dominant market power of the networks. Rather, the
Department found the history of abuses to be so compelling that,
notwithstanding the FCC rules, it imposed even broader financial
2/ See Notice, Separate Statement of Chairman Mark Fowler, at 1.
PAGENO="0069"
65
interest and syndication restraints in consent decrees to which
the networks agreed as recently as two years ago. 3/
From all appearances~ the FCC has issued its Notice in
this proceeding not because of any "decade-long debate" over the
two rules, but instead because of heavy lobbying from the
affected networks. This lobbying is part of an unseemly attempt
by the networks to reverse the judicial decrees to which they so
recently committed themselves. In private the networks must
admit to themselves that the circumstances that led the FCC to
promulgate the financial interest and syndication rules, and led
the Justice Department and the court to strengthen them, have not
changed. However, the networks clearly believe that this
particular Commission offers them a brief "window of opportunity"
for repeal of the rules, at least so long as repeal is couched in
the fashionable name of "deregulation." If successful here, the
networks undoubtedly will return to court and use the favorable
decision of the Commission as a wedge to break open the consent
decrees.
3/ See United States v. National Broadcasting Co., 449 F. Supp.
1127 (C.D. Cal. 1978), aff'dineifl., No. 79-3381 (9th Cir.
April 12, 1978), cert. ~inied, sub non. CBS v. U.S. District
Court, 48 U.S.L.W. 3186 (1979); urT~i~ States V. CBS, Inc.,
Civ. No. 74-3599--RJK (C.D. Cal. July 31, 1980), ~printed in 45
Fed. Reg. 34,463 (1980); United States v. ABC, Inc.,
Civ. No. 74-3600-RJK (C.D. Cal. Nov. 15, 1980), ~printed in 45
Fed. Reg. 58,441 (1980).
PAGENO="0070"
66
The FCC properly stood up to similar pressure from the
networks a year ago when it refused to review the Prime Time
Access Rule, a regulation imposing restrictions on the amount of
programming that the networks may broadcast during evening
hours. 4/ ~Yet that rule was adopted at exactly the same time as
the financial interest and syndication rules, and for exactly the
same reasons. The package of rules was intended as a compre-
hensive scheme to reduce network dominance. See Report and
Order, Docket No. 12782, 23 F.C.C.2d 382 (1970), modified in
~ 25 F.C.C.2d 318 (1970), aff'd sub non. Mt. Mansfield
Television Inc. v. FCC, 442 F.2d 470 (2d Cir. 1971).
Nevertheless, without any explanation for the
distinction, the FCC proposes to undercut its access rule
decision and grant the networks' request for repeal of the
financial interest half of the package. The Commission does so
despite the fact that the Network Inquiry Study on which it so
heavily relies was even more critical of the Prime Time Access
Rule than the financial interest and syndication rules, 5/
despite the fact that the access rule has been the subject of
4/ See Order, RM-3951, FCC 81-536 (released Nov. 20, 1981).
5/ See Network Inquiry Special Staff, Preliminary Report: An
Analyili of Television Program Production, Acquisition and
Distribution 132-40 (1980).
PAGENO="0071"
67
much more Ndèbate~ over the past decade, 6/ and despite the fact
that the Justice Department had not found the access rule to be
so important as to require incorporation in the network consent
decrees.
Paramount strongly supports retention of the Prime Time
Access Rule as well as the financial interest and syndication
rules. But we fail to see the logic of repealing the latter and
not the former. The same problem of network dominance underlies
both. It would be disingenuous for the FCC to distinguish
between them; presumably that is why the Commission has not even
attempted to provide a rationalization for doing so. We question
whether the FCC actually intends to repeal all of the network
rules, and has simply made a political decision. to move forward
in stages to divide the opposition.
Paramount hopes that this is not the case, and that the
Commission will not destroy one of the most successful policy
regulations it has promulgated in the last twenty years. In the
balance of these Comments Paramount discusses the serious flaws
in the reasoning of the Commission's Notice. We submit that if
the FCC impartially examines the actual structure of the televi-
siori industry, it can only conclude that the financial interest
6/ See, ~ Second Report and Order, Docket No. 19622, 50
F.C.C.2d 829 (1975); Report and Order, Docket No. 19622, 44
F.C.C.2d 1081, 1137 (1974).
PAGENO="0072"
68
and syndication rules have been and still are a successful and
necessary response to the bottleneck power of the three networks.
They must not be repealed.
II. The Rules are Vital to a Healthy
Program Market
A. The Rules Correct Continuing
Imbalances in the Marketplace
A decade ago, after many years of study, the FCC
concluded that it was essential "to eliminate the networks from
distribution and profit sharing in domestic" and certain foreign
syndication. ~port and Order, Docket No. 12782, 23 F.C.C.2d
382, 397 (1970). The Commission found that the networks were the
only significant distribution medium by which independent
producers could offer their programs to the public, and that the
networks exploited this position to obtain signific~nt
concessions as a condition of purchasing programs for network
runs. According to the FCC, "networks do not normally accept
new, untried packager-licensed programs for exhibition unless the
producer/packager is willing to cede a large part of the valuable
rights and interests in subsidiary rights to the programs to the
network." Id. at 398. In fact, as of 1968 the networks exerted
their market power such that they had a financial interest in
over 96% of their evening entertainment programs.
Paramount was all too aware of the networks' insistence
on such rights. By the mid-l960's it became impossible for us to
PAGENO="0073"
69
produce television programs for network distribution unless we
were willing to grant the networks a substantial share of the
syndication rights. And we are still bearing the burden of those
adhesion contracts. We continue to pay the networks millions of
dollars as their share of the off-network profits of programs we
developed during this period, including "Star Trek," "The Brady
Bunch," "Love American Style," and "The Odd Couple."
The financial interest and syndication rules went part
way toward redressing the competitive imbalance between the
networks and producers. The networks, however, in parallel
actions, continue to require other uniform concessions as a
condition of broadcasting a program, including "spin-off,"
renewal, artistic control, and exclusivity rights (including the
stipulation that re-runs of the program may be stripped in
daytime periods only on the network that originally purchases
it). It is well-known within the industry that these boilerplate
provisions are essentially non-negotiable. But thanks to the
financial interest and syndication rules, producers at least have
a means of recovering their other costs and even earning
significant profits through the later syndication of successful
programs.
As discussed above, the sound judgment of the FCC was
later confirmed by the separate investigation of network
practices conducted by the Department of Justice in the course of
PAGENO="0074"
70
prosecuting antitrust actions that the Department brought against
ABC, NBC, and CBS in 1974. Most of the evidence assembled by the
Department is unavailable under the terms of the consent decrees
agreed to by the networks between 1978 and 1980. But in filings
made in Support of those decrees the Department made clear that
it had found substantial proof that the networks had used their
dominant control of the nation's television airwaves to demand
and obtain financial interests and other concessions in exchange
for accepting a program for network broadcast. In fact, the
Department had testimony that the networks not only refused to
purchase specific programs when they were denied such rights, but
also threatened to and sometimes did subsequently boycott all
programs offered by recalcitrant independent studios. 7/
The Justice Department acknowledged that the FCC's
financial interest and syndication rules had been a necessary
first step toward eliminating these abuses. However, the
Department contended that even so the networks continued to use
their "dominance and control over access to the broadcasting
time" to force program suppliers to "relinquish[ I valuable
rights and interests in their programs * * * ." Competitive
7/ See Attachments 1 and 2 to "Identification of the Evidence
Tn Support of the Government's Contention that CBS and ABC Have
Violated Sections 1 and 2 of the Sherman Act," United States
v, CBS, Civil No. 74-3599-RJK (C.D. Cal. 1974); United States
v. ABC, Civil No. 74-3600-RJK (C.D. Cal, 1974),
PAGENO="0075"
71
Impact Statement, United States v. CBS, ~ (filed May 8,
1980), printed_!~ 45 Fed. Reg. 34467, 34468 (May 22, 1980). In
response to evidence of these practices, the networks agreed to a
number of limitations on their dealings with producers. As noted
above, the Justice Department viewed financial interest and
syndication restrictions to be so important that, notwithstanding
the presence of such restrictions in the FCC's rules, it insisted
that even more expansive limitations be written into the consent
decrees. See, e.g~, United States v. National Broadcasting Co.,
449 F. Supp. 1127 (1978).
The Department then went on to impose many other
prohibitions designed to allow the program suppliers "to compete
free of the artificial leverage which [the networks) have
exercised in the past." Competitive Impact Statement, United
States v. CBS, ~ 45 Fed. Reg. at 34469. Most notably, the
decrees include a general injunction forbidding the networks from
conditioning the purchase of exhibition rights to a program on
the supplier granting any rights other than those incident to the
network broadcast. The Department advised the court that this
restriction S~j5 based on the assumption that the [three
commercial television networks will continue to have substanti~~l
market power for the foreseeable future." Id. (enphasis
added).
Absolutely nothing has changed since 1980 to make that
assumption invalid. The networks in fact have become larger and
PAGENO="0076"
72
more dominant in the industry. Commercial network television is
still the only avenue into the homes of most Americans. The
networks have expanded the percentage of homes reached by their
own television stations. 8/ They will be able to expand further
if the FCC goes forward with proposals to remove the "7-7--7"
limits on television station ownership. It is no wonder that
network executives unabashedly brag (except in this proceeding)
that their dominance will continue through the next decade.
See infra at 22.
Paramount is at a loss as to what rational basis there
could be for repealing rules that -- by consensus of prior
Commissions, the Justice Department, and the Courts -- are
vitally necessary to redress competitive imbalances in the
program marketplace. The FCC's Notice of Proposed Rulemaking is
of only limited value on this point. The Commission relies most
heavily on two arguments: first, that of the Network Inquiry
Special Staff that the rules are misguided and interfere with
efficient risk-sharing, and second, the claim that the market for
television has been revolutionized by the arrival of new
technologies, eliminating the dominant position of the networks.
But neither of these theories is consistent with reality.
8/ In 1970 the network owned and operated stations reached 42%
of the total U.S. television households. By 1980 their reach had
increased to 52% of the households, and by 1982 they served 57%
of American homes. See Arbitron Local Market Books for February
1970, 1980 and 1982.
PAGENO="0077"
/ 73
B. The Recommendations of the Special Staff
~nore Marketplace Realities
The Network Inquiry Special Staff's recommendation that
the financial interest and syndication rules should be repealed
is doubly flawed -- it both ignores the crucial benefits of the
rules and erroneously suggests that they have public interest
costs. The Special Staff's report has been criticized at length
elsewhere. 9/ The Department of Justice has warned that the
"Staff's methodology was significantly flawed; therefore its
conclusions are open to question and (its] studies should not
form the basis for action by the Commission." 10/ The Committee
for Prudent Deregulation is today filing an exhaustive report
that further discusses many of the errors contained in the
Network Inquiry Study. As a result, Paramount will only make a
few significant points here.
9/ Paramount, like other program producers, provided the
Special Staff with extensive information regarding the television
entertainment market. We therefore were extremely concerned when
the Staff ignored or distorted much of that information in their
report. Frankly, however, we made a practical business decision
not to spend any additional resources in an attempt to correct
the Staff's many errors. It was our view that, given the
consent decrees that the Justice Department obtained in its
antitrust Suits against the networks at the same time that the
Special Staff issued its report, any comments on that report
would be superfluous. And in any event, we believed that the
Staff's theoretical conclusions with respect to the networks'
relationship with program suppliers was so clearly contrary to
reality that those conclusions would never be given credence by
the Commission. Obviously we were naive in that regard.
10/ Comments of the United States Department of Justice, Docket
No. 21049, at 1 (September 16, 1980).
PAGENO="0078"
74
First, the Special Staff's disregard for the benefits
of the rules is rather surprising. Elsewhere in the Report the
Staff properly found that "[p]ast Commission policies have served
effectively to limit television to a system dominated by three
over~-the-air advertiser-supported networks." Final Report, at 3
(emphasis added). The Staff also stated that "[t]he near-term
prospects for a fourth [such] network are not bright," though it
was more optimistic that pay and non-broadcast networks
eventually may develop with proper Commission nurturing. Id. at
4-5.
But despite this recognition of the dominant bottleneck
position achieved by the networks thanks to the FCC's channel
allocation policies, the Special Staff cavalierly dismissed the
need for the financial interest and syndication restrictions.
According to the Staff, the FCC "should be indifferent" to the
ability of the networks to extract financial concessions from
program suppliers. The Staff apparently believed that as long as
the networks do not push so hard as to drive the producers out of
business, it does not matter whether the networks exploit their
monopsonistic leverage to obtain supra-reasonable returns for
themselves. See Final Report at IV-77.
This narrow view of the public interest is absurd on
its face. Paramount willingly admits that the financial interest
and syndication rules are in its own economic self-interest. But
PAGENO="0079"
75
the rules are not a protectionist device giving producers a
special advantage in an otherwise competitive marketplace.
Rather, the rules are well-considered counterweights to the
dominant power of the three networks.
Notwithstanding the rules -- and the other restraints
contained in the consent decrees -- the networks have proven
themselves fully able to earn huge profits from their broadcast
activities. From 1970 to 1980 the networks' profits increased
550%, from $50 million to $325 million. Even more impressive,
their share of total television industry profits increased from
11% in 1970 to 20% in 1980. Compare Broadcasting, Sept. 6, 1971,
at 58, with Broadcasting, August 10, 1981, at 40.
That trend continues today. Last week the President of
the ABC Television Network announced that despite the recession
ABC had a record year in 1982, becoming the first network to
break the $2 billion mark in revenues. See Broadcasting,
January 24, l~83, at 42. Moreover, the CBS network reportedly
also passed the $2 billion level in 1982, and NBC is said to be
close to doing so as well. See id. at 7. The FCC cannot simply
ignore these facts and permit networks to exploit their dominant
position further; it has a special responsibility to balance the
television program market structure, particularly given its
responsibility for the creation of the networks' control of the
national airwaves.
PAGENO="0080"
/ 76
Further, the Special Staff simply ignored the fact that
the financial interest and syndication rules permit entre-
preneurial returns that independent suppliers require in order to
have the capital to invest in new programming. This may be a
reflection of the fact that, as of the time that the Staff
studied the program market, suppliers were only just beginning to
receive significant profits from syndication of programs without
the toll taken by network-demanded financial interests.
But that situation has now changed. Paramount, for
example, has used some of the profits it has received from the
syndication of its successful programs, such as "Happy Days" and
"Laverne and Shirley," to create three new first-run syndicated
programs: "Entertainment Tonight," "Solid Gold," and "Madame's
Place." It is in the process of developing a fourth such program
-- "Taking Advantage" -- for syndication in the Fall of this
year. We also were proud to produce the feature-length film "A
Woman Called Golda," which won this year's Emmy as the Best
Dramatic Program of 1982. That film also was distributed as
first-run syndicated programming (after all three networks
refused to purchase it for network distribution).
Of course, such a strengthened program market is
exactly what the FCC hoped would develop when it enacted the
network restrictions in 1970. But the market cannot survive
without contjnujn~ revenues from off-network syndication. We can
PAGENO="0081"
77
state categorically that without the revenues provided us by the
current and expected syndication of our off-network programming,
we would not be able to assume the huge expenses involved in
creating and marketing these new first-run programs. And if a
company the size of Paramount cannot do so, the Commission can be
sure that smaller producers will not be able to do so either.
The networks may permit producers to earn a modest return on
programs developed for network broadcast; they have no incentive
to permit producers to earn the additional revenues that support
non-network program development.
However, the Special Staff did more than simply ignore
the benefits of the financial interest and syndication rules; it
also incorrectly argued that the rules are harmful to the program
market. The Staff naively suggested that the rules have
"disrupted an efficient risk-sharing arrangement between the
networks and their program suppliers." Notice at ~ 31.
According to the Special Staff, but for the rules the networks
could share the risk of program production, particularly with
smaller producers and new entrants. Id. at ¶ 30.
Paramount has no objection to "efficient risk-sharing;"
indeed, it has entered into joint venture agreements partially
for that purpose. Such arrangements are in the public interest
when they are based on fair bargaining between equal parties.
But the Staff's theory tumbles like a house of cards when one
32-540 0-84--fl
PAGENO="0082"
78
recognizes the basic fact that, as explained throughout these
Comments, no producers stand on an equal footing with the
networks. Not even large studios like ourselves can bargain on
equal terms with the networks over "risk-sharing."
significantly, not one program producer has supported
repeal of these rules, even the smaller companies that the
Special Staff implies would be most interested in sharing risks
with the networks. This fact is telling, for it suggests that --
whatever the merits of the Special Staff's argument in theory -~
the television market structure is not competitive enough for
"efficient risk-sharing" to become a reality. Given the oppor-
tunity, the networks will simply demand a share of syndication
profits without having to assume any reciprocal share of the
risk. Thus, the bankrupt logic of the Special Staff simply
cannot in any rational way justify repeal of the financial
interest and syndication rules.
C. The Developing Video Markets are Not
Substitutes for Network Television
The FCC also suggests in its Notice that "the market
for television programming has undergone significant change since
adoption of the syndication and financial interest rule," and
that consequently the networks no longer may be able "to act as
monopsonistS in the purchase of television progr~mzning * * *
Notice at ¶ 32. Implicit in what Paramount has explained above,
PAGENO="0083"
79
however, is the underlying truth that -- whatever their promise
for the future -- the new video markets have in no way reduced
the dominant position of the networks. To the contrary, the
networks are more dominant now than they were in 1970, and will
continue to *be so over at least the next decade.
First of all, the Commission should not be misled into
thinking that the so-called expansion of program outlets reflects
the arrival of a practical alternative to the three networks.
Such a simplistic notion ignores the immature state of these
outlets, and the realities of the markets they serve. It is
necessary only to look at them briefly but clearly to understand
their inadequacies:
Cable televiS~2f~ Cable television offers perhaps the
best hope ~f ultimately providing an alternative national
delivery system to the networks. But it is completely wrong to
suggest that cable provides such an alternative today, or that it
will soon do so. Cable television is still in its infancy as a
vehicle for something other than the retransmission of off-air
broadcast stations. Only 30% of the nation has access to any
cable television at all, 11/ and less than 50% of the nation is
expected to be wired by 1990. 12/ Moreover, many of the existing
systems have limited channel capacity that, particularly given
the Commission's own "must-carry" rules, 13/ prevents them from
providing any significant access to non-broadcast programmers.
Thus far the only successeul cable services have been those
offering theatrical films for a monthly fee. Consumers have yet
11/ Broadcasting, Dcc, 20, 1982, at 27.
12/ ICF, "An Analysis of the Impacts of the Repeal of the
Financial Interest and Syndication Rule," Appendix 2, at 6
(1982) (hereinafter cited as "ICF Report").
13/ 47 C.F.R. SS 76.57-.63 (1981).
PAGENO="0084"
80
to demonstrate any willingness to pay a fee to receive the kind
of original television programming produced by Paramount and
others for the networks. And similarly, "basic" cable services
simply do not yet have sufficient audiences to attract
advertising to support such programming either. 14/
STV and MDS: These two technologies are not widely
available at this time. And in any event, operators only have
found it economical to program STV and MDS facilities with sports
and theatrical films. The outlets provide Paramount with no
useful alternative to the networks.
Videocassettes and discs: The FCC itself acknowledges
that only ~6% of American households currently own video-
recorders, see Notice at ¶ 36, and an even smaller percentage own
videodisc players. This market is far too snail to provide a
distribution outlet for paramount, and, more important, consumers
have shown a willingness to purchase only theatrical films.
New technologies: LPTV and DBS may become a reality,
or they may not develop at all. However, their mere potential
does not magically render them effective competitors to the
networks, and therefore obviously cannot justify repeal of the
financial interest and syndication rules today.
Additional television stations: Although the absolute
number of television stations has increased since 1970, that
number is irrelevant insofar as it includes new network affili-
ates (who increase the dominant position of ABC, CBS, and NBC),
and public television affiliates. The remaining new stations
theoretically could provide a video distribution alternative, but
they have nOt done so, and even the Special Staff concluded that
they were unlikely to do so. Final Repp~ at 4.
Paramount may be uniquely knowledgeable in this area.
In the late 1970's we made a considerable investment in a failed
attempt to organize independent stations into a "fourth network."
Despite our losses in that venture, we have continued to support
atempts to organize ad hoc networks for special events, such as
the "Operation Prime Time" consortium. However, paramount
14/ ICF Report, ~ note 12, Appendix 2, at 11-21.
PAGENO="0085"
81
essentially agrees with the Special Staff that a fourth
commercial network would be possible only in the event of a
"large increase in advertiser demand" or "a radical revision of
the Commission's spectrum allocation plan." Id. Neither is even
on the horizon.
The networks themselves certainly do not see these new
outlets, either individually or collectively, as a threat to
their dominant position in the television entertainment industry.
For example, Thornton Bradshaw, Chairman of the RCA Corporation,
recently stated his conviction "that although cable will be a
formidable competitor, the networks will remain the only
television medium with a national franchise reaching every
American television household." 15/ CBS similarly has predicted
that "[f]or the foreseeable future at least, network television
will continue to be the predominant national advertising
medium." 16/ ABC is equa~lly confident of its ability to maintain
its marketplace leverage. 17/
And in any event, the networks themselves will play a
large role in the development of these new distribution systems.
15/ Speech of Thornton Bradshaw to the Academy of Television
Arts & Sciences, Los Angeles, Ca. (Apr. 12, 1982).
16/ "The Video Marketplace in 1990: Diversity and Growth in
Perspective," at 6 (1982).
17/ See Broadcasting, January 24, 1983, at 42.
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82
They are establishing cable program services. 18/ They are
developing SD! networks. 19/ They have received authority to
operate cable systems themselves. 20/ They are distributing
videocassettes and discs. 21/ They have been granted licenses to
operate direct broadcast satellites. 22/ NBC's sister corpora-
tion, RCA American Communications, is the owner of the major
satellite transmission system.
Paramount is ready and willing to compete with the
networks -- and the diverse other players -- in these competitive
arenas of the future. But at least in the near term, none of
these technologies will replace traditional network television as
the central avenue by which producers of original entertainment
programming distribute their product to American homes. As a
result, the dominant competitive position of the networks will
continue unabated.
18/ See, e.g., Broadcasting, May 3, 1982, at 38.
19/ See Letter of William 3. Tricarico to American Broadcasting
~mpai~Ths,. FCC 82-367 (released Aug. 10, 1982) (authorizing the
"Home View Network").
20/ See CBS, Inc., 87 F.C.C.2d 587 (l98l)(waiver of the
cross-ownership rules to permit CBS to own cable systems); Notice
of Proposed Rulemakij~g, CT Docket No. 82-434, FCC 82-323
Ti~éleased Aug. 27, 1982) (proposing repeal of the network-cable
cross-ownership limits).
21/ For example, CBS has entered into a joint venture with
Twentieth-Century Fox. See Broadcasting, February 22, 1982, at
31-32.
22/ See Memorandum Opinion and Order, Applications of CBS, Inc.,
File Nos. DBS-81-02, et. al., FCC 82-498 (released Dec. 3, 1982).
PAGENO="0087"
83
III. Repeal of the Rules Would Be a Serious Economic
Blow to Independent Television Stations
The Commission suggests in its Notice that the recent
decline in network audience shares may indicate a lessening of
the networks' dominar~ce. Notice at ¶ 38. This is not the
case. Just as the FCC may not draw simplistic conclusions from
statistics regarding new program outlets, so it must take care
not to read too much into share figures. There does appear to be
some small drop off from the halcyon days when the networks
almost completely monopolized television. But some of that
decline can be attributed to audiences watching pay theatrical
movie services, an entirely separate market from the advertiser-
supported services that would be an outlet for television
entertainment programming of the type produced by Paramount.
More important, however, a substantial percentage of
the decline is due to the new strength of independent television
stations. That strength is largely an intended result of the
financial interest and syndication rules. And, when all is said
an~i done, the new strength of the independents is the primary
reason that the networks find the rules so distasteful. The
television industry correspondent for The Washington Post
recently confirmed this fact: "Network executives will tell you
these days that it isn't the competition from the "new technolo-
gies" like Cable TV that is cutting into their regular audiences
so much around the country as it is the stronger independent
PAGENO="0088"
84
stations which use network re-runs (like M*A*S*H) and old movies
for counter-programming." The Washington Post, § B, at 6, col. 2
(Jan. 17, 1983).
Prior to 1970, the networks did not allow this corn-
:petition to develop. The network's control over syndication was
sufficiently strong to permit them to block independent stations
from obtaining television programs until long after such programs
were a competitive threat to them or their affiliates. The
refusal of the networks to release programming in a timely
fashion was devastating for independent television stations,
often already disadvantaged by FCC channel allocation policies
that left them alone on the UHF dial. There is no marketplace
substitute for off-network programs. 23/ It is well-established
that syndicated programming is most valuable while original
episodes are still being broadcast on the networks -- yet the
networks refused to permit the release of such programming. 24/
And it is also clear that most programs become dated and
unattractive by approximately the fifth or sixth year after the
23/ The market for recent of f-network programs is truly
separate and non-interchangeable with the market for feature
films.
24/ There were two exceptions to this rule. Both "Bonanza" and
"Gunsrnoke" were syndicated toward the end of their long network
runs. However, these exceptions essentially prove the rule, for
both of these series were produced by the networks themselves.
Thus, by keeping independent producers from syndicating their
attractive programming, the networks artificially and
anticompetitively kept a larger market for themselves.
PAGENO="0089"
85
network run -- yet again the networks were able to warehouse
programming so that independent stations could obtain only dated
material. See ICF Report, Chapter 5.
One of the primary reasons the Commission promulgated
the financial interest and syndication rules was to eliminate the
conflict of interest that led to such anticompetitive abuses.
The FCC argued forcefully that Nthe presence of the networks as
domestic syndicators is inherently undesirable. They are in the
position of selling programs to independent stations in
competition with their own network programs on affiliated
stations * * * ." port and Order, Docket No. 12782, 23
F.C.C.2d at 394. The Commission hoped that the financial
interest and syndication rules would eliminate the ability of the
networks to keep independent stations as second-class facilities.
Much to the dismay of the networks, the FCC rules have
worked exactly as intended. Paramount and other producers have
been able to offer syndicated programming to independent
television stations in a timely fashion while that programming
still has significant audience appeal. As a result, independent
stations have been able to attract larger audiences, and in many
cases, fo~ the first time achieve financial stability. Not
coincidentally, the network shares have declined in prpportion to
the independent stations' successes.
PAGENO="0090"
86
The networks clearly are not content to watch this
trend continue. They have been outspoken in their complaints
regarding producers who sell programming to independent stations
while those shows are still are on the network. For example,
Donald Grant, President of CBS Entertainment, frankly admits that
independent stations are benefiting from what he calls the
"short-sighted" distribution practices of syndicators such as
Paramount. He warns that CBS is very unhappy that shows like
"Happy Days" receive substantial airtime in independent markets;
"we are suffering because of it." See variety, April 27, 1982,
at 51.
For the past decade the networks have been unable to
block the development of independent stations because they no
longer control syndication. But there can be no doubt what fate
would befall those stations if the financial interest and
syndication rules were repealed. Networks would warehouse
programming or keep it for their own stations as much as
possible. 25/ They might also make the programming available to
25/ The networks might also use off-network programming to
expand network time. Under this scenario, the networks would
strip recent off-network shows in "early fringe," where
independent stations currently earn a large share of their
revenues. In doing so the networks would both maximize their own
revenues from the programs (rather than simply warehousing them)
and use up the value of such programs to independents as "early
fringe" competition. As an independent syndicator, on the other
hand, Paramount is able to protect the value of off-network
programming as competition to the networks. For example, when
Paramount sold "Happy Days" and "Laverne & Shirley" to ABC to be
stripped during the daytime, we required that the shows be
broadcast prior to noon or 1 p.m. so that they would still be
fresh later for afternoon and early evening audiences on
independent stations.
PAGENO="0091"
87
their affiliates, albeit with restrictions on when and how often
the programs could be broadcast. And as in the 1960's, indepen-
dent stations would be denied the off-network programming until
its competitive value was marginal. 26/
IV. Conclusion
In light of these facts, Paramount again questions why
this proceeding has been instituted, and why the Commission seems
to presume that the financial interest and syndication rules
should be repealed. Unlike many of the FCC's regulations, these
rules have proven to be well-targeted corrections to major
competitive imbalances. Since the rules were adopted in 1970:
~ More independent producers have entered
the marketplace;
* More first-run syndicated programming is
being produced;
* Independent television stations have become
much more competitive with affiliates,
26/ In the words of the chairman of the CBS Television Network
~Tfiliates Association, "[i]f the networks participate in or
influence syndication of network programs and have a share of
downstream profits, this may impact premature syndication of
network re-runs that are being made available to independent
stations and are competing with first-run shows carried by
affiliates." Letter of James G. Babb, Jr. to CBS Network
Television Network Affiliate Association, "css Affiliate Option
Paper on Repeal of Network Financial Interest and Syndication
Rules" (Oct. 18, 1982).
PAGENO="0092"
88
perhaps even to the point of providing the
basis for a potential "fourth network;"
* `And last but not least, the networks have
increased their profits by over 550%, and
have actively begun to expand into
non-network distribution technologies.
The marketplace is working just as the FCC intended.
Paramount believes that the FCC should examine the
success of its policies, engage in some brief self-congratula-
tion, and then terminate this proceeding rapidly so that the
agency -- and we in the broadcast television industry -- can
devote our attention to the real issues that demand our attention
today. Perhaps at some time in the future the national
commercial television market will be competitive, and the
networks will no longer hold their bottleneck grasp on access to
American homes. At that time Paramount will gladly support
elimination of the financial interest and syndication rules, and
look forward to the "risk-sharing" that the Special Staff so
favors.
But until that day comes -- if it comes -- the FCC must
not undo the progress of the past decade.
Respectfully submitted,
PARAMOUNT PICTURES CORPORATION
By ___________________
Howard F. Roycroft L~,
By ___________________
Peter A. Rohrbach
Hogan & Hartson
815 ConnectiCut Avenue, N.W.
Washington, D.C. 20006
Its Attorneys
January 26, 1983
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89
BEFORE THE
~r~brra1 QIammixxiiratkrn~ ~nmmiaøtun
WASHINGTON, D. C. 20554
In the matter of
BC Docket No. 82-345
Amendments of 47 CFR S73.658(j)
The Syndication and Financial
Interest Rules
To: The Commission
COMMENTS OF MCA, INC.
MCA, Inc. ("MCA"), submits herewith its comments in response
to the Notice of Proposed Rulemakj~g, FCC 82-300, released July
21, 1982, in the above-captioned proceeding. MCA and its wholly-
owned subsidiary, Universal City Studios, Inc., are actively
engaged in the production and distribution of programs for network
television and in the syndication of programs to local television
stations. MCA is one of the most significant creative forces in
the television industry today and is thus vitally interested in
the present proceeding.
I. Introduction And Summary Of Positjoii
The Commission has here proposed the repeal of one of its
most important and effective rules for limiting the otherwise
overwhelming dominance of the three commercial networks--the
syndication and financial interest rules. The financial interest
rule, 47 CFR S73.658(j) (ii), prohibits the networks from acquiring
any ownership interest in a program produced by any entity other
PAGENO="0094"
90
than the network itself. The syndication rule, 47 CFR
S73.658(j)(i), prohibits the networks from selling or "syndicating"
programs for non-network broadcast exhibition. The syndication
and financial interest rules do not bar the networks from the
acquisition of syndication rights and financial interests in the
foreign distribution of foreign-produced programs,2J nor fron the
acquisition of non-broadcast rights to any television programs.2./
The syndication and financial interest rules were promulgated
in 1970 after over fifteen years of extensive study of the practices
which had led to the domination of television programming by the
three commercial networks. Network Television Broadcasting, Report
and Order in Docket No. 12782, 23 FCC2d 382, modified on recon.
25 FCC2d 318 (1970), aff'd, Mt. Mansfield Television, Inc. V. FCC,
442 F.2d 470 (2d Cir. 1971). The financial interest prohibition
became effective in September of 1970, and the syndication
prohibition became effective in September of 1971. In addition,
in the early 1970's the Justice Department.instituted antitrust
suits against the three networks seeking to curtail further the
networks' dominance over the television broadcast industry. These
separate suits against each network were resolved by consent decrees
1/ Network Television Broadcastin9, 26 FCC2d 28, 31 n.3 (1970).
2/ claratoryRulingonSectjon73.658(j)(jj), 87FCC2d30 (1981),
aff'd sub non. Viacom International, Inc. v. FCC, 672 F.2d 1034
(2d Cir. 1982).
PAGENO="0095"
91
entered against NBC in 1978 and against ABC and CBS in 1980,~/
whereby the networks agreed to restraints that included both the
prohibitions imposed by the syndication and financial interest
rules as well as further limitations on network practices, as will
be discussed below.
Only a few years have passed, yet the Commission is now
proposing the repeal of these rules. The repeal is sought in the
wake of a ponderous economic study, prepared by the FCC's Network
Inquiry Staff, which called the rules "misguided" and recommended
their deletion. An Analysis of Television Program Production~
Acquisition, and Distribution, Preliminary Report in Docket No.
21049, June, 1980. MCA disagrees with this study, and for numerous
reasons stated herein, opposes the proposed repeal of the
syndication and financial interest rules.
As MCA will demonstrate, the syndication and financial
interest rules have served to increase grea~ly both competition
in program supply and the diversity of programming available to
consumers. Indeed, in view of the rules' success in serving these
important public policy goals, the burden should be on the *
commercial networks to demonstrate why the rules' repeal would be
in the public interest.
3/ United States v. National Broadcasting Co., 449 F. Supp. 1127
(C.D. Cal. 1978), aff'd men., No. 77-3381 (9th Cir. April l2,*
1978), cert. denied sub non, CBS v. U.S. District Court of Central
Division of Calif., 48 U.S.L.W. 3186 (1979); United States V. ~
Inc., Civ. No. 74-3599-RJK (C.D. Cal. July 31, 1980), reprinted in
45 Fed. Reg. 34,463, 34,466 (1980); United States v. ABC1~ Inc.,
Civil No. 74-3600 RJK (C.D. Cal.), reprinted in Fed. Reg. 58,441
(1980).
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92
MCA believes that the Commission has both the jurisdiction
and responsibility to pursue these policy goals through the
imposition of the syndication and financial interest rules. The
rules and the network abuses they remedy are matters of
communications policy and are not merely economic antitrust
concerns, and thus this is an entirely appropriate area of FCC
involvement. Indeed the Commission should not abdicate its
responsibility in this matter to the Justice Department Antitrust
Division, which may only concern itself with the antitrust
considerations and would ignore the Commission's longstanding
communications policy of fostering diversity. Only the Commission
has the expertise to decide all these questions.
ThJ
MCA will also show that while the Network Inquiry Report
noted above is an impressive exercise in economic theory, it fails.
to recognize the facts and realities of television series program
sales. In this respect, it should be understood that not every
deregulatory action necessarily promotes fair and healthy
competition, and it is evident that the networks are seeking the
freedom to gain financial interests in programs and to enter the
syndication business in order to control and restrict the
availability of television series programming to their present and
future competitors.
The networks have argued that without repeal of these rules,
they will be unable to compete effectively with the wide range of
new delivery systems -- such as cable television, direct broadcast
satellite (DBS) service, low power television, arid multipoint
distribution service (MDS) -- that are expected to provide
PAGENO="0097"
93
competition for the networks over the next two decades. However,1
the rules presently do nothing to limit the involvement of the
networks in programming for these new media sources.
Today the major competition for the networks are the
independent television broadcast stations, which have as a direct
result of the effectiveness of the syndication and financial
interest rules over the past decade grown into a realistic
alternative to the networks. If the syndication and financial
interest rules are repealed as the networks and the Commission
/
propose, the networks will again have the power to restrict or
withhold altogether the availability of the types of syndicated
televisionSSerieS that have made the independent television
stations so successful in providing effective competition to the,,
network affiliates on a local market basis.
Moreover, it has been the excellent ratings and advertising
returns for syndicated series that have enabled these independent
stations to provide substantial local programming and expensive
first-run syndicated programming that could otherwise not have
been afforded by the stations. Additionally, the success of
existing independent stations has encouraged entrepreneurs to start
new independent stations in both large and small markets, increasing
the number of outlets available t~ all viewers in those markets.
In these ways, the syndication and financial interest rules have
been extraordinarily successful in increasing the diversity of
programming available to the vast majority of the viewers throughout
the country. Conversely, repeal of these rules will undoubtedly
lead to retrenchment by existing independent statiøns, and will
32-540 0-84--?
PAGENO="0098"
94
also inhibit the initiation of new independent stations, thus
resulting in a loss of diversity from the primary competition for
the networks in the 1980's.
Additionally, MCA submits that repeal of the syndication and
financial interest rules would lead to a decrease in another
important type of diversity by reducing the number of independent
entities producing programs for network television. The networki'
will remain for the rest of this decade and beyond the only entities
who can afford to pay the costs involved in buying high quality
television series programming. Repeal will enable the networks
to use their continued control of their programming bottleneck to
force program producers to give up control over the future rights
to their program series if they wish to get their series on the
network schedules. In addition to the damage such a potential
programming cartel will do to independent stations and to program
acquisition, independent producers will no longer have a profit
motive to encourage the production of new television series.
Operation of the syndication and financial interest rules over the
past decade has led to a dramatic increase in the number of entities
producing televison series programming, but removal of the profit
motive through repeal ca~ be expected to lead to a reduction in
the number of independent studios, especially in light of the
system by which network,s require deficit financing of television
series.
Although the networks do exert considerable control over
many aspects of program production by independent studios, the
involvement of the independent studios still adds a considerable
PAGENO="0099"
95
diversity of voices compared to a system where all or most programs
are produced by the networks themselves. Because the ultimate
profit from a successful series is theirs, the independent producers
are encouraged to battle the networks continually over programs,
scripts, concepts and other production matters, and a successful /
producer will often win these arguments when its future profits~
are seen as being put in jeopardy. Although the Network Inquiry
Reports only viewed diversity in terms of the creation of additonal
outlets, the involvement of a multitude of independent producers,
even on just three networks, clearly results in a real diversity
of voices. MCA submits that there is no public interest in
increasing the overall dominance of the three commercial television
networks, and for all these reasons, the syndication and financial
interest rules should be retained.
II. In View of the Success of the Syndication
and Financial Interest Rules in Fulfilling
Their Goals, the Burden Should be on the
Networks to Show Why Repeal Would be In
the Public Interest.
The syndication and financial interest rules were promulgated
in 1970 after roughly fifteen years of study by the Commission of
the historical factors and subsequent network practices which had
led to the domination of television programming by the three
commercial networks. The Commission and its staff noted that a
number of its early decisions, especially the Table of Televisloli
Assignments, 41 FCC 148 (1952), "had the effect of creating three
dominant entities -- ABC, CBS, and NBC -- which provided the major
PAGENO="0100"
96
conduits through which the public received television."~/ Under
the 1952 allocation plan, only 7 of the 50 markets received 4 or
more VHF assignments, and only 20 received 3 VHF assignments. This
situation favored the viability of no more than three networks,
for the reason that a fourth network would have access to VHF
stations in only 7 markets.~J
In the mid-1960's, after a series of staff reports examining
network practices, the Commission concluded that the networks had
greatly abused their positions to dominate American television.
The Commission found:
Among other things the staff concluded that policies
and practices presently pursued by network
corporations tend unduly to restrict competition--both
economic and creative--in the production and
procurement of programs for television exhibition;
that entry into network television program markets for
independent program producers is substantially
impeded; and that network corporations control the
source of supply of television programs and dominate
competition in both the network and syndication program
markets.
Network Television Broadcasting, Notice of Proposed Rulemaking in
Docket No. 12782, 45 FCC 2146, 2147 (1965). The Commission further
found that the practices of the networks in obtaining financial
interests in television series programming produced by
"independent" studios had grown so pervasive that by 1964 the
networks had financial and proprietary control over roughly 90
4/ FCC Network Inquiry Special Staff, New Television Networks:
Entry, Jurisdiction, Ownwershjp, and Regulation, Vol. 1, p. 39
(Washington, D.C.: Federal Communications Commission, October
1980) (hereinafter referred to as the "Network Inquiry Report's).
5/ Network Inquiry Report, Vol. 2, p. 74.
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97
percent of the programming appearing on American television in
prime time. j~ at 2153. The Commission concluded that the networks'
near total control over television program production and
procurement was in direct derogation of the public interest:
The total effect of this condition has been a marked
tendancy to centralize control of what the American
public may see and hear through television in network
corporations and thus to hamper the competitive
development of "diverse and antagonistic" sources for
television program service. This is almost the exact
reverse of that "condition of competition" within the
framework of service in the public interest intended
as the principal criterion of choice of program fare
under the American system of broadcasting.
~ at 2154 (footnotes onunitted).
To help reverse the course of network domination, the
Commission proposed, inter alia, the sync~icatiofl and financial
interest rules. In proposing these rules, the Commission stated
its purpose as follows:
The purpose of the rule proposed herein is to foster
free competition in television program markets.
Specifically, the proposed rule is designed (a) to
provide opportunity for entry of more competitive
elements into the market for television programs for
network exhibition and (b) to encourage the growth of
alternate sources of television programs for both
network and non-network exhibition.
j~ at 2147. The Commission further explained the desired effects
from the rules as follows:
The proposed rule is directed toward a strengthening
of independent program production. It should increase
the opportunity of the independent producer for access
to the networks, and the opportunity for the
development of new ideas in program production.
Furthermore, it is our hope that the proposed rule
would reduce the possibility that independent
producers may be forced to give up rights of their
programs in order to obtain access to network time.
A further benefit from the strengthening and
development of independent program producers may well
PAGENO="0102"
98
be the development of new program sources available
for additional UHF television stations.
Id. at 2158. Additionally, in adopting the syndication and
financial interest rules, the Commission expressed great concern
over the conflict of interest inherent in allowing networks to act
as syndicators of programs:
Finally, the presence of the networks as domestic
syndicators is inherently undesirable. They are in
the position of selling programs to independent
stations in competition with their own network programs
on affiliated stations, and they compete against
independent syndicators in the affiliated-station
market where they have an advantage due to their
permanent relationship with the stations.
Network Television Broadcasting, Report and Order in Docket No.
12782, su~ra, 23 FCC2d 382, 394. Thus the rule was enacted to
"eliminate a potential for competitive restraint in these
respects." Id. at 398.
The syndication and financial interest rules, in their dozen
years of operation, have been extraordinarily successful in
fulfilling their purposes of increasing competition and diversity
in program production. The number of producers supplying prime
time series to the networks has grown substantially between 1970
and the present. In addition, the number of independent television
stations has grown from 73 stations in 38 markets in 1972, to 179
stations in 86 markets in 1982, and nearly all the new independents
are UHF stations. Moreover, in that same period, the financial
standing of independent stations as a whole has improved
dramatically. In 1970, all independent stations on art aggregate
basis experienced a net loss of over 20 million dollars, while in
1980, independent stations reported total profits of over 159
PAGENO="0103"
99
million dollars.~J The operation of the syndication and financial
interest rules, as explained herein ,have contributed directly to
these positive developments.
It is clear that the syndication and financial interest rule'~\
have substantially met these central purposes of increasing
competition in television series program production and
distributiàn, and of contributing to the development and viability~i
/
of both VHF and UHF independent television stations. The
syndication rule has also by necessity prevented the "inherently
undesirable" conflict of interest involved in the networks being
permitted to engage in the domestic syndication business. In light
of the clear success of the rules in meeting these goals, the
burden should be on those who seek repeal to demonstrate why repeal
would serve the public interest.
The networks, on the other hand, are claiming that their
ability to compete is being hampered by the operation of the
syndication and financial interest rules, and point to the growth
of their "competitors" over the past few years as evidence of the
threat to the networks' future viability. The networks thus ask
the supporters of the rule to prove anew the necessity of these
restraints, ignoring the Commission's well-reasoned decisions
adopting the rules only a short time ago. The Commission found
as reèently as 1970 that the three networks had in fact greatly
abused their inordinately strong positions to dominate and control
the television program supply industry. Even if the television
6/ FCC, Annual Reports. 1971 and 1981.
PAGENO="0104"
100
industry has changed over the past decade as much as the networks
claim (and MCA denies that it has), the networks should be required
to establish beyond question that repeal of the rules would be in
the public interest.
III. The Network Inquiry Report Does Not
Adequately Justify Repeal of the
$yndication and Financial Interest Rules
The primary document urging repeal of the syndication and
financial interest rules is the Network Inquiry Report. Indeed,
the Commission's news release announcing the present Notice of
Proposed Rulemaking (Report No. 17051, released June 24, 1982)
listed the Network Inquiry Report's recommendation as the first
reason why the Commission was proposing repeal.l/ MCA submits,
however, that while the Network Inquiry Report is an impressive
exercise in economic theorizing, it fails both to recognize the -
realities of program sales and to take into account important,
long-established, non-economic communications policies. The
Report too often uses economic theories to ignore the facts and
to. explain its built-in conclusions in purely theoretical terms.
Additionally, the Report fails to address the likelihood
that repeal would lead to the creation of a network cartel in
control of off-network syndicated programming, as was developing
prior to the syndication and financial interest rules' enactment.
7/ It should be recognized, however, that the Commission had
neither accepted nor rejected the findings and conclusions of the
Network Inquiry Report.
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Another failing is that the Report employs too limited a definition
of diversity. In this respect, the Report first recognizes that
the Commission has reviewed diversity as having "three different,
but related dimensions: the types of programs, the sources of
programs, and the number of choices or outlets available to viewers
at any one time." Network Inq~airy Report, Vol. 1, p. 469. Rowever,
the Report's authors then forget two of these three important
aspects of diversity and focus on the "number of available outlets"
as the ~ measure of the Commission's diversity policies. This
approach ignores the obvious increase in diversity offered by
having numerous producers develop series programming for even just
three networks.
The Report also does not consider adequately other Commission
policies, such as the policy of promoting localism, which do not
lend themselves to purely economic quantification and analysis.
Most significantly, however, the Network Inquiry Report, in seeking
to characterize the controversy as a simple reallocation of profits,
does not sufficiently identify any public interest considerations
in favor of weakening the position of the creative community in
their bargaining with the networks.
The Commission, in setting out a number of economic and non-
economic questions for cOmment in the present proceeding, has
recognized that there is far more involved here than the mere
allocation of profits. MCA submits that beyond the theoretical
economic models there are long-standing communications policies
that would be set back significantly by repeal of the syndication
and financial interest rules.
PAGENO="0106"
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IV. The Syndication and Financial Interest
Rules Are Entirely Appropriate and
Necessary Subjects of Commission Regulation
One of the primary questions posed by the Commission's Notice
of Proposed Rulemaking is whether it is appropriate for the
Commission to involve itself in the regulation of network-program
producer relations, especially in light of the existence of the
somewhat duplicative network consent decrees. Notice of Proposed
Rulemaking, pp. 17-18. MCA submits in response that the network-
program producer relations are an entirely appropriate and
necessary subject for FCC regulation. As has been discussed above,
and as was specifically recognized by the Commission in promulgatin~
these rules, the nature of the network-program producer relations /
has a direct impact both on the specific programming available to
the American public, and on the diversity of voices inherent in-a
that programming. Additionally, as will be explored in greater
detail below, the syndication and financial interest rules have
permitted the growth and prosperity of existing independent
television stations, as well as encouraged the activation of dozens
of new independent television stations, nearly all of which are
UHF stations. These policies of fostering diversity!! and of
8/ ~ ~ National Broadcasting Co. v. U.S., 319 U.s. 190
(1943) ; Mt. Mansfield Televison, Inc. v. FCC, supra, 442 F.2d 470,
477; Declaratory Ruling on Section 73.658(j) (ii), s~pra, 87 FCC2d
30,32.
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103
encouraging the development of UHF outlets2! have long been central
concerns of the FCC in its statutory charge to "generally encourage
wider and more effective use of radio in the public interest."
Section 303(g) of the Communications Act of 1934, 47 U.s.c.
§303(g).19.!
Thus, it is clearly appropriate for the Commission to act
to prevent these potential abuses by the networks of their dominant
position, and to foster healthy competition in program supply and
syndication. By contrast, the Justice Department's concerns
generally are limited to the remedying of anticompetitive
practices, and thus the Commission should not abdicate its
responsibility for these important communications policies that
are also involved, merely because the Justice Department has acted
9/ See, eg~, ~provements to UHF Television Receptj~l, Wotice~.~
Inquiry in Gen. Docket No. 78-3~i, 70 FCC2d 1720 (1978); Fosterij~g
~pañded Use of UHF Television Channels, Report and Order in DocJc~
No. 14229, 2 FCC2d 527 (1966).
10/ The Commission's decision to limit the networks' domination
of program supply was directly affirmed in the appellate review
of the syndication and financial interest rules. Mt. Mansfie]4
Television, Inc. v. FCC, 442 F.2d 470(2d Cir. 1971). In Mt.
Mansfiei~, the Court of Appeals concluded that the rules were well
within the Commission's authority:
The syndication and financial interest rules., though direct
regulations of networks, as well as the prime time access
rule, are within the CommsiiOfl'S statutory power if they are
reasonably ancillary to the effective performance of the
Commission's various responsibilities for the regulation of
television broadcasting.
Id, at 481, ç~~n United States v. Southwestern Cable Co~, 392
U.S. 157, 178 (1968). The Court of Appeals went on to find that
the syndication and financial interest rules were indeed
"reasonably ancillary to the Commission's various responsibilities
for the regulation of television broadcasting." 422 F.2d at 487.
PAGENO="0108"
104
to remedy the flagrantly anticompetitive aspects of these network
practices1i/. Only the Commission has the statutory charge to
address the communications policies.
V. The Networks Do Not Take Sufficient Risks
in the Program Production Process to
Justify Their Claim for Furture Profits.
One of the most prominent reasons urged in support of repeal
of the syndication and financial interest rules is that the networks
take substantial risks in the process of developing new television
series programming, and that this risk-taking role justifies
allowing the networks to share in the future profits of successful
series. This argument is usually set out by analogy to the "dry
hole" situation in the oil drilling business. `It is suggested
that because the networks "finance" the development of many pilots,
only a fraction of which ever become regular series, these failed
pilots are much like "dry holes" which turn out no oil. As the
Network Inquiry Report argues at Vol. 1, p. 503, "[tjhe cost of
drilling dry holes as well as the cost of drilling gushers must
11/ This is not to suggest that the Commission does not have
concurrent responsibility with the Justice Department to seek to
prevent anticompetitive business practices of broadcast entities;
the promotion of healthy competition among the viewing outlets
available to the public has long been recognized by the Commission
as a primary communications policy goal. ~ ~ Network Cable
cross-Ownership Rules, Notice of Proposed Rulemaking in Docket No.
~4334, 47 Fed. Reg. 39212, 39213 (1982); CATV Syndicated Program
Exclusivity Rules, Report and Order in Docket Nos. 20988 and 2li78T
FCC2d 663, 814 (1979), aff'd sub non.', Malrite TV of New York v.
FCC, 652 F.2d 1140 (2nd Cir. (1981), cert. denied, 102 S.Ct. 1002
(1982).
PAGENO="0109"
105
be covered by the expected revenues from all the networks'
programs." Thus, the analogy is intended to suggest that the
networks are entitled to all or part of the future profits of
successful television series to make up for the "losses" experienced
in "bankrolling" the production of pilots that never make it to
/
the regular network schedule. -
The analogy to "dry hole" losses is entirely ludicrous. When
a oil company comes up with a "dry hole," there is a total loss of
all money invested. The oil company receives no revenues, few
benefits, and must bear all the costs in the "dry hole" situation.
In network television there is no such thing as a "dry hole": for
every network program exhibited, whether or not the series is
successful, the networks obtain revenues, generally in excess of
the license fees paid, and the only losses are those borne by the
producer.
The networks allegedly provide two theoretical risk-taking
functions: investment and banking in program development. One
would expect, from the vehemence of the networks' arguments, that
these risks are quite substantial. The facts, however, establish
the contrary: the risks are at most minimal, if not completely
illusory.
The "investment risk" of the networks relates to payments
for scripts and pilots which are not developed into series. The
likelihood of loss, as well as the amount of loss, will provide a
measure of the risk involved. A reasonable approximation of these
possibilities can be calculated from the information provided in
one of the Network Inquiry Staff's reports, An Analysis pf
PAGENO="0110"
106
Television Program Production Acquisition, and Distribution,
Preliminary Report in Docket No. 21049, June 1980 (hereinafter
"Preliminary Report"). For possible losses relating to ~ç~ipts,
the calculation begins by estimating that the networks review 600
scripts per year, based upon the figure of 200 scripts reviewed
by NBC for the 1977 season. Assume that the networks pay $40,000
per script,1a/ so that the total expenditures for scripts would
be $24 million. For purposes of this analysis, it will be assumed
that none of the $24 million can be recouped. Of course, producers
also invest money in scripts which may not be recouped.
The calculation for the risk associated with pilots can be
developed from this same information: assume 25% of the scripts,
or 150, are ordered as pilots (Preliminary Report, p. 61) at an
average cost of $500,000 per pilot (Preliminary Report, p. 62).
For all pilots actually broadcast the networks will receive
advertising revenues from which the networks can recoup their
investment and earn a profit. To determine the level of risk
associated with pilot development, it is necessary to choose a
percentage of pilots that will not be broadcast: at the 10% level
(15 pilots not broadcast), the possible loss is $7.5 million; l~/
at the 50% level (75 pilots not broadcast), the loss could be
12/ Preliminary Report, P. 61. A higher than average script cost
is used in order to include expenses for story treatment as well.
13/ We believe the 10% level to be a reasonable outside estimate:
levels of 50% and 100% are unrealistic, but are included to
demonstrate the minimal risk incurred by the networks.
PAGENO="0111"
107
$37,500,000; and at the 100% level (150 pilots not broadcast) the
possible loss is $75,000,000.
A realistic measurement of the risk involved for the\~
investment function would be to compare both possible losses, with
the networks' gross advertising revenues of $3,349 million for
1977. The results of these
of risk involved:
Percentage of Pilots
Not Broadcast 10%
Possible Losses on
100% of Scripts
Possible Losses on Pilots
Compared to Gross
Advertising Revenues
of $3,349 Million
Possible Percentage Loss
Relating to Investnent
Function
comparisons indicate the minimal level
$24,000,000
$24,000,000
$24,000,000
7,500,000
37,500~QQQ
75,000,QQ~Q
.94% 1.83% 2.95%
These can hardly be said to repr~esènt a large risk to the networks:
in the unlikely event the network loses its entire investment for
scripts and pilots, the loss will be less than 3% of its revenues
from advertising on network prograrns.3~i/
The other "risk function" involved in the network program
acquisition is that of banker for the advancement of funds. This
~j/ If the revenues for network programs from network owned and
operated stations were included, the percentage figures would be
even lower. Furthermore, the possible losses do not reflect any
advantageous income tax consequences which would diminish the
actual effect of the loss to the networks' net income.
PAGENO="0112"
108
is not really a risk function as such, but rather accounts for the
money advanced to the producer prior to delivery of a series, for
which the network charges no interest. What is really involved
here is the loss of a return that could have been earned on
alternative investments if the amount had not been advanced to the
producers.1~/ And this loss assumes that the cost of money advanced
is not included in either the license fees or the rates charged
advertisers. This amount can be calculated by using the 1977 ~
Broadcast Financial Data, Table G, expenses for "Program obtained
from others" (excluding feature films) as the amount paid for
program series. This amount of $949 million must be adjusted to
account for license fees relating to repeats, which are not financed
by advance payments. The adjustment factor used is 83% on the
basis that the license fee for a repeat equals 20% of that for the
original episode, and thus the fee relating to original episode
is 83% of the total fee paid or $788 million in 1977. Assume that
the networks advanced 70% of this amount at the commencement of
production of the new episodes; and that the time between
commencement of production and delivery of a program is three
months with an interest rate of 12% per year as the interest which
could have been charged in 1977 for *the advances.l~J The networks'
lost interest is then calculated as follows: 788 million x 70% x
15/ No*judgment is made as to whether the alternative investments
would have been better or worse than investment in program
development
16/ 12% is higher than the prime rate or other debt yields were
in 1977.
PAGENO="0113"
109
3/12 year x 12% = $16.5 million. This adds .49% to the risk's
percentage calculated on the investment risk factor, making the
total investment and banking risk factors under the three
assumptions, shown above, to be 1.43%, 2.32%, and 3.44%,
respectively. This is a very low expenditure for any business for
the development of new products.
More important, this risk is quite low in comparison to the
risks run by the producers. The Network Inquiry Staff calculated
that the probability of a program reaching the second season is
30%, and of completing the fourth season, and thus being eligible
for syndication, 17% (Preliminary Report, p. 146). The Staff
recognized that the producer has substantial start-up costs which
must be amortized for recovery over the entire life of a program
series, so that an early cancellation means the producer loses
these amounts (Prelininary Report, p. l67).l2./ Given the high
probability of early cancellation, the producer's risk is quite
high that it will lose money on a typical program. Of the two
parties involved, it is clear that the producers have the far
greater risk, to which must be added their extra burden of deficit
financing even for successful series.
Finally in this regard, it is submitted that as a policy
matter, there is no equitable reason why the networks, rather than
the creators of the programs, should receive the after-network
17/ The Network Inquiry Staff indicated that some network contracts
(although not their typical one) provide for payment in the event
of early cancellation. No attempt is made, however, to determine
whether such payments are compensatory. Preliminary Report, p. 167.
32-540 O-84--8
PAGENO="0114"
110
profits from the very few series that prove to be successful. The
creators take all the substantial economic risks in television
series program production, and the networks take few. But if the
networks were allowed to seek control of the future profits, there
is little question that the assignment of most future profits would
become a prerequisite for a producer to get his new series onto
the network schedule. And as will be shown in the next section,
the financial success of television series programs, at least
through the end of this decade, will continue to be primarily
dependent on the ability to get through the network bottleneck.
For the foreseeable future, the networks will remain by far the
predominant buyers of television programming. Because the networks
will still be the buyers of television series programming, producers
will again be forced, as they were before l97O,~/ to give up
future profits in order to gain access to the network schedule and
thereby afford production.
18/ As the Commission specifically held in adopting the syndication
and financial interest rules:
twie believe on the basis of the record before us
that networks do not normally accept new, untried
packager-licensed programs for network exhibition
unless the producer/packager is willing to cede a large
part of the valuable rights and interests in subsidiary
rights to the program to the network.
Network Television Broadcasting, Report and Order in Docket No.
12782, supra, 23 FCC2d 382, 398.
PAGENO="0115"
111
VI. The Networks' Ability to Compete With the
New Delivery Systems Is Not Dependent
On Repeal of the Syr~dication and Financial Rules.
The Notice of Proposed Rulemaking poses the question of
whether the recent and expected future development of new delivery
systems--such as pay cable, MDS, video cassettes and discs, low
power television, and DBS service--warrants a reexamination of the
Commission's prior view of "the networks as the overwhelming force
in the (program] marketplace." Notice of Proposed Rulemaking, p.
16. It is further suggested by the Notice that the networks mayfl
~ the right to obtain financial interests in programming in
order to compete effectively in this "rapidly changing~
environment."
MCA urges the Commission to take a careful look at the current
and foreseeable future status of these new delivery systems before /
qoncluding that the era of network domination has passed. The new
delivery systems are not yet a strong competitive force with respect
to competition in the acquisition of series-type television
programs. At least throughout the end of this decade, the networks'
will continue to be the predominant purchaser of television program
series.
Indeed, even the networks' own predictions of future viewing
shares recognize that the networks will retain in the aggregate
by the end of this decade at least 70% of the overall television
viewing in the United States. Additionally, it is expected that
overall audience, in terms of number of viewers, will grow for the
networks by 1990.
PAGENO="0116"
112
Specifically, the CBS Broadcast Group study, report ~
concluded that by that year, the networks will still have a 70
percent share of the prime-time audience.121 While this percentage
level is somewhat lower than 1981 share for the networks of 81
percent, CBS' report predicts that there will actually be a net
increase between 1981 and 1990 of 5,000,000 television households
reached by the networks in prime time2Q.!. Mo~t significantly,
these predictions from CBS show that they expect the three networks-
to continue to be the dominant forces in the overall video scene"
-J
through 1990. Indeed, they are predicting that all other video
sources expected to exist in l990-'-including all the new delivery
systems combined--will garner no more than a 30% share of all
viewing. With these overwhelmingly superior viewing shares, the
three networks will continue through this period to be the most
powerful and predominant buyers of television series programming.
Certainly the networks do not "need" financial interests in and
domestic syndication rights to series programs in order to "survive"
in their competition with the new delivery systems.
Moreover, it can be seen from these predicted comparative
viewing shares that the networks will continue to retain control
of the "bottleneck" for televison series programming. Only the
networks will have a sufficient revenue base to support the
19/ CBS Broadcast Group, report 1990, p. 29. See also, CBS
Television Network Sales/Marketing Services, You and CBS: A
Marketing Partnership; The Video Marketplace in 1990: Diversity
and Growth in Perspective.
~/ report 1990, P.30.
PAGENO="0117"
113:.
production of the types of high quality series that have been most
popular with American viewers. Thus the networks will remain the
dominant buyers of television series programming, and if the
syndication and financial interest rules are repealed, producers
will again be forced, as they were prior to 1970, to give up
ownership and control of these series in order to get them onto
the network schedules.
Indeed, it is readily apparent that the acquisition of th~T')
additional program rights by the networks will directly inhibit /
the viability of many of these new delivery systems and that the
networks are seeking repeal of the syndication and financial
interest rules now in order to control and restrict the availability
of quality series programming to these developing, future
competitors. By gaining control or ownership of series programs,
the networks can keep these mew delivery systems from exhibiting
the series programming that has proven to be the most popular with
the American viewing public, thus limiting their potential
competitors' growth. This is precisely analogous to the type of
conflict of interest situation vis-a-vis independent television
stations found abhorrent by the Commission in its decision
promulgating the syndication rule.
Indeed, it may well be that the syndication and financial
interest rules are not sufficient to the extent that networks are
presently permitted to acquire non-broadcast rights in any
television programs. ~ Declaratory Ruling on Section
73.658(j)(iQ, 87 FCC2d 30 (1980), aff'd sub non. Viacom
International, Inc. v. FCC, 672 F.2d 1034 (2d Cir. 1982). If any
PAGENO="0118"
114
modification of the syndication and financial interest rules is
undertaken, the Commission should consider extending the rules to
prevent the networks from obtaining such non-broadcast rights in
programs.
In Sum, the level of network control over the structure of
the television industry has not changed all that drastically since
1970, and all predictions are that the networks will continue to
be the predominant buyers of series programming through the end
of this decade. It appears that the Spector of the new delivery
systems is being bandied by the networks as a magic incantation
thought to be capable of bringing down the regulatory walls.
However, the danger presented by premature repeal of the syndication
and financial interest rules is that the networks would then be
in the position of using their increased control of program supply
to restrict the availability of the most popular television series
programming from the emerging delivery systems which are otherwise
reputed to hold so much promise of future competition. Repeal ati
this time would effectively revoke the positive effect of the pro-
competitive policies embodied in the Commission's recent DBS, LPTV,
cable deregulation, and STV decisions.
VII. Repeal of the Syndication and Financial
Interest Rules Would Seriously Impair the
Ability of Independent Television Stations
to Compete With the Networks and Their Affiliates
The most immediate danger posed by repeal of the syndication
and financial interest rules is the competitive damage such action
would do to independent television stations, which pose the most
PAGENO="0119"
115
substantial direct challenge to the networks and their affiliates.
The potential for harm to the continued competitive success of the
independent stations arises out of the same conflict of interest
situation between the networks and independents that was found to
be "inherently undesirable" by the Commission in initially adopting
the syndication and financial interest rules. Network TelevisiQi~
Broadcastjj~, Report and Order in Docket No. 12782, su~p~, 23 FCC
2d 382, 394. There are still the same grave problems as before
inherent in allowing the networks to control the availability and
terms of syndication sales of off-network television series to
independent stations. The failure of the Network Inguiry Report
to acknowledge the significance of this conflict is especially
glaring in light of its authors' avowed focus on "diversity"
strictly in terms of number of available outlets. Repeal is an
obvious threat to diversity even as measured by the Network Inquiry
Staff's narrow view of that policy.
Independent stations have truly blossomed since the
syndication rule was enacted. As noted above, in 1972, there were
a total of 73 independent television stations in operation, serving
38 markets. By 1982, new independent stations were being activated
so quickly that there were 179 independent stations serving 86
markets by year's end. Nearly all of the new independents are UHF
stations. Independent stations now cover 78 percent of U.S.
television households, compared -to 54 percent in 1972.
Additionally, during the 1970's, notwithstanding the massive
start-up costs experienced by all the new stations, the overall
financial success of independent television stations as a whole
PAGENO="0120"
116
has improved dramatically. In 1970, the operating independents
experienced a substantial aggregated net loss; by 1980, however,
the 120 operating independent stations had reported total pretax
income of $159,100,000,221 Most importantly, the financial success
of the existing independents has been the source of great
encouragement to entrepreneuts considering starting up new
independent stations in dozens of markets, and has led to floods
of applications for the remaining open UHF channels throughout at
least the top 125-150 television markets. It is the competition
that is and will continue to be provided by the independent stations
that is the primary, immediate concern of the networks and their
affiliates And repeal of the syndication and financial interest
rules will return the networks to the position of being able to
restrict the flow of off-network television series to these very
real, immediate competitors.
Indeed, the competitive success of the independent television
stations during the period after 1970 can be traced directly to
the availability of relatively recent, extremely popular, off-
network syndicated series such as "MASH," "Barney Miller," "Six
Million Dollar Man," "Mary Tyler Moore," "Three's Company," "Bionic
Woman," "The Jeffersons," "All in the Family," --- the list goes
on. These series, scheduled generally in the early-fringe and
prime time hours, have attracted unprecedented wide audiences for
the independent stations during the times the network affiliates
offer primarily news, first-run game or magazine-type stripped
21/ FCC Annual Reports, 1971, 1981.
PAGENO="0121"
117
series, and then the network line-ups. Many of these off-network
series are regularly winning their time slots against their network
affiliate competition, and have been the real key to the overall
success of the independent stations.
Most importantly, the excellent ratings and substantial
revenues generated by the recent off-network television series
have enabled the independent stations to present an ever greater
amount of locally-produced programming at other times, as well as
more top-quality first-run syndicated programming than has
heretofore been available. Although the locally~produced
programming of the independent stations may not involve more than
20 percent of overall station time, it has often been the success
of the types of off-network syndicated program series noted above
that has made even that much local programming economically
feasible. Indeed, in many cases, independent stations have been
able to sell spot availabilities on local programs only as part of
a package of spot runs that include adjacencies to both the top
series and the less popu4r locally-produced programs.
Additionally, there has been some substantial growth recently
in the market for first-run syndicated programs, such as ~A Woman
Called Golda," "The Seekers," "The Rebels," and "Nicholas
Nickelby." Production costs for these first-run series are
substantially higher for stations than the cost of buying of f-
network series, but the revenues generated by the off-network
series have made it economically feasible for many independents
to be able to afford the expensive first-run series. In these
ways, the Commission's primary policy goal of increasing diversity
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is fostered both by the economic health of alternative outlets in
the form of independent stations, and in the presentation by that
growing roster of independent stations of unique locally-produced
and first-run syndicated programming not appearing on the local
network affiliates.
The repeal of the syndication rule, however, will likely
lead to a wide variety of competitive abuses by the networks in
their added role as syndicators. Indeed it would be useful here
to catalogue these potential abuses so that the ramifications of
this obvious conflict of interest are fully understood.
The most significant competitive abuse likely to arise from
network participation in the syndication business is that the
networks will not release television program series for syndication
while those series are still strong network performers. Independent
stations will thus not be able to air these top series until after
they have lost their greatest audience .appeal. Currently, because
the networks do not have control over the syndication rights of
network series beyond the five year or so "exclusive option" period,
many of the top-rated network series have entered syndication while
they are still at the peak of their popularity on the network
schedules. Examples of these instances are "MASH," "Happy Days
Again," "Barney Miller," "LaVerne and Shirley," "Three's Company,"
"One Day at a Time," and "The Jeffersons." These series have been
at the forefront of successful syndication and have been the series
most directly responsible for the growth and economic viability
of the independent television stations.
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Indeed, the networks have made no secret that the appearance
of their top network series concurrently on independent stations
has been a real bane to the networks. For example, B. Donald
Grant, the President of CBS Entertainment, explained his network's
view in the April 27, 1982 issue of Variety:
"Producers should be aware it makes a Network uneasy
when a show such as `M.A.S.H.' is on as many as seven
times a day in some independent markets as well as on
the Network [CBS). It sure doesn't help it."
Once the networks can again obtain the syndication rights for
network series, there is little doubt that they would use this
power to "warehouse" their best series until the network run is
over, rather than allow this type of head-to-head competition with
independent stations to continue. Prior to 1970, before the
syndication rule, the syndication of a series to independent
stations before it had finished its network rum did not exist at
all. It is quite clear that this situation would return, and that
there would be no more "MASH's" through which independent stations
could build viewing shares, if the rules were repealed.
* Additionally, just as the Commission had found was occurring
prior to 1970, it is extremely likely that if the syndication and
financial interest rules were repealed, the networks as syndicators
would be inclined to favor their affiliates, and especially their
owned-and-operated stations, when they did get around to selling
their syndicated television series. It is certainly in the
networks' interests, especially when their owned and operated
stations are involved, to keep the most popular syndicated program
series on the affiliates' schedule and off the schedule of the
independent station competition. The networks' great interest in
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protecting their affiliates from competition from independent
stations is strong impetus for the affiliates to be favored in the
competition for, top syndicated series.
On the other hand, due to the mature of the network-affiliate
relations, allowing the networks to be in the syndication business
may put affiliates in a situation of having, their schedules dictated
even further by the networks. In this regard, it should be noted
that in 1970, the networks on the average provided affiliates' with
programming consuming roughly 61 percent of the affiliates' total
broadcast time.2i/ By 1980 this level had increased to 69 percent
of the affiliates' total broadcast time, even with the prime time
access rule limiting the prime time feed.221 Additionally, as the
networks continue to increase their network feeds on the weekends,
this percentage will continue to rise over 70 percent. If the
networks are freed to engage in syndication, they will effectively
be a9le to extend even greater control over the affiliates'
broad~ast schedules.
\The possibilities for network abuses are almost endless.
For ex4mple, an affiliate might be afraid to decline to purchase
from its network a series that it does not especially want, if it
is concerned about losing its affiliation with that particular
network. Another likely situation would be that an affiliate would
fear that it would lose an opportunity to obtain a hot, newly-
available syndicated series if it had too often preempted the
22/ Neilson Television Index, October 1970.
23/ Neilson Television Index, October 1980.
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network in prime time for local programs or for first-run
syndication. The networks have been exerting considerable pressure
recently against affiliates that are in the habit of not clearing
their full network lineup,2~/ and added control over syndicated
programming would give the networks a potent new whip to keep their
affiliates in line. There is no public interest in permitting the
networks to gain even greater control over the schedules of their
affiliated stations.
In all conceivable circumstances, the repeal of the
syndication and financial interest rules will enable the networks
to exert inordinate control over off-network television series
programming. This control over program series will enable the
networks to threaten the continued viability of their primary
competition through the end of this decade, the independent
television stations, by allowing the networks to choke off the
independent stations' supply of their most popular and successful
televison series programming. The independent stations now offer
consumers the greatest diversity of viewing outlets, and the
conflicts of interest inherent in allowing the networks to act as
syndicators should not be resurrected to give the networks the
power to drive out these very real competitors. The program
producers and distributors presently engaged in the syndication
business have none of these glaring conflicts of interest.
24/ For example, CBS recently threatened certain affiliates with
termination of their affiliations if the stations carried out plans
to air the indepedently produced, first-run syndicated mini-series
"Nicholas Nickleby" in place of t1~ie network line-up. ~ "Mobil,
CBS Swap Angry Words Over Nicholas Nickleby," Wall Street ~~ournal,
PAGENO="0126"
122.
VIII. The Syndication and Financial Interest
Rules Have Substantially Increased
Diversity in Program Supply
As discussed briefly above, the operation of the syndication
and financial interest rules has led to an increase in the number
of independent producers of network television series programming.
Additionally, the rules have resulted in an increase in the number
of companies engaged In the syndication of off-network and first-
run programs. It is clear, however, that repeal of the rules will
lead to a reduction in the number of both independent producers
and syndicators. The loss of the potential for future profits
from off-network sales removes the financial reward that had
encouraged the entry of many of these new players in these
businesses. Not only will new entrants be discouraged, but many
existing producers will likely be forced out of the business. Due.
to the magnitude of losses to producers inherent in producing
series for network television, the potential for profits from
subsequent off-network syndication has been, for most producers,
the sine qua non of television series production.
MCA has set out in detail above the reasons why the networks
have remained the "bottleneck" through which nearly all televison
series programming must pass for producers wishing to reach a mass
audience.2~J Additionally, for many years to come, the networks
will continue to be in the position whereby a producer, in order to
be able to initiate production of a series, must have a network
(cont.)
Dec. 23, 1982.
25/ See discussion at pp. 23-25, supra.
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contract and financial commitment in hand. Moreover, as MCA and
other production studios have emphasized repeatedly to the
Comxnmission, the networks' combined status as "the only game in
town" allows the networks to dictate the rules of television series
program purchases. The superior power of the networks as
monopsonists enables the networks, in the "bargaining" over
unproven and untried prograins,2~/ to demand that producers accept
inclusion of often onerous terms or risk being passed over.
Most prevalent of these onerous contract terms is that
producers are required to finance production of a network television
series on a deficit basis. The Network Inquiry Report's own data
showed that deficit financing is the norm and, indeed, continues
even as a series becomes more successful. For example, the Report's
analysis of program license fees indicates that average annual
revenues per program series for producers are $5.3 million, while
the average annual costs per series are $6.1 mil~ion.22/ This
indicates that deficit financing occurs in general throughout the
entire program acquisition period. The only reason why producers
are willing to accept this oppressive condition imposed on them
uniformly by the networks, is the hope that they will be able to
26/ The terms of program series contracts between producers and
networks are set at the pilot stage, when the future success o~ a
series is an unknown quality. The terms decided on at that early
point will generally govern the production through the entire life
of the series. This includes agreement as to the amount to be
paid for each program in all future seasons at preset prices,
regardless of the degree of success for the program.
27/ Averages were furnished in 1980 by the Network Inquiry Special
Staff on request, for equations in Tables 20 and 21, Preliminary
Report, pp. 373-374.
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produce and accumulate enough episodes of a series to allow for
syndication and ~ be able to realize a profit. Without the
possibility of future off.-network syndication profits from the few
series that are around long enough to be syndicated, producers
would have no reason or justification to continue to produce
television series.
The Network Inquiry Special Staff, relying on economic the~~~)
to the exclusion of reason, postulate that if producers are forced
to give up future rights and interests, they will receive additional
payments for these rights in each instance from the networks at
the outset. Thus the producers' benefit from this theoretical
process would be that they would receive small additional payments
for each program rather than a large payment for the few program
series that are eventually sold in syndication. Without any study
of whether the revenues from these several small payments would
in the long r~n be equal to the revenues from the present system,
the Network Inquiry Staff concluded that their proposed system
would allow for the market entry of additional small producers who
cannot afford deficit financing.
The failure of the Network Inquiry Report's reasoning is
that the theory fails to mesh with its other conclusion that the
prices paid by the networks for television program series do not
really reflect the specific rights granted, but rather reflect the
minimal "reservation price," which is the lowest payment level at
which a producer will continue production. Additionally, the
Report presented no evidence that prior to the enactment of the
syndication and financial interest rules, the networks paid higher
PAGENO="0129"
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prices for television series programs because they obtained more
rights. It is clear that no matter what rights are conveyed, the
networks will continue to pay the minimum "reservation price" for
unproven series, and producers will be forced either to accept the
same deficit level payments for fewer rights or get out of the
business. We submit that without the potential for future profits,
many producers will choose to get out of the business.
A reduction in the absolute number of entities producing
programs for network televison would clearly result in a loss of
diversity in the number of voices represented in the network
schedule.2~J Although at present the networks still exert
considerable control over most phases of the production of
television series programming to be aired on the networks, the
independent producers themselves are varied and diverse, and the
producers are often quite willing to fight with the networks over
program concepts and values that the producers view as important,
at least when the producers' own financial interests ride on the
outcome. Producers have the impetus to seek to win these arguments,
and often do win them, when they will ultimately gain from the
success of their series. The tension created by the present syste~~1
where networks are barred from syndication and from gaining control
of the programs, adds substantial diversity to the network schedule..
28/ Indeed, as noted above, among the purposes of the syndication
and financial interest rules were to decrease the "centralization
of creative control" over programming by the three networks, thereby
fostering a "diversity of approach which would result from a more
independent position of producers developing programs in both
network and syndication markets." Network Television Broadcastin9,
Report and Order in Docket No. 12787, 23 FCC2d 382, 389, 394.
32-540 O-84---9
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IX. Conclusion
For the past few years, the Commission has engaged in a
steady course of deregulation of telecommunications, with the goal
of replacing unnecessary regulation with an atmosphere of free
competition. The Commission's recent deregulatory actions, as
well as its decisions authorizing new delivery systems generally
on an open entry basis, have markedly increased competition and
diversity.
It does not follow from this recent success, however, that
every, possible deregulatory action increases competition and
diversity. This caveat is especially important with respect to
over-the-air television, which is not a new delivery systems that
can be opened up on a truly competitive basis merely by the
Commission ringing a bell and letting the various parties fight
it out. The chain of regulatory and other events in the history
of televison broadcasting since the 1940's, especially the
Commission's early structural decisions, have led to the
development of a national television system in which three networks
in tandem, control nearly every aspect. The pervasiveness of the
networks' control over American televison is virtually unparalleled
in any other industry. Any deregulation of the networks must
therefore be undertaken with great circumspection, for should the
Commission underestimate the degree domination and power of the
networks, or their intentions, the result will be' that numerous
erstwhile competitors of the networks may be driven out of business.
PAGENO="0131"
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MCA submits that repeal of the syndication and financial
interest rules would be extremely regressive. Repeal would destroy
the atmosphere of competition that has developed in program supply
since the rules were enacted. Repeal would also, as shown above,
cripple the primary competition the networks will face over the
next several years the independent television stations by
giving the networks the power to control and restrict the
availability of the type of syndicated television series
programming that has in the recent past made the independents so
successful. Additionally, the networks would gain from repeal the
further power to restrict the flow of popular series programming
to the new delivery systems, such as DBS, MIDS, low power television,
and cable television.
In sum, repeal of the syndication and financial interest
rules, in the name of deregulation, would lead to far greater
concentration of control and far less competition and diversity.
MCA submits that there is no public interest in freeing the networks
to increase their domination of American televison.
WHERE~'ORE, for all the foregoing reasons, MCA, Inc., urges
the Commission to retain its syndication and financial interest
rules.
Respectfully submitted,
PICA, INC.
By ~
Arthur Schein
By_________
Richard H. Waysdo f
Its Attorney
January 26, 1983
WILNER & SCEEINER
Suite 300
1200 New Hampshire Avenue, NW
Washington, ID.C. 20036
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128'
BEFORE THE
Federal Communications Commission
WASHINGTON D C
In the Matter of
BC Docket No. 82-3 45
Amendment of 47 CFR S73 658(j)
the Syndication and Financial
Rule
To The Commission
COMMENTS OF
EMBASSY COMMUNICATIONS
AND
TANDEM PRODUCTIONS INC
Fmbassy Communications and Tandem Productions, Inc by
their attorneys, and pursuant to Section 1 415 of the Commis-
sion s Rules, hereby respectfully submit their Comments on the
Notice of Proposed Rulemaking in BC Docket No 82-345 released
July 21 1982
I BACKGROUND
1 O~ May 4 1970 following 11 years of study, and
consideration of extensive comments and research analyses, the
Commission adopted a series of rules designed to limit the
domination of the television program marketplace by the three
national television networks. See Report and Order in Docket No.
12782, 23 FCC 2d 382 (1970) recon denied 25 FCC 2d 318 (1970)
In concluding that rules were necessary to promote diversity and
competition in television programming the Commission found that
PAGENO="0133"
129
the networks had come to overwhelmingly dominate the television
industry generally and program production specifically,
particularly in prime time.
2. First, the Commission found that, by the end of 1969,
the networks had achieved dominance over the broadcast television
industry. Of 224 stations in the top 50 markets, 153 were
network affiliates and only 14 markets had independent VHF tele-
vision stations. Nationwide, 499 of 621 TV stations in 1969 were
network affiliates. Id. at 385. Second, the Commission found
that network programming dominated the program schedules of the
network affiliated stations. In 1968, network affiliates carried
an average of only 3.3 to 4.7 hours a week of nonnetwork program-
ming during the 28 prime time hours. Id.
3. Third, the Commission found that "a direct relationship
existtsl *between new programs chosen for network schedules
and network acquisition of subsidiary rights and interests." Id.
at 393. As a result, the Commission concluded, "networks
accepted virtually no entertainment program for network exhibi-
tion in a 5-year period in which they did not have financial
interests in syndication and other subsequent use. . .~ Id. More-
over, the data submitted by the networks and by their consultant,
A. D. Little, confirmed that "no matter how producers are cate-
gorized in terms of bargaining power, their entry to the prime
time network television market is accompanied by the transfer of
a substantial part of the potential profitability of their
products to the purchasers -- the networks." Id. at 38S-9.
Indeed, despite the great bargaining potential o~ the existing
PAGENO="0134"
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major motion picture studios, they were unable to obtain entry to
the network television market on terms more favorable than those
obtained by other, less experienced, and financially weaker,
producers. Id. at 388.
4. Fourth, the Commission concluded that the ownership by
the networks of syndication, financial, and other interests in
allegedly independently produced programming posed a significant
conflict of interest in the selection of programming by the
networks. Id. at 394. In essence, the networks' judgment in
selecting new programs for prime time exhibition was improperly
influenced by their acquisition of subsidiary interests in the
programs chosen. In addition, the Commission was concerned by
the obvious conflict of interest created by network control over,
or influence regarding, the syndication of off-network program-
ming to independent television stations which compete with the
networks' owned and operated stations, as well as the networks'
affiliates, for viewership. Id.
5. Finally, the Commission was disturbed by the extent to
which close network supervision of so much of the nation's pro-
gramming centralizes creative control in the hands df the few.
The Commission concluded that this concentration of program
control in the hands of the networks tends to work against the
diversity of viewpoint and approach which would result from a
more independent position of producers developing programs for
both the network and syndication markets. Id.
6. Based on the facts, the Commission concluded that rules
were necessary to limit the influence of the networks over the
PAGENO="0135"
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television marketplace. The three key rules adopted by the Com-
mission were:
The Syndication Rule, 47 C.F.R. §73.658(j) (1) (i), which
prohibits the networks from syndicating television
programs to domestic television stations for nonnetwork
exhibition, distributing programs of which the network
was not the sole producer outside the United States, or
participating in profit-sharing arrangements involving
these activities.
o The Financial Interest Rule, 47 C.F.R. §73.658(j) (1)
(ii), which prohibits the networks from owning any
financial or proprietary right or interest in any
program that is independently produced, other than the
network exhibition right itself; and
O The Prime Time Access Rule, 47 C.F.R. §73.658(k),
which, as applied, prohibits network-affiliated sta-
tions in the top 50 markets from carrying more than
three hours of network entertainment programming during
the four hours of "prime time" each night.
7. It is most important to remind the Commission at the
outset that the Syndication and Financial Interest Rules were not
designed as a panacea. They were intended as a check on the
ever-growing intrusion of the networks into the creative and
production process. No one perceived these rules as a tool that
would promptly end all vestiges of network dominance. Rather,
reviving the production community and giving independent stations
an opportunity to grow were seen as reward enough to justify
their adoption.
8. Since they became effective in 1971, the Financial
Interest, Syndication, and Prime Time Access Rules have achieved
the modest success sought by the Commission. The independent
program production companies have achieved a degree of vitality
and ~Lndependence in excess of that in effect prior to adoption of
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the rules. Creative control of the television marketplace has
been dispersed to some degree. Moreover, while the development
of first run syndicated programming has not blossomed to the
extent sought by the Commission, the independent television
stations have achieved a level of competitiveness unprecedented
in the history of the industry.
9. Now the winds of deregulation have swept through the
regulatory landscape. In many instances deregulation has been
properly used to eliminate ~innecessary and counter-.productive
regulations. In some cases, however, the cause of deregulation
has been used by private interests as a reason to sweep aside
valid and valuable regulations that clearly serve the public
interest. So it is with the instant proceeding. The networks,
sensing a change in regulatory mood at the Commission, have
mounted a massive multi-million dollar campaign to eliminate any
restraints on their domination of the television industry.
Through their efforts, the Commission is now proposing to elimi-
nate the Syndication and Financial Interest Rules. Tandem
Productions and Embas~y Communications most vigorously oppose
deletion of these most important rules. They will demonstrate
herein that the public interest would be disserved *by hasty
abolition of these checks on network hegemony over the airwaves.
II. QUALIFICATIONS TO COMMENT
10. Embassy Communications ("Embassy") is a diversified
entertainment company involved in the production and distribution
of television proaram series. Tandem Productions, Inc. is art
PAGENO="0137"
133
independent production company devoting itself exclusively to the
television market. Embassy and Tandem believe they can assist
the Commission's resolution of this proceeding because they can
offer the Commission personal insight into the relationship
between the national television networks and independent
production companies.
11. Embassy and Tandem have great experience in dealing
with the networks. As experienced producers of television
series, they have licensed to the networks more than 20 series
for exhibition during prime time over the past 12 years. Their
current prime time network series include:
Archie Bunker's Place (CBS)
Gloria (CBS)
One Day at a Time (CBS)
The Jeffersons (CBS)
Diff'rent Strokes (NBC)
Silver Spoons (NBC)
Facts of Life (NBC)
Square Pegs (CBS)
Each of these series is a 30-minute duration situation comedy.
12. Embassy and Thndem are also experienced in the market-
place for syndicated programming, especially the syndication of
off-network programs. Several current and former network series
produced by Embassy or Tandem are now in syndication, including:
All in the Family
The Jeffersons
Maude
Sanford and Son
One Day at a Time
Good Times
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Each of these programs, except "All in the Family", is syndicated
by Embassy Telecommunications, an Embassy division. Tandem
formerly produced, and distributed through an affiliated company,
several first run syndicated programs, including "Mary Hartman,
Mary Hartinan", which is now being released again through Embassy
Telecommunications, as well as "Fernwood 2 Nite," "America 2
Nite," and "All that Glitters."
13. Embassy *and Tandem are well qualified to provide the
Commission with insight on the relative bargaining position of
the networks vis-a-vis the independent production companies.
Tandem's first successful series, "All in the Family", was
conceived prior to the Syndication and Financial Interest Rules,
whjch rules were adopted on May 7, 1970, but did not become
effective until July 23, 1971. Negotiations for network exhibi-
tion rights commenced between Tandem and CBS in May 1970. CBS
conditioned its agreement to broadcast "All in the Family" on a
grant of all distribution and syndication rights in the program
to CBS. The first broadcast of "All in the Family" took place in
January 1971, No written agreement covering broadcast or syndi-
cation rights, however, existed prior to late September 1971,
when an agreement dated "as of July 10, 1970" was executed by
CBS. As a result of adoption of the Syndication Rule, CBS
assigned its syndication and distribution rights in "All in the
Family" to Viacom International, Inc. through a "spin-off" of its
subsidiary, CBS Enterprises, Inc. The validity of the assignment
PAGENO="0139"
135
of distribution and syndication rights in "All in the Family" to
CBS and, ultimately, to Viacom, was unsuccessfully contested by
Tandem on a number of grounds, including incompatibility with the
Syndication and Financial Interest Rules and the Sherman Act.
See Viacom International, Inc. v. Tandem Productions, Inc., 526
F.2d 593 (1975).
14. Embassy and Tandem hope to utilize these Comments to
inform and educate the Commission as to the dangers that will
inexorably flow from abolition of the Syndication and Financial
Interest Rules. They offer these Comments through the
perspective derived from their roles as producers and syndicators
of a broad range of network, of f-network, and non-network pro-
gramming.
III. DELETION OF THE SYNDICATION AND FINANCIAL
FINANCIAL INTEREST RULES WILL CRIPPLE OR
DESTROY THE INDEPENDENT PROGRAM PRODUCTION
INDUSTRY
A. There is a Fundamental Imbalance in the
Bargaining Positions of the Networks
Vis-a-Vis the Independent Program Producers
15. A detailed understanding of the relationship between,
and relative bargaining positions of, the networks and the
independent program producers is of critical impottance to under-
standing the necessity for retaining the Syndication and Finan-
cial Interest Rules. A key premise underlying the Notice of
Proposed Rulemakin~ in this proceeding is that the networks and
the independent program producers engage in bargaining from
positions of roughly equal strength. Nothing could be farther
PAGENO="0140"
136
from the truth. In fact, the networks totally dominate the
exhibition licensing process. They have all the chips on their
side, and use their dominant bargaining position to impose their
terms on the program producers. No arms length bargaining takes
place between the network and program producer; rather, the
networks dictate the terms of the license for network exhibition
to the producer, who must accept or be deprived of any chance of
network exposure. The Commission's assumption that the networks
and the program producers have equal bargaining positions, and
could fairly negotiate for distribution of risks and benefits
from both network and syndication runs, is, quite simply, wrong.
The Commission's suppositions, while convenient from the point of
view of theoreti~al economics, do not reflect the real world. in
which the networks dominate their program suppliers. Repeal of
the Rules would exacerbate the situation and make it intolerable.
1. The Relationship Between the Networks
and the Independent Program Producers
16. To appreciate this imbalance, the Commission must
understand the process by which an idea is ultimately converted
into a network program series. While, of course, there are many
variations o.n the following theme, it represents the most typical
structure leading from story notion to broadcast series.
17. First, of course, is the creation of a concept for a
new series. The independent production companies employ staffs
of writers to produce scripts for existing series and to develop
concepts for new series. In addition, the production companies
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137
receive a number of story concepts from outside sources. The
"story notions" developed by these sources are reviewed by the
creative development staffs of the independent producers.
Concepts that lack appeal are dropped; those that seem promising
are nurtured and modified to provide what the producer believes
is the most appealing (and saleable) form. When the producers
believe they have developed a story notion or idea that will be
appealing to the networks, they contact representatives of a
network's creative development department. 1/ Note that the
producers do not normally contact more than one network.
Consciously or unconsciously, the practice is that a story
concept reviewed and rejected by one network is most unlikely to
receive favorable consideration by either of the other two
networks. Therefore, the production compaiiy must decide which
network to present its story notion to, based on the quality of
the relationship between the network and the producer, as well as
an evaluation of the particular programming needs of each
network.
18. The independent producers then present their story
notion to executives of the creative development staff of the
~/ Few series are produced with the intention that they will be
sold directly to the syndication market. Indeed, first run
syndication programming consists almost entirely of game
shows and variety/talk programs. Continuing dramatic,
action, and comedy series are far too expensive to produce
to be justified by the potential first-run syndication
market. None of Tandem's or Embassy's forays into that
market (e.g., "All That Glitters," "Fernwood 2 Nite," etc.)
have met the kind of sustained success their network series
have. These program forms can only be supported by network
exhibition.
PAGENO="0142"
138
network. This is normally an oral presentation; occasionally
written notes will be supplied, and, on a few occasions, a
written narrative "story" or "format" will be provided to the
network. At this time virtually no active producers go so far as
to commission a "freeball" script without prior consultation with
the network. The cost of such a presentation is high, and, as is
the case with every presentation of an idea for a series to the
network, the chances for acceptance very low. 2/
19. The network creative executives may accept a story
notion as originally presented. Or, more often, they suggest
changes in the concept, and a series of meetings are held refin-
ing the concept for the series. If the network creative develop-
ment executives decide to proceed with a concept, they authorize
the production of a pilot script. A contract is negotiated which
provides for the preparation of a teleplay by the production
cOmpany in return for reimbursement of its out of pocket costs.
It should be stressed that this is on an "out of pocket cost up
to" a specified amount basis. Any cost overruns must be absorbed
by the producer.. Moreover, no compensation is provided for the
producer's general overhead or for its initial costs in
developing the initial story notion.
20. The pilot teleplay script is written by the producer's
creative staff, and honed and polished by its developmental
executives. When they are satisfied w.ith the product, it is
2/ For a half-hour script, script fees alone would be anywhere
up to $50,000, and, in the unusual circumstance, can be up
to $75,000.
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presented to the network's creative staff. They review the
script, suggest possible changes, and, ultimately, make a deci-
sion as to whether the concept is worthy of further consid-
eration. If the pilot script satisfies the network creative
department, they authorize their business affairs staff to enter
into negotiations with the production company for a broad-ranging
contract that will essentially govern their entire financial
relationship for the next four to five years. 3/
21. The contract that is negotiated between the network and
the producer governs both the developmental and continuing pro-
ductioti phases of the series' life. It authorizes the production
company to produce a film or video tape pilot episode based on
the pilot script. Once again, this is on the basis of reimburse-
ment for out of pocket expenses up to a stated maximum only. The
producer canno~ profit during the developmental stage, and in
fact in the vast majority of cases cannot even cover its direct
out-of-pocket costs, let alone overhead expenses not directly
related to production of the pilot. Network auditors inspect the
producers' books to insure that no indirect costs, or costs not
expressly approved by the networks, are reimbursed to the pro-
ducer. The contract executed at thi.s tine also gives the network
a series of options to license the series for network exhibition.
At one time, the standard arrangement required the network to
order an initial run of 39 episodes if it chose to purchase a
31 Indeed, at least one network requires this to be done at the
script commitment stage.
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140
program for network exhibition. The networks subsequently cut
back their initial exposure to 26 episodes, then 22 to 24 epi-
sodes. Now the norm is for the network to guarantee the producer
only 13 episodes, including the pilot. An increasing trend is
for the network to insist on an option to acquire only 4 to 6
initial episodes. 4/ This initial contract will give the network
a series of options to acquire additional first-run episodes.
covering a period of four to four and one-half years, depending
on whether the series will receive its initial airing in the fall
or spring television seasons.
22. Price is not really negotiable at this point. Although
discussions take place, the bottom line is that the network
essentially dictates the price it will pay, and the producer must
accept what is offered or forego network exhibition. These
compensation amounts a~e not necessarily related to quality or
production costs; indeed, they place many producers in a deficit
situation throughout the life of the contract. Moreover, the
prices are fixed for the full life of the contract; provision is
made for minor (in the neighborhood of 5%) annual increases in
compensation. The program producer must bear the risk of
4/ If the series is not a quick success, the network can simply
not exercise its options for further episodes, and the
series will die a quick death. An order for only four
episodes, for example, gives the producer almost no oppor-
tunity to amortize his initial expenses over a meaningful
number of episodes. Many actors, writers, and directors
will succeed in negotiating a minimum guarantee of 13, 20,
or 24 episodes from the producer. The network may or may
not agree to cover those unused guarantees in the event of a
cancellation.
PAGENO="0145"
141
exceeding this budgeted amount; the producers cast costs alone
can easily increase by as much as 20% in each year. On the other
hand, the producer cannot share in the benefits of the potential
success of the series. Indeed, Embassy and Tandem do not know of
a single case in which a program producer was able to success-
fully negotiate a provision giving the producer a share in
profits from a successful network run or to obtain bonuses for
exceeding ratings or profit goals.
23. The program contracts contain a number of other pro-
visions. Syndication of the program is normally prohibited
during the life of the contract. The network is often permitted
to re-run the series during daytime hours without significant
additional compensation.
24. Once the development and production contract is exe-
cuted, the program producer makes the pilot program. ?~fter the
producer is satisfied with the program, it is presented to the
network. The network then makes a decision as to whether to
place the series in its program schedule. If it decides to do
this, it exercises its first option in the contract between
producer and network, and orders the initial run of episodes. If
the series is successful, the network will continue to exercise
its options for additional episodes throughout the life of the
contract. If the program is immediately unsuccessful, the series
may be cancelled. The producer will be compensated only for
those episodes already produced even though the contract provides
for a longer initial run. If the program is marginal in the
ratings, the networks will often "string along" the producer,
32-540 0-84--lO
PAGENO="0146"
142
insisting on modifications to the contract to order only a few
additional episodes at a time. The producer, whose only real
chance of recovering his expenses, much less making a profit, is
a long network run followed by syndication, has no choice but to
accede to the network's dictates.
25. If the program is unusually successful, and lives out
the four to four and one-half year term of the initial contract,
the network and the producer will negotiate a new agreement
covering network exhibition rights. The producer of such a
series will have somewhat greater bargaining strength than the
creator of an untested pilot script. But even the creator of the
most successful program series has limited negotiating room. The
simple fact is that there is no competition among the three
networks for the rights to successful series. There has not been
a single case in the past decade where the networks have competed
for the rights to a successful series. Indeed, the other net-
works simply will not enter into meaningful negotiations for the
rights to programs appearing on competing networks. The only
bargaining chip held by the production company is its threat to
terminate production of the series and to rely on revenues from
syndication and from other series. Such a "suicide" threat can
only be made, of course, by a financially strong and independent
producer.
26. In most cases, the producer's only chance to profit
from production of a television series is through a long network
run followed by successful syndication for off-network exhibi-
tion. At best, the producer will break even on out-of-pocket
PAGENO="0147"
143
development costs; overhead and cost overruns will always be
absorbed by the producer. Normally, the compensation fixed by
the network for prime time exhibition will not cover the produc-
er's production costs for the continuing episodes of the series.
These deficits must also be absorbed by the producer, who has to
proceed on the assumption that a sufficient number of episodes
will eventually be ordered by the network to support successful
off-network syndication of the series. 5/ If the network cancels
a series before a sufficient number of episodes have been
produced to permit syndication, the producer of a deficit series
can never offset its entire costs. It will have taken a loss on
the series which can never be recovered. Only "the light at the
end of the tunnel," the possibility of syndication income
following a long network run, sustains the independent production
companies and encourages them to make the investment in time,
money, and creative energy necessary to develop new television
programming.
5/ The nunther of episodes necessary to support successful
syndication of a series has not been firmly established, but
runs in the range of 65-150 episodes. This large number is
necessary to permit a series to be "stripped", i.e., carried
by the local station on a five days per week ~ without
undue duplication of episodes.
PAGENO="0148"
144
2. The Networks Have, and Will Exercise,
the Power to Extract Coercive Contract
Terms From the Independent Production
Companies
27. Several facts are immediately apparent from the rela-
tionship between the networks and the independent production
companies. First, all essential contract terms for the initial
network run are negotiated at a time when the network's bargain-
ing position is strongest and the prodticer's position is weakest.
All the producer has is a concept and an initial pilot script. 6/
He cannot intelligently gauge the likely success, and hence the
value, of the series concept, especially since the network can
insist on "creative" changes in that concept at any tine.
Moreover, because first-run syndication is not a viable market
for new series presentations, the producer must obtain network
exposure in order to give his product marketability. The
networks have the potential to reach over 80 million TV
households, and no other medium, or combination of media - pay
cable, MDS, STy, or the like - can even approach this potential.
The ~ way to obtain needed network exposure is to accede to
the contract terms dictated by the network.
28. Second, it is apparent from the very terms of the
contracts between producers and networks that they are one-sided
and dominated by the network's dictates. Indeed, there has been
a pattern of the networks imposing ever more onerous provisions
6/ See, however, footnote 3, supra.
PAGENO="0149"
145
in their contracts with producers, further increasing the pro-
ducers' risk. For example, the number of episodes in an initial
order has been reduced, at network insistence, from 39 initially
to 13 (and often only 4 to 6) at present. This substantially
reduces the opportunity for the producer to recover its overhead
and other intangible expenses. Similarly, where the networks
once were willing to reimburse the producer for unusual expenses,
and to renegotiate compensation for unusually successful series,
their approach now is to be hard nosed in any such
renegotiations, making alterations extremely difficult to obtain.
29. Finally, it is clear that the networks and the pro-
ducers will never be able to negotiate equally in an arms-length
transaction to rationally distribute the risks and benefits of
program development, production, and exhibition. At present, the
producer absorbs all the risks of failure. His expenses incurred
in developing a story notion are not recovered if the notion does
not lead to series production. His overhead and often his
out-of-pocket expenses in the pilot script and pilot episode
phases of development are not compensated by the network. Even
if the program reaches network exhibition, often the production
is in deficit financing, and the producer is encouraged to go on
only by the hope of eventual profit in the syndication stage.
The networks, on the other hand, incur no real risk. The demand
for network advertising availabilities is so high that they can
always find advertisers, even for the most unsuccessful program.
Moreover, the price of advertising on even the lowest rated shows
is high enough that the total revenues from any episode are
PAGENO="0150"
146
always much higher than the program acquisition costs for that
program. The only risk that the networks absorb is that they
will make less profit from a series with low ratings than they
might have made from a series in the same time slot with high
ratings. In every case, however, they will make a profit!
30. Not only is it clear that the networks have the ability
to effectively coerce program producers into assigning to the
networks either their entire domestic and foreign syndication
rights, or share in the profits from such syndication, but there
is a well established record that the networks will exercise such
power. Indeed, the network' s proclivity to impose such
adhesionary provisions is irrefutably demonstrated by the
statistical evidence relied on by the Commission in adopting the
Syndication and Financial Interest Rules. The networks had the
right to participate in any profits from the first network run in
96.7% of the series programs produced by the 15 major program
packagers studied by A.D. Little, and they shared in the
first-run profits of 96.1% of the series produced by the major
motion picture companies from 1959 to 1964. Similarly, the
networks had the total domestic syndication rights in 18.7% of
the programs produced by the 15 listed packagers, and shared in
the domestic syndication profits of fully 65.4% of their programs
between 1957 and 1964. The major movie companies gave up domes-
tic distribution rights to the networks in 8.5% of the programs
they produced from 1959 to 1964; more importantly, they gave the
networks domestic syndication profit shares in 77.6% of their
series. Foreign distribution rights and profits shares were
PAGENO="0151"
147
ceded to the networks in a similar number of cases. Report and
Order in Docket No. 12782, ~ There is no reason to doubt
that the networks will extract similar rights if the Syndication
and Financial Interests Rules are repealed.
31. Embassy and Tandem have the advantage of many years
experience in dealing with the networks, and it is inconceivable
for one moment to believe that if these rules are repealed the
networks will negotiate with the independent producers on an
equitable basis. They have the upper hand. Why should they give
the producer more for production in return for a percentage of
the syndications rights, when they know the producer has no other
choice but to accede to whatever they propose. It challenges
credulity to even suggest that the networks will be fair. After
all, in the final analysis it is not a question of being fair and
equitable but rather whether it is good business practice to give
a supplier more compensation for this product than necessary to
obtain that product. Good business sense, and responsibility to
maximize profits for their public investors, dictate that the
networks will pay no more than is required, and give up only
those rights necessary to obtain their product.
32. It is obvious then, that should the Syndication and
Financial Interest Rules be abolished, the networks will demand
and receive an interest in both the network and syndication
rights of every program they carry. The producers are powerless
to stop this. The suggestion in the Notice of Proposed Rulemak
that there will be bargaining as to the distribution of risks
PAGENO="0152"
148
and benefits from network exhibition of programming is supremely
naive. The truth is that \h~ networks have, and will continue to
have, the upper hand and wil\l be able to impose their will on the
program producers during contract negotiations.
B. Elimination of the Syndication and
Financial Interest Rules Will Have a
Significant Adverse Inpa~t on the
Program Producers and on the' Public
Interest
33. We have seen that the networks have, and will exercise,
the power to require program producers to cede substantial
interests in their potential program series in order to obtain
even the possibility of network exhibition. Without such network
exhibition, a program series stands virtually no chance of
success. On the other hand, the producer normally cannot earn a
profit even through a lengthy network run. The producer's
prospect for profit lies in the potential of the series for
syndication. If the networks are permitted to extract a share of
such syndication revenues from program producers, the independent
program production industry will be crippled. This would
decrease outside influence over television programming, decrease
diversity of viewpoints, and thus disserve the public interest.
34. Prior to adoption of the Syndication and Financial
Interest Rules, the television program production industry was
subject to domination by their "customers," the networks. In
order to sell their programming to the networks, they were
compelled to assign a share of their profits from the first
network run to the network. Furthermore, the program producers
PAGENO="0153"
149
were effectively coerced to assign to the networks either their
entire domestic and foreign syndication rights, or a share in the
profits from such syndication.
35. Since the adoption of the Syndication and Financial
Interest Rules, the independent program production industry has
prospered. The number of producers supplying prime time program-
ming has grown - there were 29 different producers of prime time
network entertainment programming during the 1981-1982 television
season. Among these were 22 producers that were not active prior
to 1971; these newcomers accounted for over half of the prime
time shows from independent producers. Adoption of the Syndica-
tion and Financial Interest Rules has directly resulted in a
reduction in network ownership of prime time programming. In
1964, networks owned part or all of 87% of all prime time pro-
gramming. By 1981, this had been reduced to only 13% of prime
time programs; yet network profits were at an all time high.
36. Elimination of the Syndication and Financial Interest
Rules would have a significant negative effect on the continued
vitality, and viability, of the independent television production
industry. Without the safe harbor of these rules, the program
producers will once again be subject to the total coercive
practices of the national networks. In order t.o market their
programming to the networks for prime time exhibition, producers
will be required to give the network a major financial interest
in their programs. Moreover, the current deregulatory trend may
well extend to relaxation of the "consent decrees" that limit the
extent to which the* networks may have ownership interests in
PAGENO="0154"
150
broadcast programming. In such event, the networks would be
likely to greatly expand their own program production efforts.
In one case, the network would become the program producer's
"partner"; in the other, his employer. In either event, there
would be a substantial diminution in the role and in the
independent influence of the program producers.
37. The public interest is well served by the continued
viability and independence of the television program production
business. Independent program producers provide the only
tempering of the networks' dominant influence over the content of
prime time programming. Should the networks be permitted to
obtain financial interests in a substantial percentage of prime
time programming, their influence over program content can only
increase still further. The networks will no longer review pro-
gramming produced by others and advise the producer as to pro-
posed changes. Rather, as an owner of rights in the programming,
they will dictate its content! This will further centralize
control of the creative process in the hands of network bureau-
crats who are not noted for their zest for diverse, quality
programming. The inexorable result will be a stifling of the
creative process and an aversion to take risks in innovative new
program concepts -- resulting in more of the "sameness" in
network programming that we all deplore.
38. Finally, there will be every economic incentive for the
networks to favor those production companies in which they have a
financial interest in the program selection process. Programming
decision~ will not be made on the merit of program content, but
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151
on the relative advantages of the financial interests involved.
As the Commission has already recognized, this places the net~
works in a patent conflict of interest. If the networks choose
to follow their own financial best interests, as the record
clearly indicates they will, the public will suffer by receiving
lower quality programming. Moteover, elimination of the Syndica-
tion and Financial Interest Rules will create great barriers t~
entry by new, innovative program producers.
39. Should the Syndication and Financial Interest Rules be
abolished, the public interest will be irreparably harmed. The
networks will demand and receive an interest in both the network
and syndication rights of every program they carry. The
independent producer's incentive to produce, and indeed his
margin for economic survival will be diminished, proportionate to
the networks' direct financial interest in the syndication rights
to a given show or shows. The suggestion in the Notice of
Proposed Rulemaking that elimination of the rules will allow fair
bargaining between the parties, and a fair distribution of risks
and benefits, is extremely naive. Eliminating the rules will
diminish, if not dry up altogether, the independent program
production system as it now exists. And a new system, with total
network involvement and domination over general mass media
programming will replace it. The public will have even less
chance of receiving high quality, innovative prime time
programming. Program diversity, long a key Commission goal, will
be hindered. All these factors demonstrate the wisdom of
continuing the course set by the Commission'in 1970 and retaining
PAGENO="0156"
152
these vital regulations, which are the only real checks on the
dominance of the networks.
IV. ELIMINATION OF THE RULES WILL HAVE A SIGNIFICANT
ADVERSE IMPACT ON THE ECONOMIC VIABILITY
OF THE UHF INDEPENDENT TELEVISION STATIONS
40. One of the most noteworthy broadcasting phenomena of
the 1970s was the emergence throughout the United States of
increasingly strong and competitive, independently programmed
television stations. In 1969 there were only about 80 opera-
tional independent stations in the country. For that year only
27.1% of all independent stations reported a profit. Fully 52%
of reporting independent UHF stations, and 14.7% of independent
VHF stations, showed losses in excess of $400,000 per year. This
can be contrasted with network TV stations, 78.5% of which were
profitable in 1969, and only 2.3% of which had deficits in excess
of $400,000. By 1980 there were 110 independent stations in the
United States and 54.5% were profitable; only 30% experienced
losses of $400,000 or more. We submit that of the varied
contributing factors to the strengthening of the independent
stations, one of the most important has been the availability of
popular off-network syndicated programming. Furthermore the
adoption by the FCC in 1970 of the Syndication and Financial
Interest Rules has been a major, if not the major, reason for the
increased availability of this syndicated programming product.
41. The independent producer/syndicator has rio axe to grind
insofar as selling syndicated shows to network affiliates versus
independent TV stations. As a result independents have
PAGENO="0157"
153
increasingly, through the 1970's, been able to obtain popular
off-network products that are fresh and most attractive to
viewers. At the same time, independent stations have become
increasingly competitive for audiences in the major markets --
even versus the network affiliates -- and have acquired a
significantly greater share of the viewing audience. It is clear
that the Syndication and Financial Interest Rules have enhanced
competition in the TV markets in that the rules have contributed
to the availability of desirable programming for non-network
independent television stations.
42. Elimination of the Syndication and Financial Interest
Rules would jeopardize the continued viability of all independent
stations. If the networks are allowed to control the syndication
of such programming, or even to have a financial interest in the
post-network run profitability of network series, they will have
the power to control the destiny of the independent television
stations. The networks will have the opportunity, as well as
every economic incentive, to deprive the independents of the best
off-network product. They will also have the opportunity, as
well as every economic incentive, to favor their owned and
operated stations and network affiliates in the syndication
process. 7/ This is art obvious conflict of interest that is
7/ The economic incentive exists because network affiliates are
captives of the network during most of the programming day.
Only a limited opportunity exists for syndicated programming
on network affiliates, and then never in competition with
network offerings. Independents, on the other hand, can be
competitors in the very same time slot as network program-
ming.
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154
contrary to the public interest, and yet is inevitable if the
Commission abolishes the Syndication and Financial Interest
Rules.
43. The networks could discriminate against independent
stations in a number of ways other than by favoring its affili-
ates. First, they could require that syndication be withheld
pending completion of a series' complete network run, or even
longer. This would mean that the independent stations would be
deprived of product while it was still fresh and popular. Under
such a restraint, such mainstays of independent programming such
as UM*A*S*H", "One Day at a Time" and "The Jeffersons" could not
be used while they were at their peak of popularity. 8/ This
would be clearly contrary to the public interest. Another likely
restraint that could be imposed by the networks if the Rules are
abolished is a prohibition on prime time presentation of top
quality off-network programming. This would effectively prevent
the independents from offering any real competition to the
networks during the most valuable portion of the broadcast day.
There would be every incentive for the networks to impose such a
requirement if the rules were eliminated and there was no
restraint on their acting to protect their economic turf. For
example, independent VHF station KTTV in Los Angeles recently
began to broadcast syndicated episodes of `M*A*S*H' during prime
time. Initial rating reports indicate that KTTV is achieving a
8/ Under present practices, initial syndication is barred
during the life of the initial 4 to 4 1/2 network contract.
The producer can, however, release the early episodes into
syndication during the term of any subsequent contracts.
PAGENO="0159"
155
greater share of the audience than at least one network during
that time period. Is there any doubt that the networks would act
to stop such competition if they had the opportunity?
44. Permitting the networks to control, or have any finan-
cial stake in, thesyndication of off-network programming gives
them the key to the purses of their only viable broadcast com-
petitors, the independent stations. The networks will have both
the incentive and the opportunity to hamstring the independent
stations. It is contrary to the public interest to permit the
networks to obtain such dominance over the raw material upon
which their competitors depend. Faced with such an inherent
conflict of interest, the networks can be expected to act ir~
their own best financial interest -- and thereby reduce the
diversity of programming available to independent television
statiàns, and, ultimately, the public. To the extent, then, that
a strong and competitive independent broadcasting system is in
the public interest, so too are the Syndication and Financial
Interest Rules in the public interest.
V. THE NETWORKS DERIVE THEIR DOMINANCE OF
TELEVISION VIEWING AND THE PROGRAM
MARKETPLACE FROM THEIR DOMINANCE OF A
SCARCE PUBLIC RESOURCE -- THE VHF
SPECTRUM. THIS ALONE JUSTIFIES RULES
WHICH FOSTER AN INDEPENDENT PROGRAM
PRODUCTION INDUSTRY
45. The executives of the three national television net-
works hold rio monopoly on good management, on foresight, on the
willingness to invest large sums in the hope of even greeter
PAGENO="0160"
156
rewards, or even on luck. Yet we have not seen a major new net-
work enter the television marketplace in the past 25 years. In
every other industry, there are winners and there are losers.
Some new entrants succeed and become industry leaders; some old
leaders fail to keep their grasp on the keys to success and fade
into obscurity. This has been true in virtually every industry,
from airplanes to automobiles, from ferrous metals to ferris
wheels. It has been especially prevalent in the entertainment
industry. Indeed, in its Report and Order in Docket No. 12782,
supra, the Commission identified 15 major packagers of television
programming in the period from 1957 to 1964. Few of these
entities are active today in the development of new network
series. Most have faded away entirely. Yet, year after year,
the networks maintain their dominance of the American television.
viewing outlets, and in turn dominance of the television program
market. This dominance is easy to document. But how can it be
explained? The answer lies in the networks dominance of the VHF
television spectrum.
46. There are only 525 operating commercial VHF television
stations operating in the United States. Of these, fully 500 are
network affiliates. The remaining 25 are independent stations.
The networks themselves each own and operate 5 VHF television
stations in the top 8 markets. In contrast, of the 276 operating
UHF stations in the United States, 122 are network affiliates and
PAGENO="0161"
157
154 operate as independent- stations. It is clear then, that the
networks continue to dominate the use of the VHF spectrum. 9/
47. The continuing dominance by the networks of television
viewing and pro~raxnming then, is directly related to their
dominance of the VHF television market. Indeed, the only places
where there are VHF independents are markets with 4 or more VHF
allocations. The VHF spectrum constitutes a scarce and extremely
valuable public resource. If anyone should benefit from the
exploitation of this great natural resource, it should be the
public. Yet the networks already extract great profits as a
result of their dominance of the VHF spectrum. Now they seek to
utilize their dominant position to extract a portion of the
potential revenues of the program producers. This is contrary to
public policy and to the public interest. The only reason that
the networks will be able to share in the producers' rights is
their almost complete control over access to the nation's
airwaves.
48. It is most unfair and serves no public good to allow
the networks to use their entrenched position -- founded on a
public resource (the VHF spectrum) to in turn take over complete
9/ A truly competitive fourth national television network
cannot hope to emerge under these conditions. Any such
network would be forced to rely upon UHF affiliates to cover
a significantly greater proportion of the national viewing
audience than the existing dominant networks. Such UHF
affiliates could not effectively compete with the entrenched
VHF affiliates of the existing networks. If the Commission
doubts this obvious fact, it should search its records to
determine the last time a network voluntarily changed from a
VHF affiliate in,a market to a UHF facility in the same
market. It will be a long and fruitless search!
32-540 0-84--il
PAGENO="0162"
158
content and financial control of all TV programming, and ulti-
mately to cripple or destroy the independent program industry.
That is exactly what will happen if the Syndication and Financial
Interest Rules are repealed. The response to the Commission's
inquiry, raised in its Notice of Proposed Rulemaking at Paragraph
42, as to whether protection of program producers from undue
network influence is a proper object of FCC concern, is a
resounding "YES!" The limited control over network activities
brought about by the Syndication and Financial Interest Rules is
little enough for the networks to pay for the VHF spectrum they
dominate now -- and by virtue of being there "first," have
dominated since the beginning of TV broadcasting.
49. Moreover, the networks should not be permitted to use
their shared monopoly power to block the entry of new, and
potentially superior, program suppliers. Yet there is an insuf-
ficient number of unaffiliated VHF stations to support the entry
of any new national television network. Only through the
recently improved competitive position of the UHF independent
stations is there any hope on the horizon for the emergence of a
competitive new network. As noted earlier, however, abolition of
the Syndication and Financial Interest Rules will give the
networks control of the programming upon which the recent success
of the independents has been built. The networks would have the
power to decimate the independents and thus prevent their forming
the basis for an emerging competitor network. Certainly the
public interest would be served by the entry of a fourth
television network. If the Syndication and Financial Interest
PAGENO="0163"
159
Rules are deleted, there will be no chance that a new network
will link the VHF and UHF independents into a viable new
competitor for national viewing habits and national advertising
dollars. For this reason alone, the Rules should be retained.
VI. REPEAL OF THE SYNDICATION AND FINAN-
CIAL INTEREST RULES CANNOT BE JUSTI-
FIElD BY AN ALLEGED NEED TO IMPROVE THE
NETWORKS' COMPETITIVE POSITION AGAINST
EMERGIN~ TECHNOLOGIES
50. It has been suggested that the networks are in a poor
competitive position vis-a-vis emerging video technologies such
as low power television, subscription television, pay cable,
direct broadcast satellite television, video cassettes and discs,
and the like. Indeed, the Notice of Proposed Rulem~4p~., ~
at paragraph 34, et ~., expounds at great length as to these
alternative program sources to support the proposition that the
networks may no longer have a dominant position in the market for
television programming. The Commission's assessment is, at best,
premature. The fact is that the networks' dominance over the
program marketplace is more effective than ever. Moreover, while
a few new television viewing outlets are in their infancy, and
others may emerge over the next decade, the networks will con-
tinue to dominate the television viewing and advertising market-
place for the foreseeable future. As long as the networks
PAGENO="0164"
160
dominate television viewing, they will, by definition, dominate
television programming. 10/
51. The assertion .that the networks need control of the
syndication market, as they will achieve if the Syndication and
Financial Interest Rules are abrogated, so as to better compete
with such new video outlets, is ridiculous. There are only a
handful of LPTV stations in operation, and it will be many years
before LPTV is a viable force in the television marketplace. DBS
is at least three years away from operation. At best it is
anticipated to attract a moderate proportion of non-cable house-
holds. Pay cable and home video are not viable markets for the
series programming that is the mainstay of network television.
Their staple is motion picture and sports telecasting, which
appeal to viewers on an irregular basis and at a cost that will
always limit the size of their audience. In contrast, network
television continues to dominate television viewing patterns.
While their share of viewing has slipped slightly in recent
years, this has been due primarily to the competitiveness of
independent television broadcast stations, not to the emergence
10/ Indeed it is in recognition of the fact that the networks
dominate TV viewing in the United States that independent
producers are required to go through the network turnstile
in order to reach the mass TV audience and thereby obtain
marketability for such programming. A pay cable programmer
such as Home Box Office may in the future acquire a program
series or two for distribution to their approximately 10
million subscribers. But this is a drop in the bucket
compared to the 22 hours of programs needed by each of the
three networks for their weekly viewing sched~T~ And
remember, the network shows are available to in excess of 80
million United States TV households, the true mass TV
viewing audience for some time to come.
PAGENO="0165"
161
of new technologies. Moreover, the total nutnber~ of households
watching network television continues to increase. The networks
do not need a share of syndication rights to better compete with
new video technologies. A more likely answer is that they seek
such rights so that they can control the syndication market and
thereby limit the competitiveness of independent television
stations.
52. A fact which the Commission has overlooked is that
there is nothing stopping the networks from participating in
every aspect of the development of these new technologies.
Indeed, the networks have taken steps in recent months to do
exactly this. For example, both CBS and the parent of NBC have
received authorizations for new direct broadcast satellite
television facilities. They will be in the forefront of DBS
development. All three networks have been active in the
development of non-broadcast cable program channels, in general,
and pay cable services, in particular. The networks have
recently received permission to enter into the ownership of cable
television facilities, and one network has already acted to
implement such an interest. Similarly, the networks are all
active in the development of software, and in two cases,
hardware, for the home video and home computer market. Embassy
and Tandem believe that the appropriate role for the networks is
to foster these.new technologies, not to erect roadblocks to
their implementation.
53. It is clear, therefore, that the emergence of new video
technologies, which have yet to take a meaningful share of the
PAGENO="0166"
162
viewing audience, and which will not be fully implemented for the
next decade, offers no rationale for the deletion of the Syndica-
tion and Financial Interest Rules. There is no prohibition to
network involvement in such emerging video forms, if, as claimed,
they offer such competitive potential. In no event should the
networks be allowed to obtain interests in television programming
that will enable them to stifle the emergence of these bright new
hopes for the viewing public. They will be able to do this if
the Rules are done away with because the networks will then have
the capacity to control the accessibility of all off-network
programming -- the very programming that must form the initial
basis for the potential success of such new technologies.
VII. CONCLUSION
54. The Syndication and Financial Interest Rules have well
served their intended modest purpose. The total dominance of the
networks over the creative element of television programming has
been arrested somewhat. The independent production companies
have achieved a measure of financial independence and viability.
Equally as important, independent television has prospered
through ix~creased access to fresh new off-network programming.
In addition to serving these beneficial purposes, the rules have
caused no harm. The three dominant national television networks
remain highly successful; their profitability is staggering.
Clearly the networks have not suffered under these Rules.
55. If the Syndication and Financial Interest Rules are
abolished, the public will ultimately suffer. Fir3t, the
PAGENO="0167"
163
independent production companies will become true puppets of the
networks, with a reduction in their willingness, and ability, to
develop risky new innovative programming. Second, the fate of
the independent television stations will be placed in the hands
of the networks, who will have every incentive to limit their
access to popu:Lar programming, and thus lirnit.their competitive-
ness. Again the public will suffer a loss of program diversity.
In addition, the development of new video technologies will be
limited by network control of programming, the software upon
which all forms of technological hardware depends. Finally, the
public will suffer because the possibility of a new, innovative
fourth network will diminish. If the Rules are abolished, the
public will be the ultimate losers.
56. In contrast to all these negative public interest
factors, there are no public interest considerations supporting
repeal of the Syndication and Financial Interest Rules. Rather,
all we have is a naked power grab by the networks, who already
have more than enough power, wealth and influence. There has
been no change in the underlying facts since the Rules were
adopted to provide an opportunity for an independent programming
industry to develop, and thereby to offer some degree of
diversity and independence to the programming available to the
American public. These limited goals, we submit, have been
achieved. But let us not deceive ourselves. Stronger rules, not
repeal of the limited rules now in effect, are in order if the
creeping power of the networks is to be effectively curtailed.
PAGENO="0168"
164~
57. As the Commission said in 1970, the Syndication and
Financial Interest Rules are prophylactic in nature. Let us
weigh them in that light. The Commission has seen the process
that independent producers live with on a day-'to-day basis, and
has heard from parties with extensive practical experience the
actual nature of the relationship between producer and network.
It is not a pretty picture. The relationship between producer
and network is still very one-sided,. but the Rules have made the
financial risks the producers undertake, and the intrusions they
suffer from the networks, worth the candle. The system is a long
way from perfect, but the public has to be better off by having a
stronger independent production community that the networks must
rely on, and a stronger, healthier independent television station
market to compete with the networks, than was the case prior to
1970 and will be the case once again if the Rules are
repealed.
58. If the Syndication and Financial Interest Rules are
abolished, the independent production community will no longer be
independent. Indeed, it could appropriately be renamed the
unetwork production community." The program producers have
gained a modicum of independence through the Rules. As a' result,
the public has benefited from the creative talents of the
independent production community, and the diversity of ideas that
talent has brought to network programming. We respectfully plead
that this "small" effort to free us even partially from the death
grip of network control not be retracted.
PAGENO="0169"
165
59. If the Commission succumbs to two years of network
pressure and abandons these rules, the industry will suffer and
network dominance of programming -- syndicated as well as network
programming -- will be all pervasive. The independent program
industry will clearly be a loser under this scenario. More
importantly, hewevar, the American public will suffer in that it
will lose the opportun~ity for diversity and independence in
programming determined by the Commission to be so important when
the Rules were initially adopted.
For all the above reasons, this proceeding should be termi-
nated without further action.
Respectfully submitted,
EMBASSY COMMUNICATIONS
TANDEM PRODUCTIONS, INC.
1901 Avenue of the Stars
Los Angeles, California
Fisher, Wayland, Cooper
& Leader
1100 Connecticut Avenue, N.W.
Suite 730
Washington, D.C. 20036
By g2~2~-V C(~~
Robert V. Cahill, /
Executive Vice President
And
~
By ope
C if ord M. Harringtofl
Dated: January 26, 1983
Its Attorneys
PAGENO="0170"
166
Mr. WIRTH. Thank you, Mr. Valenti.
Mr. Funkhouser.
STATEMENT OF ROBERT FUNKHOUSER
Mr. FUNKHOUSER. You are a tough act to follow, Jack.
My name is Bob Funkhouser and I am vice president of advertis-
ing for the Carnation Co. I am speaking here today on behalf of the
Association of National Advertisers.
The membership of the Association of National Advertisers are
the companies which advertise most consistently on network televi-
sion strongly oppose repeal of the financial interest and syndica-
tion rule because the rule is necessary to provide the public with a
wide variety of program options and the rule is necessary to pro-
vide significant competition in the television marketplace.
In 1970, the FCC concluded that there was undue concentration
of control in the three networks over television pragrams. Thus,
the primary objective of the rule is to encourage growth of alterna-
tive sources of programing.
The benefit of the rule is demonstrated by the growth of the
number and economic health of independent television stations,
which provide the principal competition to the networks. Repeal of
the rule would, in effect, return the potential to significantly influ-
ence or control the distribution and pricing of off-network pro-
grams to the network.
Some suggestions have been made that the FCC consider adop-
tion of a narrow rule, which would prevent the networks from
warehousing off-network programs from syndication. While in
theory such action may appear to be a solution to the potential
problems, in our view such a rule would not be adequate. There are
several ways in which the networks could deny independent sta-
tions timely access to off-network programming and thereby re-
strict competition.
For example: by giving own stations and affiliates the first oppor-
tunity or preferential treatment in acquiring a program in their
market; by imposing restrictions on when a particular off-work pro-
gram can be scheduled and by deliberately establishing unreason-
ably high prices or unacceptable conditions for sale.
These same restrictions could be imposed if the networks are
barred from direct syndication of programs but are permitted to ac-
quire financial interest in programs they broadcast. In reality, it
would be impossible to detect or eliminate the influence of the net-
work through its financial interest alone could exercise over a dis-
tributor.
Such influence would probably result from private agreements or
understandings to the benefit of the network and to the detriment
of their principal competitors, the independent stations.
In summary, the public is best served by a broad variety of tele-
vision viewing options and by the lowest possible advertising prices.
The financial interest and syndication rule works to help provide a
competitive marketplace for television programs and for the sale of
television advertising and, therefore, serves the public interest.
The FCC should not rely on the good will or self restraint of the
networks to assure that the competitive marketplace continues.
PAGENO="0171"
167
ANA, therefore, strongly supports the retention of the rule in its
present form until such time as it is demonstrably clear that
changing marketplace conditions have made the television adver~
tising market truly competitive.
Mr. WmTH. Thank you very much, Mr. Funkhouser.
Mr. VALENTI. I forgot to ask earlier that my comments prepared
by MPAA would be included in the record.
Mr. WIRTH. Yes. I had noted earlier that statements of all the
members of the panel, along with supplementary elements that
anyone has information added would be included in full in the
record without objection from either of my colleagues.
Mr. Cassara.
STATEMENT OF ANTHONY B. CASSARA
Mr. CASSARA. My name is Tony Cassar~. I am president of
Golden West Television, which is the owner of channel 5, the inde-
pendent station here in Los Angeles.
The growth of independent television stations over the last 10
years is proof that the financial interest and syndication rule is
achieving what the Federal Communications Commission wanted it
to, a counterbalance to the networks' total domination of television
programing.
The rule ended the networks' control of off-network syndicated
programs. As a result of the rule, KTLA and other independents
have been able to provide alternative program choices to the view-
ing public. The rule has created a thriving marketplace in which a
large number of suppliers compete to sell programs to independent
and affiliated stations alike.
The suppliers profit from our success as operators. Eliminating
the rule will disrupt that free marketplace. It will force independ-
ent stations to deal with an oligopoly, the networks, who have a
much greater interest in our failure than in our success. Should in-
dependents suffer, a likely result if the rule is repealed, the public
would pay the price in reduced program choices and higher prices
for goods and services due to increased advertising costs.
Off-network programing has been the mainstay of schedules on
independent stations and a major factor in the growth of independ-
ents over the last 10 years.
Like all other independents, KTLA competes with the network
stations for audience and advertising revenue. We compete by
counterprograming; that is, by giving the public program choices
different than the network stations offer.
The most critical time period for independents is 4 to 8 p.m.,
Eastern and Pacific time. The network stations tend to schedule
news and information programs during this time. By scheduling
recent off-network syndicated programs instead, independents pro-
vide viewers with alternatives.
It would be naive to assume that if the rule were repealed the
networks would not use their control of or considerable leverage
over the off-network syndication market to restrain the growth and
viability of their foremost competitors.
If the networks were to control the syndication of the most popu-
lar off-network series, independent stations would suffer. More im-
PAGENO="0172"
168
portantly, the viewers would suffer from the reduction of the quan-
tity and quality of alternative television program choices.
The networks are not three poor aging dinosaurs that will be
driven to extinction soon if the rule is not repealed-the very rule
that more than anything else has been responsible for the growth
of the independent television ~tations in this country over the last
decade~
To the contrary, the networks are three of the most powerful and
successful communications companies in the world. And the compe-
tition they fear is not the new technologies. It is independent tele-
vision. Make no mistake, no mortal blow will be dealt this three-
headed Goliath by independent stations pelting it with off-network
programing. An erosion in combined network shares from 86 per-
cent of the country's TV households in the fall of 1981 to 82 per-
cent in the fall of 1982 is hardly a mortal blow. With an 82 percent
of television households, the three networks are far and away the
most effective mass advertising medium in existence. That hardly
sounds like the verge of extinction to me.
We independent stations have been surviving with a mere frac-
tion of that share. And as far as the new technologies go, as Pogo
used to say "We have met the enemy and he is us." The networks
are heavily involved in the new technologies now and will be more
so in the future.
ESPN, satellite news channel, Tn-Star, DBS, video discs, video
tapes, `satellites, videotex, the networks are involved in all of these
and more. The networks are the new technologies.
Reports of the three networks' extinction has been greatly exag-
gerated by them. Despite the fact that thanks to the financial in-
terest and syndication rule they do not enjoy the total dominance
they once had, the networks are still stronger than anything else
in sight and are likely to remain so for many years to come. This is
not a fight between big New York network money and big Holly-
wood producer money, as the networks would like us to believe.
This is a fight for the viability of the country's independent tele-
vision stations. Repeal of the financial interest and syndication
rule would give the networks the ability to control our very life-
blood, popular, recent, off-network programs that are the backbone
of our schedules.
If the networks are allowed back into syndication, with one
stroke of the bureaucratic pen, 10 years of growth of independent
television stations will `be reversed and there will be less competi-
tion in free television.
Mr. Chairman, I fail to see how that is in the public interest.
Thank you.
[Testimony resumes on p. 297.]
[Mr. Cassara's prepared statement follows:]
PAGENO="0173"
169
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~ i~e ~ ~c2 c~t~cm~~
and Financ~, Los
The growth of Independent television stations over the last 10
years is proof that the Financial Interest and Syndication Rule
has achieved what the Federal Communications Commission wanted
it to -- a counter-balance to the networks' total domination of
television programming. Due in large part to the removal of the
networks' control as sellers of off-network syndicated programs
to their own biggest rivals -- the independent stations -- KTLA
and other independents have been able to provide alternative
program choices to the viewing public. Viewers now can see what
they want to see when they want to see it.
The Rule has created a thriving marketplace in which a large
number of suppliers compete to sell programs to independent and
affiliated stations. The suppliers prof it from our success as
operators.
Eliminating the Rule will disrupt that free marketplace. It
will force KTLA to deal with an oligopoly -- the networks --
who have a greater interest in our failure than in our success~
Should independents suffer -- a likely result if the Rule is
repealed -- the public would pay the price in reduced program
choices and higher prices for goods and services due to increased
advertising costs.
PAGENO="0174"
170
Off-network programming has been the mainstay of schedules
on independent stations and the major factor in the growth of
independents over the last ten years.
Like all other independents, KTLA competes with the network
stations for audience and advertising revenue. We all
compete by counterprogramming, that is, by giving the public
choices different than the network stations offer.
The most critical time period for independents is 4-8 p.m.
Eastern and Pacific time. The network stations tend to schedule
news and information programs during this time. By scheduling
recent off-network syndicated programs instead, independents
provide viewers quality programming alternatives.
By recent off-network syndicated programs, I mean shows that
are still on the network or have just completed their network
runs: MASH, Happy Days, Laverne and Shirley, Barney Miller.
do not mean older off-network offerings such as I Love Lucy and
Bonanza.
PAGENO="0175"
171
In light of this, it would be naive to assume that if the Rule
were repealed, the networks would not use their control of,
or considerable leverage over, the off-network syndication market
to restrain the growth and viability of their foremost competitors.
If the networks were to control the syndication of the most popular
off-network series, independent stations would suffer. More
importantly, the viewers would suffer from the reduction of the
quantity and quality of alternative television program choices.
Of course, the networks would not engage solely in outright
"warehousing" of all their syndicated programs. That is, they
would not withhold all programs from independents, since such
anticompetitive conduct would be obvious. However, the networks
could use their control of syndication rights and interests to
weaken independent stations in more subtle and less visible ways.
MASH is a very successful syndicated program on many independents~
If CBS controlled its syndication, would it be sold to independents
in major markets or to CBS affiliated and owned stations?
PAGENO="0176"
172
The networks could favor affiliated stations through such
behind-the-scenes devices as advanced negotiations and discrim-
inatory price concessions. Networks can alert affiliates as
to when certain programs will enter the syndication markets,
allowing affiliates to plan for this in their future program
schedules. An independent with no such advance warning might
have already committed its program budget to less desirable
shows.
Networks put all this aside and claim that competition from
the new technologies is their only reason for wanting the
Rule repealed. They say the Rule unfairly prevents them from
competing for programming in the "free marketplace," and that
the future of free, advertiser-supported television depends on
the Rule's repeal.
This is nonsense. The networks are not three poor, aging
dinosaurs that will be doomed to extinction soon if the Rule
is not repealed -- the very Rule that, more than anything else,
has been responsible for the growth of the independent tele-
vision stations in this country over the last decade.
To the contrary, the networks are three of the most power-
ful and successful communications companies in the world. And
the competition they fear is not the new technologies. It is
independent television. But make no mistake. No mortal blow
will be dealth this three-headed Goliath by independent stations
PAGENO="0177"
173
pelting it with off-network programming. An erosion in combined
network shares from 86% of the country's television households
in the Fall of 1981 to 82% in the Fall of 1982 is hardly a mortal
blow. With an 82% share of television households, the three
networks are far and away the most effective advertising medium
in existence. That hardly sounds like the verge of extinction.
We independent stations have been surviving with a mere fraction
of that share. And as for the new technologies, as Pogo used to
say, "We have met the enemy and it is us." The networks are
heavily involved in the new technologies now, and will be more so
in the future. ESPN, Satellite News Channel, Tri-Star, DSS,
video discs, video tapes, satellites, videotex -- the networks are
involved in all of these and more. The networks are the new
technologies.
Reports of the three networks' extinction has been greatly
exaggerated -- by them. Despite the fact that they do not
enjoy the total dominance they once had, the networks are
still stronger than anything else in sight and are likely to
remain so for some time to coffle.
This is not just a fight between big New York network money
and big Hollywood producer money. It is not just a fight for
the independence of the creative small producers. This is a fight
for the viability of the country's independent television stations.
32-540 O-84--12.
PAGENO="0178"
174
The networks blame the new technologies for their problems.
But it is the independent stations that really concern them.
What concerns independent stations is the network's regaining
the ability to control our very lifeblood -- popular, recent,
off-network programs.
If the networks are allowed back into syndication, with one
stroke of the bureaucratic pen ten years' growth of independent
television stations will be reversed and there will be less
competition in free television. And that is not in the public
interest.
(CONNITTEE NOTE: The material supplied for the record has been placed
in the files of the committee.)
PAGENO="0179"
175
BEFORE THE
Federal Communications Commission
WASHINGTON, D. C.
In the Matter of
Amendment of 47 CFR § 73.658(j);
the Syndication and Financial ) BC' Docket No. 82-345
Interest Rule
To: The Commission
COMMEN'~S OF TEE ASSOCIATION OF
INDEPENDENT TELEVISION STATIONS, INC.
The Association of Independent Television Stations, Inc.
("INTV"), by its attorneys and pursuant to Section 1.415 of
the Commission's Rules, hereby submits its Comments in
response to the Commission's Notice of Proposed Rulemaki~g~"
in the above-captioned p~oceeding.u/'
I. INTRODUCTION
1. INTV is the principal industry association of Ameri-
ca's independent television stations, with 97 member stations
not affiliated with any of the three national television
networks, located in 70 television markets ranging from 19
of the top 20 markets to some of the smallest. Sixty-'tiine
1/ FCC 82-300, tel. July 21, 1982 (hereinafter referred
to as the NNoticeN).
2/ INTV also is a member of the Committee for Prudent
Deregulation ("CPD"), which has prepared separate comments
in this proceeding. INTV concurs fully in the comments
of CPD.
PAGENO="0180"
176
of INTV's ninety-seven member stations are UHF independents.~."
INTV's participation in the instant proceeding is uniquely
appropriate, inasmuch as the Financial Interest and Syndica-
tion Rule,~" the Cotnmissiori's review of which is the subject
of the Notice, was promulgated in part to foster `~the birth
and development of its members, "the independent stations,
and particularly the UHF independents upon which Congress arid
the Commission have relied for a fully competitive nationwide
television broadcast service." Report and Order in Docket
No. 12782, Network Television Broadcasting, 23 FCC 2d 382,
394, modified in part, 2.5 FCC 2d 318 (1970), aff'd sub mom.
Mt. Mansfield Television, Inc. v. FCC, 442 F.2d 470 (2d Cir.
1971) (hereinafter referred to as the "Report and Order").
2. The Notice seeks to determine whether the Rule,
which was the fruit of a generation of study of network pro-
gram procurement and syndication practices that culminated
in the Report and Order,~1 is efficacious and in the
public interest, or whether it should be repealed. As a
3/ A list of INTV's menber stations is attached hereto at
Appendix A.
4/ 47 CFR § 73.658(j), hereInafter s~metimes referred to
as "the Rule."
5/ The Report and Order also adopted the "Prime Time Access
Rule,' 47 CPR § 73.658(k), which is not under review in
the instant proceeding.
PAGENO="0181"
177
possible rationale for the latter alternative, the Notice
propounds that the Rule could not and has not `deterired] the
practices that (it] was designed to reach" or, alternatively,
that `changes in market conditions over the past decade nay
have obviated the need for this rule."~~' INTV and its mem-
bers are living proof that the Rule fl~ achieved its avowedly
"modest" purpose of "encouraging the inclusion of the feas-
ible maximum of independently controlled and independently
provided programs in (station] schedules."1' Due in large
part to the Rule's removal of an "inherently undesirable" net-
work presence as sellers of programs "to independent stations
in competition with their own network programs on affiliated
stations,"~" independent stations have flourished both in
numbers and as truly competitive providers of attractive,
alternative program choices for the American people. Because
the Rule has served the Communications Act's "cardinal prin-
ciples" of competition and diversity in the television indus-
try so well, INTV submits that the public interest demands
that the Rule be retained.
6/ Notice i~ 2.
~/ Report and Order at 400 (emphasis added).
8/ Id. at 394.
PAGENO="0182"
178
II. THE RULE HAS SERVED THE PUBLIC INTEREST BY FOSTERING
COMPETITION AND DIVERSITY IN BROADCAST TELEVISION
A. The Rule has Aided the Development of Numerous
and Strong Independent Stations, Thereby Con-
tributing to Increased Program Choices for the
Public
1. Growth of Ind~ nd_ant Stations
3. The Commission's Notice in the instant proceeding
is at once puzzling and disturbing, in that it relegates to a
mere mention the "issue of the impact that deletion of this
rule would have upon independent television stations, where
networks, acting as syndicators, would be in the business of
selling program-rights to be used in competition with their
network fare."V The Report and Order underlying the Rule
did not treat this question so summarily; rather, it recog-
nized and addressed the harmful conflict of interest inherent
in the networks acting as sellers of programs to their prin~
cipal. competitors. Indeed, this conflict was a primary reason
for the Rule's adoption:
the presence of the networks as domestic
syndicators is inherently undesirable.
They are in the position of selling pro-
grams to independent stations in competi-
tion with their own network programs on
affiliated stations, and they compete
against independent syndicators in the
affiliated-station ntarket where they have
an advantage due to their permanent rela-
tionship with the stations. ~9/
9/ Notice ¶ 42.
10/ Report and Order at 394.
PAGENO="0183"
179
4. For these and other compelling reasons, the Commis-
sion determined that it was necessary to remove the three
networks from the business of syndicating independently pro-
duced television programs to other domestic television sta-
tions. Moreover, the Commission reasonably found that it was
necessary to prohibit the networks from acquiring financial
interests in first-run programming, inasmuch as it would be
ineffectual "to exclude networks from active participation in
the syndication market and then permit them to act as brokers
in acquiring syndication rights, and interests and reselling
them to those actively engaged in syndicatiofl."~" At the
heart of the Commission' s conclusion was its long-held con-
viction that
Diversity of programs and development of diverse
and antagonistic sources of program service are
essential to the broadcast licensee's discharge
of his duty as trustee for the public in the
operation of his channel. . . . In this way we
may more nearly achieve the goal described by
Judge Learned Hand in 1942, and echoed by
Justice White in 1969, of a television broadcast
structure which is served "by the widest practi-
cable variety" of choice of programs available
for broadcasting; that system which will most
stimulate and liberate those who create and
produce television programs and those who pur-
vey them to the public. ~/
5. As "purveyors" of television programs to the pub-
lic, independent television stations are second only to the
~/ j~. at 398.
12/ Id. at 400 (footnotes omitted).
PAGENO="0184"
180
networks; indeed, by their very definition, independents are
the ~ conventional broadcast competitors of CBS, ABC and
NBC. That the independent stations have been "stimulated and
liberated" in the years succeeding the adoption of the Rule
is a matter of statistical fact)~-~' As depicted in Table 1,
there were 65 independent stations in the tjnited States at
the end of 1970. By 1982, the ranks of licensed independents
had swelled almost threefold, to 179 all but 25 of which
are UHF stations, upon which Congress and the commission hai~e
expressly rested their hopes for a "fully competitive nation-~
wide television broadcast service.
13/ The data contained herein concerning independent sta~
tions are a product of Commission reports and records arid
INTV's own research. INTV is widely recognized, as the
most authoritative and accurate source of statistical
data relating to independent stations.
li/ Report and Order at 394.
PAGENO="0185"
181
TABLE 1
GROWTH OF INDEPENDENT TELEVISION STATIONS
BY FORMAT, l97O~1982 (ALL MARKETS)
General STy!
VHF UHF Religious SpaniSh ~ ~/Othe~ ~
As of 12/31/70 22 26 6 8 2 1
1/71 12/78 0 19 11 4 2 2
1/79 - 12/82 ~J ~, 46 _.a .1
TOTAL 25 91 28 14 13 8
Increase Since
1970 3 65 22 6 11 7
NOTE: All VHF independent stations have a ~general" ~ com-
mercial, advertiser-supported) format.
Includes three licensed stations scheduled to go on the
air in 1983.
**/ Several stations offer a part~'STV and part financial or
news format.
PAGENO="0186"
182
6. As the table shows, independent stations have truly
become a "nationwide' presence, reaching 78 percent of the
nation's households, compared to only 54 percent in 1972.
Even more impressive is the fact that no fewer than 75 of
these 114 additional stations have been licensed in the
past four years. Importantly, the vast majority of this
growth has been among "free" independents: 68 of the inde-
pendents licensed since 1970 are general format, advertiser~
supported stations, with most of the remainder comprised of
religious (22) and Spanish language (14) stations. Only 21
independents offer any subscription television (STy) pro-
gramming, usually mixed with "free" programming during part of
the broadcast day.
7. While the ranks of independents have swelled by 114
stations since the adoption of the Rule, network-owned and
affiliated stations (while obviously far more numerous) have
registered a net gain of only ~ station, and their tJHF
stations actually have decreased by 15. Thus, the growth
in number of television program outlets available to the
American public since 1970, and the diversified program
choioes that such' additional viewing outlets offer to the
public, has consisted entirely oe the growth of independent
stations.
PAGENO="0187"
183
2. Growth in Competitive Viability of Independent
Stations
8. Just as important as the growth of independent sta-
tions in raw numbers is their development as a truly attrac-'
tive alternative to network programming. While the networks
clearly continue to dominate the television programming
industry, independents have made significant inroads in
viewer acceptance in recent years. As Table 2 illustrates,
independent station audience shares have increased substan-~
tiaU.y in every viewing "daypart~' in recent years, especi-
ally among adult viewers between the ages of 25 and 54, the
largest television audience "bloc" and the one that accounts
for an overwhelming majority of purchasers of products
advertised on television. Since free broadcast television
consists only of network and independent stations, the cor-
relation between the independents' increased share and the
networks' decreased share is readily apparent.
PAGENO="0188"
184
TABLE 2
INDEPENDENT/NETWORK AFFILIATED STATION
DMA AUDIENCE SEARES, 1979 and 1982
~(TOP 20 MARKET COMPOSITEL~
DMA FIOtJSEHOLIDS ADULTS 25-'54
Share Share
1222. 12~i Change 1979 1982 Change
1. Early Fringe
(6-'7:30 pm, M-F)
INDEPENDENTS 25 27 +2 25 32 +6
AFFILIATES 67 64 -.3 70 64 -.6
2. Prime Accesa
~7:30-.8 pmf ti-F)
INDEPENDENTS 22 26 +4 25 31 +6
AFFILIATES 69 63 -.6 70 63 -7*
3. Prime Time
($~1l pm, ti-F)
INDEPENDENTS 9 11 +2 8 12 +4
AFFILIATES 86 79 ...7 88 83 .5
4. Late Fringe
~11-11:30 p.m. ti-F)
INDEPENDENTS U. 15 +4 12 16 +4
AFFILIATES 85 79 ..4 86 81 -5
5. Late Evening
0.1:30 p~-1 am ti-F)
INDEPENDENTS 10 16 +6 13 19 +6
AFFILIATES 83 73 ]~J 84 77
Source: NSI, February 1979 and 1982.
PAGENO="0189"
185
9. In fact, as illustrated in Tables 3 through 8, the
modest inroads into the networks' once absolute dominance of
America's television system that have been made in recent years
have been forged mostly by the increasingly competitive inde-
pendents, and ~ (as the networks have suggested) by pay
cable and other "new" video technologies. In the periods
depicted, independents draw a vastly greater audience share
than pay cable in all households ~ in pay cable households
over the total viewing day (Table 3), in daytime (Table 4),
early fringe (Table 5), late fringe (Table 6) and on weekends
(Table 7). Indeed, independents have even outdrawn pay cable
in pay cable households in prime time (Table 8).
PAGENO="0190"
% AVERAUE AUDIENCE - TOTAL DAY
ANNUAL TRENDS
Composite HH's Pay Cable Hi-folds Basic Cable H'Holds Non-Cable l-l'Hokls
TV tjsage* 27.9 29.5 29.6 31.8 35.5 34.9 30.7 30.1 27.6 26.8 28.2 28.5
I U~TI
0.5 0.9
0.2 __________ `~2~8
I Pay Cable O~4 ~ii~ 1.09 r-i
II Cable Origin. ~.o 110.3 r-~i ~ 6.0
] Other
On-Air
INTWK
-AFFIL
22.5 22.9 22.0 20.9 21.2 19.9 22.6 23.3 23.0
NTWK
Share** 81 78 74 66 60 57 84 83 81
November `79 `80 `81 `79 `80 `81 79 `80 `81
* May be less than sum of reception sources because of simultaneous viewing
% NTWK / % TV USAGE
1.9
9.7
CHART 0
PAGENO="0191"
% AVERAGE AUDIENCE - WEEKDAY DAYTIME (MON... FRI. 1OAM-4:3Uf~u
`ANNUAL TRENDS
Composite HH's Pay Cable H'Holds Basic Cable H'Holds Non-Cable l-l'Holds
TV fJsage* 25.2 25.7 25.8 27.2 30.0 29.3 29.6 26.2 24.3 23.9 24.7 25.2
1.0
o.iI~ I
01 0.1 0.3. ...LJ~ I r]o.5
* f I Oi7~l 1
_____ r1
~flJ Pay Cable I 4*~I ~`IJ~I 8.D~ .6.4 ~ ~ 4.51 4.7 1
D Cable Origin. 1-~-4----1~---1 5.3'
D Other
On-Air
EJ NTWK
-AFFIL
20.6 20.3 20.0 20.5 19.9 19.0 22.4 19.8 18.1 20.1 20.4 20.7
NTWK
Share** 82 79 78 75 66 65 76 76 75 84 83 82
November 79 `80 `81 79 `80 `81 `79 `80 `81 `79 `80 `81
May be less than sum of reception sources because of simultaneous viewing
`%NTWK/%TVUSAt3E Cl-IARTH
PAGENO="0192"
% AVERAGE AUDIENCE - EARLY FRINGE (MON.-FRI. 4:30-7:3OPM)
ANNUAL TRENDS
Cémposlte HHs Pay Cable H'Holds BasIc Cable HHotds Non-Cable H'Hokls
TV Usage* 46.7 49.0 49.5 54.0 53.5 53.2 49.9 51.2 49.2 45.1 47.5 48.4
I 1.1
o.s 0.9 1 1 I 1.2 ._L. 2.0
1111
0;3
44.9
I Pay Cable ~.. ~ ~i'4~t; .13.9 12.2 12.1 13.3
10.5
I Cable Origin.
I Other
On-Air
J NTWK
-AFFIL
35.3 35.4 34.4 32.3 28.8 27.4 35.9 36.6 36.0 35.5 36.3 35.9
NTWK
Share** 76 72 69 50 54 52 72 71 73 79 76 74
November `79 `80 `81 `79 `80 `81 `79 `80 `81 79 `80 `81
* May be less than sum of reception sources because of simultaneous viewing
%NTWK/%TVUSAGE . CHP~RTJ
PAGENO="0193"
0
% AVERAGE AUUIEI~#~ - LM I ~ rFfl~~13f~' L"~
ANNUAL TRENDS
Composite IIH's Pay Cable HFtolds Basic Cable H'Holds
TV Usage* 26.0 28.2 26.7 28.3 39.3 35.5 27.3 25.8 22.2
Non-Cable HI bIds
25.3 26.7 25.3
I Pay Cable
I Cable Origin.
3 Other
On-Air
I NTWK
-AFFIL
NTWK
Share**
November
0.8
0.7
5.1 0.7
5.9
4.1~
21.9 19.4 17.8
80 75 80
79 80 81
* May be less than sum of reception sources because of simultaneous viewing
*&%NTWK/%TVUSAOE
3.5
22.2 22.51 20.1
~L0~
79
81
CHAFIT I
PAGENO="0194"
% AVERAGE AUDIENCE - SATURLPAY/SUNUAY 1-II~Vi
ANNUAL TRENDS
Composite Ill-I's Pay Cable H'Holds Basic Cable H'Holds Non-Cable Il'Holds
TV Usage* 39.2 43.6 43.6 48.7 55.1 53.4 43.3 45.3 40.9 37.1 41.0 41.5
:~6~
1.4 _____
f~9
0.3I~9 I I 1 ~
~4~J II II ~2
F~ii1o~4I1o.9I 167 15.5 I [1 8.6 9.7
J Pay Cable . 12.8 106
9.7 8.1.
J Cable Origin.
J Other
On-Air
J NTWK
-AFFIL
29.4 32.7 31.5 27.7 30.9 30.3 29.9 32.5 29.1 29.5 33.0 32.4
NTWK
Share** 75 75 72 57 56 57 69 72 71 80 80 78
November `79 `80 `81 79 `80 `81 `79 `80 `81 `79 `80 `81
* May be less than sum of reception sources because of simultaneous viewing
CHART N
PAGENO="0195"
% AVERAGE AUDIENCE - PRIMETIME (MON.-SUN. 8 11 i-~u~;
ANNUAL TRENDS
Composite HI-I's Pay Cable H'Holds Basic Cable H'Holds
TV Iisage* 61.2 64.3 63.3 70.0 13.2 70.6 65.7 65.6 60.5
j
2.4 2.2
ff~i14
1.5 2.3
0.9 ~n
.u~U .~
9.6(
53.6 54.1 51.5
133
2.6
10'7
~3 Pay Cable
El Cable Origin.
El Other
On-Air
D NTWK
-AFFII
NTWK
Share**
November
Non-Cable lit-bids
59.1 62.2 62.0
6.8 8.7 9.5
53.5 54.7 53.7
91 88 87
`79 `80 - ~81
50.5 50.9 45.8 55.7 53.8 49.0
J~8i~J~J .~ ~ :: :~ ~
* May be less than sum of reception sources because of simultaneous viewing
**%NTwK/%TvusAGE
CHART F
PAGENO="0196"
192
10. AS independent stations have garnered increasing
television audience shares, their advertising revenues, and
thus their profitability, naturally also have increased.
Specifically, as indicated in Table 9, the independent sta-
tion share of national and local spot advertising sales has
almost doubled, from 12.7% of the 1970 total to 23.2% in
1982. Consequently, Congress' and the Commission's hopes for
a viable independent television industry are far closer to
becoming a reality than when the Financial Interest and
Syndication Rule took full effect. As depicted in Table 10,
54% of all independents were profitable in 1980, as compared
to only 38% in l974)-~1 Although UHF independents are "still
struggling," as they were at the time of the Report and
Qrd~, 45.7% of independent "U's" are now profitable, com-
pared to only 29.1% of independent "U's" which were prof it-
able as recently as 1974. (Lest the growth in profitable
independents seems ove.rly encouraging, it should also be
noted as a matter of perspective that a significant majority
(67.2%) of network-affiliated UHF stations were profitable in
1981.)
15/ Because of the unprecedented growth of independent sta-
tions in the past few years, and the typical pattern
of independent stations needing several years on the
air before reaching profitability, the total percentage
of profitable independents actually has decreased in
recent years, from a high of .74% in 1977. However,
"established" independents are more profitable than
ever before, and a great many more independents are
profitable now than before the adoption of the Rule.
PAGENO="0197"
193
TABLE 9
TREND OF NATIONAL AND LOCAL
SPOT TV REVENITE (GROSS)
YEAR
TOTAL SPOT TV
TOTAL INDEPENDENT
SPOT TV
Revenue
(in mi,l1ions~
7, change
from prey.
ygar
Revenue
(in millions)
7. change
from prey.
year
INDEPENDENT
SHARE OF
TOTAL
1970
1.692
214.3
12.7,
1971
1.688
-0.2
225.1
+5.0
13.3
1972
1.988
+17.8
274.4
+21.9
13.8
1973
2.162
+8.8
290
+5.7
13.4
1974
2.351
+8.7
343
+18.3
14.6
1975
2.565
+9,1
401
+16.9
15.6
1976
3.354
+30.8
585
+45.9
l7~4
1977
3.598
+7.2
627
+7.2
17.4
1978
4.375
+21.6
780
+24.4
17.8
1979
4.871
+11.3
885
+13.5
18.2
1980
5.471
+12.3
1087
`
+22.8
19.9
1981
6.275
+14.7
1351
+24.3
21.5
1982
7.154
+14.0
1.662
+23.0
23.2
Source: 1974-1980: FCC
1981-1982: INTV estimate from TVB/FCC data
PAGENO="0198"
194
TABLE 10
PROFITABLE STATIONS BY TYPE: 1974-1980
Net~rk Affiliates Indee~iderxts
I~L i UHF T~L
~ L 2~1 JLS7~JL~1JLS~2.
1974 378 (87.3) 64 (57.1) 442 (81.1) 17 (54.8) 16 (29.1) 33 (38.4)
1975 376 (87.0) 59 (51.8) 435 (79.7) 22 (73.3) 27 (51.9) 49 (59.8)
1976 393 (91.4) 80 (68.4) 473 (86.4) 25 (83.3) 39 (63.9) 64 (70.3)
1977 397 (92.5) 89 (76.1) 486 (89.0) 25 (86.2) 38 (67.9) 63 (74.1)
1978 402 (93.1) 96 (82.8) 498 (90.9) 24 (82.8) 40 (57.1) 64 (64.6)
1979 387 (90.4) 89 (76.1) 476 (87.3) 21 (77.8) 33 (49.3) 54 (57.4)
1980 378 (89.2) 78 (67.2) 456 (84.4) 23 (79.3) 37 (45.7) 60 (54.5)
SOURCE: FCC Ar~nua1 Reports, Table 9
PAGENO="0199"
195
11. Thus, it is evident that although network-owned and
affiliated stations continue to dominate the American televi-
sion market, a far greater measure of competition for viewers
exists today than prior to the adoption and effective date of
the Rule. In short, the past decade has witnessed the ascent
of independent stations as viable competitors of network-owned
and affiliated stations and, as explained below, as popularly
accepted conveyors of diverse, alternative television program
choices and viewpoints.
B. The Rule, by Affording Independent Stations
Fair Access to the Most Popular Off-Network
Syndicated Programming, has Made an Impor-
tant Contribution to the Development of
Independent Stations and to Diversity in
Television Programming
12. The previous discussion demonstrates that indepen-
dent television stations have become far more competitive and
prosperous vis-a-vis the three dominant national networks
in the years since the adoption of the Financial Interest
and Syndication Rule. Yet, neither the Commissions ~~ce
initiating its "review' of the Rule, nor the Final Report of
the Network Inquiry Special Staff~" that recommended its
repeal evinced any understanding that the existence of the
16/ Network Inquiry Special Staff, FCC, New Television Net-
works: tntry, jurisdiction, Ownership and Regulation
(1980) (hereinafter referred to as the `Net~crk Inquiry
Report').
PAGENO="0200"
196
Rule has been a crucial catalyst of this beneficial increase
in free television outlets and, consequently, in diversity of
program choices available to the American people.
13. The Report and Order wherein the Rule was formu-
lated found, largely on the basis of data and studies commis-
sioned by the networks themselves, that:
the three national television networks for
all practical purposes control the entire
network television program production pro-S
cess from idea through exhibition. Begause
off-network programs constitute a principal
staple of the nonnetwork prograrn narket,
networks also control the production and
hence, the form and content, o~ a large
share of the syndicated ~roqrams exhibited
by television stations. The networks have
gradually ~- since about 1957 ~- increased
their economic and creative control of the
entire television program process. 17/
14. The dependence of independent stations on of f-
network syndicated programming is well known, and can be
discerned merely by perusing the program schedule of any
independent station. This reality of independent programming
is chiefly a function of (1) the fact that an independent
station must purchase or originate programming for its entire
broadcast day (typically 19 1/2 hours), while a typical net-
work affiliate need only program its own channel for 7 1/2
hours daily; and (2) the particular appeal of popular and re-
cent off-network programs across broad demographic categories
of an independent stations audience. That recent off-network
~/ Report arjd Order at 389 (emphasis added).
PAGENO="0201"
197
syndicated programming is the lifeblood of the independent
station was not lost on the Network Inquiry Special Staff in
its overall survey of the television programming marketplace.
The Network Inquiry Report observed: "Independent stations
use many more hours of, and invest far more heavily in,
syndicated programs [than network affiliates]. Obviously,
this derives primarily from the fact that these stations
lack a network program source."~" The Rep~~t observed
that virtually every independent station with the where-
withal to do so has striven, usually with considerable
success, to increase its ratings (and, consequently, its
advertising revenues and profits) by building its program
day around popular, current off-network series such as
nM*A*S*H," "Happy Days," "Laverne and Shirley," "Barney
Miller," "Three's Company" and similar long-running "hit"
programs. As the Network Inquiry correctly observed:
Independent stations have been able to
garner a substantial share of the added
(advertising] revenues as they have demon-
strated *an ability to compete successfully
with affiliates during certain periods of
the broadcast day, especially between
approximately 5:00 and 8:00 P.M. E.S.T.
Independent station programmers often refer
to this period as their prime time and
schedule their most popular, and expensive,
off-network programs during these hours.
These stations view this as counter pro-
gramming, to offer viewers an alternative
~/ ~etwork Inquiry Report, Vol. 2 at 405.
PAGENO="0202"
198
to local and national news and first-run
syndicated programs usually telecast by
affiliates during the same period. ~/
15. The sustained growth of independent stations in the
past decade, in numbers, prosperity and competitiveness with
network-owned and affiliated stations, is due in no small
part to the independents' freedom of access to the most
popular and most recent off-network syndicated programs. A
notable illustration of the enhanced audience share that a
schedule built upon such programs can achieve is that of
independent station KPBO, Phoenix, Arizona. Table 11 sets
forth KPBO's weekday schedule, which relies principally on
off-network syndicated series. Since introducing such a pro-
gram schedule, KPHO has become one of the highest rated sta-
tions in Phoenix, outdrawing even network affiliates, and in
fact achieved the highest rating of j~ station in the
Phoenix market during the July 1982 ratings "sweeps."aQJ
Affidavit of Richard De Angelis, attached hereto at Appendix
B. Although few independents have duplicated the extraordi-
nary success of KPEO, independent station managers universally
agree that the unfettered availability of the most popular,
most current off-network syndicated programs has played a
leading role in independents' recent ratings gains, and that
19/ Id. at 428 (footnote omitted).
See July 1982 ARE and Nielsen Reports.
PAGENO="0203"
iProgram H-
Schedule
Monday through Friday
6:00AM Great Space Coaster
6:30AM Sgt. Preston
7:00AM Wallace & L.admo
8:00AM Tom & Jerry Show
8:30AM Open House
9:00AM Morning Movie
10:30AM Donahue
11:30AM News 5 Midday
1 2:00PM Dick Van Dyke Show
12:30PM Andy Griffith Show
1:00PM Hogan's Heroes
1:30PM lLove Lucy
2:00PM I Dream of Jeannie
2:30PM Gilligan's Island
3:00PM Bugs, Tom & Jerry,
& Pink Panther
3:30PM Scooby Doo
4~00PM Happy Days Again
4:30PM Mork & Mindy
5:00PM Eight Is Enough
600PM Laverne & Shirley & Co.
630PM M*A*S*H
7:00PM Charlie's Angels
8:00PM Hawaii5-0
9:00PM Bob Newhart Show
9:30PM News 5
10:00PM Barney Miller
10:30PM Soap
11:00PM Benny Hill
11:30PM TheOddCouple
12:00AM Movietime
2:00AM News 5 Final
Friday Night
2:30AM Friday Late Show
4:30AM Friday Late, Late Show
Saturday
6:30AM It's Your Business
7:00AM Open Camera
7:30AM GetltOn
8:00AM EsteEresTu
8:30AM Little Rascals
9:00AM Saturday Morning Movie
10:30AM World Beyond
12:00PM Action Theatre
2:00PM Adventure Theatre
4:00PM Bionic Woman
5:00PM Starsky & Hutch
6:00PM HeeHaw
7:00PM Saturday Movie Special
9:00PM Bob Newhart Show
9:30PM News 5 Saturday
10:00PM Hollywood Greats
12:00AM Late Show
2:00AM News 5 Final
2:30AM Late, Late Show
4:30AM Early Morning Movie
Sunday
6:30AM Johnny Quest
7 OOAM Bewitched
7:30AM Robert Schuller
8:30AM Oral Roberts
9:00AM Mass For Shut-Ins
9:30AM Richard Jackson
10:30AM Wallace & Ladmo Presen
Comedy Greats
12:00PM Million Dollar Movie
2:00PM Sunday Afternoon Movie
3:30PM Wild Kingdom
4:00PM Bionic Woman
5:00PM The Invaders
6:00PM Buck Rogers
700PM Sunday Movie Special
9:00PM Bob Newhart Show
9:30PM News 5 Sunday
10:00PM The Honeymooners
10:30PM Fight Back
with David Horowitz
11:00PM Harry-C
12:00AM News5Rnal
199
I KP~C TEL~'/TSC~4 .~C16 MCRT'I 3L,~CX CANYON ~C 3CX 2C100 ~YOENIX. ARIZONA wCOB ~A-
PAGENO="0204"
200
continued access to such programming is essential to sustain
their recent successes and to permit further development.
The importance of such continued access is attested to by the
Statement of over 50 independent station managers in support
of the Comments of the Committee for Prudent Deregulation, of
which IN'TV is a member. That Statement, which is being filed
concurrently in the Comments of the Con~ittee, is incorporated
herein by reference.
16. It is equally apparent that independent stations
today continue tohave freedom of access to early episodes of
current first-run network programs because the networks are
unable to prevent such popular programming from reaching
their independent competitors. The networks have not reacted
gracefully to even the slightest semblance of competition for
the American television audience, and have become increasingly
transparent about what they would do if given the opportunity
again to own ~yndication rights and financial interests in
programs. Even as the networks profess, in the context of the
instant proceeding, that their re-entry into the program
syndication business would not affect the availability of the
most popular network series to independent stations, their own
public and private statements belie these assurances and
crystallize the "inherent conflict of interest" that would
recur if the Commission were to repeal the Financial Interest
and Syndication Rule. For example, a recent article in Variety
PAGENO="0205"
201
attributed the following views to B. Donald Grant, President
of CBS Entertainment:
Producers should be aware it makes a net~
work uneasy "when a show such as `Mash' is
on as many as seven times in one day in
some independent markets, as well as on
the network (CBS). It sure doesn't help
it," he said. . . . Because of government
regulations, networks are not allowed to
have any real say on syndication, he
noted. . ..
17. Even more to the point, if less veiled, is the
written statement of the Chairman of the CBS Television Net-
work Affiliates Association, who in a letter to CBS affiliates
enclosing a ballot soliciting their views on whether to sup-
port the network's effort to obtain repeal of the Rule in
the instant proceeding, advanced the following "Reasons for
Affiliates to Favor Repeal":
3. If the networks participate in or influence
syndication of network programs and have a
share of downstream profits, this may impact
premature syndication of network re-runs that
are being made available to independent sta-
tions and are competing with first-run network
shows carried by Affiliates. 22/
CBS' appeal to greed has not gone unnoticed by its affili-
ates. In early filed comments in this proceeding, CBS
21/ D. Kaufman, "Grant: Rush to Syndie Short-Sighted --
Indies Benefit at Nets' Expense," Vari~y, April 28,
1982, at 51.
22/ Letter of James C. Babb, Jr. to CBS Television Network
Affiliates Association, "CBS Affiliates Option Paper on
Repeal Of Network Financial Interest And Syndication
Rules," Oct. 18, 1982.
PAGENO="0206"
202
affiliate ~IEN, Eureka, California, predicted that if the Rule
were deleted, "(p]remature syndication of ne~twork reruns made
available to independent stations would be slowed. . . .
18. The networks apparently deem the syndication of a
series to independent stations to be "premature' if the
program is still popular enough and current enough to provide
significant competition to network programming, whether the
program is used in early fringe to "counter prdgram" against
network and local news, durinq prime time, or even in late
fringe in competition with network-fed late might programming.
Indeed, given the accelerating trend toward more network-
supplied programming and less affiliate-supplied programming in
all dayparts, the networks have a strong incentive to with-
hold off-network programming that may attract substantial
audiences to their competitors in virtually every period of
the broadcast day.
19.. In truth, the networks seem to define "premature"
syndication as the distribution of reruns of popular series
at a time when they still appeal to audiences. The Commis-
sion must recognize that, if it repeals the Rule, it will not
only be fortifying the networks' overwhelming supremacy over
pay television and other emerging services, but also will be
restoring a significant anti-competitive, anti-diversity
23/ Letter filing of KIEM-TV in BC Docket No. 82-345,
Dec. 22, 1982.
PAGENO="0207"
203
weapon that can, and evidently will, be wielded by the net~
works to retard the development of competitive independent
stations, by delaying the availability of programs that have
significant audience appeal. As has been demonstrated time
and again, network conduct in pursuit of maximum ratings
rarely has been tempered by a public-spirited interest in
diversity or viewer welfare. If anything, recent events
compel an opposite conclusion, as the following letter to
the editor of Broadcasti~ç illustrates:
EDITOR: As program director for WNtJV-TV
channel 54, a new independent UEP station
in Baltimore, I share Bob Keeshan's con-
cern over the decline in children's pro~
graming (BROADCASTING, Aug. 2).
WN~JV~.TV is deeply concerned about
the messages children get from television.
And since the local CBS affiliate has
chosen not to run Captain Kangaroo, it
was our feeling that channel 54 would
make a fine home for the Captain, Bunny-
rabbit and all their friends.
However, after contacting Eunice
Lewis, district supervisor for affiliate
business at CBS, we were informed that
we could carry the program -- but not at
any time when CBS was feeding network
programs. "We don't compete with our-
selves," Ms. Lewis told me.
This meant that either WNUV-TV
could run Captain Kangaroo at its current
graveyard slot at 6:30 a.m., or after
the kids have left fcr school at 9.
So because of CBS's inflexibility,
the children of Baltimore will not have
the opportunity of being able to enjoy
this fine program. We sincerely hope
PAGENO="0208"
204
that one day soon CBS will reconsider
this restrictive practice. -- Mark
Salditch, director of programing, WNtJV-
TV Baltimore. 24/
20. The preceding statements of network and affiliate
executives, and the above-described pattern of network con-
duct, underline the central and very real danger, eliminated
by the adoption of the Rule, which would be reimplanted by
its repeal: that the networks would favor their affiliates
and, even more assuredly, their wholly-owned and operated
statiøns, in the syndication of the most coveted prime time
programs, through such behind-the-scenes devices as advance
negotiations and discriminatory price concessions.
21. In fact, the Rule is far more essential today than
it was a decade ago. The record shows that independent sta-
tions have developed the financial ability to compete with
network ~o&o's'T and affiliates for premium syndicated pro-
grams only since the mid-l970's. Thus, the importance of
syndication and who controls it in the overall balancing of
relationships between network-owned and affiliated stations
24/ Broadcasting, Aug. 16, 1982, at 18. ~ recent example of
the possible exercise of network market power to preserve
ratings dominance without regard for the public's inter-
est in diverse television program choices is CBS' alleged
threat to cancel affiliation agreements with one or more
stations if the station(s) aired the independently pro-
duced (and critically acclaimed) adaptation of Charles
Dickens' ~Nicho1as Nickleby" in place of network pro-
gramming on January 10~l3, 1983. See "Mobil, CBS Swap
Angry Words Over `Nicholas Nickleby'," Stall Street Journal,
Dec. 23, 1982, at 14.
PAGENO="0209"
205
arid independent statio~is has intensified dramatically since
the Rule was adopted. In 1970, as the Network Inqui~ry Report
observed, the economic dominance of the networks was such
that they shad no need to resort to exclusionary practices to
forestall competitors."~-~~'
22. Now, the calculus has changed somewhat, as indepen-
dent stations have become able to compete with the o&o's and
affiliates -- in a fair syndication marketplace, in arm's-
length dealings with independent syndicators -- for the most
appealing off-network programs. Absent the Rule, the networks
could favor their owned and affiliated outlets in the distri-
bution of such programming, in a wide variety of direct arid
indirect (and, importantly, undetectabl~) ways. The current
marketplace testifies that the networks have far more power-
ful incentives to use their power today than in 1970, and
their recent conduct, statements and broad hints evince that
they will use this power to favor their proteges and fore-
stall their competitors.
23. Finally, the gains in profitability that have been
made by independents in the past decade, in large part because
of their freedom of access to popular off-network syndicated
series, have provided many independents with the financial
wherewithal to participate occasionally in ad hoc "networks"
25/ Network Inquiry Report, Vol. 1 at 521 (emphasiS added).
32-540 O-84--14
PAGENO="0210"
206
to exhibit high quality first~run programs and mini~series
such as "Nicholas Nickleby," "A Woman Called Golda" and
"Edward the King" on a national basis. This healthy devel-'
opinent in the television industry, which unquestionably
furthers the richest kind of diversity of program concepts
as well as provides alternative viewer choices, is the
direct result of independents' ability to attract large
audiences and increased advertising revenues to their
"regular" program schedules.
24. The Rule has thus achieved at least a modicum of
success in fulfilling one of the Report and Order's primary
goals in adopting it, ~ to "more nearly achieve . . . a
television broadcast structure which is served `by the widest
practicable variety' of choice of programs available for
broadcasting. "~-~" At the same time, the Rule has
guaranteed independent television stations fair access to
program sources by removing the networks from the "inherently
undesirable" conflict of interest of "selling programs to
independent stations in competition with their own network
programs on affiliated stations. . . . ~ The demonstrable
public interest benefit is that more television stations are
showing diversified programming that the public most wants to
see, at the times when the public most wants to see it.
j~,' Report and Order at 400.
27/ Id. at 394.
PAGENO="0211"
207
III. REPEAL OF TEE RULE WOULD BE INIMICAL TO TEE PUELIC
INTEREST IN COMPETITION AND DIVERSITY IN TELEVISION
PROGRAMMING V
A. The Enduring Public Interest Basis of the Rule
25. As the Financial Interest and Syndication Rule has
played an important role in furthering competition (more viable
stations with higher audience ratings and advertising revenues)
and diversity (increased, and more attractive, program choices
and enhanced ability to offer expensive first-run syndicated
programming) in the American television industry, so the repeal
of this prophylactic structural regulation would be contrary to
these paramount communications policy objectives. Repeal of
the Rule would enlarge the overbearing market power of a
three-firm oligopoly that owes its existence to the Commis-
sion's thirty-year old channel allocation policy.
26. Competition and diversity in television service are
not vague, catch-all concepts to which Congress and the Com-
mission have merely accorded polite lip service. Instead,
the Financial Interest and Syndication Rule was specifically
designed "to foster free competition in television program
markets."~1" In affirming the Report and Order, the United
States Court of Appeals for the Second Circuit observed that
the Rule is "aimed at decreasing network dominance and curbing
potential competitive restraints."~-~' And in the Commission's
28/ Notice of Proposed Rulemaking in Docket No. 12782, 45
FCC 2146, 2147 (1965).
29/ Mt. Mansfield Television, Inc. v. FCC, 442 F.2d 470,
486-87 (2d Cir. 1971).
PAGENO="0212"
208
most recent interpretation of the Rule, it reaffirmed the
underlying conclusion that demanded its ameliorative action:
that it was not desirable for so few enti-
ties to have such a degree of power over
what the American public nay see and hear
over so many television stations; that a
diversification of economic interest and
power in this area is a cardinal principle
of the public interest standard of the
Communications Act.
Networks Can Buy Nonbroadcast Programs, 87 FCC 2d 30, 32
(1981), aff'd sub nan. Viacom Intern. Inc. v. FCC, 672 F.2d
1034 (2d Cir. 1982).
27. The Commission's unwavering policy to foster compe~-
tition and diversity in television has been equally prominent
in its authorization of new television services such as cable
television, low power television and direct broadcast satel-
lites)-~/ And, as indicated earlier, it is "the independent
stations, and particularly the still-struggling tIHF indepen-
dents upon which Congress and the Commission have relied
for a fully competitive nationwide television broadcast ser~
because independent broadcast outlets are the
best, and virtually the only, free television alternatives
to the networks.
28. The reason for the Commission's efforts to encourage
competition in television broadcast service is simple: an
30/ See, ~ Amendment of Part 76, 52 FCC 2d 1, 43 (1975);
Direct Btoadcast Satellites, 90 FCC 2d 676, 680 (1982);
Low Power Television Service, 51 RR 2d 476, 486, appeal
pending sub non. Black Citizens For Fair ~4edia v. FCC,
No. 82-1549 (D.C. Cir., filed April 26, 1982).
31/ Report and Order at 394.
PAGENO="0213"
209
inadequate degree of competition to the three broadcast
networks has existed to date. As the Network Inquiry Report
concluded:
there are at present only three full-
time nationwide networks principally because
of FCC policies. Since 1952, the Commission
often has acted, perhaps inadvertently, to
prevent additional networks from serving
American viewers. Whatever economic power
ABC, CBS and NBC ppssess is in large measure
a result of Commission policies that p~g~
tected them from potential competitors.
Consequently, the networks have had no need
to resort to exclusionary practices to fore-
stall competitors. ~/
29. Baying ordained the evolution of a broadcast tele-
vision system dominated by three companies, it cannot seri-
ously be asserted that the Commission's maintenance of a
structural regulation that has loosened but not measurably
affected that dominance is anti-competitive or contrary to
the principle of a free marketplace. Rather, the Commission
recognized the Rule to be a necessary measure to permit a
modicum of competition in the television program supply and
distribution markets. It is elementary that measures which
assist competition and diversity in this industry upon which
the American people so heavily depend for both information
and entertainment are in the public interest, and that
actions which would tend to perpetuate or fortify an oligopoly
situation in that industry are not.
32/ Network Inquiry Report, Vol. 1 at 521 (emphasis added).
PAGENO="0214"
210
30. As demonstrated above, the Rule furthers competition
and div~ersity in television by permitting independent sta~
tions unfettered access to the types of programming that
enable them to compete effectively. Moreover, this new and
healthy upsurge in competition has had another important and
beneficial effect: it has exerted a stabilizing p~essure on
television advertising costs. Table 12 depicts the compara~
tive magnitude of television advertising cost increases
since 1976 in markets with and without a significant number
of independent stations. It shows that advertising price
increases have been significantly smaller in markets that
have a strong independent station presence, because there
are more outlets competing for advertising dollars. Since
product advertising costs are invariably passed through to
consumers of the products, it is evident that the competitive
pressure of independent stations on advertising cost increases
carries with it a tangible consumer benefit, in the form of
lower product prices than would otherwise be the case.
PAGENO="0215"
211
*1
TABLE 12-
Sample of Competitive Cost Per Point
Station Grouping: 1976 1982 % Chang~e
I. Top 10 Markets (6)
(3+Independents) Prime $186 $264 + 41~9
Fringe 62 97 + 56.5
II. Top 20 Markets (10)
(2 Independents) Prime 80 127 +. 58.8
Fringe 27 52 +: 93.0
III. Top 30 Markets (7)
(1 Independent) Prime 44 88 +100.0
Fringe 18 38 +111.0
~/ Source: Media Market Guide, 4th Quarter 1976/1982.
31. This conclusion is strongly confirmed by independent
studies performed by the Association of National Advertisers
(DANA"). MA has already registered its support for retention
of the Rule, based on its central finding that:
In those markets with high levels of vjes~ij~g
to independent stations, the cost per thousand
viewers paid by ty~1ca1 advertisers ranged
from 20% to 60% lower than the cost paid in
markets with fittle or no independent station
viewing. ~/
32. Thus, America's major television advertisers recog~
nize that the presence of strong, competitive independent
stations is in the public interest, for without such competi-
tion, "the price of televisi~on advertising -- a cost which
33/ Statement by the Association of National Advertisers,
Inc., Jan. 21, 1983, at 6 (emphasis in original). See
~ "Presentation of A.N.A. Position With Regard TO
Financial Interest Rule," INTV Annual Convention,
Jar.. 18, 1983, attached hereto at Appendix C.
PAGENO="0216"
212
\the public, directly or indirectly, must eventually bear --
~uld increase."~~1 Therefore, these advertisers, who deal
on~\constant basis with both networks and independents, urge
that the Rule should be retained.
B. Barmful Consequences of Repeal of the Rule Upon
Independent Stations
33. As noted earlier, independent stations have, in the
past decade, risen from relative obscurity to become the most
formidable competitors of the networks and their affiliates.
Indeed, the independents enjoy far greater total audience and
viewer share than pay cable or any other non-network video
medium. In short, the independents' growth has been at the
expense of the networks, and has been attributable in large
measure to the free availability, through arm's-length deal-
ings with independent syndicators, of the "best" (j~, the
most popular) off-network progrants.1~1 As demonstrated supra
pp. 27-29, the networks have all too clearly delineated their
intentions should they be permitted to re-enter the domestic
program syndication market. In light of these manifestations
of intent, it would be passing naive, not to mention a grave
disservice to the public interest, blithely to assume that the
networks would not use their control or significant leverage
34/ Statenent by the Association of National Advertisers,
Inc., at l1
~ Network Inquiry Report, Vol. 2 at 423; supra text
accompanying note p 24, n.l9.
PAGENO="0217"
213
in the off-network syndication market to restrain the grcwth
and viability of their foremost competitors. Instead, all
available evidence indicates that repeal of the Financial
Interest and syndication Rule would reinstate one of the
primary evils that the Couixnissiori's 1970 ~port and Order
documented and sought to eradicate)-~'
34. If the networks were to withhold or delay syndica-
tion of the most popular network series, the long-term resu~.t
could only be a weakening of independent station schedules
and viewing shares and, more pertinent in the context of the
Commission's public interest goals, a significant reduction
in the quantity and quality of alternative television program
choices available without cost to the American public. If
off-network series with the broad audience appeal of ~M*A*S*H"
and "flappy Days" were replaced by less popular, more shopworn
36/ The Commission recognized that it would not be satisfac-
tory to the public interest to wait until the syndica-
tion market was completely dominated by the networks
before taking corrective action. Indeed, the Commission
did not expect that the Rule would make the syndication
or program supply market perfectly competitive, or that
the first-run syndication market would immediately
flourish. As the court in Mt. Mansfield noted, it "is
irrelevant that the rule is aimed at potential rather
than actual domination or restraints, or that the Com-
mission is not certain that the developments forecast will
occur if the rule is not enacted." Instead, the court
observed, the Commission's purpose was to "`plan in
advance of foreseeable events, instead of waitthg to react
to them.'" 442 F.2d at 487 (quoting United States v.
Southwestern Cable Co., 392 U.S. 137, 176-177 (1968)).
The Rule, then, was designed to prevent a deteriorating
state of affairs from worsening.
PAGENO="0218"
214
programming such as "My Favorite Martian" or "Bewitched" or
by old movies, viewers clearly would be unfairly arid need-
lessly deprived of attractive alternative program choices to
the networks' fare. Indeed, if the networks successfully
recapture the ratings points that independent stations have
gained in the past decade, the ultimate result could be fewer
free television alternatives for the public at large and a
resulting increase in demand for pay television programming.
35. Moreover, the predictable erosion in the competitive
position of independent stations that wotild ensue if the net-
works were able to warehouse their top programs or to limit
"premature" syndication (i.e., release to syndicatior~ when
the program is still sufficiently popular, current and topical
to draw ratings points away frørn first-run network series)
would starve the independents of their principal source of
revenue. Consequently, independents would be denied the
financial ability to acquire such high quality first-run
syndicated programming as "A Woman Called Golda" and other
Operation Prime Time productions. They might also be
severely limited in their ability to purchase popular access
period programs such as "P.M. Magazine" and "Entertainment
Tonight."
36. Finally, it is evident that whatever small potential
may exist for the formation of a fourth free, over-the-air
national television network depends crucially on the partici-
pation of strong independent stations such as those that
PAGENO="0219"
215
occasionally have been successful in forming "~ fl' net-
works in order to exhibit a particular program or mini-series
nationally.~-~ To the extent that the competitive posi-
tion of independent stations is eroded, the prospects for the
creation of a fourth network, and the immeasurably beneficial
increase in program choices, sources and ideas that such a
network would provide, would disappear, and the domination of
free television by three entities would be all but assured
in perpetuity. Such a result clearly would be destructive of
the long recognized public interest in having access both to
alternative program choices and to more diverse types of
programming.
37. In short, repeal of the Rule most likely would
result in (1) less desirable program choices for the public;
(2) diminished program servicg to the public; (3) even less
credible competition in broadcast television for CBS, ASC
and NBC; (4) higher advertising prices in many markets; and,
eventually (5) higher consumer product prices. INTV submits
that ~ of these consequences, let alone all of them, would
constitute an extremely high price in terms of the public
interest generally and, more specifically, in consumer
welfare, for the singularly dubious goal of promoting the
37/ See Network Inquiry Report, Vol. 1 at 168-171, where
it is posited that a new network comprised of existing
and new independent stations on presently assigned onan-
nels might possibly be financiallyfeasible.
PAGENO="0220"
216
`free marketplace" by assisting and fortifying a three~firm,
government-created oligopoly.
C. Harmful Consequences of Repeal of the Rule Upon
the Television Program Su~~ly Market
38. The Commission obviously did not adopt the Financial
Interest and Syndication Rule solely out of concorn for
independent stations. Indeed, the Rule is the culmination of
a generation of study of network practices with respect to
the television program supply industry. However, the Commis-
sion recognized the interrelationship in the impacts of net-
work program procurement practices upon television program
creators and producers on the one hand and independent sta-
tion purchasers of off-~network programming on the other:
the three national television networks for
all practical purposes control the entire
network television program productidn pro-
cess from idea through exhibition. Because
off-network programs constitute a principal
staple of the nonnetwork program market,
networks also control the production and
hence, the form and content, of a large
share of the syndicated programs exhibited
by television stations. The networks have
gradually -- since about 1957 -- increased
their economic and creative control of the
entire television program process. ~/
The Report and Order concluded:
to the extent that close network super-
vision of so much of the Nation's program-
ing centralizes creative control, it tends
to work against the diversity of approach
which would result from a more independent
38/ Report and Order at 389.
PAGENO="0221"
217
position of producers developing programs
in both network and syndication markets. ~/
39. The Commission reasonably concluded, on the basis
of network-'commissioned studies, that there existed a strong
correlation between the networks' retention of financial
interests and syndication rights and the extent of network
control over the creative process in program production. By
helping to loosen the "centralization of control" over program
creativity in the networks, the Rule has contributed to
diversity in television programming sources as well as pro-
gram outlets, to the benefit of independent stations and the
public at large.
IV. REPEAL OF THE RULE IS NOT NECESSARY TO ASSURE
THE CONTINUED VITALITY OF TEE THREE DOMINANT
TELEVISION NETWORKS
40. Tables 2 through 10 herein, discussed sup~ pp. 9-
21, clearly indicate two undeniable facts: (1) that America's
independent television stations have become more competitive
and profitable since the adoption of the Rule; and (2) that
the three national television networks continue to dominate
broadcast television service in the United States. The Rule,
then, has not crippled the networks; rather, it simply has
imposed a structural restraint on the overwhelming power of
the networks in the program supply market. The networks,
however, insist that the Rule must be repealed if they are to
be able to continue to compete with cable and pay television
39/ Id. at 394.
PAGENO="0222"
218
and other emerging video technologies for programming. They
plead that the Rule unfairly prevents them from competing in
the free marketplace, and that the survival of free televi-
sion itself is at stake in the instant proceediri~. As the
principal spokesman for free mon-network television stations
in the United States, INTV submits that these claims are
utterly devoid of merit.
41. First, as demonstrated earlier, broadcast television
is not a "free marketplace," but is dominated by a three-firm
oligopoly that controls the television program market arid the
national advertising market. Nevertheless, the networks
contend that competitiom from the "new media" has or will
become so overwhelming that, unless the Rule is repealed
immediately, they soon will be unable to compete with pay cable
and other video services for first-rum programming. The
networks project losses in potential audience and audience
shares for free television, coupled with a massive exodus of
audiences to pay services, and allege that unless they are
permitted to acquire syndication rights and profit shares in
independently produced programs, they will be unfairly pre-
vented from obtaining the minimum amount of revenue necessary
to protect the free television system from pay television
"theft0 of high quality first-run programs. In the same
breath, the networks claim that their share of financial
interests and syndication rights was insignificant prior to
the Rule and would continue to be insignificant if it were
PAGENO="0223"
219
repealed. Finally, the networks pledge that they would not
restrict the availability of off-network programming to
independent stations because such a practice would be con-'
trary to their economic interest.
42. The networks' pessimistic predictions before the
Commission and their affiliates during the course of this
proceeding are glaringly inconsistent not only with external
projections, but with their own bullish estimates as show-'
cased in other forums. For example, in November 1982, NBC
network management warned affiliates that "pay television
will economically overtake the networks" by 1986 and in 1990
will surpass network revenues by $3 billion annually.~'
ABC affiliates were presented with estimates that network
audience would decline from 39.4 million in l98~ to 39.1 mil-
lion in 1990, and that the network audience share, which had
"fallen" to 81% in 1982, would drop to 64% by l990.~'~
43. In sharp contrast to these bleak forecasts are CBS
and ABC forecasts prepared for other audiences. A CBS!
Broadcast Group analysis projects that pay cable's total
prime time share in 1990 will be 11% to the networks' 70%, and
~Q,/ Minutes of Presentation of NBC Management to NBC Affili-
ates Board of Directors, Nov. 7-9, 1982 ("Repeal of the
Financial Interest and Syndication Rules: The Critical
Facts," National Broadcasting Company, Nov. 1982, at
2).
~j/ Summary of Remarks of Everett H. Erlick, Senior V.P.
and General Counsel, ABC, Inc.: ("Financial Interest/
Syndication Rules," ABC-TV Affiliate Closed Circuit,
Nov. 29, 1982, at Table 1).
PAGENO="0224"
220
that "(ejven with a share loss for the network affiliates,
arid gains for the other sources, the network homes delivery
is more than twice the size of all other sources combined,
and the actual network gain 5,000,000 homes -- is the
largest of any source.'ia" CSS estimates that network
revenues in 1990 will be $15-~20 billion, compared with total
pay cable revenues of $6~-8 billion, and adds: "It should be
noted that, while the network number is divisible by three,
* * . (pay cable] totals will be fractionalized much
further."~~' Finally (and of particular interest to INTV),
CBS predicts that pay cable will reach only 6.7 million homes
in 1990, and that, in fact, "shifts of programming from
independent stations to cable will provide more available
audience for network affiliates.
44. Meanwhile, the President of ABC Television, in a
November speech to the Broadcast Advertising Club of Chicago,
projected that "both local and network television revenues
(will] grow from well over $12 billion today to $35 billion
in 1990. We expect cable revenues in 1990 to equal about
seven percent of that total, and pay cable revenues to reach
42/ CBS/Broadcast Group, `The Road to 1990,' at 29-30.
43/ Id. at 32 (emphasis added).
44/ Id. at 28 (emphasis added).
PAGENO="0225"
221
about 14 percent ($4.9 billion1."~' Finally, ABC'S 1981
(and most recent) Annual Report to Shareholders stated that
"the network achieved record revenues and profits in both the
fourth quarter and full year 1981." CBS' Annual Report
advised that "For the CBS Television Network Division
1981 was an excellent year. Record revenues and profits were
achieved. . . ."~-~1' NBC's view of the future was summarized
in the headline of a May 17, 1982 News Release: "Commercial
Networks Will Dominate Communications Media In Future, Accord-
ing To `State Of The Media' Data Shown To NBC Affiliates."
45. Of similarly dubious authenticity are network claims
that pay television services will soon be able to outbid free
television for first-run "network quality" progroms. In
fact, no network entertainment series has yet been "stolen"
by pay cable,~2-~' and the pay networks themselves openly
acknowledge that they cannot compete with the networks in the
development of new entertainment series.
45/ Remarks of John C. Severino, President, ABC Television,
Nov. 17, 1982, at 9.
46/ NBC profits declined during this period, but Thornton
Bradshaw, Chairman and Chief Executive Officer of RCA,
stated on April 12, 1982 that "If we were just average
in ratings we would have an upswing in earnings of $175
million."
47/ Reported attempts by pay cable to outbid the networks
for "Hill Street Blues" and "Taxi" (which was cancelled
by ABC and subsequently picked up by NBC) obviously
were unsuccessful. "Paper Chase," which reportedly will
air on cable in the future, was discarded by a network
several years ago after one-half season.
32-540 O-84--15
PAGENO="0226"
222
46. The networks would have the Commission believe that
they desperately need syndication revenues and profit shares
in order to beneficently plow those revenues back into the
free television system and thus assure its continued preemi-
nence; yet the networks and their affiliated companies have
in recent years invested most heavily not in their broadcast
properties, but in the very services that they say are primed
to swallow them whole. For example, CBS, in addition to
investing scores o~ millions in its short-lived "CBS Cable"
Network, is a pay cable programming partner, a cable system
owner, a DBS system permittee, a videotext venturer, a pro-
posed multi-channel. MDS programmer in the nation's largest
markets, a videodisc manufacturer, and a feature film partner
with Home Box Office and Coli.unbia Pictures. ABC supplies
prograxnmthg to the principal cable sports network, ESPN, is a
partner in a cable news network, has established a subscription
television (S'rv) "Home Video Network" over its owned and
affiliated stations, and through ABC Video is involved in a
number of pay cable and other video delivery ventures.~~1
NBC is a videotext developer and videodisc venturer and its
parent, RCA, is the primary cable satellite operator, a 50%
partner in The Entertainment Channel, a pay cable network, a
48/ See "ABC's Wide World of Risks," Washington Post,
Jan. 16, 1983, at Fl.
PAGENO="0227"
223
DBS permittee, and a videodisc and videocassette equipment
manufacturer, In fact, as Table 13 illustrates, the networks
are unrestrained from entering practically any communications
field, and are totally unrestrained in this respect under the
terms of the Financial Interest and Syndicatron Rule. Rather
than "saving" the networks from pay television, repeal of the
Rule would permit the networks to reap oligopoly profits from
broadcast television in order to invest even more heavily in
the lucrative new technologies.
47. Stripped of its "disinformation" aspects, the net-
works' campaign to secure rescission of the Rule is in truth
an effort to maintain the oligopolistic structure of the
television industry, rather than a fight for their "survival."
Their own worst scenarios would see a 1990 network share of
60-'65 percent of the American television audience less
than their current 80-'85 percent share, but still enough to
qualify them as oligopolists.
PAGENO="0228"
Permitted Network Activities
Network broadcast program exhibition
Foreign syndication of network produced
programs
Foreign syndication of foreign produced
programs (subject to separate negotia-
tion requirement o~ DO~ consent decrees)
U.S. and foreign cable distribution
U.S. and foreign videocassette distribution
U.S. and foreign videodisc distribution
Local broadcast exhibition through owned
and operated stations
Direct broadcast satellite program
distribution
Mu.ltipoint distribution service (MDS)
program distribution
Theatrical n~vie production
TV program production
U.S. and foreign theatrical mstion picture
distribution
Program Riqhts That May Be Acquired
From U.S. Ptoducers (Subject to
separate negotiation requirements
of D3~ consent decrees, where
applicable
Network broadcast rights
Local broadcast rights for network owned
and operated stations
Pay TV rights
Videocassette rights
Videodisc rights
Cable TV rights
085 rights
t4DS rights
SIV rights
Merchandising rights (T-shirts, toys, etc.
based upon network licensed programs)
Theatrical exhibition rights
"Spin-Off" rights (rights to any program
based on cast and/or plot of program
licensed by network)
Exclusivity rights (exclusive rights to
exhibit programs during network license
term)
Artistic approval rights (rIghts to control
cast, script and all other creative ele-
ments of programs commissioned from inde-
pendent producers)
Renewal rights (right to order new episodes
of series licensed by network at preset-
prices)
U.S. broadcast syndication
Foreign syndication of
programs acquired from U.S.
producers
ProqramRiq~ts That May N~
Be Acquired From U.S.
Producers
TV broadcast syndication rights
224
PEBMITT~ ~ND PRCHIBITED NET~BK ACrIVITIES
~ THE FINANCIAL ~TEREST~)ND SYNDICATIC~ RULE
Prohibited Network Activities
PAGENO="0229"
225
48. Finally, the networks claim that their re-entry
into the domestic syndication market would have no negative or
anti-competitive effect on that market. The most ubiquitous
network claim is to the effect that "the honest truth is that
all three networks combined totalled only about 9 percent of
the domestic syndication market in the period before the
rules were adopted. . . . lIlt is ludicrous to believe the
networks could control the syndication market in the `80's
when they had less than 10% of it in the
49. However, the 1969 Arthur D. Little, Inc. report~-~'1
that was commissioned by CB$ and NBC and utilized by the
Commission found that, during the 1960's, the networks held
domestic syndication rights in 23.0 percent to 31.2 percent
of independently proauced entertainment series hours,~ and
syndication profit shares in 57.2 percertt to 74.3 percent of
such hours.~~ The ~~p~rt and Ord~ observed that "revenues
accruing to networks from syndication activities are substan-
tial and are increasing,"~' and that "networks accepted vir-
tually no entertainment program for network exhibition in a
49/ NBC Presentation to Affiliates, Nov. 1982, at 7.
~Q~/ Television Program Production, Procurement, Dis-
tribution and Scheduling: Data Relating to ?ro-
posals for Rule Making in FCC Docket No. 12782
(Arthur D. Little, Inc., 1969).
~ j~. at 52, Table 21.
52/ Id. at 54, Table 23.
53/ Recort and Order at 392.
PAGENO="0230"
226
5-year period in which they did not have financial interests
in syndication and other subsequent use. . . . There-'
fore, there was ample support for the Commission's determina-~
tion that "network judgment in choosing new programs i~
substantially influenced by their acquisition of subsidiary
interests in the programs chosen."~'
50. The networks' contention that they did not actively
pursue syndication rights and financial interests in programs
prior to the Rule is fantasy, and their assurances that they
would not be heavily involved in syndication if the Rule were
deleted, in view of their own s~tatements and their current
all-'out campaign to secure its repeal, seem to ring hollow.
Repeal of the Rule would give a regulatory blessing to the
"significant conflict of interest" inherent in the networks'
role as syndicators of programs to their principal competitors,
the indèpend-e-n-t stations. It would be grossly unreasonable for
the Commission to conclude that this inherent and harmful
conflict of interest would not recur if the Rule were deleted.
V. CQNCLtJSION
51. Contrary to the Network Inquiry Staff's perception
that "no new outlets or viewing options are encouraged by the
54/ Id. at 393.
55/ Id. at 394 (footnote omitted).
PAGENO="0231"
227
rule,"~-~' INTV submits that precisely the opposite is
true: scores of new advertiser-supported television outlets
and g~reat~y enhanced viewing options have been encouraged by
the Rule.
52. In a nutshell, the Rule has played a significant
role in enabling independent stations to compete fairly and
freely for the recent off-network syndicated programming that
most appeals to television viewers. The free availability of
these programs has enabled independents to grow larger and
stronger, in numbers, audience shares and profitability.
Finally, it has allowed independents to offer the programs
that viewersrnost want to see at the times they most want to
see them, to become better able to purchase high quality
first-run syndicated programming, and to exert a positive
influence in stabilizing advertising prices and, resultantly,
consumer product costs. The Rule has, quite simply, con-
-tributed to competition and diversity in free television.
53. ~epeal of the Rule would not be consistent with the
Commission's proper mandate to deregulate the television in-
dustry in order to steer clear of decisions better left to
competiti~ze forces in a free marketplace. Instead, repeal of
the Rule would insulate the networks from what little compe-
tition exists today in that marketplace, to the detriment of
56/ See Notice ~j 31.
PAGENO="0232"
228
independent stations, program suppliers and, most importantly,
the public interest in diversity of program outlets, sources
and ideas. By any reasonable yardstick, the three national
networks are robust and will remain so for many years to come.
The networks have demonstrated repeatedly over the course of
a generation that they can compete in the marketplace more
effectively than any other communications medium. That mar~
ketplace is best served by retention oe a low cost, effective
rule that furthers, rather than inhibits, competition in
broadcast television.
Respectfully submitted,
ASSOCIATION OF INDEPENDENT
TELEVISION STATIONS, INC.
By -. ..
J. Latxránt Scharff
James M Smith
PIERSON, BALL & DOWD
1200 18th Street, N.W.
Washington, D.C. 20036
Its Attorneys
January 26, 1983
PAGENO="0233"
229
AcrivE ~ERS
1~AYtJ Spo~cane `~3DRB Louisville
I~}~ S~ Francisco WFBT Mirx~e~olis
KCJX El Paso WFFL' Fot Wayne
KCOP Los ~Angeles WElD Chicago
KCPQ Seattle-Tacora WFLX West Palm Beach
~C~L St. Louis WFNZ Allontcwn
~CH Portland-Sal~ WF~S T~a
KETZ S~ta Rosa ~GI' Greensboro
KC~ Oklahcma City WG~ Chicago
KGSW Albuquerque W~O New Orleans
1~J Los Angeles WJ'~4 Wthston-Sal~
K}t[V Houston ~`iI~D De~oit
KJAA Lubbock, Texas W~S Philadelphia
KIIPH Fresno . WLVI Boston
I~NSP Minneapolis ~D ~1botmne, Florida
1~AI Albuquerque WHEW New York
I~D1~B Cklaliccoa City ~`tFL Orlando
KOKI Tulsa ~R New York
KPHO Phc~iix WP~i Pittsb~gh
K?LP~ St. Louis WPHL Philadelphia
KPIV Portland WPIZ New York
1(BBK Sa~to WPtII ~bile-Pensacola
KRIV Houston WFtY M~his
KS}3B Kansas City WPWR Aurora, Illinois
KSTtJ Salt Lake City WRLH Richrnnd
KS'IW Seattle-Taccxxia W]~F Philadelphia -
KIIA Los Angeles WIOG St. Petersb~xg-Tan~a
I~V Nanna-Boise WTSG Albany, Georgia
ICIV Los Angeles WTI'G Washington, D.C.
KL'VT Dallas-Ft. Worth WrTO Bir~.n~~t
KIVU San Francisco WrIV Indianapolis
KIXA Dallas-Ft. Worth WIVZ Norfol1~
F~1 Saor~to-Stoc1~on WDC~ Waterb~y, Connecticut
KUSI San Diego WU~JB Cleveland
KVVU Las Vegas WUHF Rochester
I~1(~ Denver WUTV Buffalo
KILl Minneapolis WVAH Ch~lestcri-Hi.~tington
1~X~ Dallas-Ft. Worth wry Nilwau~ee
I(ZAZ Tucson WYAH Ports~uth-Norfolk-Newport News
WANX Atlanta WXD( Cincinnati
WAWS Jacksonville WXNE Boston
WCD~ Miani WZIV Nashville
WDCA Washington, D.C. ~IV San Diego
~
Focus Ccctxiications, Inc., Nashville, Tennessee
Green River Broadcasting, Inc., C~bellsville, Kentuclcj
Independence Broadcasting Corporation, Des ~bines, Iowa
~VO-lV/Austin Television, Austin, Texas
Sh~ock Broadcasting Co., Inc., Honolulu, Hawaii
W}~S-TV Asheville, N. C. -Gre `lle-Spertanbt.~g, S.C.
WIVtJ Skokie, Illinois
I~.~/Lictle Rock Ccn~.~ications Associatas, Little Rock, Arkansas
CIV of Connecticut, Inc., Worbixn, ~assadrusetts
Anacc~, Inc., Indianaoolis, Indiana
WFTG-lVf~trovisicn, Inc., St~ord, Connecticut
PAGENO="0234"
230
T~D1T/~ ` t'Tt~'T T(
.~LI_L. £1 ~ } i. ~4_~ .L~A..4 ~ L ) J. ~
AFFIDAVIT
State of Arizona
\ )
County of Maricopa
I, Richard De Angelis, being first duly sworn, do hereby depose and
state:
1. ~I\am Vice President and General Manager of independent television
station KPHO\1V, Phoenix, Arizona.
2. Table~1 of the "Comments of the Association of Independent Television
Stations, Inc." (\~TV") of which this Affidavit is a part, accurately represents
KPHO's regular weekdaç program schedule.
3. As stated in iNT~'s Comments, KPHO achieved the highest AOl and DMA
Sign-On/Sign-Off ratings a~ shares of any television station in the Phoenix
market in the July 1982 rati~g~ sweeps. In addition, KPHO was tied for the
second highest AOl and DMA rati)~g~ in the November 1982 sweeps. KPHO has
regularly achieved high audience ra~ngs in the Phoenix market.
4. KPHO's ratings haveincrease~\substantially in the period since our
program schedule was altered to include `~ny more off-netWork syndicated programs.
I believe that KPHO's increased popularity'~àq~ng audiences in Phoenix has been
due in large part to our station's schedule wh~c!~ is built upon a significant
number of off-network syndicated programs, and that our continued success is
dependent in part upon our continued fair access to the most recent and popular
off-network syndicated programs.
PAGENO="0235"
231
5. The information contained herein is true and complete to my own
knowledge and belief.
Richard De Angelis
Sworn to and subscribed before me this of January, 1983.
N ary Public 6
My Cormission expires
PAGENO="0236"
232
PRESENTATION OF,
AJ4.A. POSiTION
WITH REGARD TO
FINANCIAL INTEREST RULE
s ?t.. ~
~ , ~y ~
Thcrna~ 1. Ryan
INTY ANNUAL CONVENTION
(Los Angel es1 Ca ii forni a January 18, 1 ~83)
PAGENO="0237"
233
Good Afternoon...I'm delighted to be here. It's a much nicer place
* to be on january 18th than Boston.. *: * *. *:
I am here representing the membership and Board of Directors of the
Association of 1~ational Advertisers to tell you about the Association's
* postion with regard to the Financial Interest/Syndication Rule.
About a year and a half ago, we became aware that the F C C. was
considering rescinding the Rule Subsequently we1learned thaf Interest
~ t~ (~ 1 3øf~ t~~t" 3 ~
In the F.C.C.. `s deliberations ~with regard to the Rule was becomi n~ very
intense. And the Independent stations, the networks and the producers
* had it at the very top of their list of priority items.
After some discussIon, the Board of the A.N.A. determined that the
vItal interests of viewers and advertisers clearly could be affected by a
change in this rule. The Board voted, therefore, to study the matter
carefully and develop a position with regard to changing the rule.
Obviously, television is extremely important, If not vital, to the
operation of many of the businesses of A.N.A. members. The networks have
been extremely important to many of us for a period of years and have
contributed significantly to the successes of our businesses by providing
PAGENO="0238"
234
an efficient means of ccmmunication with our markets. Obviously the
stations, both independent and affilated, all over the country have also
been extremely Important to us as the theans of efficiently and forcefully
coninunicating with our markets. And the producers have provided the
programoing which has attracted the large audiences advertisers seek. So
the advertisers are somewhere in the middle of this debate beàause all
parties have been important to us over the years and continue to be:
important to us
..:~ .` ~:. ~ : ... *i(.
I .~ t 3
Therefore~ in developing its position the A H A Board felt we should
make every effort to provide all concerned an opportunity to share their
views with. us before- we came to any firm conclusion. As a result, we
have spent a good deal of time over the last 8 or 9 months considering
this Issue, listening as carefully and ob.jectively as we could to anyone
who wished to talk with us. : -*
As a matter of procedure, we first asked the Television Coninittee of
the A.NA. to look into this question and make a reconsnendation to the
Board. The TV Coninittee heard presentations from each of the networks
individually and a rna.jor joint presentation from the networks. They also
heard a presentation from the Coninittee For Prudent De~'Regulation which,
as you know, represents the Independent stations and producers. They
also listened to representatives of the 4A's.
PAGENO="0239"
235
In short, we have tried to go through a process here to arrive as
objectively as possible at a position which we believe represents the
best interests of our membership, the advertisers and, very importantly,
the best Interests of the viewing public.
In 1982 national advertisers invested 6.2.. billion dollars In network
television and 4.3- bil1ion~ dollars in Spot Television.
So we are obviously very concerned with the health and well being of
television.~ ~ r 1 1' ~ 4 1
Our ob,~ectives on a continuing basis and Immediately with regard to
the Financial Interest/Syndication Rule are to help maintain the
attractiveness of television `as the primary source of Information and
enter~ainment for viewers and to keep television an efficient advertising
medium.
Therefore, in the last several months we have looked at the impact
the Financial Interest/Syndication Rule has had or is likely to have on
these two objectives.
Sie have also tried to assess what impact the new media technologies
are having now and are likely to have in the future on these objectives
PAGENO="0240"
236
and what impact retention or rescinding of the Rule may have in this
changi ng envi ronrnent.
It seems to us that one critical question is this: Have the
Financial Intarest/Syndi cation Rule and the growth of the new media
technologies so altered the market structure and diminished the market
dominance of the networks as to make It in the viewers Interest to
eliminate the Rule and let market forces work? r
~`y In the late' ~6Os there obviously waa~ problem.~' Yerj simply, the FCC.
said `,..there Is an undue concentration of control in the three~-network
corporations over television programs available to the publicTM. The FCC
studied the matter thoughtfully and thoroughly and then promulgated the
Rule In question. .,
The clear objectives here were to serve the viewing public by opening
up the marketplace to provide viewers with greater viewing opations, this
to be accomplished by encouraging the growth of alternative sources of
prograrmning to compete with the networks.
IThat has happened?
In 1972 the average prime time share of audience held by the three
networks together was 9O~.
PAGENO="0241"
237
In 1982 the three network share on the same basis is 70%.
In 1972 the Independent Stations held a 9% share of audience.
In 1982 the Independents' share is 20%.
Cable systems supported by adverti si rig now has 3% of the audi enca.
In 1972, then 99% of viewing was, to either the networks or
Indpendents
Since then the total has fallen to 93%.
The reason for the decline, of course, is the growth of cable
te1evfsion~-basjc and pay...which now has 6% of the audience share4
Public television in both 1972 and 1982 has had about a 1% share.
In part, the growth in share of audience that the Independents have
achieved is the result of an increase In the number of independent
stations from 73 in 38 markets to 165 in 78 markets.
Both the Increase in audience share and the number of stations are
the direct result of the availability of programing the public wants to
watch brought about by the Rule.
32-540 O-84--16
PAGENO="0242"
238
It is apparent from this very simple analysis that the Rule is
starting to have the effect the FCC desired.
It is also apparent, however, that the networks with 80% of the
audience in prime time continue to be the dominant distributors of
progranmiing. In arriving at our position we have not attempted to
analyze or interpret In any detail what the effect of the networks
roonopsonistic position Is on the producers, but have left that to others
to deal with who are mare directly Involved
*~ `~. *:;~ ~
What have been the economic consequences so far for adverti sers? The
price of television time is important here because it is a cost which the
pubi Ic--either directly or thdirectly--must eventually bear.
W& looked first at the cost trends of television, using the index
numbers compiled by McC~nn-~rlckson.
Using their numbers for the same years, 1972-1982, we find that
network unit costs through 1982 have Increased 194%.
Over this same period, the Consumer Price Index has risen l32%--a
difference of 61 percentage points.
PAGENO="0243"
239
It's true that network prices were quite stable until about 1973 when
they started Increasing sharply.
As part of our analysis we tried to deteii~ine whether stronger
Independent stations with an increased share of viewing are providing
greater competition to network-affiliated stations and helping hold down
the cost for Spot television time paid by advertisers.
* Several of our members looked at their Spot costs for the second
quarter of l~82 Cost per thousands for the particular demographic an
advertiser used for buying were used as the base These CP7I's for the
top 50 inar~ets were then added and am average for all 50 markets obtained.
Then the CP?4 in each of the 50 markets was indexed to the average.
For example, if the average for all 50 markets was $6.00, the index would
* be 100. Then, if New York was $4.00, the New York index would be 66.
Next we determined the share of viewing to Independents in all day
parts versus network~affiliatas and ranked the 50 markets from highest
share of viewing to 0 share.
What we found was that in the 10 markets with the highest share of
viewing, Spot costs were at an index of 75.5. In the next 10 markets
with second highest share of independent viewing, Spot costs were at an
index of 81.
PAGENO="0244"
240
The next 11 markets had a cost index of 91. And markets 32-~38 were
at a 90 index.
The last 12 markets had an index of 123.
What we found was a very close correlat~on between the Independent&
share of viewing and Spot costs. Where Independents are strongest, Spot
costs are lowest.
There was ã spread in Spot cost~ therefore, from the top group of
markets where independent viewing was hightest to the bottom group with
little or no independent viewing of 47.5 points.
There have been two basic reasons for the dramatic increases in the
cost of network television over the last. ten years. One reason has been
increases in the costs of progra~mn1 ng. The other reason has been an
excess of demand over the~ fixed inventory supply of the three networks.
We are dealing with supply and demand of an extremely valuable
commodity, the cost of which has been rising at a rate out of proportion
to the rest of the economy because of Insufficient supply.
PAGENO="0245"
241
We believe the analysis I just gave correlating spot costs to
increased Independent station viewing clearly demonstrates the economic
value of enhanced competition made possible by the Financial
Interest/Syndication Rule. :
This is obviously in the interests of advertisers. We also believe,
however, that increased viewer options and greater television price
competitiøn are a direct result of the FCC's original objectives and are
very much in the public interest.
But, the FCC is questionning wh~ther it should rescind the Rule.
We have seem so far that the network share losses are to independent
stations primarily, as those stations provide viewers with attractive
progran~ui ng options. Stronger independent stations are providing greater
advertising price competition ir( the marketplace for the affiliated
stations.
W~ believe It is reasonable to assume that if the networks are
permitted to gain an ownership position In the programs they carry, they
will take whatever action they can to prevent further erosion of their
audiences and provide protection to their affiliates in the marketplace.
PAGENO="0246"
242
-j
The cost of programming Is, as I mentioned a few minutes ago, a rnnjor
Ingredient In the cost of television. The networks, as the prlmarj
buyers of programming and under some pressure from advertisers, are in a
strong position to exercise cost control. If, however, they are
permitted to abdicate their buyer position and become partners with the
sellers of programming, it seems to us self-evident that they would no
longer have the same incentive to hold ~osts down.
The argument Is made that the networics need the revenue from
owner~hip In pogi'a~s and pI~Of1~ f~om~'the subsequent syndication of those
programs' in order to remain competitive.
It is difficult for us' to understand how a group of companies that
have enjoyed revenue increases' substantially greater than the rate of
inflation need further strengthening to maintain themselves.
Furthermore, since the revenues from syndication will occur three to
five years downstream, that will not solve today `s probl ems.
At this point we should also point out that we do have sympathy for
the problem of the networks In dealing with the seemingly uncontrolled
Increases in the cost of programming. The growth of the new media
technologies Is creating an unprecedented demand for entertainment
software. If the productIon community is going to meet this challenge,
PAGENO="0247"
243
we believe a whole new level of maturity and a much more disciplined
approach to program development and production Is going to be required.
But there is' another prcbl em that the networks are faced with that
must be considered and that Is pay television.
Although the audiences are still reiatively small, they are making'
inroads in the network shares... The, networks' position is that they are
being outbid by HBO for the best movies and that they need greater
revenue in order to compete with HBO and the other emerging services..
First..of all, as I indicated a moment ago, the revenues from
syndication, which come later, will not meet the networks current need.
The networks will have to increase current prices to do that. `,` .
While we recognize the networks potential problem in competing with
Pay Television Services,'such as HBO,' we fail to see how rescinding the
Financial Interest/Syndication Rule will solve that problem.
Finally, a major premise underlying the FCC's decision to consider
rescinding the Rule is the belief that the new media delivery systems
have developed to the point where there are strong alternatives to the
networks.~alternatives for viewers and alternatives for producers-~for
the distribution of their programs.
PAGENO="0248"
244
On the basis that this premise is valid.~ the argument is advanced
that elimination of the Rule in line with the current trend toward
de~regulation would allow the marketplace to operate freely and in the
public interest.
Philosophically we are in support of de~.regulation. We believe,
however, that timing is critical. Cable, both~ basic and pay, satellite
t~ home delivery, video cassettes, and subscription television have Just
begun to emerge. They are far from developed and most are losing money.
Although 35~ of the country has cable television, the networks still
remain the overwhelming,; s~iir~e~~ of inforiiation and entertaiment for
television viewers. The networks are still the dominant outlet for
* programs and the primary means used by national advertisers to reach
their markets efficiently. *.: :
For all of the reasons I. have outlined, the A.N.A. will file with the
FCC the recoemendation that the Financial Interest/Syndication Rule not
be rescinded at this time.
We do recognize that important changes may occur In the television
marketplace in the next few years. We are further recormnending,
therefore, that the issue be reviewed again In 1986.
Thank you.
PAGENO="0249"
245
BEFORE THE
Federal Communications Commission
WASHINGTON, D. C.
In the Matter of
Amendment of 47 CFR73.658(j);
the Syndication and Financial ) BC Docket No. 82-345
Interest Rule
To: The Commission
REPLY COMMENTS OF TEE ASSOCIATION OF
INDEPENDENT TELEVISION STATIONS, INC.
The Association of Independent Television Stations,
Inc. ("INTV"), by its attorneys and pursuant to Section 1.415
of the Commission's Rules, hereby submits its Reply Comments //
in the above-captioned proceeding.~ /"
1.. INTV'S initial Comments in response to the Conimis-
sions's Notice of Proposed Rule Makjjig~/ in this proceeding,
filed January 26, 1983, expressed its full a~d unequivocal
support for retention of Section 73.658(j) of the Commission's
Rules, the Financial Interest and Syndication Rule ("the
Rule").. Notwithstanding self-'serviflg claims to the contrary
by the three national television networks, independent
television stations have grown and flourished since the
LI INTV also is a member of the Committee for Prudent
Deregulation ("CPD"), which has prepared separate
comments in this proceeding in which INTV concurs.
2/ FCC 82-300, rd. July 2],, 1982 ("Notice").
PAGENO="0250"
246
adoption of the Rule and, in the view of virtually every
independent station owner and manager,~1' in large part
because of the Rule. More importantly, in terms of the
public interest goals of the Commission pursuant to the
Communications Act, competition and diversity in broadcast
television outlets and program choices have increased as the
numbers and audience shares of America's independent stations
have increased. For these reasons, tNTV renews its plea that
the public interest demands retention of the Rule.
I. INTRODUCTION AND SUMMARY
Z. INTV's initial Comments in this proceeding docu-
mented the phenomenal increase in the number of independent
television stations in the United States under the Rule, from
65 in 1970 to 179 in 1982, all but twenty-five of which are
UHF stations, "upon which Congress and the Commission have
relied for a fully competitive nationwide television broad-
cast service."~ Concurrently, independent station audiences
have multiplied from a 9 percent share in 1972 to a 20
3/ See "Statement of Facts by Independent Television
Broadcasters," Comments of the Committee for Prudent
Deregulation in BC Docket No. 82-345, filed Jan. 26,
1983, at Att. 3.
4/ Network Television Broadcasting, 23 FCC 2d 382, 394,
modified in part, 25 FCC 2d 318 (1970), aff'd sub nom.
Mt. Mansfield Television, Inc. V. FCC, 42~2 F. 2d 470
(2d Cir. 1971) ("1970 Report and Order").
PAGENO="0251"
247
percent share in 1982, and the independent station share
of national and local spot advertising sales has nearly
doubled since 1970. As the extraordinary p~rogress of inde-
pendent television broadcasting has measurably furthered the
Commission's goal of increasing competition in the television
industry, it has also furthered another paramount Communi-
cations Act policy goal by greatly increasing diversity in
television outlets and program sources since the adoption
of the Rule. During this period, the number of network-
affiliated stations increased by one, while the number of
independent stations has swelled by 114. Thus, it is the
independent stations that have accounted for the substantial
increase in free television viewing outlets and the innova-
tive and diversified program choices that have become avail-
able to the public since the adoption of the Rule.
3. Of greatest significance to the Commission's
deliberations in this proceeding, INTV's Comments established
that the unfettered availability to independent stations of
recent off-network syndicated programming under the Rule has
been a key element in this beneficial increase in free
television outlets and, consequently, in the diversity of
television program choices available to the American people.
One need only review the audience ratings of independent
stations to discern that the independent station programming
that is most coveted by audiences, and that which is most
PAGENO="0252"
248
responsible for the substantial competitive inroads that
independents have forged vis-a~-vis the networks in the
past decade, consists of entertainment series that are
released into syndication while they are still fresh and
popular, often while they are still enjoying a successful
network run. In short, the Rule has fostered the growth and
viability of independent stations by making the most popular
and recent syndicated programming available to independents
on a fair and equitable basis, through independent program
syndicators who have a clear and unambiguous economic inter-
est in the success of independent stations..
4. ~`inally, INTV demonstrated, based on empirical data
and the networks' own public and private statements, that the
networks, as the dominant economic entities in the American
television industry, have both the present ability and strong
economic incentives to weaken the competitive strength of
their independent competitors. Absent the Rule, the networks
would have the opportunity to weaken the independents and
thus recoup the audience shares lost to independents, by
restricting the timely and unfettered availability of popular
off-network programs.
5.. In these Reply Comments, INTV will show that the full
record now available to the Commission in this proceeding --
consisting primarily of the initial comments of Interested
parties and the wealth of testimony presented during the
PAGENO="0253"
249
Commission's hearings on this issue on March 14, 1983 -- con-
firms INTV's conviction that the Rule has served the public
interest by contributing mightily to competition and divers-'
ity in broadcast television, and that its rescission pre-
dictably could erase the gains that independent television
stations have made in the past decade in contributing to this
beneficial enhancement of competition and diversity in free
television service for nearly all Americans. Therefore,
while the Rule has not perfectly accomplished all of its
stated objectives, it has served the Commission, the conuner-
cial television industry and the American people well and
clearly should be retained to permit it to continue its
contributions to the ultimate achievement of a truly com-
petitive and diversified television marketplace. First,
virtually every cominenter in this proceeding, includin~g the
three national television networks and their affiliated
station associations, acknowledge that it is the nation's
free independent television stations - and not pay and
advertiser-supported cable and other so-called Nnew media"
-- that are the foremost competitors of the three networks
for the American television audience.
6. Second, the Comments of such diverse entities as
the United States Department of Justice, the Association of
National Advertisers and tile Committee for Prudent Deregula-
tion confirm the strong causal link between the fair and early
PAGENO="0254"
250
availability of off-network syndicated programming to indepen-
dent stations (by virtue of an independent syndication market-
place) and the concomitant rise of independent stations as a
ubiquitous and competitive force in broadcast television. In
fact, the comments of unbiased participants in this proceeding
have persuasively discredited virtually every network argument
relating to the Rule's impact on independent stations. In
plain fact, while the networks have attempted to disassociate
the new competitiveness of independent stations from the
existence of the Rule, the networks fail utterly to assail
two plain facts which severely undercut the networks' thesis:
(1) the most popular shows on independent stations are pro-
grams that are still on the networks' prime time schedules;
and (2) prior to the Rule, network series did not appear on
independent stations during their initial network run.
7. Finally, the Commission's March 14 hearings in this
proceeding further crystallized the fact that rescission of
the Rule would pose a grave danger to independent stations
and to the modicum of competition that they have contributed
to America's free television system under the Rule. The
t~tiinony presented for the record during the March 14 hear-
ings made all too clear that, absent the Rule, the networks
could restrict the availability of the lifeblood of indepen-
dent station schedules -- i.e., recent off-network syndicated
programs -- either by simply withholding or delaying their
PAGENO="0255"
251
syndication or through the far subtler and virtually undetect~
able techi~ique of favoring their owned arid affiliated sta-
tions over independents through advance notice and negotia-
tions, discriminatory price concessions and a variety of
other methods. Therefore, as INTV will further establish
herein, the Rule must be retained, both because of its
beneficial effects upon independent television broadcasting
and television viewers and because of the crippling effect
that its repeal predictably could have upon those stations
and the public.
II. THE COMMENTS SUBMITTED BY OTHERS IN THIS PROCEEDING
CONFIRM INTV'S VIEW OF THE RULE'S POSITIVE AND
PREVENTIVE EFFECTS
8. The initial comments submitted by other interested
parties in the instant proceeding confirm the primary thesis
of INTV's Comments and the underlying reason for its support
of retention of the Rule: that (1) recent of f-network syndi~'
cated programming, which has become available to independent
stations under the Rule, has been a critical factor in the
growth and profitability of independents in the past decade;
(2) repeal of the Rule would give the networks the opportunity
to weaken independent stations by restricting their access
to the most popular and recent off-'network programs; and (3)
the networks have the ability and the economic incentive to
exercise the market power necessary to impose such restraints
on independents' access to programming.
PAGENO="0256"
252
9. The most pronounced effects of the Rule have only
begun to be felt during the last few years as programs have
become available in syndication during their prime-'time net-
work runs. For example, independent station WPIX New York
signed a letter of intent for Happy Days in November 1976,
three years after it debuted on the ABC Network, for exhibi-
tion commencing in October 1979. Since that time, WPIX has
acquired other popular programs through independent syndica-
tors during their successful prime time runs, ~ Laver~e
and Shirley (purchased three years into its network run and
first aired in syndication in October 1981), The Jeffersons
(first aired in October 1981), Chips (first airedin Septem-
ber 1982) and Alice (first aired in October 1982). This
pattern has been followed by independent stations throughout
the nation with similarly successful results.
10. Even the networks acknowledge, as they must, that
since the Rule was adopted in 1970 independent stations have
become far more competitive to the networks' owned and af-
filiated stations. However, the networks seek totally to
divorce the rise of independents from the freedom of access
to off-network syndicated programming that the Rule has in-
troduced. Instead, the networks contend that N(s)everal fac
tors unrelated to the rules account for the enhanced competi-
tive position of independent stations and the resulting in-
crease in the number of independents."~" Among these factors,
~ Comments of CBS, Inc. in BC Docket No. 82-345, filed
Jan. 26, 1983, at 72 ("CBS Comments").
PAGENO="0257"
253
the networks credit improved UHF reception, carriage of in-
dependent stations on cable systems, the Prime Time Access
Rule, and, cryptically, "an overall upturn of viewer and
advertiser interest in independent stations."~~'
11. Fortunately, commenters as diverse as the Associa-
tion of National Advertisers, the U.S. Department of Justice,
Action for Children's Television, the Communication Commission
of the National Council of the Churches of Christ in the U.S.A.
and the Office of Commun6catiofl of the United Church of
Christ, and the Committee for Prudent Deregulation, as well
as INTV and a large number of individual independent station
licensees and owners of both independent and affiliated sta-
tions, have illuminated the single most proximate cause of
this "overall upturn of viewer and advertiser interest", to
wit: the independents1 ability to obtain fair and equitable
access to recent off-network syndicated programming.
12. The CommentS of the Association of National Adver-
tisers ("ANA") and the Department of Justice ("DOJ") are par-
ticularly instructive. ANA and its members are intimately
6/ Comments of National Broadcasting Company, Inc., at 75
n.l ("NBC Comments"). CBS also attempts to disassoci-
ate the growth of independents from the Rule on the
basis of the fact that most of that growth has occurred
in the past three years. See CBS Comments at 72-74.
CBS fails to mention that this time frame correlates
strongly with the expiration of network exclusivity
rights to many of the first generation of popular
programs that were developed after the Rule took
effect. ~ `~ 9, ~
32-540 O-84--17
PAGENO="0258"
254
involved in business dealings with both the networks and the
independents on a daily basis and are thus free of institu-
tional bias in this proceeding. More importantly, ANA's
membership is perhaps the best authority on what brings
ratings success to television programs and stations, and
is uniquely qualified to judge the validity of the claims
of the networks and their economists that "(t]he cost of
network time to advertisers and the cost of advertised
products to consumers have been made greater than they
otherwise would have been"1' absent the Rule. Based on its
thorough review of the Rule and its impacts on broadcast
television programming and stations, ANA reported to the
Commission:
The benefit of the growth of competition
through the independent stations within
the advertising market is apparent on
examination of advertiser costs. In
those markets with high levels of viewing
to independent stations, the cost per
~housand viewers paid by typical adv~r-
tisers ranged from 20% to 60% lower than
the cost paid in markets with little or
no independent station viewing.
A.N.A. believes that the growth in
the number of independent television
stations and their economic health are
directly attributable to greater access
to off-network programming following upon
the adoption of the E'inancial Interest/
Syndication Rule. A.N.A. further be-
lieves that rescinding the Rule would.
~/ CBS Comments at 146 (footnote omitted).
PAGENO="0259"
255
curtail the further growth of the inde-'
pendents and might indeed jeopardize
their present health.V
ANA concluded:
The Financial Interest/Syndication Rule
gives the independent stations assurance
that off-'network syndicated programs will
be available to them. If the Rule is
rescinded, the networks could control
both the distribution and the pricing of
off-network programs and thereby deny the
independent stations -- the networ~p±
principal competitors timely access
to this most vital ingredient to their
successful growth4/
Finally, with respect to the cost to ~~sume~ of rescission
of the Rule, ANA concluded: ~With less competition and higher
program costs, the price of television advertising -~ a cost
which the public, directly or indirectly, must eventually
bear -~ would increase."~"
13. The Comments of DOJ further corroborate INTV's
thesis, and indeed contradict and discredit virtually every
network contention concerning the relationship between the
Rule and the nation's independent stations. In brief, the
networks' comments argued that:
V ANA Comments at 6 (emphasis in original). See also
Thomas Ryan, Presentation of A.N.A. Position with Re-
gard to Financial Interest Rule, INTV Annual Convention
(Jan. 18, 1983) (INTV Comments at App. C).
2.1 Id. at 7-8 (emphasis in original).
10/ Id. at 11.
PAGENO="0260"
256
(1) "factors unrelated to the rules account for
the enhanced competitive position of the
independent stations and the resulting
increase in the number of independents;"ll/
(2) the television marketplace of 1983 precludes
any possibility of network monopolization
of, or control over a substantial portion
of, the off~network syndicated programming
market ;ia/
(3) network collusion to control the off-network
syndication market is similarly impossible;
and even if it were possible, it would
quickly be detected and prosecuted by the
Department of Justice;13/
(4) there is no basis to believe that the net-
works would seek control of the off-network
syndication market if the Rule were repealed,
inasmuch as they did not do so prior to the
Rule and it would be against their economic.
interest to do so now;l4/
(5) the emergence of the "new" video media has
eliminated network dominance over the tele-
vision industry and has created a new, coin-
petitive programming marketplace;l5/ and
11/ CBS Comments at 72. 5~ also NBC Comments at 75 n.1.
12/ See CBS Comments at 158, 162-63; Comments of American
Broadcasting Companies, Inc., at 115-116 ("ABC Com-
ments"); NBC Comments at 212.
13/ See CBS Comments at 7, 12, 163-166.
14/ See CBS Comments at 142, 158, 164-166; ABC Comments at
112-115; NBC Comments at 11-12.
15/ See, ~ CBS Comments at 112 ("EBO, not one of the
conventional broadcast networks, may be `the most power-
ful force in the entertainment business today.'")
(footnote omitted);ABC Comments at 77-89; NBC Comments
at 16-72, 103.
PAGENO="0261"
257
(6) the networks today are merely "three efficient
competitors" in the television marketplace,
and should be able to obtain the same rights
and interests as other video media.~/
14. Although DOJ supports a search for a narrower rule
rather than retention of the Rule in its present form, it
concurs fully with INTV's assessment that access to off-'
network syndicated programming has been instrumental in
independent stations' recent competitive gains and, cru-
cially, that repeal of the Rule could endanger the compet-
itive viability of existing and future independent stations.
In apparent anticipation of the network contentions outlined
above, DOJ's Comments, in sequence, found that:
(1) the "independent stations' success in program-
ming against the networks has been based
largely on off-network programming;"~/
(2) "(t]he networks are in a unique position to
monopolize off-network syndicated programming,"
and could collude tacitly to reduce the
supply of off-network programming;~/
(3) "It is unclear . . . how likely detection and
effective prosecution would be under the
Sherman Act in cases of tacit collusion--that
is, parallel conduct arrived at by the networks
without explicit agreement. The networks ha~e
engaged in many parallel practices., includ~~g
the number of reruns aired, the number~~
commercial minutes run on networks programS~
and the production fees paid for programmi~q.
Thus, the Department ~S not confident
See CBS Comments at 169; NBC Comments at 7-9, 12-13, 201.
DOJ Comments at 29.
Id. at 39-40.
PAGENO="0262"
258
that the antitrust laws can be relied upon as
the most effective tool for ensuring against
possible anticompetitive network practices in
this area; "19/
(4) "Clearly, the networks have more incentive
to monopolize syndicated programming today
(than prior to the Rule, when the value of
syndicated programs was far smaller than
current prices]. . . . The number of inde-
pendent television stations has increased from
73 ut 1972 to 165 in 1982. Viewership of
independent stations in prime time has in-
creased from 10% in 1970 to 17% in 1981. The
independents have successfully used off-network
syndicated programming to develop viewer
acceptance and increase ratings dramatically,
pa:ticularly in the 4:00 p.m. to 8:00 p.m.
period. Thus, the networks have more incen-
tive now than in the 1960s to delay or withhold
programs from independent stations;"20/
(5) "it is by no means certain that (the]
new media will eliminate network dominance.
* * .. Thus, in light of the uncertainty
surrounding the new technologies, the Commis-
sion should not, for the present, rely heavily
on this factor in assessing the warehousing
problem . . . ;"fl/ and
(6) "The problem (of competitive danger to
independents absent the Rule] stems from
the networks' dominance over national broad-
casting, a role that has resulted not so much
from market forces as from the Commission's
spectrum allocation policies."22/
~/ Id. at 40-41 (footnotes omitted; emphasis added).
20/ Id. at 44 (footnote omitted).
21/ Id. at 46 (footnote omitted).
22/ Id. at 47.
PAGENO="0263"
259
III. THE COMMISSION'S MARCH 14 ORAL HEARINGS DEMONSTRATED
THAT THE RULE'S BENEFICIAL IMPACT ON INDEPENDENT
STATIONS M~D THE DANGER TO INDEPENDENTS OF ITS REPEAL
ARE THE PRINCIPAL ISSUES BEFORE THE COMMISSION IN
THIS PROCEEDING
15. The above-described Comments of DOJ and ANA, as well
as many others, have crystallized the principal issue that
faces the Commission in this proceeding: whether the Rule
serves the public interest by virtue of its substantial con-
tribution to the growth and competitive viability of indepen-
dent television stations, and, consequently, to competition
and diversity in broadcast television. Or, put another way:
whether ~pea~ of the Rule would be contr~y to the public
interest, inasmuch as. it would threaten the competitive posi-
tion and viability of independent stations and especially the
UHF independents "upon which Congress and the Commission have
relied for a fully competitive nationwide television broad-
cast service."~' The Commission's March 14, 1983 oral
hearings in this proceeding further clarified that the
threat to the continued vitality of independents in the event
of repeal of the Rule -- and the viewer and consumer losses
that such a threat would necessarily entail -- is a very real,
legitimate and crucial issue that the Commission cannot
afford to discount.
~/ 1970 Report and Order at 394.
PAGENO="0264"
260
16. Although the impact of the Rule on independents was
not the primary reason for its adoption in 1970, INTV submits
that its beneficial impact on independents as well as tele-'
vision viewers and consumers of products advertised on tele-~
vision, coupled with the injurious effect that its repeal
could well have on independents and the viewing and consuming
public, more than adequately justifies the Rule's retention.
As CBS has acknowledged, the Rule should be retained "if the
Commissior~ now believes that (it] in fact serve(s] legitimate
purposes at an acceptable cost to the public whatever may
have been thought ten or more years ago."~-4~' INTV believes
that the initial comments in this proceeding demonstrated,
and the March 14 Commission hearings confirmed still further,
that the Rule does serve legitimate purposes., i.e., the
cardinal Communications Act principles of competition and
diversity in television -~ and that the Rule's "cost to the
public", if any, is relatively slight.
17. During the March 14 hearings, representatives of
the Department of Justice and the Association of National
Advertisers reiterated and underscored their concerns,,
described above, that outright repeal of the Rule could
have potentially serious negative effects on independent
stations and viewer and consumer welfare. They agreed that
24/ CBS Comments, Vol. II, App. A at 1.
PAGENO="0265"
261
the networks could and quite possibly would restrict or delay
the availability of off-network syndicated programming to
independent stations, resulting in fewer and weaker indepen-
dent stations, less diversity in television program choices
and, ultimately, higher consumer product prices. Moreover,
owners of television station groups that include both inde-
pendent and network-affiliated stations, such as raft Broad-
casting and Metromedia, eloquently testified both to the
importance to independent stations of fair access to recent,
popular off-network syndicated programming and to the abil-
ity and incentives of the networks to restrict or delay the
availability of such programming to independents. These
group owners strongly favored the Rule's retention.
18. First-hand portrayals of independent stations'
gains under the Rule and the genuine threat to their viabil-
ity if they are stripped of the Rule's pro-competitive pro-
tections were presented by two independent station managers,
Bob Wormingtofl of station KSHB-TV Kansas City, Missouri, and
Dick Dc Angelis of station KPBO-TV Phoenix, Arizona. INTV
submits that the Commission would be well served to carefully
consider and reflect upon the testimony of Messrs. Wormington
and Dc Angelis, who have personally witnessed the beneficial
effects of the Rule on their own stations and whose experi-
ence uniquely qualifies them to perceive the predictable
consequences of its rescission. hccordingly, the prepared
PAGENO="0266"
262
statements of Messrs. Wormington and De Angelis are appended
hereto as Exhibits 1 and 2, respectively, and are hereby
incorporated by reference in these Comments.
A. ~atings, Advertising and Programming
19. Mr. Wormingtort's testimony focused on the immutable
precept of broadcast television stations everywhere: the
competition between the network station and the independent
for audience and the advertising revenues that critically
depend on the size of that audience:
Advertisers don't like to buy low~rated
shows. That's why the networks cancel
them. That's why Indies strive for
maximum ratings. Many advertisers have
minimum rating cutoffs, usually a 5
rating or better. Why? Because on
a statistical variation if you have a
3 rating it could be a 1, it could be
better than that, but an advertiser
shelters its buy by buying a minimum
rating. To us and to the networks
ratings are money in the bank, and if
someone controls our programming, they
control our revenues..~/
20. It is the presence of the Financial Interest and
Syndication Rule that prevents the networks from influencing
the current syndication marketplace, where release of pro~
grams into syndication is achieved on a timely basis, and where
25/ Stenographic Transcript of Bearings in the Matter of Net-
work Television Financial Interest and Syndication Pro-
ceeding (International Transcription Services, Inc.,
Mar. 14, 1983) ("Tr.), Testimony of Bob J. Wormington
at 235 (hereinafter referred to as "Testimony of . .
A copy of this transcript is on file in the Secretary's
office.
PAGENO="0267"
263
syndication sales are based on marketplace forces rather than
vested interests. As Mr. WOrmington testified:
Right now there is a very sharp, clear
line of distinction between the creators
of programs and those who program them.
The networks buy and program. We buy
and program, and we compete with each
other. Does the current system work?
Yes. It's a give and take marketplace
right now. We don't mind bargaining with
sellers whose only incentive is to make
money selling programs. We need them,
but just as importantly, they need us.
They're not going to drive us out of
business with exorbitant prices or by
withholding or delaying programs or
putting restrictions such as when we can
or cannot televise programs. But to the
networks we're competition. If the
independent station is cut off at the
pass in getting programming, the networks
stand to gain a lot more in advertising
revenues, than they would lose in recoup~
ing program investments.
It's a fact that we're in an expensive
competitive business of competing for
people's times and attentions, and since
multimillion dollar program contracts are
involved, we plan our programming moves
months, even years, in advance. Our
competition in those moves are the ABC,
CBS, and NBC stations. If we have to buy
from the major networks, we are telling
them well in advance what our programming
plans are going to be.j~/
21. Mr. Dc Angelis, who has utilized recent off-network
syndicated programming to achieve audience shares for KPffO~-
TV Phoenix that are competitive with or greater than the
network affiliates in that market,~" offered a unique
26/ Id. at 237-38. ,
~ INTV Comments at 24-26 and App. B.
PAGENO="0268"
264
perspective as to the ways in which the competitive position
of his and other independent stations might be undermined if
the Rule were repealed:
The existing financial interest and
syndication rules have created a thriv-~
ing marketplace in which a large number
of suppliers compete to sell KPHO-TV
programming. These suppliers profit
enormously from my success as an opera~
tor. Changing the rules to enable the
networks to gain financial interest and
syndication rights will disrupt a free
marketplace. . . Unlike the indepen-
dent producers who profit from KPHO's
success, the (networks as holders of
syndication interests] would have greater
profit from the station's failure.
Ultimately, the public would pay the
price in reduced free program choices and
higher costs of goods and services
through increased advertising costs..~/
B. "Warehousing" and Network Favoritism
22. During the March 14 hearings, network representa-
tives fervently disavowed any intention to "warehouse" ~
withhold from syndication) programs in which they might
obtain syndication rights and interests if the Rule is
repealed. Indeed, the Senior Vice President and General
Counsel of ABC testified:
We state flatly and for the record that
there will be no warehousing of any
product for which we have the syndication
rights. . . . However, if FCC still has
reservations . . . , it could adopt a gen-
eral policy statement in its final Report
28/ Prepared Statement of Dick Dc Angelis, Exh. 2at 1;
see also Tr. at 227.
PAGENO="0269"
265
and Order precluding warehousing, an
approach the Commission has frequently
followed in the past and one to which
we would have absolutely no objection
because that will not be our policy.~/
23. INTV believes that the networks might not engage
solely in outright and overt "warehousing" of all of their syn-
dicated product, as the networks appear to define that term
(, outright withholding of programs), inasmuch as such
anticompetitive conduct would be susceptible to detection.
Unfortunately, however, the networks could use their control
of syndication rights and interests to weaken their indepen-
dent competitors in far subtler and less visible ways than
outright "warehousing." Indeed, as cited in INTV's initial
Comments, the danger to independents in the absence of the
Rule is not limited to network "warehousing," but "that the
networks would favor their affiliates and, even more assuredly,
their wholly-owned and operated stations, in the syndication
of the most coveted prime time programs, through such behind-
the-scenes devices as advance negotiations and discriminatory
price concessions,"~' or by delaying syndication until the
program was no longer carried by the network in first-run.
Or, as Bob WormingtOn testified before the Commission:
29/ Testimony of Everett if. Erlick, Tr. at 74. Significantly,
the President of CBS, Thomas Wyman, declared that CBS
was unwilling even to accept a general policy statement
precluding warehousing, stating: "I see no reason to
compromise." "Verbal Battling Qver Financial Interest,
Syndication," Broadcasti~q, March 21, 1982, p. 58.
INTV Comments at 30.
PAGENO="0270"
266
Could they warehouse? Yes, but beyond
warehousing can they put unrealistic
restrictions on their [programs] use?
Yes. Can they make them available on
short notice? Yes. Can they make them
available at exorbitant prices? Yes.
And why these fears that they would do
this? Just by way of example, a week
ago the ABC affiliate in Kansas City
did not clear the opening premier
telecast of USFL footbaL]~. It was
never offered to us by ABC. They
chose to keep it off the air in
our market rather than offer it to
the independent .31/
Dick. Dc Angelis also noted that anticompetitive network
conduct in the absence of the Rule likely would not be
limited to "warehousing."
My fear and a real fear is that the
network has more to gain by withholding
or diverting product from KPBO than can
be generated in license fees on the
competitive market. By withholding
product to diminish the independents'
audiences, the network and its owned
and operated and affiliated stations
would reap a bonanza in artificially
increased advertising rates. The net-
works could also create additional
availabilities to corner advertising
dollars by diverting off-network pro-
grainming to create secondary cable
channels. Or by withholding minutes
for network sale in whatever programs
they do release to the marketplace to
create ad hoc, secondary network avails.
* . . The gains to the networks in any
of these three instances would be awe-
some in comparison to legitimate license
fees for off-network syndication in the
free and competitive marketplace as it
exists today.32/
31/ Testimony of Bob J. Worinington, Tr. at 236.
~/ Testimony of Dick Dc Angelis, Tr. at 231.
PAGENO="0271"
267
24. Specifically, the networks could favor their af-
filiates `and disadvantage independent stations by setting
prices at a level whicIi~ would preclude independents from bid-
ding for off-network programs. If an affiliate purchased at
the higher price, the network could increase the station's
compensation, thereby returning to the station a portion of
the purchase price. Also, networks could, through means no
more sinister than a telephone call, alert affiliates as to
when certain programs would enter the syndication market.
AffiliatCs could plan for this, while independents, given
_short notice of program availability, already may have com-
mitted their program acquisition budgets for other, less
desirable programs. A network, as syndicator, also could
disadvantage independents !jl-A-xil affiliates by insisting
on a short-term contract for rights to an off-network program.
After the independent station invested in publicizing the
program, the contract would end and, through the means dis-
cussed above, the program could be sold to the affiliate.
Additionally, when an independent station contracts for a
program the network-syndicator plans to release in the
future, that information could be relayed by the network
to its local affiliate, thereby revealing the independent's
program plans to a direct competitor. This would give the
affiliate information with which to plan its own programming.
The independent would not have access to comparable intel-
ligence.
PAGENO="0272"
268
25. The networks also could restrict an independent
station's programming flexibility by imposing restrictions on
when a syndicated program can be scheduled. For example, NBC
released Saturday Night Live into syndication with a restric-
tion prohibiting its use on Saturday night. Similarly, NBC
will not allow scheduling of the syndicated Johnny Carson Show
in the late night time period..IV Additionally, the network
could withhold several commercial minutes from a syndicated
program, selling that time to national advertisers and thus
restricting the amount of advertising time available to the
local independent station.-14~'
26. Finally, a network could restrict the supply Qf pro-
gramming in a variety of ways. Certainly it could refuse to
syndicate a program altogether, perhaps holding it for the
network's own use on, for example, a cable network. A net-
work could strip a program during the daytime after removing
it from the network's prime time schedule, thus being able
to claim that syndication would violate an exclusivity agree-
ment)-~/ The withholding of even a small portion of of f-
network programming could be injurious to independent sta-
tions, as well as to advertisers and, ultimately, the viewing
public.
~ Testimony of Lucille Salhany, Tr. at 275-76.
See Comments of Turner Broadcasting System at 32.
35/ See Comments of Taft Broadcasting Company at I17~26.
PAGENO="0273"
269
27. Therefore, a mere Commission "policy statement" pre~
cluding warehousing would be wholly inadequate, inasmuch as
it would reach only one of the many techniques that the net-
works could use to undermine independent television stations
and thus increase their own ratings and revenues. Instead,
the Commission must ensure that the networks are prevented
from gaining any measure of control over any facet of the
market for off-network syndicated programming -- an insurance
that the Rule provides today, with little or no cost to the
networks or the American public.
IV. THE COMMENTS AND HEARINGS IN THIS PROCEEDING
REAFFIRM THAT REPEAL OF THE RULE IS UNNECESSARY
TO PRESERVE THE VITALITY OF THE THREE DOMINANT
NETWORKS OR OF "FREE" TELEVISION
28. At the heart of the networks' arguments for repeal
of the Rule is their contention that, unless the Rule is re~
scinded, they will be unable to "remain" competitive with
cable and pay television and other emerging video technolo-
gies. In essence, they plead that the Rule unfairly prevents
them from competing for programming in the "free market-
place," and that the future of free, advertiser-supported
television depends critically on swift Commission action to
rescind the Rule.1~/
36/ Perhaps the best testimony to the accuracy of the net~
works' estimation of the audience-generating potential
of cable networks may be found in the performance of
their own cable network ventures, ~ CBS Cable and
(footnote continued)
32-540 O-84--18
PAGENO="0274"
270
29. The initial comments in this proceeding of the enti-~
ties whose livelihoods depend on the prosperity of the "free"
television system, and specifically on the continued vitality
of network entertainment series, for their very existence
independent broadcast stations and television advertisers -~
delonstrate that the networks remain highly profitable
institutions, as well as the dominant force in the Amen-
can television industry. As INTV's Comments pointed out, pay
and advertiser-supported cable, pay television and the other
"new media" have made only minor competitive inroads vis-a-
vis the networks, and in fact independents, and not the new
media, have become the networks' foremost competitors.~"
Moreover, the networks' own forecasts (with the notable excep-
tion of those tailored for this proceeding) project that in
1990 the networks will continue to enjoy a 70 percent audience
share (compared to 11 percent for pay cable), will garner
revenues of $15-20 billion to cable's $6-8 billion, and will
actually gain an additional audience of 5 million households.~"
(footnote continued)
RCA's The Entertainment Channei -- both of which dis-
banded, in the face of losses in the tens of millions,
within the past six months. See "Shifting Through The
Fallout of CBS Cable, Disney, Broadcasting, Sept. 20,
1982, p. 27; "Entertainment Channel's End," Broadca$~
~ Feb. 28, 1983, p. 44.
37/ ~ 1NTV Comments at 9-17.
38/ Id. at 45-47, citi~q CBS/Broadcast Group, The Road to
1990, at 29-32.
PAGENO="0275"
271
CBS itself has observed that "while the network number (for
total audience and revenues] is divisible by three, the ~
cable] totals will be fractionalized much further."~'
Moreover, CBS predicts, perhaps too optimistically, that only
6.7 million households will subscribe to pay cable in 1990,
and that "shifts of programming from independent stations to
cable will provide more available audience for network affili-~
ates."~W While the networks make many claims and present
many pessimistic forecasts in their Comments, it has proven
rather difficult for them to explain away their own decidedly
inconsistent statements.
30. The initial comments submitted in this proceeding
and the testimony of witnesses at the Commission's March 14
hearings only confirm INTV's finding that the networks con~
tinue to dominate the television programming industry and will
for many years to come. While the networks speak of "massive
defections" of series programming to cable networks, they
must acknowledge that no network entertainment series has
ever "defected" to pay cable, although they protest rather
lamely that the pay cable networks' efforts to obtain ~J
and Rill Street Blues were unsuccessful "for a variety of
39/ CBS/Broadcast Group, The Road to 1990, at 32 (emphasis
added).
40/ Id. at 28 (emphasis added).
PAGENO="0276"
272
reasons."~" In sum, while it may be true, as well as
beneficial to the public interest, that the networks are no
longer "the only game in town,"~" they remain the town's
most prominent citizens and 80 percent landowners. As Peter
Ailport, President of the Association of National Adver-
tisers, testified during the Commission's March 14 hearing:
More recently, in the current 1982/83
television season, during a time of
economic recession and in the face of
share erosion, the networks increased
their (advertising] prices some 16 to 19
percent. This is hardly a sign of an
industry that is vigorously competi-
tive. . . . The only true competition
to the networks has been the growth of
the independent stations.j~/
Or, in the words of Fred Pierce, President and CEO of ABC:
"The lowest-rated show on the ABC Television Network
41/ CBS Comments at 110. Mel Blumenthal, Executive Vice
President of MTM Enterprises, Inc. (Bill Street Blue~i
producer) offered a first-hand perspective during his
March 14 testimony:
Although there is a lot of talk of
original programming for pay television,
and, indeed, some limited amount of
original programming has been produced,
the amounts of money available from pay
services are so far below what the net-
works will spend due to their enormous
audiences which generate billions of
dollars of advertising revenues per
year that MTM cannot now, nor for the
foreseeable future, contemplate produc-
tion of high-quality expensive program-
ming such as "St. Elsewhere" and "Bill
Street Blues" for pay television. (Tes-
timony of Mel Blumenthal, Tr. at 69.]
42/ NBC Comments at 122; CBS Comments at 112.
43/. Testimony of Peter Allport, Tr. at 178.
PAGENO="0277"
273
prime-time schedule this season has an average audience of
18 million people. I think you'll agree we have a very high
definition of failure. Overall, we attract audiences that no
one else can compete with."~~
31. The Commission's oral hearings also revealed the
falsity of another network tactic in this proceeding: to
lead the Commission and the public to believe that the
survival of the free television system requires the Rule's
repeal. NBC's Comments, for example, asserted: "All ele-
ments of free television . . . are adversely affected. That
is precisely why many members of the public who cannot afford
to pay for television service have asked the Commission to
repeal the Rules. These members of the public have no
economic stake in this proceeding--other than that they
depend on free television."~' During the March 14 hearings,
the fears expressed by elderly persons' groups for the future
of free television pr4pted Commissioners Dawson and Jones
to express dismay at t~e "scare tactics" encouraged by the
opponents of the Rule.~1'
44/ Frederick S. Pierce, President and Chief Executive
Officer, American Broadcasting Companies, Inc., Remarks
Before the Financial Analysts Federation, Kansas City,
Mo. at 2 (Mar. 2, 1983) (emphasis added).
j~/ NBC Comments at 9.
46/ §j~ Tr. at 362-66. Commissioner Dawson commented during
the hearing:
I'm absolutely astounded by the amount of
education that must have gone on to get
(footnote continued)
PAGENO="0278"
274
32. In fact, as the Department of Justice commented,
"it is by no means certain that Ethel new media will eliminate
network dominance. . . . Thus, in light of the uncertainty
surrounding the new technologies, the Commission should not,
for the present, rely heavily on this factor in assessing
the warehousing problem . . . . Indeed, the President
of the CBS Television Network has stated that the recent "ero-~
sion" of network audience (to an 80 percent share in 1982) is
"manageable and leveling off,"~V and NBC has actually
cited a "significant trend" in pay cable ratings, ~ that
"liBO's average primetime rating within its own subscriber
universe (!:.~.:.` pay cable homes] has been consistently de-
dining for the last five months," from a high rating of 13.3
and a 21 share in June 1982 to a 9.0 rating and a 13 share
in October 1982. NBC said this rating decline "was initially
masked by EBO's increasing penetration."~' Meanwhile, the
(footnote continued)
this group together to talk about the
immediate demise of the three networks.
I'm just astounded. I think the scare
tactics we have seen today are rather
frightening. The networks themselves talk
about having a dominant position into
1990. If they're going to be in new
technologies, their competitors are going
to be themselves. [Tr. at 362.1
47/ DOJ Comments at 46.
48/ Electronic Media, Feb. 24, 1983, p. 14.
49/ "NBC Points to Drop in Ratings for EBO," Multichannel
News, Nov. 15, 1982, p. 11.
PAGENO="0279"
275
Commission has reported that cable television system profits
plummeted by 79 percent in 1981 to $40 million, from $168
million in ~ and over.the-'air subscription television
(STV) stations are losing subscribers and shutting down in
major markets.~~' In contrast NBC, generally considered to
be the "least healthy" of the three networks, registered a
profit increase of 124.3% in 1982, with profits of $107.9
million in 1992 compared to $48.1 million in 1981, and posted
revenues of $1.8 billion.L~/ Both CBS and ABC boasted reven~
ues of over $2 billion in 1982, making the past year the first
in which total network revenues have surpassed the $6 billion
mark.~" Finally, the 1982 Nielsen rating compilations
reveal that television viewing reached an all-'time high in
1982, with 92 percent of viewing attributable to over-the-
air television and 8 percent to cable, "with no increase in
50/ "Cable Took a Beating in `81," Broadcasting, Mar. 28,
1983, p. 91.
51/ STV stations are largely unprofitable and actually lost
nearly 79,000 subscribers in the last quarter of 1982
alone. At least four STV services (in Boston, San
Francisco, St. t.ouis and Oklahoma City) have shut down
in *the past six months. See Pay TV Newsletter, Jan. 26,
1983, pp. 1-4; Satellite Week, April Il, 1983, p. 8.
52/ "The Phoenix Ariseth," Broadc~~Sting, April 4, 1983,
p. 121.
53/ Broadcastipg, Jan. 31, 1983, p. 7; Broadcasting, Jan. 24,
1983, p. 7. See also, ~ABC-TV's First $2 Billion Year,"
Broadcasting, Jan. 24, 1983, p. 42.
PAGENO="0280"
276
cable's share during (the] year's last 8 inonths."~-~"
Clearly, no "threat" exists to either the networks or free
television as. a whole that justifies repeal of the Rule.
V. THE RULE HAS ENABLED INDEPENDENT STATIONS TO
BETTER SERVE THEIR COMMUNITIES OF LICENSE WITH
FIRST~RUN AND LOCALLY ORIGINATED PROGRAMMING -
33. INTV's Comments urged the Commission to retain the
Financial Interest and Syndication Rule because its member
stations clearly have benefited from the open, competitive
syndicated program marketplace that the Rule has engendered,
and the American public in turn has benefited from the
development of competitive and financially stable independent
stations that now broadcast to far greater segments of the
public.
34. The most direct effect of the Rule, the increase in
independent stations' access to recent off-network syndicated
programming, has itself contributed to diversity by enabling
audiences to view the most appealing off~networic programs
durinq time periods that are particularly desirableand con~
venient. However, the Rule's foremost contribution to diver-
sity in television lies in the fact that the independents'
increased presence and profitability under the Rule has
provided them with the economic wherewithal to originate or
purchase first-run programming that network O&O's and affili-
ates either cannot or will not exhibit.
54/ Television Digest, Jan.. 31, 1983, p. 8.
PAGENO="0281"
277
35. As noted earlier, the impress~.ve increase in the
number of television stations serving the American public
since the adoption of the Rule has been entirely attributable
to the increase in independent stations. Moreover, as noted
in INTV's initial Comments, independent stations, by their
very definition, purchase or produce programming for their
entire broadcast day (typically 19-1/2 hours or more), while
the preponderance of an O&O or affiliated station's day is
filled by inherently non-local network programming designed
for maximum mass-audience appeal. A network-owned or affili-
ated station typically programs its own channel for only 7 to
7-1/2 hours daily, and that number is continuing to contract.
36. Demonstrably, the networks are expanding their
dominion over their local owned and affiliated stations.
Network-fed programming is increasingly predominant in every
broadcast daypart, from expanded early-morning news and infor-
mation shows (NBC's Early Toda~! and Today, ABC's News This
Morning and Good Morning America, and the two-hour CBS MOrN-
ing News), to increasing amounts of network-supplied soap
operas; game shows and other daytime programming, to an
expanding network presence in late-night programming (~
News Nightline and The Last Word, NBC's Late Night With David
Letterman and NBC News Overnight, and CBS's Weekday Night
Movj~es), to an everincreasing supply of weekend sports and
special programming.
37. More recently, the networks have stepped up efforts
to gain affiliate acquiescence to expanded network evening
PAGENO="0282"
278
news broadcasts.~-~~1 Moreover, the Prime Time Access Rule,
which was promulgated primarily to encourage the development
of more locally originated and independently supplied programs
on network stations, clearly has not arrested the trend
toward increasing network-supplied programming outside of the
7:30-8:00 p.m. weekday time slot. The general manager of an
NBC affiliate has observed: "Since the prime time access rule
was put into effect, the networks have expanded their program-
ming hours by
38. The obvious impact of this increasing network intru-
sion into local station program schedules is that affiliated
stations have an ever-dwindling portion of their broadcast day
available for eithen locally oriented programming or first-run
syndication. As another NBC affiliate manager has stated:
"We [network and affiliates] have to remain partners *in all
of this, but my license calls for me to serve the local com-
munity."L!/ `Today's profitable independents are better able
than prior to the Rule to fill this void and to produce and
air locally oriented entertainment, informational and public
affairs programming for their local communities in fulf ill-
ment of their obligations as ]~icense-holders and public
55/ See "Affiliates Ready to Fight Network Expansion,"
~Tctronic Media, Mar. 10, 1983, p. 21.
~/ i~.
~2/ ~.
PAGENO="0283"
279
trustees. As Lucille Salhany, a director of NATPE Interna~
tional and programming supervisor for five network-'affiliated
and two UHF independent stations, testified during the Commis-'
sion's March 14 hearings:
If a 10 o'clock news service in Miami or
in Philadelphia is important, if local
coverage of sporting events is important,
and if a public service special like "Job
Fair" in Washington is important, then so
are these rules because if you tip the
balance of power in favor of these net-'
works and if you in any way slow down the
growth of the independents, you're stifling
profit potential and preventing investment
in projects (such] as I've mentioned4~/
39. Moreover, in no small measure due to tk~e Rule, many
independents today are capable of acquiring, at least occasion-'
ally, high-'quality, first-'run programs and mini-series such as
"Edward the King," "A Woman Called Golda" and, most recently,
the highly acclaimed "Nicholas Nickleby." The~e types of pro-'
gramming, which indisputably contribute to the richest form of
diversity in broadcast television, are within the capabilities
of independent stations only because of their ability to at-'
tract large audiences and increased advertising revenues to
their "regular" program schedules, the most profitable corn-
ponent of which is recent off-network syndicated programming.
~/ Testimony of Lucille Salhany, Tr. at 278-79.
PAGENO="0284"
280
VI. THE COMMISSION MUST ENSURE THAT THE NETWORKS CANNOT
OBTAIN CONTROL OF SYNDICATION RIGHTS TO ANY OFF-NETWORK
SERIES PROGRAMMING
40. The Pinancial~Interest and Syndication Rule has
served the interests of television viewers and consumers
the public interest by enabling independent stations to
compete fairly and freely for the recent off-network syndi-
cated programming that most appeals to television viewers.
Simply put, the R~e has contributed mightily to the birth of
scores of new advertiser-supported television outlets and has
greatly enhanced consumer viewing options. Additionally, the
Rule has enabled independents to offer more local and original
programming, to purchase more high quality first-run syndi-
cated programming, and to exert a positive influence in
stabilizin~ advertising prices and, resultantly, consumer
product costs. The Rule has, in short, contributed to compe-
tition and diversity ~in free television.
41. The plain fact is that the Rule has assured the
existence of an independent, decentralized program syndica-
tion industry that, given the increasing value of syndicated
product in the past decade, predictably would otherwise have
become centralized in the three dominant networks. The Dc-
partment of Justice has confirmed that "there is some danger
that if the networks obtain control of of f-~network syndica-
tion rights, they may have the ability and incentive collec-
tively to exercise market power over off-network syndicated
PAGENO="0285"
281
programming.~1~' Moreover, DOJ has concluded that it would
not be necessary for the networks to control all recent off-
network syndication to weaken independents and force artifi-
cial increases in advertising rates and, ultimately, consumer
products:
Since the three networks have market power in
national broadcasting, a position they are not
likely to lose in the near future, they may be
able to obtain an undue amount of syndication
rights to the network programming. The networks
would have an incentive and may have the ability
to withhold some of this programming from syndi-
cation in order to increase license fees or
advertising rates. This could have an adverse
effect on independent broadcast stations which
use off-network programming to compete with the
networks and their affiliates in each market.
If this effect were achieved through tacit rather
than overt collusion, the antitrust laws might,
as a practical matter, not reach the.network's
actions .jQ/
42. Therefore, it is clear that the Rule must be retained
in some form to ensure that the networks could never exercise
any measure of control over the off-network syndication
market.~'
DO.7 Comments at 4.
Testimony of Stanley Gorinson, Tr. at 20-21.
In the 1979-80 television Nseason,~t CBS alone accounted
for 8 of the 10 highest-rated television series. The
following season, 1980-81, it had 7 of the top 10 shows.
If this pattern holds in future years, it is entirely
possible that CBS alone could control syndication rights
to enough of the m~t popular series to exercise market
power in the off-network syndication market. This theory
(footnote continued)
PAGENO="0286"
282
43. In view of the overwhelming evidence presented in
this docket that the networks are healthy and profitable and
will continue to dominate American television for the fore-
seeable future, that the program supply market is competi-
tive,iY barriers to entry are low-~' and small producers
have acceptable alternative methods of sharing risk than ced-
ing syndi~cation rights or interests to a network investor,~"
INTV submits that the wisest course would be sinply to leave
this unobtrusive and self-executing Rule in place, at least
until such time as the networks are no longer capable of
exercising market power~1" and the U.S. television industry is
(footnote continued)
is bolstered by one of CBS's economic consultants in this
proceeding, Dr. Bruce Owen, who testified in a 1980 anti-
trust case that control over a 50 percent share of the
programs in the market for pay television programming
would be sufficient to confer the power to affect the
price of progranuning in that market. See Testimony of
Dr. Bruce N. Owen in United States v. Columbia Pictures
Industries, Inc., No. 80 Civ. 4438 (GLG) (S.D.N.Y.), Tr.
at 1625 (Dec. 2-3, 1980).
62/ See, ~ DOJ Comments at 15; NBC Comments at 107 (cur-
rent program supply market, is "vigorous and healthy").
63/ See DOJ Comments at 19.
j4J ~.
j~/ In fact, at least one network apparently has succeeded in
wielding its market power to deprive local independent
stations of their rights to televise local baseball games.
NBC Television's new agreement with major league baseball
provides that, effective next year, ~ NBC stations
(footnote continued)
PAGENO="0287"
283
truly competitive. Since it has become manifestly evident
that there must be some rule to restrain the networks from
exercising control over the off-network syndication business,
the best and most efficacious rule clearly is one that is
entirely self-enforcing, practically impossible to circumvent
and low in cost to the public. The only rule that adequately
satisfies all of these criteria is the financial Interest and
Syndication Rule as it exists today.
44~ Several alternatives to the current rule have been
suggested. Unfortunately, all of the alternative formula-
tions that INTV has studied to date would be far more
costly and difficult to enforce than the current Rule and,
more importantly, all would give the networks interests in
programming that could amount to de facto control. The
proposals that would allow the networks to obtain substan-
tial financial interests but not syndication rights in
(footnote continued)
may broadcast local games on Saturday afternoons. This
will mean that independent stations (such as WPIX New
York, WOR New York and WDCA Washington, which long have
telecast New York Yankees, New York Mets and Baltimore
Orioles games, respectively) will be prevented from
telecasting local major league baseball teams' games on
Saturday afternoons, and millions of fans will be de-
prived of the opportunity to watch their home teams on
Saturdays, notwithstanding the fact that local audiences
currently prefer to view the Saturday games of their
hometown teams over the "national" NBC games by over-
whelming margins. See New York Times, April 12, 1983,
at 38.
PAGENO="0288"
284
programming, for example, suffer from the same infirmity
that OOJ ascribed to one of its "alternatives":
"The major drawback . . . is the difficulty in
drafting and policing a rule that properly defines
what contractual terms constitute an effective
minority interest. The networks might be able
to draft contracts that would give them effective
control over distribution although they appeared
to be merely minority owners."j~/
Indeed, the Commission's adoption of the financial interest
prohibition in the Rule was based on its recognition of a
similar infirmity, i.e. that it would be ineffectual "to
exclude networks from active participation in the syndication
market and then permit them to act as brokers ifl acquiring
syndication rights and interests . . ~i2/
45. In sum, INTV supports retention of the current Rule
because it most completely accomplishes the two paramount
policy objectives that, in IN~rV's view, must be preserved:
(1) independent television stations ~
have unrestricted access to ~ of f-
network syndicated programming in a
free, open and independent marketplace;
and
(2) independent stations ~ have access
to syndicated programming through the
widest possible number of syndicators,
, in a competitive market.
46. Preservation of these essential and complementary
objectives necesSarily means, at a minimum, that the three
66/ DOJ Comments at 50.
~/ 1970 Report and Order at 398.
PAGENO="0289"
285
major networks cannot be permitted to control or influence
the syndication of any first-run entertainment series, either
during or after its initial network run. Moreover, the
networks cannot be given the leverage to restrict the off-'
network exhibition of any program during any part of a
television station's broadcast day, inasmuch as independents
must compete with network stations and their network-supplied
programming during nearly every period of the broadcast day.
The Commission must at all costs ensure that its resolution
of the instant inquiry permits of no possibility that the
networks could achieve any measure of profit participation
that could possibly amount to control over the broadcast
exhibition of any off-network entertainment series. The most
efficient and simple resolution would be achieved by retention
of the current Rule.
VII. CONCLUSION
47. INTV respectfully submits that the Financial Inter-
est and Syndication Rule should be retained because it serves
legitimate purposes that clearly are in the public interest:
it furthers competition and diversity in television by
permitting independent television stations to thrive and
serve ever-greater numbers of the American people with high-
quality entertainment, cultural, news, information, public
affairs and locally oriented ~rograrnming that offers viewers
32-540 O-84--19
PAGENO="0290"
286
a genuine alternative to the national, "mass market" pro~
granuning exhibited by the three national television networks.
INTV does riot wish the networks indeed, it believes
that the networks serve legitimate needs and preferences of
the American people. However, the immutable fact remains that
the three networks unquestionably continue to dominate the
American television industry and shall for many years to
come, if not in perpetuity. As long as broadcast television
remains riot a free marketplace but a Commission-ordained
oligopoly with but three gatekeepers, the Commission must
continue to ensure that those gatekeepers do not obtain any
measure of control over the programming that permits its only
broadcast competitors -- the independents to continue to
provide diverse, alternative program choices to the American
public.
~/ INTV believes, as Bob Wormington indicated during an
exchange with Commissioner Dawson during the Commission's
March 14 hearing, that the Commission's priorities in
pursuing its goal of a more competitive television mar-
ketplace would be far better served by re-examining those
of its regulations, such as the "7~7~7 Rule," which may
prevent experienced broadcasters from achieving suffi~-
cient size to realize economies in program acquisition
and networking activities. See Tr. at 3l3~'3l7. Such
rules may well prevent the full realization of scale
economies. If so, their elimination would increase com~
petition and enhance the welfare of television viewers.
An "experiment" with lifting such artifical ownership
limits would approach the issue of broadcast industry
Structure and network dominance in a more fundamental
and promising way than the preseht proceeding.
PAGENO="0291"
287
48. It has become apparent during the course of this
proceeding that the Rule has in fact benefited independent
stations and the public at large by permitting independents
to obtain the programming they need to survive and prosper
on a fair, equitable and arms-length basis, from suppliers
who will benefit handsomely from their success and would
suffer from their failure. It has become equally evident
since the initiation of this proceeding that the motives
of the networks and their affiliates in seeking the Rule's
repeal are something less than purely pro-competitive, and
their public and private statements have not been comforting
to independents. INTV cannot be optimistic as to network
conduct upon the Rule's repeal at a time when network
officials are acknowledging that "in our opinion a far more
important competitor for us to watchand program against and
compete with is the independent television station. That
is going to grow at a rate that far exceeds any of the wired
media as f at as we are concerned,"~V and affiliate associa-
tions are openly suggesting that repeal of the Rule "may im-
pact premature syndication of network re-runs that are being
made available to independent stations and are competing with
69/ Remarks of James if. Rosenfield, Executive Vice-President,
CBS Broadcast Group, to New England Chapter, National
Academy of Television Arts and Sciences (played in tape-
recorded form during Testimony of Robert Bennett), Tr.
at 247-48.
PAGENO="0292"
288
first run network shows carried by Affiliates."2-21' Indeed,
as Robert Bennett, Senior Vice President of Metromedia, Inc.,
observed during the Commission's March 14 hearings:
The chain of events which brought us all
to this room today is really quite simple
to trace. The syndication and financial
interest rules fostered a strong syndica-
tion market which facilitated the growth
of independent stations which, in turn,
led to a slight decline in network shares
and which caused the networks to seek the
repeal of the rules. 71/
49. The comments submitted in this proceeding, and the
testimony presented during the Commission's March 14 oral
hearings by witnesses whose only vested interest in this
proceeding is the future of a truly competitive free televi-
sion system, establish beyond any doubt that the Rule fl~
benefited independent stations and television viewers, and
that the danger to the continued vitality of independents if
the Rule were repealed is all too real. The Commission
observed upon adopting the Rule that "the presence of the
networks as domestic syndicators is inherently undesirable.
They are in the position of selling programs to independent
stations in competition with their own network programs on
70/ Letter from James 0. Babb, Jr. to CBS Television Network
Affiliates Association, "CBS Affiliates Option Paper
on Repeal Of Network Financial Interest And Syndication
Rules" (Oct. 18, 1982).
j~/ Testimony of Robert Bennett, Tr. at 247.
PAGENO="0293"
289
affiliated stations . . . . "~/ Nothing in today's televi-'
sion marketplace would make a restoration of this x~etwork
presence any less "inherently undesirable." INTV reaffirms
its conviction that the American television marketplace is
best served by the retention of this low cost, effective Rule
that furthers, rather than inhibits, competition among broad-'
cast television outlets.
Respectfully submitted,
ASSOCIATION OF INDEPENDENT
TELEVISION STATIONS, INC.
J. Laurent Scharff / /
Oa4,~Q~ iC(. ~
J~s M. Smith
PIERSON, BALL & DOWD
1200 18th Street, N.W.
Washington, D.C. 20036
(202) 331-8566
Its Attorneys
April 26, 1983
72/ 1970 Report and Order at 394.
PAGENO="0294"
290
~.emarks of Bob .1. Wormington
March 14, 1983
My name is Bob J. Worrnington. I'm General Manager of KSHB-.TV
Kansas City, M~,ssouri, a VHF independent station. Kansas City
is the 27th television market . . . and probably typical of a
lot of markets with independent television stations in the U.S.
we have six television stations, three network V's and three
UHF's, which includes 1 PBS station and 2 independents. We
operate what we feel would be, in many instances, a typical inde-
pendent station.
Prior to my coming with KSHB-TV, I spent 18 years with network
affiliated stations. I've been in independent television for the
past 13 years. I am the past chairman of the Association of
Independent Television Stations, and I am here speaking on behalf
of th~ INTV . . . because we feel that the issue being argued
here today is sri issue of competition . . competition not only
between networks and independents . . . but competition for
viewers and competition for advertisers.
The real competition for the networks is not pay television .
is not cable news networks . . . or ESPN . . . or USA Network .
not the so-called "new technology" . . . it is the independent
television stations and you cannot talk about the future of free
television without considering the role of the independents.
(GO TO CHART #1)
PAGENO="0295"
291
This chart shows the growth of indies in the last decade
(1) Growth of number of stations;
(2) Advertising revenues;
(3) Now showing profits (was a loss);
(4) Ana in 1983, advertising spot revenues for thde-
pendent stations are expected to top 1.5 billion dollars.
Why this increase? Purely and simply, the availability of better
programming, which translates to bigger audiences.
For example, in the top 20 markets ... . independents versus
affiliated stations . . . in various weekday time periods
here's what's happened:
Early fringe or 6.7:30 p.m.: Between 1979 and 1982,
independents increased their share of audience from 25 to 277. -
network affiliates dropped from 67 to 647. . . . a 2 share point
gain for independents, a 3 share point loss for affiliates. -
In prime access, 7:30 to 8 p.m.: Indies went from 22 to
267. shares, affiliates dropped from 69 to 637. shares . . . a 4-
point gain for indies, a 6 point loss for affiliates.
In late fringe: Indies went from an 11 to a 157. share,
a gain of 4 share points, and the affiliates lost the same amount.
What is significant about these share losses by the ne~ts and
their affiliates is that the lion's share of these losses was to
independents, not to the so-called "new media" that the networks
say is threatening them.
PAGENO="0296"
292
Recent . . . or "fresh" is the term we use.. . . off~-network
progratraning has played a key role in the independents' success.
The freshness of this programming has certainly increased tre-
mendously since the FCC rules on financial interest and syndication
were imposed some years ago.
(GO TO CHART #2)
You can see from this chart -- which would be typical of many
independents - - the tremendous importance of off-network prograing
to the revenue and profitability of an independent television
station such as ours. Revenues are tied very directly to audience
shares.
Note how much of our revenue is geared to the off-network shows.
A major reason is that in early fringe prograning, based on the
latest Arbitrons, we are either #1 or #2 in rating and share,
or #1 or #2 in adults 18-49 throughout those hours -- and that's
important to advertisers. Advertisers don't like to buy low-
rated shows. That's why networks cancel them, and why indies
strive for maximum ratings. Many advertisers have minimum
rating cut-offs . . . usually a five or better. Why? Because of
statistical variations, a 3 rating could be a 1 . . . it could be.
a 5 . . . so an advertiser shelters its buy with a minimum rating.
Ratings are money in the bank . . . to networks and to independents.
So if someone controls our progranuning, they control our revenues.
(pause)
PAGENO="0297"
293
We make no bones about it -- given the networks' ability to
control the distribution of the bulk of our programming, this
is what we face. First the reality that we get our audience
basically from network affiliates. Our gains are their losses --
and all revenues . . . theirs and ours . . . are tied very directly
to audience size. Second, a network is the sum of its affiliates.
If an affiliate is weak, it hurts the network, so networks
support the affiliates and do what they can to protect and
support them.
In protecting the affiliate, would the networks offer the best
properties to us, their competition? No: Would they warehouse,
or put unrealistic restrictions on their use? Yes: Why these
fears? Just as a footnote, a week ago, the ABC-TV affiliate in
Kansas City did not clear the opening premier telecast of IJSFL
football. It was never offered to us by ABC-TV . . . they chose
to keep it off the air in our market rather than offer it to the
independent.
Incidentally, they do sort of the same thing with college football.
Under the network contracts with the NCAA, it is virtually
impossible for an independent in a major market to televise a
live local college football game because of the restrictions
imposed by the networks and the NCAA . . - impositions so
restrictive that. the courts have ruled those contracts to be
PAGENO="0298"
294
unlawful . . . a decision the Justice Department is supporting
in the appeal filings. And those are the same networks telling
us how nice they'll be to do business with.
(pause)
What happens if off-network programming isn't offered to us?
What then? What about alternate sources? The "new technologies"
are into movies and sports . . . not .series programming
there isn't another source available. To go to our source now,
we buy our programming from producers . . . we compete against
the networks. What this lets us do is go to the creative sources
of the prograing . . . the Norman Lears of our industry .
who actually create prograiing. The networks do the same thing
we do -- go to the creative producers -- only they have a first-
run crack at it. We use the residual benefits in a further
expansion of the creations of the program distributors. Right
now, there is a very clear line of distinction between the creators
of programs and those who program them. The networks program --
we program. We compete with each other.
Does the current system work? Yes. It' s a give and take in the
market right now. The good shows bring lots of money - - the bad
ones don't. Untested shows bring less than tested shows~. .
and a good test of audience acceptance is on the network level.
PAGENO="0299"
295
We don't mind bargaining with sellers' whose only incentive is
to make money selling programs. We need them but just as
important, they need us.
They're not going to drive us out of business with exorbitant
prices, or by withholding or delaying programs or putting on
restrictions such as when we can or cannot televise a program.
But to the networks, we're competition -~ and they'd just as soon
we weren' t there. If the independent stations are cut off at
the pass in getting prograing, the networks stand to gain a
lot more in advertising revenues than they would lose in
recouping progranmiing investments.
The repeal of the financial interest rule .would reverse not only
the progress that has been made in free television for the past
decade, it would ha~.?e a tremendous imp&ct on the next decade in
alternatives in viewing and advertising opportunities for both
viewers and advertisers.
It is a fact that we are in a fiercely competitive business.--
competing for people's time and attention. Since multi-million
dollar program contracts are involved, we have to plan our pro-
gra~ing moves months, sometimes years, in advance. Our competition
in those moves are the ABC, CBS and NBC stations. If we have to
buy from maj or networks, ~e are telling them well in advance what
our programing strategies are. It's like Macy's having to tell
Gimble's, or Sony telling RCA, what they're going to market next.
PAGENO="0300"
296
We would have to reveal to the networks what our future progranmting
plans are.
Keep in mind that we program in the same manner the networks do --
in blocks of programs. If we try to assemble blocks of programs
and they choose to stop us in our tracks, they just have to sell
one of the programs to their own affiliate, not make it available
or put unrealistic restrictions on its use so we couldn't
effectively block programs. Even worse, in major markets where
the networks operate owned and operated stations, the independent
stations in those markets would be forced to deal directly with
their competitors.
The networks, by their own comments, face a bright future, with
or without repeal of the rule. But the future o~ independents
is inUmately linked to the availability and continuing supply
of fresh, current off.network programming being supplied by the
people who create them . . . the program producer and distributor.
We need to have this supply without fetters, without restrictions,
and with increased opportunity.
We don't mind open competition. If you've been around independent
television stations, you know we're for it . . . we thrive on it.
But the competition has to be open. Putting the networks back
into the syndication business makes the business less open .
more subject to abuse. That's why we're here. And that's why
we ask you to carefully consider the points we are making here
today.
Thank you.
PAGENO="0301"
297
Mr. WIRTH. Thank you very much, Mr. Cassara.
Our final witness on the first panel is Naomi Gurian from the
Writers Guild, who we are especially, pleased to have with us this
morning. Ms. Gurian had a 11/2-hour trip to get here this morning.
Thank you very much for being here and welcome, Ms. Gurian.
STATEMENT OF NAOMI GURIAN
Ms. GURIAN. Thank you, Mr. Chairman.
I am Naomi Gurian and executive director of the Writers Guild
of America West. I represent approximate 6,200 writers located
mainly on the west coast and through my Eastern affiliate, another
2,100 writers. These are the writer-entrepreneurs who will be dev-
astated by repeal of the rule and specifically our minority writers
will be most severely injured. Our writers strongly support H.R.
2250.
Frankly, gentlemen, we need 5 years. Let me explain. In 1981,
after struggling for years, against all three networks and all of the
companies I find myself allied with today, we finally made a break-
through, along with the other talent unions and we negotiated
comprehensive, extensive, affirmative action programs for writers,
actors, and directors.
Those programs were not easy to negotiate. Originally, our mem-
bers looked at the companies and the networks and said a pox on
both your houses. A more internal, detailed look revealed that out
of the two doors leading to employment, we could pry open the
door that led to the independent producer. The door that leads to
network employment is closed to our minority writers. Let me ex-
plain.
We negotiated affirmative action programs that have several
prongs. One prong relates to those minority writers within our
union, but that is a trap if you let yourself relate only to that, be-
cause entrance into our union is dependent on employment and if a
minority writer can't get employed-and the major employer is, of
course, the three networks-then he can't even get into the union.
So, our affirmative action program has two major programs, one
addressed to union members and one that is addressed to minority
writers who are not able to get into the union, but functioning all
over the country and attempting to break into the industry.
In the 1½ or 2 years since we negotiated this program, we have
initiated and reactivated a committee of black writers, a committee
of Latino writers, a committee of women writers, a committee of
older writers, and a committee of disabled writers. These commit-
tees are at long last functioning. We are meeting on a constant
basis with representatives of the independent producers and we
have begun a program which in a short time should begin to give
us a channel for employment, employment of minorities that the
networks do not afford us.
The networks are a closed door. One of the provisions that exists
in our collective bargaining agreement exists in similar form in the
collective bargaining agreement of the Directors' Guild and the
Screen Actors' Guild and that is that creative control should reside
in the hands of the independent producer and under the collective
PAGENO="0302"
298
bargaining agreement, the independent producer is precluded from
feeding creative decisionmaking to the third party, the networks.
These provisions are violated constantly by the networks every
day. The violations occur because the networks intend to master-
mind profit and bleach programs there. That is their double objec-
tive. The violation of the talent guilds collective, bargaining agree-
ments is so consistent, so pervasive, that the three unions have met
together, have examined the problems and finally hired legal coun-
sel to examine and draft legal action against the networks for
these violations.
We believe that the double-pronged action of enforcing, imple-
menting and the shotgun approach of our affirmative action plan,
coupled with legal action against the networks for violation of the
creative control provision will at long last provide the talent in
Hollywood a pathway to employment.
We need the 5 years, gentlemen.
I would like Some remarks made by writer members and non-
writer members of the union to be put into the record, Mr. Chair-
man.
[Testimony resumes on p. 382.]
[Ms. Gurian's prepared statement follows:]
PAGENO="0303"
299
Oral Presentation by Naomi Gurian, Executive Director, Writers
~iIld of America, in Support of H.R. 2250 before the Subcommittee
on Telecommunications, Consumer Protection and Finance of the
Committee on Energy and Commerce, U.S. House of Representatives,
Los Angeles, California, June 1, 1983.
My name is Naomi Gurian. I am the Executive Director
of the Writers Guild of America West and I represent our
6,200 writers who reside in and around the West Coast, and
approximately 2,100 writers in our Eastern New York affil-
iate. These 8,300 writers are the struggling Norman Lears
of today. These are the writer entrepreneurs that the f in-
ancial interest, syndication and prime time access rules
currently protect. The rules create a nurturing environment
within which young writers can grow and aspire to the posi-
tion of a Norman Lear with Embassy Productions. The members
of my guild strongly support H.R. 2250. Quite frankly, we
are frightened by the FCC's headlong rush to repeal their
own recently adopted rules. A simple moratorium, during
which time we can rationally assess changes occurring in
this industry, will harm no one. FCC repeal of the rules,
however, will devastate the members of my guild from both a
financial and creative point of view.
Without these rules there are no checks and balances to
protect the small guy, the member of my union. Let me
explain to you the two major ways in which this happens.
First of all, economic; by allowing the small guy to have a
financial interest in the back end rights to the programs
he helps create, you provide him with an incentive to stay
PAGENO="0304"
300
in this risky business as well as that modicum of bargaining
leverage that is necessary to compete with the three network
giants. Without this leverage, he has no hope of selling
his ideas, and that leads me to the second most important
part of my statement.
I believe that this Subcommittee wants to serve the
public interest, and I believe you serve that goal by
creating an environment which is conducive to the diversity
of expression, which inevitably leads to new ideas and pro-
grams. If you remove the minimal controls the FCC estab-
lished in 1970, you will stifle all diversity of expression.
Even today, with the rules, a writer's creativity is im-
pinged by network dominance. You must realize that to my
Guild, the rules are the ~ mechanisms that prevent total
network control of the creative process.
The talent unions in Hollywood, that is, the Screen
Actors' Guild, the Directors' Guild, and the Writers' Guild,
have, after hard and arduous sessions, negotiated provisions
in their collective bargaining agreements with various
production entities. The agreements reserve certain cre-
ative decisions to those production entities. Thus, the
production entities are able to exercise creative discretion
as to the nature of the script which eventually becomes the
program 2~merica watches, the individual playing the princi-
pal role, and the individuals that we call the day player.
PAGENO="0305"
301
Today, these collective bargaining provisions give the
producers certain vital creative controls. But we wage an
ongoing battle against the pervasive and'consistent network
expansion over creative control. The stuggle to protect our
rights from network encroachment has reached such a level
that the diverse talent unions have organized together and
hired a law firm to examine potential legal action against
expansion of network creative contrpl.
If the networks acquire syndication rights or any
financial interest in programs, they will surely impose
their institutional creative biases on writers even more
than they do today. You must remember that the networks are
seeking to reach the lowest common denominator of ~znerican
viewers to attract advertisers. In contrast, when a writer
and a producer develop a program, the producer does not
share the network's concern with pleasing advertisers and
airing "safe" programs aimed at the collective tastes of
television viewers across the nation.
With regard to minority programming, it could be on
the air tomorrow if the networks permitted it. The only
thing stopping them is their own profit maximizing motives.
The Guild fights the networks by filing EEOC claims every
day. Our thought is that if minorities have greater oppor-
tunities to work on scripts and behin6 the scenes, the
viewing public will benefit by having more programs reflect-
32-540 O-84---20
PAGENO="0306"
302
ing the minority way of, life. The networks have opposed us
at every juncture.
One network recently issued an edict prohibiting writers
over 35 years old from participating in programs created
for that network. They wanted all of their programming to
iterest only viewers between 18 and 35 because they are the
predominant consumers of products advertised on the networks.
Together with the production company, we have battled this'
unreasonable policy. I find their credibility questionable
when the networks argue that repeal of these FCC rules will
allow them to air more programming involving the elderly or
ethnic minorities.
Fortunately for writers, the lowest common denominator
mentality does not filter down to the producers we work with
-- creativity is encouraged, not discouraged. With the
protections of the rules, writers and producers are more
willing to push for fresh, innovative programming ideas.
Even if we are only occasionally successful in gettinq such
quality programs on the air, the viewing public is enriched.
Without the rules to provide financial and creative in-
centives for talented writers to stay in the television
business, I genuinely fear that the overall quality of
television will suffer.
I would like to address myself to another significant
point. To the unions in Hollywood, it is ludicrous to hear
PAGENO="0307"
303
the three network giants state that they are fearful about
the competition from the growing cable-pay markets. The
networks are effectively asking the FCC to protect them from
the very competition the FCC has encouraged for years. The
networks do not need protection from cable: rather cable,
which is still in its embryonic stage, needs protection so
that it can mature into healthy adulthood.
Right now, if the networks do not buy an idea, it goes
into the wastebasket. There are stirrings of new opportun-
ity in cable and pay-TV, but these are only distant hopes to
our membership which suffers an unemployment rate approach-
ing 60 percent.
Quite frankly, cable cannot afford writers of original
programming under the terms of our collective bargaining
agreements. To write for cable projects, we have had to
secure special waivers on a case-by-case basis permitting us
to get sub-standard pay for our work.
As a member of the industry which could be devastated
by the FCC's headlong rush to repeal the rules, I am here to
tell you that the "new media" revolution has not yet come,
it is only beginning. The FCC's perception of a competitive
new media is wrong, it is a distant and weak prospect.
A cable industry, that has done very little original
programming and does not have the wherewithal to air ori-
ginal programmitig without reducing union wages, is not a
PAGENO="0308"
304
threat tQ the networks. Writers and producers of quality
series are not flocking to cable -- they will continue to
look to networks as the forum for their product for many,
many years to come.
In conclusion, this is not the time to repeal the f in-
ancial interest, syndication or prime time access rules.
The Writers Guild strongly urges Congress to enact H.R.
2250. To provide the Subcommittee with additional support
for the position that repeal would be harmful to the cre-
ativity and diversity of the guild members that I represent,
I would like to submit, along with my testimony, the at-
tached letters, speeches and Senate testimony which was
prepared by guild members and submitted to t}~e FCC.
(CONMITTEE NOTE: The additional material submitted for the record has
been placed in the files of the Committee.)
PAGENO="0309"
305
~flITEfl~ ~ILD OTAMER!CA,west,Lflnc.
8955 BEVERLY BOULEVARD
LOS ANGELES. CALIFORNIA 90040 213) 550-1000
Cable: INTWRITER, LOS ANGELES
January 20, 1983
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTO~I, D.C.
In the Matter of
Amendment of 47 C.F.R.
473.658(j); the ) BC Docket No. 82-345
~ Syndication and Financial
Interest Rule
The antecedents of the Writers Guild of America, west,
Inc. (and Writers Guild of America, East, Inc.) reach back
* to the early 1920's when the Screen Writers Guild was first
formed in Los Angeles. The Guild has long been recognized
and certified by the National Labor Relations Board as the
exclusive harg~ining agent for writers who are employed to
write the entertainment portion of motion pictures or tele-
vision films. Its collective bargaining agreements with
producers of motion pictures and films for television cover
writers employed on an assignment basis as well as those
employed on a term basis and also cover the purchases of
literary material from professional writers for use in
motion pictures and television.
The attached documents are the comments of the Writers
Guild of America, west on the proposed repeal of the
Syndication and Financial Interest Rule.
Ver truly yours,-.~,
omi Gur~a'~r
Executive Director
NG:cr
Enclosures
PAGENO="0310"
306
i~ ~ ~ or AME p~ ~ A, west, cqnc.
Dear Commissioner:
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048 (213~ 550-1000
(`able: INTWRITER, LOS ANGELES
January 19, 1983
~4, l\
As the President of the Writers Guild of America, west, a
union of 6,200 writers who write all of what is seen on
television that is not written by members of Writers Guild
of America, East (a sister union of 2,200 writers), I want
to address the issue of deregulation that touches upon net-
work ownerahip of syndication rights in shows they air on
the networks. As you are already aware, the producers of
television shows, majors and minors together, oppose this
idea. I want to explain why we- -who work for them and sell
to them-- join in their opposition.
There is essentially only one market for first run televi-
sion programs--the three networks. The success of a show
normally depends on network exhibition. A writer with an
idea for a show he wants to write and see produced, must
therefore persuade a network that it ought to televise that
show. If the networks do not buy the idea, it goes into the
wastebasket. There a~-e stirrings of new opportunity in
cable and pay-TV, but these are only distant hopes to our
membership which suffers an unemployment rate approaching 60
percent.
In 1970, when the current regulation was adopted, the three
networks were the sole market. There were at that time
perhaps eight independent producers. They sold a few shows
to the networks which they hoped to pay off in syndication
to independent stations here and abroad. Many of those
independents were in fact thinly disguised fronts of the
networks. For example, the star of a hit network show was
often able to negotiate a deal wherein he "owned' a company
that produced the network show in which he appeared. In
fact he was usually a minority partner in the sense that he
shared profits with the network, but the actual manufacture,
distribution and accounting of the show was done by the net-
work.
The stranglehold this placed upon the industry was evident
both in a business and an artistic way. The production cxc-
Continued - .
PAGENO="0311"
307
cutives of only three companies determined what America saw
on television. Production directly for syndication was eco-
nomically impossible without a first-run network sale to
amortize production costs. In fact the networks saw to it
that what few independents were allowed to function, for
whatever reasons, did not get paid their full production
costs for a network run; their only hope for profit came
from syndication to independent stations of reruns. Yet the
only shows that had value as reruns- -like I LOVE LUCY,
GUNSMOKE, etc. - -were shows that had been successful on net-
works first
The result of this particular regulation was a paradox in
that for once a government regulation actually resulted in
creating a free marketplace- -or one that more closely
resembles one. Instead of three network executives, we had
within a few years literally hundreds of companies to whom
we could bring ideas for new, fresh shows- -even shows that
had been turned down by networks as inconsistent with their
current philosophy or as competitive with ideas they already
had in work. Since 1970 this handful of companies supplying
networks (and those, as noted above, closely controlled and
majority owned by the networks) have grown into a strong
group of major suppliers who have sufficient financial
strength and stability to finance development on their own.
They still depend upon the network as their primary market,
but they provide lively competition not only among them-
selves but with the networks to invent, to experiment, to
bring some fresh air into the stale and repetitive
programming the networks tend to produce left to themselves.
But it is not just the dead hand of monopoly upon the inven-
tive spirit that is at issue, It is the matter of a free
marketplace. When there are only three customers, and some
8,400 writers trying to sell ideas, the idea of a
marketplace evaporates; it more closely resembles an
intellectual breadline, or the bureaucracy of a socialist
state. We need as many companies making as much as they can
out there.
A case in point: Norman Lear was able to found a company to
supply CBS with ALL IN THE FAMILY. On the basis of this and
other hit shows, his Tandem became a major independent
supplier of programming to networks, In later years he had
snother idea- -an irreverent takeoff on soap operas called
MARY HARTHAN, MARY HARTMAN which was rejected by all three
networks. In other years, and under other conditions, it
would have been dead. Tandem was strong enough financially
to take the risk of trying to interest enough independent TV
stations--as if it were assembling an ad hoc network- -to
Continued . .
PAGENO="0312"
308
absorb some of the cost. Lear's faith was strong enough so
that it was tried. It worked. MARY HARTMAN, MARY HARTMAN
was a hit and it paved the way for others--FERNW000 2NIGHT,
etc. --that would have never happened had it not been for the
existence of financially strong, professionally experienced
independent companies.
There is a host of small independent producers, often formed
to produce single productions but that live on to do others
that make this almost a demonstration of the strength and
energy of the American free economy. The individual
entrepreneur is still alive and strong and kicking sand in
the bullies' faces in this arena.
They bring to the networks ideas and proposals from the out-
side, and they have the economic strength to fight them
through--Gerry Eisenberg's Sozak Company that produced JAMES
DEAN, HAVING BABIES, SECRETS; David Rinteis' THE MEMBER OF
THE WEDDING, ALL THE WAY HOME, and GIDEON'S TRUMPET starring
Henry Fonda; Furia/Oringer's CRISIS: AMERICA ~ IRAN, a six-
hour mini-series; to name but a few. None of these would
have been seen without the clout of strong independents.
We, who earn our living in this market, can clearly see the
growth of diversity and energy and financial strength that
the regulation has given this busiiiess. We also see the
constant efforts on the part of the networks to reach out
for control, both financial and creative. We experienced it
before regulation. We see it constantly working behind the
scenes now. During the past year the networks have success-
fully moved to take creative (that is writing and
producing) powers away from the independent creators in the
daytime soap operas. This was traditionally an area in
which the shows were produced and controlled on a daily
basis by a head writer- -he or she was usually th~ person who
had invented and developed the show. Today the day-by-day
decisions are increasingly made by network executives, and
the writers and producers have been fired.
The networks have consistently violated terms of agreements
under which independent producers guarantee to their wri-
ters, actors, directors that the producers have authority
not only to pay but to hire and fire. The networks routi-
nely force producers to bow to their decisions as to who is
to be hued, what they are to write, who is to direct and
how, and what actors may be used. It is a natural thing for
them to do. Who resists power when it is available to hand?
But in these cases they are in violation of contracts writ-
ten with not only our Guild but the Directors Guild, the
Continued . .
PAGENO="0313"
309
Screen Actors Guild and the Producers Guild. We are jointly
exploring legal relief. This may seem to be a aide issue,
but to us it sets in high relief the fact that the fear of
network domination (if they are deregulated in this way) is
not just a vague anxiety that they might try to gobble up
the market: it is a certainty. They did it before, and
they have never stopped trying in devious ways to do it
since.
We have a free and healthy competitive entrepreneur market
in which some 2,000 firms are doing well, in which the net-
works themselves are prospering. I want to paraphrase a
conservative slogan we can all agree upon: "If it ain't
broke, don't fix it." This is one regulation that works.
Si ncer.e,ly,
* ~ ~--,**~~
Frank Pierson
* President, Writers Guild of America,
~ west, Inc.
FP: cr
PAGENO="0314"
310
FRANK R. PIERSON
PRESIDENT OF WGAW -- 1981-1983
Name of Film
SHOT BE REQUEST
FRAGILE
CAMPAIGN OF BILLY BANJO
POINT OF IMPACT
CHAMPAGNE SAFARI
THE SEARCH
NIGHT THE TOWN DIED
THE LEDGE
FIGHT AT ADOBE WELLS
OUT AT THE OLD BALL PARK
THE ROAD
AN ACCIDENT LOOKING FOR
A PLACE TO HAPPEN
THE VISITORS
THE FOUR THUMBS STORY
ARROW IN THE BLUE
THE S.S. AMERICAN DREAM
PRINCE AMONG MEN
THE HUNTERS
BUILD YOUR HOUSES WITH
THEIR BACK TO THE SEA
CAT BALLOU
THE HAPPENING
COOL HAND LUKE
THE LOOKING GLASS WAR
42ND ACADEMY AWARDS
PR ESENTAT ION
THE ANDERSON TAPES
NiCHOLS
~THE DEER CROSSING
GULLEY VS. HANSEN
ALL IN THE FAMILY
AND OTHER SPRINGS I
MAY NOT SEE
DOG DAY AFTERNOON
A STAR IS BORN
KING OF THE GYPSIES
HAYWIRE
From Series Entitled
Have Gun-Will Travel
Have Gun-Will Travel
"Have Gun-Will Travel"
"Alcoa-Goodyear"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Have Gun-Will Travel"
"Naked City"
"Dr. Kildare"
"Empire"
"Empi re"
"Naked City"
"Redigo"
"Redigo"
"Route 66"
"An ABC Special"
Pilot
"The Bold Ones"
Network or
Company
CBS
CBS
CBS
Screen Gems
CBS
CBS
CBS
CBS
CBS
CBS
CBS
Screen Gems
MGM
Screen Gems
Screen Gems
Screen Gems
Screen Gems
Screen Gems
Screen Gems
Harold Hecht/Columbia
Columbia
Warner Brothers
Columbia
ABC
Robert M. Weitman Prods
Nichols-Cherokee/Warner
Brothers
Nichols-Cherokee/Warner
Brothers
Nichols-Cherokee/Warner
Brothers
Ni cli ols - Cherokee/War ii or
Brothers
Amanda Fallon/UTV
Warner Brothers
First Artists
Dm0 de Laurentis Corp.
Warner Bros. for CBS
PAGENO="0315"
311
LLENRCC PRODUCTIONS
I 601 AVENUE OF THE STAAS
SUITE 911
LOS ANGELES. CALIFORNIA 90067
January 9, 1983
Chairman
Federal Ccmnunicaticns Caiinission
Washington, D.C.
Dear Casnissioner:
As the writer who wrote the first carinercial television program in
Hollywocd-the year, I believe, was 1947-I feel qualified to voice my strong
opposition to the cont~lated deregulation of the networks "financial
interest" in programning. It would be tantanuint to al1~iing a wolf pack to
select its a~n dinner.
When the networks possessed this right, they had a financial interest
in 93% of all network prcgranraing. It was inpcssible for an independent like
myself-I also direct and preduce television and theatrical films-to have a
program accepted by any of the three networks unless they ware "cut in" on the
profits and syndication. Once the rule is repealed, there is every reason to
believe they will resort to their old habits.
What does this maan for the United States? It maans the almost
absolute control of the air by three ccrrpanies and the elimination of
independent creativity. The networks, sane of Arrmrica' s most profitable
corporations, already ask independent prcducers to "deficit finance"
prograirining-protect the networks fran loss. David is forced to protect
Goliath, and n~ you wculd take away his slingshot. The free exchange of ideas
is at the very roots of the existmnce of a democracy; that free exchange wculd
be stifled. Even creators must eat.
A few years ago, I wrote and shared the directing and pruduction
functions on a six-hour television film about a President of the United States,
Dwight Eisenh~r, entitled, "Ike". Because of my protection under the
existing regulations, the network, A~, which made the film with its ~n
subsidiary, A~ Circle Films, concluded a deal with ma whereby I cz~ned the
Anerican syndication rights after two network runs, and shared the foreign
syndication equally. The network profited handsanely, and so did I. If the
rules ware changed, A~ could easily reserve all financial benefit for
themselves; and I would have to resort to my only recourse-refuse to make the
film. While that would probably not alter the course of history, many of
Anerica `s most creative minds might choose the sane route. The public, to whcxn
the airwaves belong, would be the real victim.
I respectfully submit that the freedan of the individual to receive a
just return for creative effort is at least as iirportant as the right of three
giant corporations to receive excessive profits.
Sincerely,
- ~-- ~1.
r'~/trs Melville Shavèlson
President
PAGENO="0316"
MELVILLE SHAVELSON
PRESIDENT OF WGAW -- 1969-1971 a~d 1979-1981
PRESIDENT OF WGAW SCREEN BRANCH - - 1967-1969
THE KID FROM BROOKLYN
WHERE THERE'S LIFE
SORROWFUL JONES
TWO GUYS AND A GAL
EASY DOES IT
IT'S ONLY MONEY
ALWAYS LEAVE THEM LAUGHING
THE DAUGHTER OF ROSIE O'GRADY
RIDING HIGH
ON MOONLIGHT BAY
ROOM FOR ONE MORE
I'LL SEE YOU IN MY DREAMS
APRIL IN PARIS
TROUBLE ALONG THE WAY
LIVING IT UP
THE SEVEN LITTLE FOYS
ACADEMY AWARDS
BEAU JAMES
HOUSEBOAT
THE FIVE PENNIES
THE SECRET LIFE OF
JAMES THURBER
ACADEMY AWARDS SHOW
HOUSE OF HARRIS
GUEST ARTIST
IT STARTED IN NAPLES
ON THE DOUBLE
THE PIGEON THAT TOOK ROME
THE SEVEN LITTLE FOYS
36TH ANNUAL ACADEMY AWARDS
CAESAR'S GHOST
CAST A GIANT SHADOW
ACCIDENTAL FAMILY
YOURS, MINE 6 OURS
MY WORLD 6 WELCOME TO IT
CR1 STABEL
THE NIGHT THE HOUSE
CAUGHT FIRE
ALLAN
EL RE
THE WAR BETWEEN M~N
AND WOMEN
44TH ANNUAL ACADEMY AWARDS
PRESENTATION
MIXED COMPANY
THE LEGEND OF VALENTINO
THE GREAT HOUDINIS
IKE
TRUE STORIES
54TH ANNUAL ACADEMY AWARDS
UA
Paramount
Paramount
Warner Brothers
RKO
RKO
Warner Brothers
Warner Brothers
Parmount
Warner Brothers
Warner Brothers
Warner Brothers
Warner Brothers
Warner Brothers
Martin/Lewis Prod./Para
Paramount
NBC
Paramount
Paramount
Paramount
Screen Gems
NBC
L.F. Edelman
L.F. Edelman
Paramount
Dena/Capri--Parainount
Paramount
Chrysler Theater-Revue
ABC
20th Century Fox
Mirisch
Sheldon Leonard
Desilu/Walden Prods
Sheldon Leonard
Sheldon Leonard
Sheldon Leonard
Allan/Warner Brothers
Elke/Warner Brothers
Cinema Center Films
NBC
Lienroc Prods.
Spelling/Goldberg
ABC Circle Films
ABC Circle Films
ABC Circle Films
ABC
312
Name of Film
Network or
From Series Entitled Company
NBC Special
Special
NBC Special
"Love I, Marriage"
"Love 6 Marriage'
ABC Special
"Three Coins In the
Fountain"
Pilot
Pilot
"My World 6 Welcome To It"
"My World B Welcome To It"
Pilot
Pilot
NBC Special
ABC Movie-of-the-Week
ABC Mini Series
Pilot - ABC
ABC Special
PAGENO="0317"
318
January 13, 1983
Dear Commissiotier,
My name is Fay Kanin, and I am a business woman.
My business is that of writing and producing television
films. I know that you are in discussion concerning
repeal of the Financial Interest and Syndication Rule
and I am taking this opportunity to communicate with
you because my economic future is at stake. Repeal of
these rules will effectively eliminate my ability to
compete in the marketplace and to continue to do what
I do best.
In the present marketplace, I must "sell" my idea
for a television project to one of the three networks,
since those three networks virtually dominate the television
program market. I must interest them in financing the
production so that I can write and produce the film.
If the network has no interest, I have no opportunity to
go ahead with the project. If, however, the project
looks attractive to the network, then the network and my
production company make a deal. Because of its over-
whelming power in terms of economic realities, the network
wields the strongest club in those negotiations. They
give me a license fee for production which does r~ot, in
99 out of 100 cases, cover the necessary production costs.
That means I must deficit finance the film, and any hope
of making a profit on the film must come in its syndication.
Under the proposed repeal of the syndication rule,
the networks with their overwhelming bargaining power,
will negotiate a deal with me which eliminates any oppor-
tunity for me to participate in profits generated by
tne syndication markets. Those profits will consequently
be dealt directly into the network coffers. In addition,
the networks will be able to control the timing of a
film's release to the syndication markets so that it will
not compete with the viewing audience watching their
prime-time programming.
PAGENO="0318"
314
The ideal concept of arms-length bargaining between
adversaries of equal strength and negotiating ability is
not a realistic one in the world in which I work. Thus,
the rules enacted by the FCC have in recent years p~otecte~
my interest and allowed me to meet the network's power with
some bargaining equality. This has helped me and other
independent producers to function in a highly competitive
market. In turn, it has made a great diversity of programming
available to the American public.
I cite my own film entitled "Friendly Fire." It
dealt with material of a sensitive nature, drawn from
the experiences of a real Iowa family during the Vietnam
war, and brought to the public a significant and valuable
social theme. It won the Emmy for the best television
film of that year. This program could not have been made
and aired were it not for the willingness of an independent
production company to provide the deficit financing that
was necessary above the amount provided by the network.
And the company could not have done that if there were
no hope of their recouping that gamble in syndication.
To repeal the rules that protect such investment
by independent producers is to deprive the public of the
diversity and quality of programming to which they are
entitled. Every day, I and you read anguished pleas by
the public and the critical community for improvement in
the quality of T.V. programming. The answer lies in
enhancing, rather than removing, the present rules, so
that the hundreds or thousands of independent producers not
only continue to flourish but even win back some of the
bargaining leverage and power currently wielded by the
three networks.
The public interest standard remains the same, and
that interest is not well-served by according the three
giants in the industry that small remaining wedge Of tt~e
pie that they currently do not have.
I thank you for your attention and thoughtful consider-
ation of this issue.
Respectfully,
PAGENO="0319"
315
FAY KANIN
PRESIDENT OF WGAW SCREEN BRANCH - - 1971-1973
Name of Film
GOODBYE MY FANCY
MY PAL GUS
RHAPSODY
CLEOPATRA COLLINS
OPPOSITE SEX
TEACHER'S PET
THE RIGHT APPROACH
THE SWORDSMAN OF SIENA
HEAT OF ANGER
TELL ME WHERE IT HURTS
HUSTLING
FRIENDLY FIRE
From Series Entitled
Campbell Star Stage
Pilot
G.E. Theatre
ABC Movie-of-the-week
ABC Special
Network or
Company
Warner Brothers
20th Century Fox
MGM
Revue
MGM
Paramount
20th Century Fox
MGM
Metromedia
Tomorrow Entertainment
Lillian Gallo/Filmways
Marble Arch Prods.
PAGENO="0320"
316
GIDEON PRODUCTIONS, INC.
DAVID W. RINTELS
Executiue Producer
JACQUELINE TONE
Assistant to Mr. Pintels January 10, 1983
Dear Commissioner,
Many of us in the television business believe that there
is a perception, in Washington and elsewhere, that the
current fight over deregulation of our industry is essen-
tially a fight over money --
-- that greedy networks and~gzeèdy producers and production
companies are engaged in a~sordid little squabble over who
will own the product and therefore be able to live in an
even ritzier section of Beverly Hills with a larger swimming
pool and one more Mercedes in the heated garage.
In part it's true. The fight is partly over money, and power,
and the F.C.C. will hear a lot of arguments about who is
really at risk and why all the rewards should flow in that
direction. You will hear rhetoric to the effect that this
is the United States, not a foreign country with an alien
ideology, and that the Government here has no business
meddling in private business.
Some of those arguments may have some merit one way or the
other but they all indispt~tibly have one thing in common:
They are self-serving.
They are designed to build up one side's case while tearing
dowr~ the otherts, which may be good tactics
-- but may also result in you throwing up your hands, saying
"A plague on both your houses," and walking away from the
fight, not caring who wins.
Why should you care? In this not-so-petty money fight, the
public interest doesn't seem to be at stake. Let them sort
it out themselves with no regulation from us.
I hope to convince you that that approach would be a tragic
mistake, not because of the consequence on independent producers
and writers, although that clearly is a factor --
-- but because of the effect on the American people and what
they see on television. I believe that --
2002 OLD RANCH ROAD. LOS ANGELES, CALIFORNIA 90049 . (213) 4540383
PAGENO="0321"
317
-- the public interest is ~phatical~ at stake here --
-- and that you will best serve that interest by not allowing
the networks to control, any more than they now do, the
programs which they exhibit.
My argument is based on one simple premise: That networks
and independent producers -- not all independent producers,
but a lot of them, and all the good ones -- have radically
different objectives, and the programs they do reflect that
difference.
The network's objective is, simply and principally, to max-
imize its ratings. But its primary audience is not, as commonly
supposed, the viewer at home; it is the advertiser with money
to spend. Advertisers pay more money to reach larger audiences;
networks want as much of that money as they can~ get; therefore
they give the advertisers what they want.
What do advertisers want? Profundity? Controversy? Innovative
drama? Ballet? Science? Literature? Or popular, lowest-
common-denominator junk food for the eyes, which will attract
the largest possible audience?
They -- with the rarest of exceptions, such as Hallmark -- do
not want profundity, controversy, etc.
And -- again with the rarest of exceptions -- the networks give
them what they want. Junk food for the mind. So that's what
90% of television is.
What about the independent writer and producer? How is he
different?
If my name goes on a show, I will fight to my last breath to
do that show as well as I can. To pick a subject which interests
me -- and not the mythical 12-year-old which TV caters to -- and
to fight off the network's pressures to make me soften it, or
popularize it, or use an actor that is in a series they want
to push, or a director who is maybe quicker and cheaper but not
as good. I don't give a damn about ratings (which is, I'm
afraid, painfully obvious in some of the shows I've done) if,
to get them, I have to do anything which will hurt my show.
That is the difference between us and the networks.
And that is what is so dangerous about the proposed deregulation.
If I do not own a show, if I am merely an employee for rent, a
hired gun, I will have to do what the network tells me -- or
I will be fired. I cannot be as bold as I would like to be.
32-540 O-84--21
PAGENO="0322"
318
Today, if a network doesn't like what I sin doing, I own the
show -- and I can go across the Street and maybe get it made
there, either at another network or in pay television.
Tomorrow, if you let the network own the shows, it's either
do it their way -- or they'll get someone who will. And
their way is not the way of the artist, or the visionary,
or the risk-taker, the fresh and free and independent spirit.
One example will suffice:
In 1979, I was asked by a network to write a program specif-
ically to "make points with the F.C.C." They wanted a show
about the United States Supreme Court.
I wrote a script for them which they hated. They hated it
so much they wouldn't even meet with me to tell me how much
they hated it or what changes they might want.
Had the network owned the program, that would have been the
end of it. But they did not own it. I went across the street,
to CBS, and they bought the show and put it on the air in 1980.
The program was GIDEON'S TRUMPET, the last show Henry Fonda
ever did for a network. It also starred John Houseman, Jose
Ferrer, Fay Wray, Sam Jaf fee and Dean Jagger. It won the
following awarda: Writers Guild Outstanding Script of the
Year; American Bar Association Gavel Award; Christopher Award;
National Board of Review and Films in Review David Park Griffith
Award, Best Television Film; A.L. Wirin Writer's Award presented
by the ACLU Foundation of Southern California in cooperation
with the Writers Guild of America, west; George Foster Peabldv
Award; Ohio State School cf Journalism Award; The Chicago
International Film Festival Award.
Unusual shows, controversial shows, shows which aspire to do
something more than merely distract or amuse, are in the net-
works' mind a luxury they can rarely afford. Those they do
put on are frequently under pressure to do things that will,
in the mind of someone at the network, make them more popular.
To stem this tide, an independent producer or writer can make
a stand which can make a difference.
But he must be able to stay independent, to be able to fight
for his program. That means he must control it. Must own it.
Must be able to fight without fear that he will be replaced
by someone who will do whatever the network tells him.
An independent show, in short, will usually be a better show.
More distinctive. More personal. With a goal other than
merely reaching a large mass of undiscriminating viewers.
PAGENO="0323"
319
A network-owned show, on the other hand, will be far more
likely to perpetuate the kind of television the networks
have been giving us for thirty years. If the objective is
greater conformity and more of the same, give the networks
all the control.
But I believe television, and the audience -- the public
interest -- will be better served by k~ping the few indepen-
dent people independent.
W. ~intels
President, Gideon Productions,
Inc. and Chairman, Committee
on National Affairs, WGA, west
P.S. In 1972, when I was Chairman of the WGAw's Committee on
Censorship and Freedom of Expression, I testified before
Senator Sam Ervin and his Subcommittee on Constitutional Rights
on the relationship between networks and writerS and producers.
I believe that testimony is relevant to the current issue,
and at the risk of overburdening you, I append it here.
In 1975, as President of the Writers Guild, I appeared with
three network executives before the Federal Communications
Bar Association and spoke on the same subject. I also append
that.
DWR/j t
end.
PAGENO="0324"
320
DAVID W. RINTELS
PRESIDENT OF WGAW -- 1975-1977
CREDITS:
The Member of the Wedding, 1982, NBC Live Theatre. Executive Producer.
Starring Pearl Bailey, Dana Hill, Howard E. Rollins, Jr., Benjamin
Bernouy. Written by Carson McCullers. Directed by Delbert Mann.
*
All The Way Home, 1981, NBC Live Theatre. Executive Producer.
Starring Sally Filed, William Hurt, Ned Beatty, Polly Holliday.
Written by Tad Mosel. Directed by Delbert Mann.
*
Gideon's Trumpet, 1980, Hallmark Hall of Fame, CBS-TV, Writer-Producer.
Starring Henry Fonda, Jose Ferrer, John Houseman, Fay Wray, Sam Jaffe,
Dean Jagger. Based on the book by Anthony Lewis.
Emmy Nominations - Outstanding Writing and Outstanding
Drama Special; Writers Guild of ~America Outstanding Script
of the Year; American Bar Association Gavel Award;
Christopher Award; National Board of Review and Films
in Review David Wark Griffith Award, Best Television Film;
A.L. Wirin Writer's Award presented by the ACLU Foundation
of Southern California in cooperation with the Writers
Guild of America, west; George Foster Peabody Award;
Ohio State School of Journalism Award; The Chicago
International Film Festival Award.
*
The Oldest Living Graduate, 1980, NBC Live Theatre and Stage,
Executive Producer. Starring Henry Fonda, Claris Leachman, George
Grizzard.
Three Emmy Nominations; Two Emmy Awards - Best Supporting
Actor (Grizzard), Best Achievement in Camera.
Washington: Behind Closed Doors, 1977, ABC-TV, Co-Writer, Co-Supervising
Producer. Starring Jason Robards, Cliff Robertson, Robert Vaughn,
John Houseman.
Seven Einmy Nominations including Outstanding Limited
Series; One Enimy Award - Best Supporting Actor (Vaughn).
*
The Supreme Court and Civil Liberties: The Bank Secrecy Act, 1973,
f or the American Civil Liberties Union and KCET-TV, Co-Writer,
Co-Producer. Starring Henry Fonda, Burt Lancaster.
Exnmy Nomination - Outstanding Information Special.
PAGENO="0325"
321
Fear On Trial, 1975, CBS-TV, Writer. Starring George C. Scott,
William Devane.
Emmy Award - Outstanding Writing; Emmy Nomination -
Outstanding Drama Special; Writers Guild of America
Outstanding Script of the Year; American Bar Association
Gavel Award; Christopher Award.
*
Clarence Darrow, 1974, Stage and NBC-TV, Writer. Starring Henry
Fonda. Directed by John Rouseman (Stage) and John Rich (Television).
Ernmy Award - Outstanding Writing; American Bar
Association Gavel Award; George Foster Peabody Award
(shared); New York Drama Desk Outstanding New
Playwright Award.
*
A Continual Roar of Musketry, Parts I and II, The Senator, 1970,
t~~-TV, Writer. Starring Hal Holbrook.
Emrny Nomination - Outstanding Writing; Writers Guild
of America Outstanding Script of the Year; American
Bar Association Gavel Award.
*
Episodes of The Defenders, Slattery's People, The Young Lawyers,
Run For Your Life, The Invaders, etc., Writer.
*
Articles for the New York Sunday Times, L.A. Times Calendar
magazine, etc.
FDR, ABC-TV, Researcher.
*
The Nation's Future, NBC-TV, Researcher.
*
WVOX-AM, News Director, Reporter.
*
The Boston Herald, Reporter.
OTHER AWARDS:
American Civil Liberties Union Bill of Rights Award, 1980.
Writers Guild of America Valentine Davies Award, 1980, "In memory
of Valentine Davies whose contribution to the Motion Picture
community brought dignity and honor to writers everywhere."
PAGENO="0326"
322
ORGANIZATIONS:
Writers Guild of America, west.
President, 1975-77.
Board of Directors, 1970-75.
Chairman, Committee on Censorship and Freedom of Expression,
1970-73.
Chairman, Committee on National Affairs, 1977-present.
Chairman, Committee on Cultural Exchange, 1978-present.
KCET-TV, Community Advisory Board, 1979-1981.
Clarence Darrow Foundation, Board of Directors, 1977-present.
The American Civil Liberties Union.
Population Education, Inc., Board of Directors, 1975-78.
National Captioning Institute, Writers Advisdry Board, 1979-
present.
PAGENO="0327"
323
REI'tARKS TO ThE FEDE~R~AL CO~1MUNICATIONS 6AR ASSOCiATION
David W. Rintels
Presscient, Writers Guild of America, West
October 25, 1975
PAGENO="0328"
324
When Dick Heffner told me there would be four of us
appearing here, that the other three were network censors, and
that we would each be given five minutes for an opening statement,
I invnediately looked up the Equal Time Provision, Section 315, of
the Federal Coimnunications Act ana there found to my surprise
that ~Eien one person debates three ~k~o are, in fact, one original
and two carbon copies, that the one is entitled to equal time
with all three of them. So I wEli be longer than five minutes,
for ~4iich I apologize, but I franidy view this forum as so
critical to the things I believe in that musthave time just
to outline the most important.
I hope not to get personal . I have never met any of
these three eminently~likeable gentlemen before last week. Also,
you will have to be aware that censors are onl~j one facet of a
larger problem, that wnsle they are hired by the networks to say
No, others called programing people, as opposed to these
gentlemen or program practises or standards and practises -- are
paid at least as well to say Yes, more blood, more violence, more
lowest.coninon~'denominator programing, and to schedule the stew of
endless, mindless trash we are exposed to night after night after
night.
Censors and programing people are in the same
schizophrenic relatonshp to eacn other that Milton Berle's left
hand is to his right. Most of you have seen Berles routine where,
PAGENO="0329"
325
with one hand raised high, he node~tly end pubHcly urges the
audience to refrain frcxn applause -- wnile with the other hand, held
low, he privately urges them on. So it is with the networks. Today
you are seeing on this platform only the rnode~t hand of censorship
held high, but the other hand of progranuning is there, in New York
and Los Angeles, doing its work.. Both hands are in this togeth'er,
and they share responsibility for rnak~ng television what it is today.
I want to speak to you ~baut the harm I think television
is doing our country. I want to answer your questions about how it
works mechanically and to what end. I want tQ share with you the
decision-making process and whom it serves, wont to discuss with
you possible ways to adapt or change the present system, through law,
technology, or negotiation. By cne end of these brief remarks, I
may not be any closer to answer;nci the central question posed here -~
`%lho's To Decide What's Fit For The Ar? -- but hope to be
approaching an answer to tne quest or' Whs ~ Fit To Decide --?,`
and that may be a start.
1 am speaking now of pr~me-tinie entertainment television.
There is other TV -- news, public brcadc~ting, public access, cable,
daytime, Sunday morning -- but prime time is what the vast majority
of the public watches, 75,000,000 and more a night, and it has by far
the greatest impact. The memoers of my union write it. The program
people schedule it. These tnree men censor it. Let me give you jus:
a couple of examples how it wor~.s.
PAGENO="0330"
326
Norman Lear wants to do a Thanksgiving show on ALL IN THE
FAMILY about whether a coup~e shouid teach a young child about God and
religion-- specifically, whether a young child should be allowed to
choose his own rd igion. CBS tells him' rio -- that it would offend the
religious. Norman offers to film the show at his own risk--meaning
at a cost of $100,000 -- and then to let a group of prominent religious
leaders sit in judgement and determine if the show is offensive. CBS
says no-- they're not going to let any outside group, religious leaders
or no, tell them how to program for CBS.
We say you'll offend them but we won't let you find out and
even if you do find out that you don't offend them, we won't show it.
Catch 22.
(AUTHOR'S NOTE: There is a revealing sequel to this, story~
CBS has changed its mind and w~ I now broadcast the show. They
had 4jC~O ~`O ___
say that they changed their position after Lear changed the script ~ h,y
~..Jsome patently offensive passages. Specifically, a CBS official
charged before a large and influential audience that there was a scene
in the script in which Mike Stivic, the Cob Coiner character, had said
to Archie Bunker/Carroll ~ `If there's a God, he can take this I,"
accompanied by a skyward thrust of a raised mia~le finger. He also said
that, Lear had agreed to make some other chances to to~ down the script.
`ver-yoNe (`resePdr 1i-rii+~r ~1Er,~j~, -~-r~ ~ ~ ~ ~CE~«=~ ,`+`i4~
- iu, ` applauded CBS's judgment in removing ob~ e
and offensive material from the show.
~A, ~ ori~e~ ~
Norman Lear, ~ was astounded and out-
j,~ ~ ~hmrje~.
raged,1~ He sad, fir~t, t"et no s'_ch gesture had ever been made in any
script he has ever seen associates ~ith; and, second, that he had not
~ 7~a ~ ~.ii1~ CBS, ha~~ ~ ~-~a" Aad
capitulated but cad sb.t tne s~"ow exactly as -e wanted. rio sent me the
shoot5ng A
PAGENO="0331"
327
script (Lear was the producer,Lou Derman the writer) which
includes the following passage ~erbat1~i:
MIKE
If there is a God, which I don't
believe there is, then he would
be everyplace.
ARCHIE
Right.
MIKE
And he would know everything.
ARCH1E
Rignt.
MIKE
Then he knows what3s in my heart.
ARCHIE
So he knows you don: t believe
in him.
MIKE
That's right. But if I
be! ieve in God would be
because he was a oving and
forgiving God.
ARCHIE
He wouldn't forgive you for
being an atheist.
MIKE
Yes he would, hed forgive me
anything.
ARCH E
He wou!dn't forgive you for
beng disrespectfuI~
MIKE
Sure he wou~d.
PAGENO="0332"
328
ARCHIE
Ah
(GIVES RASPBERRY)
to you.
MIKE
He'd even forgive me for doing
that.
ARCHIE
For what? Going
(GIVES RASPBERRY)
to me?
MIKE
No. For going
(GIVES RASPBERRY)
to him.
ARCH IE
(SHOCKED, STARES AT MiKE, THEN
RUNS AROUND ROOM)
Whoa ... whoa ... what did you do?
God have mercy on your sou `. Edith
Edith.
EDITH (o.s.)
1t111 be ready in a mirlute.
ARCHIE
I never in my whole I i~e seen anybody
so ~ow and deoraved that he would go
(GIVES RASPBERRY)
to Him.
(COVERING HIS HAND IN MOTION UPWARD)
MIKE
Arch, it doesnt make any difference
anyway. if I bel eyed in God,
wouIdn't go
(GvEs RASPBERRY)
to Him.
ARCHE
He done it agairi~.
PAGENO="0333"
329
MIKE
But I don't b& eve in God, so went
(GIVES RASPBERRY)
to nobody.
ARCHIE
And again~ I'm getting out of here~
(HE EXITS TO KiTCHEN)
That scene will appear (appeared) intact when the program
is (was) broadcast on November 2L+.
Concerning the second point, whether CBS required Lear to
make other changes in the script, I've read berman's first script and
the final shooting script and I think both sides believe they.are
telling the whole truth. The process works like this:
Lear sends CBS the script ... CBS protests ... Lear hears
and tries to ignore them ... he and the writers rework the script, as
they do in every case, for quality ... Lear sends it back to CBS
CBS notes an improvement but protests again ... LearAand the writer
make more changes, again for quality ... CBS is further mollified
and the process continues until both sides are exhausted and ~
_____ a ~ ~ ~`2 ,~ re «=~`/
The process is, in Fred A!lens immortal expression,
like being nibbled to death by duck~ ings.
In this case the final script was, in my. opinion, better
in some resoects than the first draft; it was certainly not bolder.
This episode indicates only that although Lear is unique,
with more clout than anyone in the history of television, and with
more resources and more abMity and more determination to fight
back, even he could not have gotten the first drift on the air.
PAGENO="0334"
330
Furthermore, Lear hu~ to go through this proc~s~ ifl every episode
of every series and it is, he sa~ys, taking a terrible toll on him.
Concerning this "Little Atheist" episode, he finaHy told CBS "If
you decide not to run it the wa~ made it, then you must know
more about this bus;ness than I do and you can produce all my
series yourselves." That slowed CBS down only until the next
episode of ALL IN THE FAIIIL2Y came in, in which there is a scene of
Archie diapering the new baby. CBS insists that the baby must be
diapered buttocks up so as not to show the genitals, and never mind
that nobody has ever diapered a baby buttocks up in all the long
history of diapering. Lear hac Alan horn of his office call
jJ~f~L~T~ iLL. ~ to say that he cou 1 d
not go through any more of these fights, that it was too debilitating,
that it destroyed totally the creative process. Stay tuned for
CBS's response)
If it se~s that I am being particuiarly hard on CBS,
I promise you I don't mean to be. Actually, most of us feel that
CBS s.far ana ~wiy the best network in t~r;i;s ol its riunships
with.the creative community. In ~ew York it used to ~e said, with
considerable truth, tnat CBS was Bloomingdeie's ... NBC was Gimbel's
and ABC was E. J. Korvette'~. Today, virtually everyone in
the creative community sti Ii feels that CBS is -- in terms of its
program staff ana in terms of its censors botn -- far and away the
most reasonable and ec'aest, ~t~H Boomirigdalo's; that ABC is still
E. J. Korvette, with some occa ora~ positive signs, some rare
aspratdns. But ~lBC~s progran~er~ -- I rn nor. taiking about the
PAGENO="0335"
331
censors here can now best be compared toW. 1. Grant. NBC
programmers are so determined to buy an audience, so dominated
by numbers specialists and salesmen and lowest-common-denominator
programmers, that the creative community feels that NBC suffers
us only as a necessary evil . As a consequence, the creative
community views NBC as an unneccessary evil . Recently I have
heard it expressed far more strongly, too, that they view us with
contempt -- with the consequence that the reverse is also true.
For example, FAY, the NBC series starring Lee Grant,
was designed as something different for TV -- a modern look at a
modern divorcee, middle~aged but young, with human needs, sexual
needs, and a fine, free spirit. FAY got killed coming out of the
blocks. She couldn't sleep with her ex~husband. She couldn't
spend the night with a man. The network even retitled an episode
from ~`Fay and the Married Man'1 to "Fay and the Doctor," and then
told the producers that Fay could not be involved with a married
man at all -- even it she didn't know he was married.
i'm sorry to say haven't seen the series, and I guess
now I won't get the chance. NBC says, and I think honestly beiieves~
rt cancelled FAY because the series wasn't good and because it was
drawing low ratings. But long before those things happened, something
else was killed -- the spirit that 5 needed to make a seres work,
the freedom, the love, the pride, the independence, the joy, the
creativity. Who in tne world can take pride in havinQ to do less
than her best, ano at gunpoint? Not Susan Harris, the creator of
FAY; said I don't take it personally, but I do; we all do.
PAGENO="0336"
332
Ed Weinb~rger and Stan Daniels on PHYLLIS wanted to
do a show concerning the communications gap between mother and
daughter; many of you probably saw it irs its censored form. The
premise of the show was that Phyllis' teen-age daughter was away on
an overnight trip, skiissg I believe, and had spent the night in the
same room with a young man. Phyllis was deeply concerned: had
there been sexual relations between them and, far more importantly
for the purposes of the show, how to talk to her daughter about it,
and most especially how to talk about it truthfully. Some people
might think there is no more important subject in the country today
than parent-chile communication. Let me tell you what CBS dld.J~YJfr/a/Iy1 Thty in
M Ml 041 The st in ra~,Pere0 o~ hf~4~~ ~7~' ~
having had a heart-to-heart talk with the daughter, clicking her
heels as she jumps in the air and saying in obvious relief -- "She
didn't do it." - and then doing a tnrrfic double-take of
realization and saying -- "Unless she liud." After a bitter fight,
CBS5 made them cut that last line -- "Unless she I ed" -- and in the
process reduced a play about communications to another sniggering,
white-bread, middle-class, muscle-aged morality sermon which ends
on the upbeat note that Nice bins Still Don't Do it, ~
~ _L _. - `_ LL 1--,. It `s a hell
- m~. ~ b~,j,e1e `~,.J W4,wlser~er
of a note when people or calibreAhave to threaten to resign to
try to preserve tneir snow's integrity for the network; and I take
that personally, too
PAGENO="0337"
333
The harm to us is clear. Most of us do not have the zXxa~Blt
strength to fight back. Most of us find the process so nerve-wra~king ant
debilitating, so humiliating and destructive, that we do not dare put
the thoughts we care most about into our scripts. Why should we)when
the at3ndard each idea will be measured against is simply whether --
as the Chief CBS West Coast censor told one poducer -- it might
offend `any uptight parent in America7
frxdn~, _____
do these stories, and thousands like them, add up to~ ~4aa.li- 4a..~
They aod up to the fact that television is, from one
end to the other, from eight o'clock to eleven o'clock, a lie.
It is a lie that is tolo 5 two stages. First the
kinos of programs scheduled. Cop ~riows wits cops as judges,
juries and executioners, and never mind about civil rigsts arid
courts and presumptions of innocence. Family Snows with problems
that ace made either unreal or insignificant or can be laughed
away. Action-adventure shows with simplistic steel-jawed super-
heroes. All three network censors talked this morning about their
New ~ankness in selial themes. Sex sells. So; alas, does violence.
32-540 O-84--22
PAGENO="0338"
334
Audiences and advertisers love it. But other aspects of real life?
Life with unhappy endings? Government? Politics? War? Religion?
Human drama with real pain? A quiet drama in which people just sit
and talk about their lives or whatever matters to them? Real crises,
from energy to identity? The economy? Race? Treated realistically?
Not on your life, not from eight to eleven~ when the real world is
superseded by the television world. That's Part One of the lie -- the
prograimling part, which says tnat friction, substance, controversy,
reality must be avoided at all costs lest any viewer or sponsor,
actual or even potential , be offended and criticisn generated and
money lost. People want to be ~~tertaine~, they say, and they
define entertainment to exclude content -- but of course the exclusion
of content is a very loud, profound, content-filled statement about
the nature of the real world.
The second part of the lie is the censorship part, the small,
niggling part of the lie. At the behest of network management and also
to avoid offending, these men see to it that bullets wound but don~t
kill, that police hit but aon't hurt, that people speak in euphemisms.
They show you action but not the drastic or painful consequences of
that action, so none of it's real stic. Little of it's true.
You, with your knowledge and experience, can handle
these lies and sort them out. But can everyone? Can people who
live on dirt farms and never see Blacks tell that the Blacks they
PAGENO="0339"
335
see on television are 1 es? How about your children? Did you know
that according to a study done for the Kerner Commission 15% of
middle-class white children ... 30% of poor white children ... and
L~Q% of poor black children bel eve in the true-to-life nature of
television content? Mr. Travesis of NBC said this morning that he
was concerned protecting children. Are children -- is anyone --
protected by being sheltered, totally, from ideas? from the truth,
or a truth? If there were only three schools to teach all the
children in the country ... if these schools were operated and/or
programmed by three large companies which justified their performance in
terms of profits ... if the teachers and administrators were hired and
fired not on the basis of wnac they taught but only on the basis of
how many they taught it to . if tne companies could say, as
the networks do, tflat when the schools teach unpopular things or
unpleasant things, parents grow angry and withdraw their children,
thus unacceptably reduc;ng the profits of the system ... aren't the
consequences of that too horrible to contemplate? Yet you have
all seen figures tr~at purport to show chat by the time a child has
finished college, he or she has spent 5,000 hours in classrooms and
18,000 hours in front of a television set. You have heard the
definition of television as cflewing gum for the mind, So you
cannot help knowing triat we are raising a nation of children that will
barely be smart enougn to watch television and chew gum at the same
t i me.
PAGENO="0340"
336
Why? How did it happen, not just to the children but t~
all of us?
It happened because the men who control television have
misread the law, deliberately and to their own interest; and because
they must not begin to understand the terrible impact their selfish
decisions have on the country.
First, the law. You all know better than 1 that the
standard of the law is `the public interest, convenience and
necessity." They claim on Sixth Avenue that they ~ giving the
public what the public wants and that, therefore, they are prograrm~ing
in the public interest. There are a number of propositions inherent
in that claim, that `~~Ie are giving the public what it wants,' ~nd
they bear close examination.
In the first place, they are not giving anyone anything.
They are selling, at a cost of $L+,850,000,000 a year -~thats the
figure `Advertising Age' says was spent by advertisers on all
television last year -- proaucts to the American consumer. Thdt
cost is passed on directly to viewers in the price of gooes and
services. We are paying almost five billion dollars a year for this
free television. A ~ot of that money sticks to the networks.
,1 listened in vain this morning, as I knew I would, hoping that one
of these three gentlemen would discuss something more than how
they must program to balance the competing demands of diverse
PAGENO="0341"
337
ideological groups, how they believe in the nobility of ideas and how
they have enhanced the flow of these ideas at great risk. I was hoping
that one of them might acknowledge an economic factor, the dollar
value of their decisions, tneir own and their employers1 self-interest.
They did not.
In the second place, when they say `the public' they do
not mean the public; they mean ~t of the public. Television is
demographics; advertisers want tc reach primarily women l8-.L~9 years
old. So when a show like `3e'~eriy Hillbillies' a few years ago, or
`Gunsmoke' last year, is on, it can be a major hit in terms of audience
size and still be cancel tea -- because it appeals to what advertisers
consider the wrong people, older, rural , less affluent people,
part of the public, to be sure, a nuge part, but the wrong part.
So older people are underrepresented on teievision; so are Blacks;
so are rural; so are poor. hetworks~ dominated by their sponsors,
do not consider cnem an equal part of the public.
And, of course, people with taste and intelligence are
not an equal part of th~ pubi ic. People who, I hasten to add, do riot
say there should not be escapist television.. I don't know anyone in
the world who believes triat television snould be elevating all the
time. Intelligent people Ike escapist television just as, I
know, escape artists like intelligence. Can we not strike a balance
PAGENO="0342"
338
in ~4iich if 70% want to escape, the 30% Cc)fl still have drama that
is uncensored, and literature, and dance, and politics, and truth ...?
No, they say, if 51% of the Country wants escapist drivel,
this is a democracy and so virtually 100% of them must have it virtually
100% of the time. On all three channels. And they do not choose to
discuss any responsibility they might have for conditioning the public
to respond, like Pavlov's dogs, to what they give us. They do not
acknowledge that there are tens of millions of us wj~o won't watch
what they give us at all because we refuse to be demeaned.
In the third place, is everything that the public is
interested in necessarily in the puolic interest? Robert Sarnoff,
when Chairman of NBC, said that it was. To-which Les Brown answered
in TELEVISION: ThE BUSINESS BEHIND THE BOX -- `It was patently
a definition to justify broadcasting's excesses in commercial
entertainment. A young chiid may be crested in lighting matches
and an older one in experimenting with drugs, but any parent knows
that neither is in their best interest.'
The next time a network official or censor or advertiser
or ratings specialist tells you `we are giving the publicwhat it
wants,' the translation reads `We are selling to advertisers for
profit what ~ want and what a narrowly-defined part of the buying
public, largely white, female, 184f9, wants a majority of the time.
We are doing this in our own interest.'
PAGENO="0343"
339
And now, having pushed my theme to the brink, please
allow me to retreat two steps. I know there are good shows on
television, skillful shows, beautifully written and produced shows.
There are, very rarely, bold and free-spirited and truly challenging
shows on television. Networks are large bureaucratic organizations
that canh~ot and do not mathematically stamp everything into
uniformity. Sometimes real events compel unusual candor.
Sometimes subtlety outwits the machine. Sometimes the machine is
looking the other way. The first-ever black-white drama, c~alled
"A Man is Ten Feet Tall ," got on Philco-Goodyear Playhouse because
the series had already been canceHed and nobody paid any attention
to what the last program would be. But each time an unusually bold
show gets on the air, insiders wiH tell you that there is an
unusual answer to explain it.
My other step back from the brink is in terms of the
comedy shows of recent vintage, ALL IN THE FAMILY and its family
of successors. CBS in particular has helped oreak important new
ground here despite all the censorship and we are all grateful for
these shows and their bold themes well handled; you know how strongly
we believe they could profit greatly from more freedom, of course,
~as we all would profit, but I want to make a different point.
Comedy, which has throughout history been the cutting edge of
social coment and change, has to have a dramatic afly to present
a true picture of the real world. GOOD TIMES needs RAISIN IN THE
SUN. RAISIN neeas SOUNDER, wnich needs JANE PITTMAN, which needs
PAGENO="0344"
340
THE AUTOBIOGRAPHY OF MALCOLM X ... and on and on ana on. And then,
slowly, one day, the truth begins to emerge.
Television prevents that necessary process of fermentation.
Dramatic writers are not allowed the scope and do not have anywhere
near the strength of a Norman Lear. Perhaps the networks think drama
is not so entertaining -- again, that dreaded word. Perhaps they
are concerned lest we hit too close to the bone. Perhaps the fact
that people laugh at comedies ma~' give the networks a sense of
assurance that the people are not taking these shows too seriously;
a laughing audience may provide a disclaimer, while in a dramatic
show there is risk and corr~itrnent, two qualities the networks are
never comfortable with.
There may also be, I hesitate to add, a real risk in
situation comedies if they are not balanced by dramatic programs
on similar themes, Teiev,sion speeds change in our society. It
takes us to the moon and to China. It b~rings the country to the
pity and the city to the country. But at the same time television speeds
change, as my friend Loring Mandel , President of Writers Guild of
America, East, has said, it slows and distorts our ~rcepcipn of
change. Thus -
- wnen television takes us to the ghetto, it is never
the real ghetto, where rats bite and people go hungry and children
cry themselves to steep, tts the sit-corn g'iecto. Ahd 75,000 people
a night think that's not so baa, what the hell are the Blacks bellyaching
about all the timet
PAGENO="0345"
341
Of course, the same is true of television drama -- and
now I am returning to my original thesis, the harm television is
causing to our country. Television police are always honest and SerIe
ColMJrIey &s/~ ~/ C/Cc~M4veAI7~vq /~_~ CQ4,&sP,fi.1T104/.
sawyers are always pr"istine and medici~ is inexpensive and ~)g.~t ~
t~a c.~, ,`20 ~ c~aJ, ~.4 I,çi ass, ec4cc `~`4" ~,, ~ ~. ~ ~ ,~
everything is fine -
- only of course it isn't, so when people are forced to
choose between the real worlo and the television world, they choose
the warm, safe television world. They choose safe, friendly
unreality and consequently they have trouble adjusting. They cannot
cope. Because people have lied to them they stone each other as
they get on school buses and they don't concern themselves with
free lunch programs because no one's starving and they aon't begin
to know enough about real government, real law, real love, real
anything, to help them order their yes or our country.
I don't say television aione is responsible. I do
say it's a vitally important factor.
Ths country was founded on an nterchange of ideas.
Now the people with the it~eas and the forum are siie~ced. I cane to
you on behalf of the 5,000 men and women who write television and to
ask for your help. We're a mixed lot. Some of us write for money;
some for the love of writing, some because we do it well; some
because we can't co anything else, some because we have something
to say; some to improve television and some even to improve the
wor d.
PAGENO="0346"
342
One thing unites us. There is not a man or w~nan, dramatic
writeç or comedy writer, among us, who is allowud to do his or her
best or who feels he or she couldn't write better without the programming
and censorship restrictions which dominate our lives and our art.
There's not a woman or man among us wno couldn't better serve th"~.
public interest if the censors and numbers specialists and lowest-
common-denominator programmers were not forever clinging to our backs,
slowing our uphill climb toward the truth. There is not one among us who
has not felt the bitter humi!,ation of Berthold Brecht when he said,
"Each day I journey to the market place where lies are bought;
hopefully, take my place among the sellers." aetween us,
we must find ways to effect change -- in our interest, in yours,
and in the country's.
PAGENO="0347"
343
STATEMENT OF DAVID W. RINTELS*
Before the
SENATE SUBCOMMITTEE ON CONSTITUTIONAL RIGHTS
February8, 1972
PAGENO="0348"
344
My name is David W. Rintels. I am a writer, a member of the govern-
Ing Council of The Writers Guild of America, West, and the Chairman of
the Guild's Committee on Censorship. With me are Christopher Knopf, Liam
O'Brien and Norman Lear, all distinguished writers and long-standing members
of the Guild. The President of the WGAw, Ranald MacDougall, has written
to you that "Insofar as the Writers Guild of America is traditionally, histor-
ically, and unalterably opposed to censorship in any form, the members
appearing before you have our complete support in their presentation." We
deeply appreciate their support and confidence. Today, however, we speak
as individual writers about our personal expreiences and working knowledge.
As members of the Writers Guild, whose 3,000 members write every
network television dramatic, comedy and variety program produced in this
country, we appreciate and support fully this Subcommittee's historic efforts
to keep the printed and broadcast press free of the restrictions of censorship
and intimidation. Your work is vital to insure an informed public, just as
an informed public is vital to insure the successful working of democracy.
ft is our hope here to convey to you our heartfelt belief that there are
two related issues which fall within the scope of these hearings and which
demand your most urgent attention:
First, the right of the men and women who write for television to deal in
ideas and truths and realities free from the repressive censorship and program
practices under which we do, in fact, write. -
Second, the right of the American people to be exposed to something more
than an endless cycle of programs that mislead them and distort the real-
ities of what is happening in America today.
PAGENO="0349"
345
That these two i sues are related and of grave concern to all of us
should be clearly d monstrated by the following statistics taken from a
recent poll of our G lid. Of all who responded:
Eighty-six (86) percent have found, from personal experience, that
censorship exists in television. Many state, further, that they have
never written a script, no matter how innocent, that has not been censored.
Eighty-one (81) percent believe that television is presenting a distorted
picture of what is happening in this country today - politically, economi-
cally and racially.
Only eight (8) percent believe that current television programming is
in the public interest, convenience and necessity, ` as required by The
Federal Communications Act of 1934, Title 47, U.S. Code, Secs. 307a, 307d.
Because these figures suggest strongly our conviction that the American
people are being badly served by the television industry's use of the airwaves
which they, the American people, own, it is proper to inquire as to the causes
of these abuses. We approach this inquiry not, we hasten to add, in any spirit
that all television must be educational or instructive or elevating, but rather
from the following basis: Even granting for the moment the questionable argu-
ment advanced by those who control television - an argument we do not grant,
PAGENO="0350"
346
for reasons we will later explore - that because so many of the American
people are willing to settle for non-stop lowest-common-denominator
programming, television must be doing something right, must it then
follow that virtually one hundred percent of all network dramatic and comedy
programming must be aimed at the lowest aspirations of this audience
virtually one hundred percent of the time, even to the point of disregard-
ing arty reasonable standards of balance, qUality and reality? Must
anything which does not amuse and titillate the majority be censored
out, as it is in fact, as we shall shortly document? This is where we
wish to join the battle and to enlist your support, over the question of
whether current television programming and censorship practices and the
inevitable resulting product are in the public interest, as the law requires.
We believe emphatically that they are not, and that while we are the first
victims of these practice~, the' ultimate victims are the American people.
The situation in television today - how serious is it? How well does
television fulfill its legal and moral obligation to serve the public
interest?
First, it must be understood how all-pervasive television has
become in America. More than 95% of all homes are equipped
PAGENO="0351"
347
with television, a substantially larger number than have indoor
plumbing. A quarter of all horses have more than one set. The
average home has its television on an astounding 6.43 hours a
day. At any given time between 8:00 - 11:00 p.m. not less than
75,000,000 people are ~,atching television, with 91% of them
tuned to one of the three networks.
The people who control television use these figures to
demonstrate their wide audience acceptance and to document their
positive contributions to American life: Such love and devotion
must have been earned.
We look at these same figures
and are horrified because we know, first-hand, that 75,000,00D
~seop1e are nightly being fed programs deliberately designed to
have no resemblance at all to reality, nonsense whose only
purpose is to sell snake-oil and laxatives and underarm deodorants.
We know this but apparently the 75,000,300 do not. This is what
is so tragic: people believe what they are being told,
(Broadcasting) .... matters more
over the long run.. . .than what
anybody else does because (it is)
more persistently shaping the minds
of more people than the rest of us
put together.
- ARCHIBALD MacLEISH
PAGENO="0352"
348
"(Carroll) O'Connor (of ALL IN TF~ FAMILY)
is baffled by some letters which show
people take TV so seriously they evidently
feel the Bunkers are a real family. Some
ask why he treats his wife as he does; one
man called hi'ii a big, dumb 5-0-B for so
doing; another wrote asking why he didn t
leave his wife because she was suèh a
dumbbell
- VARIETY
"Forty percent of the poor black children
and thirty percent of the poor white
children (compared with 15 percent of the
middle-class white youngsters) were ardent
believers of the true~to-life nature of the
television content."
Dr. Bradley S. Greenberg,
Michigan State University,
reporting on his study of
violence to the Kerner
Commission.
So people watch television by the tens of millions. Many
believe it literally. All of us are influenced by it to some
extent. Increasingly television has become the literature of
PAGENO="0353"
349
the Seventies. It is the newspaper, the magazine, the
town meeting, the high school, the college of the country.
With such enormous influence comes enormous power, and
with such power should come -- must come, in the public
interest -- responsibility. We agree wholeheartedly with
industry spokesmen who say that television has a responsibility
to entertain. But we also believe that television has a
responsibility not to deceive. A responsibility not to present
one narrow view as the whole truth. A responsibility not to shy
away from reality, from issues, from controversy, from substance,
from public discussion of all matters in the public interest.
Yet it is our contention that in prime-time entertainment
television, which most of the people watch most of the time and
which has by far the largest impact of all television, these
responsibilities are being shirked, wilfully and totally.
From thousands of examples consider the following:
My collaborator and I interested a producer in doing a script
about a magazine photographer in Vietnam who was shooting a
picture essay on l8-year-olds going into their first combat. The
photographer. a man who likes to incite action as much as to
observe it, follows one especially cocky boy until he comes face
to face with a guerilla and then takes a picture showing terror
in the boys eyes. The boy acts bravely; he just looks afraid.
32-540 O-84---23
PAGENO="0354"
350
On the next patrol the boy, who has been shown the pictures
of himself by the photographer with the result that he now
begins to question his own bravery, anxiously looks around
to see where the photographer is and whether he is taking
more damning photos. He turns once too often and is killed.
The producer liked the story well enough -a character study
that would allow us to say something about truth and bravery,
he kindly called it - to forward it to the network for its
required approval. The network liked the story, too. They
*wanted only one change. Vietnam is controversial, you know.
My collaborator, wise in the ways of television, felt his
heart sink. If they wanted the story moved to Korea, or
Germany during World War II; the usual gambits, we were prepared
to make a fight of it.
~o, not at all. Keep the story fresh and contemporary by
all means. Keep it in the present. Just change the locale to
Spain, make it a bullfight instead of a war, and make the soldier
into a matador. That way, when the bull charges, the matador
can look to *see whether the photographer is taking more
pictures and...,
*
Last year John Bloch was Story Editor on an ABC-Paramount
Studios series called THE YOU~ LAWYERS. He wrote a script iti
whiCh the white male Young Lawyer was to be shown having a drink
PAGENO="0355"
351
in a public place with the black female Young Lawyer. Just drinking
and talking, with perfect and total innocence. Six times the producer,
acting under the explicit direction of the Paramount Studios censor
and network liaison-man, Henry Colman, requested that the black girl
be rewritten into a white girl; six times Bloch refused. Finally he
was promised that the change would not be made. His option was
not picked up by the studio and, after he was let go, the film was
shot - with a white girl playing the part.
*
Norman Felton, Executive Producer of DR. KILDARE, writes: "On
one occasion,. despite backing from the American Medical Association,
the National Educational Association and the Surgeon General of the
United States (who eventually sent a telegram to the network endors-
ing the project) we were not allowed to present a film concerned with
venereal disease * It was developed with scrupulous attention to
good ~tas te. The advisors, as above, pointed out that people watched
a program like DR. KILDARE more than documentaries, and it would be
of great benefit to the people of America for the film to be made and
shown. The network, however, was afraid of `offending .
*
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Robert Collins, an established writer, was asked three
times to write episodes of TI~ SENATOR, deservedly called
the boldest and best dramatic series on recent television.
The theme of the first story I submitted was the question
of possible anthesty for draft evaders. The Producer refused
the story on the ground that advocacy of amnesty was not the
consensus of the country and was therefore unacceptable.
The second show I proposed concerned itself with the
question of whether a homosexual in government was, by the fact
of his homosexuality, a possible security risk. The Producer
was willing in this case - but because the treatment of the
homosexual in my story was sympathetic and he was portrayed as
neither nance nor psychopath, and I refused to treat him as
such, the network refused the story.
The third story I proposed, again with the Producers
approval, dealt with the Pentagons storage of n~rve gas near
an urban area. A one-line memo from Jean Messerschmitt of NBC
to the Producer said simply this story was unacceptable to the
network. She gave no reason but the Producer told me he had
heard the subject would offend sponsors. who had dealings with
the Pentagon. I don't know about that; I do know that NBC is
RCA, and RCA is one of the biggest defense contractors.'
*
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I have been required, by NBC and also by ABC, to delete
the word Pentagon' from scripts even in strictly factual
references. I have been allowed, on occasion, to mention the
word `army. I don't understand the logic.
But I do understand perfectly the logic of the following:
On the ABC series T}~ INVADERS, the Producers were ordered to
delete the word `integrated' from a script. The networks
position, stated to the Producer, was that the word could be
used on occasion but must never be spoken by the hero of a
series.
*
Norman Felton, again concerning his experiences as Executive
Producer of DR. KILDARE:
"We once did a script on KILDARE called `Holiday Weekend'. A
doctor had told us that holiday weekends were the worst time in
a hospital due to auto crashes. We thought it would be a public
service to make a show about this, dramatizing - painfully -
the need for safer and saner driving, and put it on the air the
Thursday before the Labor Day weekend. NBC fought us, long and
bitterly, before finally giving in, on the grounds that we were
an entertainment show and what, please, was entertaining about
auto crashes?
*
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Writers by the dozens report that they have written
characters who are black and have seen them changed to white;
they have written Jews and seen them converted to Gentiles;
they have proposed shows about South African apartheid,
Vietnam, old folks, mental disease, pàlitics, business, labor,
, and minorities; and they have been chased out of
studios.
*
This year, one year after THE SENATOR was cancelled, ABC
and Universal Studios did a show starring Anthony Quinn called
THE MAN AND THE CITY. Producer Stanley Rubin says: "Although
the format cried out for relevancy we were flatly forbidden to
make a relevant show. On a series about a contemporary Mexican-
American Mayor of a southwestern city, no stories about the poor,
about the old, radicals, Chicanos, Blacks - the whole field of
urban life was, expressly and by fiat, forbidder~."
Says Rubin, "I wanted to do one show about the refusal of a
father to accept a posthumous medal for his son, killed in
Vietnam. The issue of the war was background to the plot, which
concerned the man and not the war. The network turned this story
down. ABC does not recognize war.
*
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There are thousands of other stories ranging from the
ridiculous -- as when.. Adrian Samish, who supervises all
scripts for QM Productions, which is responsible for THE
FUGITIVE, THE FBI, CANNON, etc., objected to a political
referenCe in a script of mine by slanuning his fist on my desk
and telling me, `We hired you to write scripts, goddam it, not
to put your ideas in them' -- to the marvelously sublime, as when
the Producer of the series MY FAVORITE MARTIAN required a
writer to change a line on the grounds that "A Martian would
never talk like that." The list is so long that it is
impossible to believe for one moment that these are isolated
instances, temporary abberations, foolishness on the part of a
few myopic individuals. On the contrary, these instances are
symptomatic of the rigorous and final institutionalization of
c ensorship and thought control on television.
Let us now look at one whole series: ABC's THE FBI~
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T~ FBI series, about to go into its eighth successful
year under the official imprimatur of J. Edgar Hoover and the
Federal Bureau of Investigation, formerly claimed that its
programs were based on real FBI cases, when they frequently
were not, and even now claims that its programs are `inspired'
by real FBI cases, which they frequently are not; that
although the names and places are fictitious, everything you
see on the air happened and they have even broadcast official-
looking file numbers on the air to prove it; and, if this
i~ t enough, a narrator begins each program by announcing the
exact date on which the crime was committed and ends each
program by announcing, documentary-style, the federal prison
terms meted out by federal courts to the criminals. They then
show you the great seal of the FBI and thank the Bureau and Mr.
Hoover for their cooperation. They strongly imply, in short,
that they are telling you the truth about what the FBI does.
The facts suggest something very different.
For eicample, I was offered a job writing on the series;
when I asked them which case they wanted me to adapt, they told
me to come up with a story of my own invention - no case needed.
Other writers, including the President of the Television Branch
of the Writers Guild of America, have had the same experience.
It doesn't always work this way -- sometimes the Producers
invent and write out, with the cooperation of the resident FBI
Agent assigned to the series, one page `notions which they
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357
then assign to writers; sometimes the shows are in fact based
on real cases but in many cases the story is not only. not
based on' or `inspired' by real FBI cases, it is invented
solely by the writer and/or producer, and inevitably the
story details are fabricated from beginning to end. As
William Randolph Hearst cabled the artist Frederic Remington
in 1898 before hostilities broke out between the United States
and Spain over Cuba, `You provide the pictures, I'll provide
the war."
For a second example, I was asked to write another episode
of THE FBI on a stibject of my.choice, at about the time, five
or six years ago, when the four little Black girls were killed
~y the bomb in the Birmingham Church. It had been announced
that the FBI was involving itself in the case and I told the
producer I wanted to write a* fictional account of it. He
checked with the sponsor, the Ford Motor Company, and with the
FBI -- every proposed show is cleared sequentially through the
producing company, QM; the Federal Bureau of Investigation;
the network, ABC; and the sponsor, Ford; and any of the four
can veto any show for any reason, which it need not disclose --
and reported back that they would be delighted to have ne
write about a Church bombing subject only to these stipulations:
The Church must be in the North, there could be no Negroes
j~volved, and the bombing could have nothing ~t all to do with
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358
civil rights. After I said I wouldn't write that program,
I asked if I could do a show on police brutality, also in
the news at that time; certainly, the answer came back, as
long as the charge was trumped up, the policeman vindicated,
and the man who brought the specious charge prosecuted.
For a third example, and to lend credence to the second,
in the seven years in which the series has been on the air,
years of great change racially in this country, change in
which the FBI has been centrally involved, the producers have
never - not once - done a program about any aspect of the
violation of the civil rights of a minority. There is
dramatic material for a thousand shows in this area, and the
writers would not, for a change, have to invent the details;
scores of writers have asked if they could write about civil
rights and each has been turned down * I f you want to do a
kidnaping, great; Communist espionage, wonderful; organized
crime, marvelous; civil rights, never,
~`ourth example: On the series no FBI agent has ever bugged
a house or tapped a phone or hired a paid informant, And no
writer is ever allowed to suggest that these stratagems are
ever employed, or indeed that they xist. They may be
invaluable to police work and the FBI certainly employs them,
the argument goes, but they're bad public relations. The public
can be spared these trvths,
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Fifth example: Should a writer want to write, say, about
violations of anti-trust law, he is told to go elsewhere~ In
seven years not one episode of the FBI has allowed on this
subject. The trouble is, of course, there is no other place
for the writer to go in television -- no other series will
touch this subject, either -- so no writer can write about it
on television, and nobody who depends on television for his
knowledge of the world will ever know that crime in the real
world is sometimes committed by respectable white-collar types.
Street crime and organized-gang crime and law-an4-order crime
exist because they are a staple of dramatic televisiOO. Anti-
trust crime does not exist, in effect, because television says
it does not exist, any more than violations of minority rights
happen. The FBI in Washington of course does know that these
crimes happen because it is charged with investigating then,
in fact if not on televisiOr1~
There are other misrepresentations made to the American
people by this purportedly realistic series. Although the
Director of the FBI, Mr. Hoover, has said publicly that La
Cosa Nostra exists, the series chooses to call it The
OrganizatiOfl~ a criminal syndicate whose chief visible trait
is that its membership is comprised of a lot of nen-it~iians
named Smith keeping up with a lot of folks named Jones; again,
although the FBI explicitly teaches its agents never to shoot
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360
except to kill, on the series nobody has been killed for
years now wounded by the carload, certainly, but never
killed.
There is other, sadder evidence of the series refusal
to deal with the real world or even to acknowledge its
existence -- in seven years on the air, not one woman has ever
been hired to write an episode, nor has any Black, despite the
fact that on one occasion a white writer with four credits on
the series recommended a black writer and said that he would
rewrite the script for free if the black writer's script was
not up to par; and, a matter which will concern the members
of this Subcommittee on Constitional Rights as much as it does
us, namely that the producers acknowledge privately what has
long been an open secret in the industry, that all actors and
writers and directhrs are screened by the Federal Bureau of
Investigation in Washington and only those who are politically
acceptable to the FBI are hired -- but by now the message.
should be clear. The American people are being force-~fed a
dishonest picture of the work of a Government agency and any
writer who attempts to portray the real world, suggesting that
white collar or business crime exists or that crimes against
peoples' rights are as much a source of national concern as
crimes against their persons, is simply not allowed to do so~
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361
The writer has no more freedom to deviate from the official
line in any series in television. Take the omnipresent
medical shows as a group -- MARCUS WELBY, M.D. on ABC; MEDICAL
CENTER on CBS; THE DOCTORS segment of THE BOLD ONES on NBC.
Anybody who watches these programs must of necessity believe
the following about American medicine:
- No patient is ever denied a hospital bed or required to wait
until one is available.
No doctor ever charges for his services; no hospital ever
bills a patient; no one ever has to go on charity, or do without
care.
- Almost every doctor cures almost every patient -- if only the
patient lets him. Occasionally someone does die, more likely
out of boredom or pique than of the medical professions
inability to cure him; he's usually 107 when he goes.
- The American Medical Association doesn't exisL and of course
doesn t lobby. There' s no need for it, to be sure, becat~se rio
one on television ever suggests that we need more and better
doctors, more and better høspitals, more and better medical
schools, lower-cost health care or, heaven help. us, national
health insura:~ce,
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362
The one man with more experience than any other in
producing medical shows for television, Norman Felton, has
been responsible for DR. KILDARE, THE ELEVENTH HOUR, and
THE PSYCHIATRIST. Felton says:
"Television does not reflect truth.
On the DR. KILDARE series we were asked
by NBC to get the approval and seal of
the A.M.A. This meant that we submitted
scripts for approval to the A.M.A.
Although the organization gave us
technical help, it goes without saying
that we did not present an accurate
picture of the practi~e of medicine, or
the difficulties many people had in
obtaining adeqtiate medical care... * The
networks censorship extended from
preventing us from tackling whole subject
matters to a myriad of smaller items,
such as making us take out any reference
to `breast' or use of the word in a film
concerned with mastectomy. Control of
ideas exists down to the present in
series such as MARCUS WELBY, M.D., and
MEDICAL CENTER.
At least two Senators on this Subcommittee -- Senator
Kennedy and Senator Scott -- have strong feeling~ about the
cost and availability of health care in this country: they
atand up here, in one of the two most influential forums in
the country, and they say so. Its their right, not to say
their obligation. Many writers agree with them. Those who
do are absolutely prohibited from standing up in the other most
influential forum and suggesting that American medicine could
be improved, its costs reduced, its scope expanded. Your work
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363
is more difficult because our television doctors are all
heroes and above mistakes or the need for help or improvement.
They're doing fine, their patients are all in splendid shape
at the end of the hour, and the viewer is content -- what could
possibly be wrong with American health care?
The consequences of this shallow one-sidedness are tragic.
No debate ensues, no national awareness of a problem which some
of you and some of us believe may have reached crisis proportions.
Personally, I don't know whether there is a health crisis in
America; I'd like to know; I do know that it is a gross
disservice to the country to refuse to discuss whether such a
crisis exists.
Here, then, is the impossible situation we labor under. We
want desperately to write about the subjects which interest us
as writers and human beings, subjects which are not very
different from those ~rhich interest you. But we cannot because
the men who control television have decreed, we feel in gravest
error, that these matters do not interest the public. Cops-and-
robbers interest the public; large and happy families whose
worst problem is whether Gramps will find his ne~i set of teeth
before the Saturday-night wingding at the Go~lden Age Home
interest the public; dentists with chimpanzees and priests who
solve crimes and lawyers who invariably defend minority-group
PAGENO="0368"
~64
children without fee and never lose a case -- these interest
the public. But life and truth do not interest the public and
cannot be written abouf except in rare instances when we are
allowed to explore controversial themes, but only under the
most rigidly controlled conditions and only under the
expressed conaition that we still play it safe'.
It is our contention that this is one of the basest and
most virulent forms of censorship imaginable, that there are
substantial First Amendment questions here, and that there is,
as a consequence, an immediate need to examine the enormous
gap between what the law requires -- namely, that television
program in the public interest -- and the television industry's
own and self-serving interpretation of the law -- namely, that
it feels free to put on practically anything which will attract
a sufficient audience.
The broadcasters have rewritten the definiti,on of `the
public interest as follows:
"Robert Sarnoff, in a speech while he
was still chairman of corporate NBC (he
has since become chairman of the parent
RCA Corporation), once ventured a
definition. He said the public interest
was what the public was interested in.
It was patently a definition t~ justify
- broadcasting's excesses in commercial
entertainment. A young child may ~oe
interested in lighting matches and an
PAGENO="0369"
365
older one in experimenting with
drugs, but any parent knows that
neither is in their best interest.
- LES BROWN in TELEVISION: THE
BUSINESS BEHIND TEE BOX.
a program in which a large part
of the audience is interested is by
that very fact.. * in the public interest.
- DR. FPANK STA1~TON, then
President, now Vice-Chairman of
the Board of CBS, 1970.
"I believe that he (Stanton) despaired of
the broadcast schedule about 1960; there-
after he di~ not bother to watch much of
it except for news and special programs.
- FRED FRIENDLY, former President,
CBS News, now with the Ford
Foundation, in DUE TO CIRCUMSTANCES
BEYOND OUR CONTROL.
We do not have to watch, either; but we do write for it and
under arbitrary and restrictive conditions imposed upon no
other people in this country. We cannot explore, we cannot
discuss, we cannot criticize. Lawyers and police and teachers
and clergy all have the right. They can say what is on their
minds. They can criticize where they feel criticism is merited.
We cannot; writers in television are absolutely prohibited that
right of speech. The NBC Radio and Television Broadcast
Standards and Practices Book, Page 8, Paragraph 1, reads:
32-540 O-84--24
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366
Respect for lawyers, police, teachers
and the clergy should not be diminished
by undue and unnecessary emphasis on
unfavorable aspects of members of these
professions.
The Standards and Practices books do not spell out the many
other restrictions under which we labor. Of course, they do not
have to. We all know what the rules are by now and we know how
to obey them if we hope to survive.
These unwritten rules, which were born out of the union
between Television and Business and which limit so drastically
our right to speak and your right to hear, were carved in granite
long before 1959. But never have they been better expressed than
in a memo of that year, when Hubbell Robinson was in charge of
all Programming for CBS Television. The following is a letter
he received from the general manager for radio and television
of a major advertising agency:
`We have already passed along to ybur
people something of the flareback that
came to various members of the sponsor
organization and, in turn, was passed
along to us.
We know that your series is striving
mightily to do things that are different
and outstanding so that as a series it
will rise above the general level of TV
drama. This is fine but since the
series is a vehicle for. commercial
advertisers, it must also be extremely
sensitive to utilizing anything, however
dramatic, however different, however well
done, if this will offend viewers.
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367
Creative people, of course, are
constantly protesting against being
stifled by what they may think are
the narrow, limited or prejudiced
views of other people, and certainly
creative people must be offered an
opportunity for the full development
of their creative talents - but only
under certain circumstances, This
cannot be true in the case of a
commercial vehicle,
You know that we can never lose sight
of the fact that the sole purpose for
which an advertiser spends money is to
win friends and influence people. Any-
thing that he might do, however
meritorious in one direction, that makes
enemies is a bad action and is to be
assiduously avoided. As long as this
series wishes commercial sponsorship,
all of the creative people associated
therewith must never forget that not to
offend people must be an inviolate rule
for guiding their operation, Narrow,
prejudiced, ignorant, or ~rhat you will,
though any part of the population may be,
as a commercial vehicle the series must be
ever alert not to alienate its viewers.
I think you can gather that from the
spensors point of view this matter is
serious. We would like to hope that as
a result of this second major flare-up
in one season you are taking such st~ps
as may be necessary to insure that no
future program in this series violates the
public concept of what is right.
- Robinson, Introduction to ELECTRONIC
DRAMA, by Averson and White
Dollars, ratings, sponsors, affiliates, networks - the whole
economic base of television has been so thoroughly documented
that it requires no elaboration here. Suffice to say that in
the sante year Robinson received that letter, Walter Lippmann
PAGENO="0372"
368
wrote While television is supposed to be free,' it has in
fact become the creature, the servant and indeed the
prostitute of merchandising.
What is in the sponsor's interest is clear. What is in
the network's intereSt is also clear. We only get into
difficulties when we ask, as the law invites us to, what is
in the public interest?
Realistically and unsurprisingly, every writer who wants
to make a living knows what the rules are; learning is the
beginning of survival. As a consequence, censorship
invarithly and unhappily begins, like charity, at home. The
unwritten rules are so well known that it is a recklessly
brave and probably independently wealthy writer who attemptS
to buck The System in an attempt to get anything of substance
on the air. The majority of writers whohope to sell know
enough to come in with safe ideas.
If they do not, the network quickly tells them~
Writes William Froug:
"During the two years I served as an
Executive Producer at CES-TV it was
repeatedly made clear to me that the
network was in the business of `pure
entertainment, that nothing of a
controversial, provocative or disturbing
mature was to be permitted in progranming~
PAGENO="0373"
369
The philosophy, often explicitly
expressed, always implicit in the
day-to-day operations, was to
provide the greatest number of people
with the least offensive material.
As noted writer Walter Brown Newman,
author of the original GUNSMOKE script
in radio from which the series
originated, stated it to me: `In
television the writer's job is to
write about nothin~.'"
But if a writer screws up his courage and mortgages his
house, he can try. Many do. They can go in and meet a
Producer.with a story they want to do. With what prospects?
What is the Producer's function? Writes Froug:
"As the producer of many television
series (TWILIGHT ZONE, M1~(. NOVAK,
PLAYHOUSE 90, ALCOA-GOODYEAR THEATRE,
BEWITCHED, DICK POWELL THEATRE, etc.)
it was a correlative of the work that
a precise form of pre-censorship and
self-censorship be exercised at all
times. That is to say that my
function was to discourage writers from
thinking in areas which the networks
would find too `sensitive
Froug never was given a written copy of the unwritten rules,
either. He never had to be:
"The rules existed and to my best knowledge
still exist. They were the topic of many
meetings with network officials and it was
rarely necessary that they be written down.
Everyone always clearly understood everyone
else when it came to what could and what
could not be dramatized on television.
There was no chance for misunderstanding for,
if a submitted story violated any of the
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370
precepts... it was quickly returned
with a phone call to the effect that
such-and-such could not be approved
unless the offensive material were
deleted.
Even writers who should know better censor themselves and
each other when they get into positions of responsibility as
producers and executives. Two weeks ago a writer-producer
who serves on the Censprship Committee of the Writers Guild
told another writer that he would not buy a script about the
practice of some otherwise reputable drug companies which
manufacture excess amphetamines for the illicit market ox~ the
grounds that, although the problem was factual and serious,
`You cant get away with taking on a drug company on television
and you know it.' In other words, you can attack dope-pushers
on television only up to the point where they become a vested
interest; and then you must stop.
If the fact is that we do admittedly censor ourselves, if
only to prevent the networks from doing it to us, why are we
here criticizing The System and the networks?
The answer is that the network is to blame because it sets
a climate, a tone, a standard which requires us to write only
the material it Wjil put on. The tone is set when they schedule
only action-advent3re melodramas and situation comedies and
variety shows to write for; it grows through the meetings at
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371
which they expound the unwritten rules; and it reaches full flower
when they hunt through our scripts looking for words and ideas and
dreams to delete. Does anyone believe for a moment that if the
networks actively sought creativity, ideas, provocative themes
handled with conviction, that if they encouraged writers to use
logic and reason and emotion and truth in ou~ scripts instead of
three shootouts, two auto crashes and a karate chop on the neck,
we would not jump at the chance?
They say they are an entertainment medium although the law says
they must program in the public interest. They say they are an
entertainment medium and then define entertainment to rule out
the actions and passions of our time. They allow laughter but
not tears, fantasy but not reality, escapism but not truth. Tele-
vision chooses almost never to stretch its boundaries to include
serious drama, or indeed any drama that Is not melodrama; chooses
not to allow points of view not `safe, not its own; chooses not to
include art or music or literature in its giddy chase after what it
considers entertainment.
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372
We want to entertain; writers don't want to bore anyone
any more than executives 5o~ But why cannot entertainment
be truthful? Free from distortion? Why cannot television
ever reflect the real world? Why must it always be that
television brings you a detective in a wheelchair and that
is a success so next they bring you an insurance investigator
who is blind and that is a success with the result that now
ABC is trying to put together a new show about -- I wouldn't
kid about this -- a Sheriff in the Old West with a stiff
trigger finger.
In the public interest, presumably.
Earlier we said we would challenge the whole premise that
a clear majority of the people want this kind of programming
and the corollary to that premise, which has become the credo
and raison d'etre and justification of the television industry,
that the people will watch no other kind. I hate, personally,
being held in such base contempt by the television industry,
and I don't believe them. When THE SENATOR ~ias on, so briefly,
it had an average 29-rating share for the year, which `translates
into imprecise millions but means that 29 out of each hundred
television sets were tuned to a show of significant content.
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373
On occasion THE SENATOR went over a 35-share, meaning that
more than one-third of the national audience was watching
this show. Or ~/iewed another way, probably more people
watched one episode of THE SENATOR on television than have
seen, live in theatres, all the plays of Shakespeare
produced in every language in every country of the world
since they were written.
Does this not suggest that we are smarter, more aware,
more eager to be informed and involved in the world around us
than these men who program shows in such disregard for us can know
or will admit? And isn't it vitally important to ask the'
question raised by former Senator William Benton, as cited by
Commissioner Johnson of the Federal Communications Commission
in his book, `How To Talk Sack To Your Television Set:
I can only ask, if this alleged
`wasteland' is indeed what the American
people want, is it all they want of
television?. . .Is it all they are entitled
to?.. .Are not.. .these dwellers of the
wasteland.. the same Americans who have
taxed themselves to create a vast
educational system. are they not the
same who have established an admirable
system of justice, created a network of
churches,. .when they turn their TV knobs,
do they not by the millions have interests
broader than the entertainment which is so
complacently theirs?. .1 think the American
people should expect that the greatest
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374
.1 single instrument of human
communication ever developed must
make its due contribution to human
security and human advancement....
A high corrunon denominator distinguishes
our people - as well as a low one -
and both denominators apply to the same
men, women and youngsters. Television
has crystallized into the low road..."
There is still another collateral question which must be
asked. Is television really giving us what we want, as its
spokesmen claim, or has it, rather, simply conditioned us to
accept and even appreciate, like Pavlov's dogs, what it programs
for us? We can never truly know the price we have paid and
continue to pay, individually and as a nstion, for televisicn's
conditioning of us and our expectations. Like babies who h~ve
been fed nothing but Pablum, our taste h~s been dulled to the
point that dry martinis and thick steaks taste somehow wroncr.
It does not have to be this way. In Elizabethan England,
the popular theatre of the day - their equivalent of our
television was Shakespeare and Marlowe. From the royalty in
the galleries to the common people in the pits, it was what
they got and it became what they wanted - or perhaps it was the
other way `round. We have not progressed culturally quite as
far as we think in three-and-a-half centuries. Television is
partly the evidence of this, and I suspect also partly the
cause.
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375
And yet, when they give us the few chances we get to see
quality progrsmming, as often as not we do respond. Dramatic
subjects, provocative themes provocatively handled -- these
draw enormous audiences. Norman Lear is here to testify to
that as Producer of ALL IN THE FAMILY -- and also to the three
years of difficulty he had in getting the series on the air.
The Director of Sales and Marketing for Time-Life Films,
Wynn Nathan. further substantiates the case for quality
programming In a publication of the Broadcast Information Bureau, Inc.
"I have talked about `quality and.
specialized programs as though I assumed
they would get poor ratings. And perhaps
I have fallen into a trap I suggested the
program makers have fallen into. Actually,
when supposedly specialized programs, have
been tried in prime time lately, they have
often done surprisingly well in the
ratings. One good example was `The Six
Wives of Henry VIII,' a BBC-TV produced
series of six ninety-minute plays -- quite
specialized in that it was about English
history and was serious drama. Television
programming for only a special highbrow
audience, it seemed. While it was plainly
quality programming, Henry VIII was not a
safe programming idea for prime time.
Here's what happened when it played: it
increased CBS's audienoe for the time
period 10% over the previous four weeks,
getting a 25% share of the national
audience; and in the key markets of Los
Angeles and New York it consistently beat
network A's movie in the ratings -- by
large margins."
PAGENO="0380"
376
So the public is truly interested in programs truly in
the public interest. We can be delighted that CBS showed
this series, even though someone else produced it. Still,
why cannot CBS produce good television? Why did CBS, like
NBC and ABC, reject the prize-winning British series
CIVILIZATION, hosted by Sir Kenneth Clark, when it was
offered to them, and let PBS - Educational Television - carry
it?
One answer is given by William Froug:
"A few years ago I was employed by
CBS Television as Executive Producer
in charge of Dramatic Programs. On
my first day of work I reported to
Runt Stromberg, Jr., Vice President
in charge of Programs for CBS,*
Hollywood, at that time. Mr. Stromberg
briefed me on my duties with the
following statement:
`Your job here is to produce shit.
And the British Broadcasting Corporation is left to
produce CIVILIZATION, THE SIX WIVES OF HENRY VIII and THE
FORSYTHE SAGA.
Its a disgrace and a scandal but it's also something worse,
a source of national sadness and concern for all of us that
American television imports CIVILIZATION, THE SIX WIVES OF.
HENRY VIII,. and FORSYTHE SAGA, while American televi'sion exports
PAGENO="0381"
377
THE BEVERLY HILLBILLIES, GREEN ACRES and GILLIGAN S ISLAND.
You are not the only ones in this country who have to worry
about a Balance of Payments deficit.
And every year it gets worse.
Ours is not a new complaint. Television has long been
delinquent in its responsibilities. Even its most ardent
defenders concede that:
Too often the~ machine runs away with
itself.. .instead of keeping pace with
the social needs it was created to
serve.
- William S. Paley, Chairman of
the Board, CBS, 1936.
What, if anything, is significant and new in our appeal?
The difference might be only that now the country seems of
a mood to demand its rights, to ask for itself what it believes
to be fair. There is a bright new spirit afoot which says that
if air pollution is legal and Institutionalized, it ought not
to be. A protest must be made and must be listened to.
PAGENO="0382"
378
It is our belief that air pollution is no less a problem
in television than it is in the automobile industry or a mill
town or a crowded city, and that the public interest means
that we can no more afford the one than the other.
The men who control television do not agree with us. But
their view of the public interest was made painfully clear
several years ago when, long ~fter the Surgeon General issued
his report conclusively linking cigarette smoking with cancer,
they persisted in advertising cigarettes and stopped only when
Congress passed a law forbidding it.
Their view of the public interest as being subservient to
their private interests has not changed for the better. And
now it seems clear that something must be done.
The solution could possibly lie in our hands as wr,
if only our hands were untied. There is little wrong with
television that could not be cured by diversity of ideas and
programs, by t1~e freedom to explore and discuss anything in
this world free from the fears and strictures which dominate our
business. At least it would be a beginning.
* We are sometimes asked what we really want, why the end of
censorship is so important to us. Sometimes the question is
meant to imply that we are little boys who want to write dirty
words on bathroom walls.
PAGENO="0383"
379
Nothing could be further from the truth. What we want is
the freedom that everyone else in this country has and which
we alone are denied -~ the freedom not to have to distort the
truth as we see it.
We are also asked what difference it will make. Aren't we
all writers of fiction anyway? Aren't, illusion and fantasy
our stock in trade? Here the answer is easier.
Perhaps among us there isa Zola or a Dickens, a man who
can see a wrong and by his skill and zeal require us to right it.
Perhaps we can stimulate and excite the oountry to care about
its deeper heritage, its drama and art and music and history and
poetry and literature and science, all the glories which
television now denies us.
But the real difference would be that whereas now we are
required to foster, without critical examination, a mythology
which states that a punch in the mouth solves all problems and
doesn't really hurt anyone, that bullets wound without killing,
that ours is a society hampered in its strivings to improve
its acknowledged greatness only by the efforts of a few sinister
malcontents who seek to undermine us for their own perverse
purposes, instead of this mythology we could proceed to ar~
PAGENO="0384"
380
honest evaluation of who we are arid where we are headed.
Once we become aware that in real life the cavalry does not
always arrive in time, that the good guys do not always win,
that it must hurt deeply to be black and unemployed or to be
hungry in a land of abundance, once we strip away the cliches
and look at the problems, then we can make that new first
step toward our great arid shared goals.
We want desperately to aid in this effort, not hinder it.
A member of this Senate sees deep implications in refusing
to make the necessary effort. Senator Robert Dole poses the
following questions:
Every day and every night for most of
their lives your children and mine have
watched (on television) the major problemz
of the universe solved in 30 to 6~ minutes.
Is it possible - and I throw this at you
as a question, not a conclusion - is it
possible part of the unrest in t1~is
country, part of the dissatisfaction with
our leaders is that, as far as our children
are concerned, they do not solve problems
fast enough? The smog that is here today
is here tomorrow~ And so is the civil
rights problem. And so is the war. And
you name it. In real life problems are
solved and go away very slowly. Are our
children having trouble separating the
immediacy of TV from the reality of life?
Are they demanding more than we can ever
deliver, or more than they will ever be
able to deliver? Is TV creating a
frustration with reality that car only be
relieved by threats and demands for change,
and that failing, by violence?
PAGENO="0385"
381
I don't know the answer but I suggest
that we think about it~
We, too, have raised a great many questions here today and,
like Senator Dole, we do not pretend to know all the answers~
~hit it seems to us that the problems we have discussed are so
grave and the consequences for America so great that a new
attempt to examine the course of television, drawing on the
nation's best minds, must now be made~ We therefore hope that
you will recommend creation of a Citizens Committee to Examine
Television which can make the necessary study and detailed
recommendations that will, hopefully, start us on the high roa&
We ask partly for ourselves~ Doestoievski has written,
"There is one punishment so terrible that even hardened convicts
tremble at the prospect, and that is simply this: to take a
man's lifework arid render it meaningless.' But much core than
for ourselves as writers, we ask for the countr~j.
32-540 O-84--25
PAGENO="0386"
382
Mr. WIRTH. Thank you very much and those will be included in
full in the record.
Before we get to questions, it is also the usual procedure of the
subcommittee to ask panelists if they would like to respond or have
comments on what was said by other panelists.
Mr. Dunham.
~Mr. DUNHAM. Thank you.
Without undertaking to answer all of my friend Mr. Valenti's
comments, I would like to put the question of independent stations
and warehousing in perspective in terms of this hearing, if I might,
very briefly.
The growth of independents is primarily a function of the growth
and acceptance of UHF stations. They got on the channel dial and
became more acceptable and advertisers turned to them. Off-net-
work programs are sold to VHF and UHF independent stations.
We don't withhold them now. "Little House," one of the few pro-
grams that NBC is able to own, is in syndication and has been for
several years. Even though it is on the network, it is sold to inde-
pendent stations.
The concern of the independent stations seems to be not that the
product won't be sold, but that somehow the networks will get all
the rights and together collude to withhold not high-rated syndicat-
ed product, but marginal syndicated product and there is a great
deal of that around.
The thought of the three networks being able to collude like
tha~t, when we compete in every other respect, programing, audi~
ences, affiliates, news coverage, seems to me almost bizarre, but it
is a concern the independent stations express. The fact is that the
Department of Justice has addressed that. Every one of the argu-
ments you have heard this morning has been made to the FTC and
the Department of Justice.
The Department of Justice has said how about a narrow rule
that will deal with the concern of the independent stations about
collusion and move on. I really don't think that is going to be an
issue. The Commission has jurisdiction over it and is considering it.
But for the purpose of this hearing, let me point out that ware-
housing has absolutely nothing to do with the financial interest
rule. It has absolutely nothing to do with the ability to finance new
independent producers.
To say that we should now have legislation that would strip the
FCC for a period of 5 years of its authority to deal with the chang-
ing program marketplace, to say nothing of the broadcast industry
on this issue, because of this narrow question of warehousing
which the Department of Justice has addressed, seems to me is a
very extreme position, indeed.
Mr. WIRTH. Mr. Colloff.
Mr. COLLOFF. I would like to, if I might, address the question of
competition, which Mr. Valenti talked about and the question of
whether or not the repeal of these rules would increase competi-
tion.
We believe that repeal of these rules clearly would increase com-
petition. I think you only have to look at the record of the past 10
years since the rules became effective to examine wl3at has hap-
pened in this marketplace.
PAGENO="0387"
383
The number of programing suppliers is down 32 percent, accord-
ing to the figures supplied by the Committee for Prudent Deregula-
tion, one of the groups advocating continued maintenance of the
rules.
Four of the major studios, Universal, Columbia, Paramount and
Warner, account for 59 percent of the off-network syndicated prod-
uct from recent years. One of those studios, Universal, alone ac-
counts for 25 percent. That is a higher share than all three net-
works combined held during the 1960's before this rule came into
effect.
There has been a decrease in the percentage of independently
supplied programing to the networks, which I believe Mr. Dunham
alluded to, since these rules came into effect. The net impact of
these rules has been to decrease the number of competitors in this
marketplace by, first of all, leaving the three networks out of this
marketplace and, second, by cutting off traditional sources of fi-
nancing to independent producers, thereby decreasing the number
and percentage of independent producers supplying programing to
the television networks.
That, in our belief, is what has happened under these rules, a de-
crease in competition. We believe that repeal of these rules would
tend to increase that competition by revitalizing the independent
production sector of this industry.
Mr. WIRTH. Further comments?
Ms. GURIAN. Yes. Mr. Chairman, I am sorry. I just don't want to
let that go. It is not the way the industry operates.
When a Universal or Paramount television program is aired,
that Universal or Paramount program is undoubtedly done in con-
junction with one of scores of independent producers who associate
with the big companies for distribution and other reasons.
The Universal logo does not mean there is one producer. There
are many independent producers, many of them my writer mem-
bers, who work under the Universal banner or the Paramount
banner. That is just a misreading of the way the industry operates.
Mr. WIRTH. Mr. Cassara.
Mr. CAS5ARA. Mr. Chairman, with respect to the comment that
the issue is not one of warehousing, I would like to point out that
the networks are very aware of what the independents have been
able to do since this rule was put into place. I will give you one
example. Here in Los Angeles in the early 1970's, 1972, the four
VHF independents in this market collectively had 32 percent of the
revenue that was coming into this market. Today, they have 50
percent of the revenue that is coming into this market and it is a
direct result of the fact that they have been able to get off-network
programs much earlier than they were able to before the rule was
put into effect and they, therefore, have been able to compete
much more effectively with the three owned and operated stations
here in Los Angeles.
These are not stupid people, Mr. Chairman. They recognize what
is going on and their target is the independent television stations,
regardless of what they say.
Mr. WIRTH. Mr. Valenti.
Mr. VALENTI. Mr. Chairman, I don't know where to begin be-
cause what my dear friend Cory Dunham and Roger Colloff are
PAGENO="0388"
384
talking about is a world that doesn't exist. Warehousing-I don't
give a damn about warehousing because everybody in our business
knows that the networks, if they are in control, they are not going
to license this material. They will find ways to do it that the Jus-
tice Department can't get to.
There is a world that we all live in and then there is a world
that the academics and some of the regulators live in and they
bear the same relations as the rings of Saturn do to the LOs Ange-
les Lakers, for God's sake.
Why is it-just think about it from a commonsense standpoint.
All these gifts that Mr. Dunham and Mr. Colloff come bearing pro-
ducers, why is it no producer wants to fall into the clutches of
these decent and honorable gentlemen? Why is that? Doesn't that
give you some cause to wonder?
They have never answered the questions. What is the public in-
terest in this, Mr. Chairman? Why should this rule be changed
simply because the networks want it changed? Is it going to in-
crease or decrease competition? You don't have to be a Ph.D. from
Harvard to understand that when you only have three buyers and
they take over the marketplace everybody else becomes an employ-
ee or they are out.
And the final thing on this minority issue. There is a weight of
documenation a mile high that some producers are afraid to bring
to you because they will blacklisted by these networks. They try to
put minority people into a series and some of the responses from
the networks are really too egregious to put into the record here.
At no time has any of these two gentlemen, intelligent and
honest that they are, at no time have they addressed the real ques-
tions here. All the questions that I asked they have not answered.
Pay cable? CBS has climbed right into bed with HBO. They are
partners with HBO, for God's sake. Why are they saying pay cable
is going to take over the world, because if it does they are going to
be like Senator Robert Kerr, who said "I am against all monopolies
that I am not a part of". Well, by God, they are going to be part of
the monopoly.
I am just asking the networks to answer the real questions in a
real world and not live in this theoretical world that doesn't exist.
Mr. WIRTH. Well, gentlemen and Ms. Gurian, we might move to
questions.
Let me just make one comment if I might. I was concerned in
your opening remarks, Mr. Dunham, when one of the five points
was that this legislation would strip the FCC of the authority to act
in the public interest.
It has been the concern of this subcommittee for a long period of
time that our responsibility is to remind the FCC that it is not an
entity unto itself. It is not a creature of the Reagan administration
or any administration. The FCC reports to the U.S. Congress. It
was established by the U.S. Congress, and it is accountable to the
U.S. Congress.
I make that point not to you as much, Mr. Dunham, as for the
record and, once again, for our friends at the FCC.
The other point that you made, which I was concerned about, is
that "The rule will mean the demise of free TV." I arrived at my
quarters last night at the local Hilton Hotel and found there wait-
PAGENO="0389"
385
ing for me a number of telegrams from various groups urging me
to make sure that the FCC repeal the financial interest and syndi-
cation rules to protect free TV. So, their position would be consist-
ent with yours. Remarkable that we received all of those last night,
isn't it?
I would like to ask Mr. Funkhouser and Mr. Cassara if you all
are advocating the maintenance of the rule are you therefore, ad-
vocating the demise of free TV?. Is that the position you are
taking?
Mr. CASSARA. Since we are in free television, it would be pretty
stupid of us to take a position that would advocate our own demise.
As an operator of an independent station, my future depends on
the health and success of the three networks and if I thought that
leaving this rule inpiace was going to destroy the three networks, I
would be for repeal, because I get most of my programing from the
three networks. So, it is quite the contrary, Mr. Chairman.
Mr. WIRTH. So, you would not agree with Mr. Dunham's state-
ment that unless we repeal the rule we are going to see the demise
of free TV?
Mr. CASSARA. Absolutely not.
Mr. WIRTH. Mr. Funkhouser, do you have any comment on that?
Mr. FUNKHOUSER. Well, only that we do depend on the networks
because they are still the mass medium and we would not like to
see them suffer. We don't think they will if this rule is retained.
Mr. WIRTH. Mr. Dunham, would you like to maybe further
expand on that?
Mr. DUNHAM. Let me say, Mr. Chairman, that I was not for a
moment seeking to question the fundamental power of the Con-
gress in this area. In fact, this entire proceeding started some years
ago, and shortly thereafter, under a Democratic Chairman Ferris,
was endorsed explicitly by Senator Hollings who welcomed the in-
quiry. He felt it was time for this entire matter of regulation of
networks to be reexamined. That proceeding has since been going
forward, if not necessarily as a bipartisan effort, certainly not as a
recent Reagonomics deregulation effort.
It really has to do with the ability of people going to the program
market to develop alternate program sources, alternate sources of
program supply. The fact is, as Mr. Valenti says, in the real world
the program producers, the big studios are here in this community.
They make programing for theatricals. They make programing for
television and now, of course, are shifting much of their allocation
of resources to pay.
From our point of view, the point of view of those seeking to buy
programing, we fuel the free television system that is made avail-
able to our affiliates and, in turn, off network to independent sta-
tions. When we gq into the marketplace now, we deal with a cer-
tain number of producers. We are not able, as we used to be before
these rules, to finance the development of new, independent pro-
ducers. That, it seems to us, is an important point. It is an impor-
tant point for those interested in the development of minority pro-
ducers.
We have seen that that issue is brought to the attention of not
only the Commission, as you point out, but to members of the
public who are also concerned about the future of free TV. It
PAGENO="0390"
386
doesn't have to be, I think, the demise of free TV. It's the loss of
the kinds of service that free television now provides the public
that is at stake~
We have lost first-run theatrical .motion pictures. We have lost
some sports events. Certainly, pay television, whose subscription
revenues will equal those of the three networks in a few years and
will outstrip them by far thereafter, have the purchasing power to
move into the program industry, as they are, and to attract what is
a relatively finite number of creative talent and writers.
From our point of view, our ability to provide the free television
service, fueled by entertainment programing, of news, sports and
an across-the-board schedule for the American public, whether or
not they can afford pay TV, is critical to us. That is our job, which
is why we have sought to inform members of the public, union
members, people with low incomes and others of this question, so
that they can be heard, so that their views can be brought to your
attention.
Mr. WIRTH. I just don't understand that argument, Mr. Dunham.
If the advertisers who would have the most to lose with the loss of
all of this programing are arguing on the other side, it just doesn't
make any sense. I can't understand that, but maybe we can-----
Mr. DUNHAM. It bothers me also.
Mr. WIRTH. We can try again at some other point for me to un-
derstand how the lifting of this rule could be dangerous to your
health.
Let me go to my colleague from California, Mr. Waxman.
Mr. WAXMAN. I don't want to abandon that last point because it
seems to me that there is a misapprehension that has been fostered
by the networks that the future of pay TV is at stake. I know that
as a chairman of the Health Committee I deal with a number of
organizations that are trying to combat diseases and they have
been told specifically that they won't have public service announce-
ments any more on network television at 4 a.m. or whatever other
time they get because pay TV is out the window if these rules are
not repealed.
Now, Mr. Dunham and Mr. Colloff, do you believe that if the
rules are not repealed that pay TV is going to be extinct as we
have known it-free TV is not going to be available any longer and
it is not going to be a viable alternative for most American people?
Mr. COLLOFF. I don't think that we are saying that the demise of
free television is at hand. What we are saying is that there is a
fundamental unfairness in the marketplace as it currer~tly exists;
that is, the three networks are not able to participate in the type of
after-market benefits which others in the industry are.
Mr. WAXMAN. I understand the argument you--
Mr. Cou~oFF. And that as the purchasing power of competing
media grow, and most estimates are that the purchasing power of
pay cable will be approximately equal to that of the networks b7
1990, that as the purchasing power of pay cable and other competi-
tors grow the quality of programing which free television is able to
put on the air will decline.
Mr. WAXMAN. It is a very different question of whether you
think you are going to be able to pay for quality television or
whether you think you are going to maintain the profits that you
PAGENO="0391"
387
now have than whether we are going to have the public informed
that free TV will no longer be available to them. My question spe-
cifically to you, and I understand your answer to be that we are
not facing the demise of free television for the public. Is that a fair
statement?
Mr. COLLOFF. That is correct. I don't think that we would argue
we are facing--
Mr. WAXMAN. Mr. Dunham, would you accept that conclusion, as
well?
Mr. DUNHAM. Yes. Perhaps I can clarify what may be a point of
confusion.
Mr. WAXMAN. Well, I will tell you what I would rather have is a
direct answer, rather than to explain items that you may think are
confusing, which may not be. Do you think that we are facing the
demise of free television if these rules are not changed?
Mr. DUNHAM. Certainly the character of the programing that we
now experience will be materially lessened, yes.
Mr. WAXMAN. I want to go into another point. I only have a few
minutes, but I do want to hear from others as well. I find interest-
ing the ar~gument from the network representatives here that they
want to protect the small, independent TV producers when all the
independent TV producers wa~it to~ be independent of the networks
and argue against the networks. I find it curious the networks
saying that they want to protect the-they want to revitalize tele-
vision and protect this free television market when we find the in-
dependent stations saying that they are afraid they are not going
to be able to compete and, offer free television as well and we find
that the advertisers are saying that they are afraid that there is
going to be more of a concentration of power in a three-network
situation with affiliates being all-powerful in local television if we
change these rules.
How do you respond to that, Mr.. Colloff?
Mr. COLLOFF. I guess I would say that--.
Mr. WAXMAN. Why do you think that you are protecting the in~
terests of groups who disagree with you when they say that they
don't feel that you are representing them? ..
Mr. COLLOFF. Today's little producers are tomorrow's big produc-
ers. If I were a Tandem or a Lorimar or an MTM today, I probably
would not want these rules repealed because I am very comfortable
operating under these rules. It shields me from additional competi-
tion. If I were a Tandem or a Lorimar or an MTM 10 years ago, I
think I would have wanted to operate in an atmosphere in. which
there were no rules because I, as a small producer, would have
wanted to have been able to go to the network--
Mr. WAXMAN. This is what you say the small producers want,
but the small producers aren't saying they want this protection.
They are saying they want protection from you, not from the
larger independent producers.
Mr. COLLOFF. It depends on the definition of small. I think you
will hear later today from an independent producer, Mr. Ochoa,
who does not share that point of view. I think that the history of
deregulatory efforts are replete with examples of people within the
business who want protection from further competition. It is a per-
fectly understandable position. It, however, is not one which we be-
PAGENO="0392"
388
lieve fosters the type of competition which this subcothmittee and,
I think, we all want to foster.
Mr. WAXMAN. Ms. Gurian, I would like you to respond to ,that.
You represent the writers and many of the writers are struggling
to have an opportunity with a small independent production oper-
ation. Do they fear the networks or do they fear the larger produc-
ers?
Ms. GURIAN; It is the three sisters. The networks that we fear
most of all, and we fear them because the networks insist on main-
taining the quality of programing that we believe is too homoge-
nous and too bleached to serve any sort of public interest.
Our writer/producers, writer/directors are the small entrepre-
neurs who aspire to be the Norman Lears, the MTM's of tomorrow.
They can only flourish with the multiplicity of independent produc-
ers and. production houses around. It is the only way that~they can
survive. That means that the rules must stay in place. Additional-
ly, I have one comment that I must make from the working man
and woman's point of view.
This fear of the Goliath of pay television and stripping every-
thing away from free television is absolutely laughable. Our union
went on the most costly 3-month strike we have had in years in
1981 to secure pay television provisions and what we have discov-
ered in recent years is that there is almost no domestic, original
pay TV programing because there is no money `to pay for it., The
market is too fragmented to have any sort of strong economic face.
We are approached every day from the small producer who, is will-
ing' to timidly put a toe in the pay TV water because he' needs mas-
sive waivers from our minimums. He can't pay those minimums
and they are not big.
Mr. WAXMAN. I just have one last question and I am going to
have to then let the chairman decide how much he wants to open
up for all sorts of responses. But, Mr. Cassara, we hear from Mr.
Dunham that the Justice Department is going to protect you and
other independent television stations from warehousing where you
will be denied the opportunity to show reruns in order to compete
with the network affiliates because the Justice Department will
then come in and intercede on your behalf should they find the
networks doing what, of course, the networks say they wouldn't do
if they had the opportunity to do it to you. Do you feel comfortable
with that? Do you think that the `Justice Department ought to be
your protector or do you think there ought to be a self-policing rule
that prevents the networks from coming in and unfairly competing
with independent stations?
Mr. CASSARA. I don't feel at all comfortable with that. The Jus-
tice Department couldn't possibly police the day-to-day~workings of
this business `and what goes on behind the scenes. It is not just
what is obvious to everyone that they do, but there is a lot that
they can do that would not be obvious.
It would be impossible, in my view, for the Justice Department to
police the situation. The rule works as a stand-alone situation. It is
cost effective. Frankly, I think that the Government has enough to
do without having to police the day-to-day workings of the televi-
sion industry. I would not feel comfortable at all with that situa-
tion.
PAGENO="0393"
389
Mr. WIRTH. Thank you very much. Mr. Leland.
Mr. LELAND. Thank you, Mr. Chairman.
I am very impressed at what I have heard today because I think
that this gives essence to the real issues that I have raised in my
opening statement and I am truly concerned that everybody is ad-
dressing themselves to the issues of minorities and I am pleased
that so many people are sensitive about this issue, particularly
these representing both sides of the financial-all sides of the fi-
nancial interest and syndication rules.
Mr. Chairman, let me first compliment and thank Mrs. Gurian,
if I can, for her efforts and her organization's efforts concerning af-
firmative action. I certainly appreciate that and I hope, indeed,
that these hearings and further hearings will give rise to more par-
ticipation on not just the part of the independent producers, but
also on the part of the networks, because we are truly concerned
about not only the minority actors and actresses who have been so
blatantly discriminated against but also those writeth and directors
and producers, et al.
Mr. Dunham, in the Screen Actors Guild survey I alluded to in
my opening statement, NBC was the only network for which statis-
tics were available. According to that survey, NBC cast almost 94
percent of its 1,145 roles with white actors and actresses. Only 6
percent of the roles went to black actors and actresses and only
one-third of 1 percent of the roles were cast with Hispanics. In a 15
month period, NBC cast only one Asian and no American Indians
in any of its programs. Does this not reflect an incredible insensi-
tivity on the part of NBC with regard to minorities and indicate
that minorities are second-class citizens with the networks? In light
of these statistics, why should the minorities believe repeal of the
rules would be in their interest?
Mr. DUNHAM. We have asked SAG for the basis for that report
because we would like to examine it ourselves. That was a report,
as you understand, not of employees of NBC, but employees of the
producers; that is, the producers selecting people and casting them
in roles. We have not been able to obtain from SAG the basis for
that conclusion, even thought it is only of producers, not NBC's em-
ployees.
I think the real proof of the pudding, however, is what is on the
air and if you look at what is on NBC's prime time schedule, I
think there you will see the beginning of the results of work over
now several years on our network; that is to say, we meet with pro-
ducers at the beginning of every season, our Standards Department
and others, and we say to them not only do we want better casting
and more representative casting, but we are determined to prevent
offensive stereotyping. We work with the producers to that end. We
can persuade them. We can reason with them. We can ask them
and we review every bit of production they do for that purpose.
If you look at our schedule today, think of the pro-social role
models-if I might just list the programs: "Hill Street Blues," "St.
Elsewhere," "Fame," "Powers of Matthew Star," "Silver Spoon,"
"Quincy," "Teachers Only," "Chips," next season "Bay City Blues,"
"Love and Honor." All are programs that have strong, regular-ap-
pearing minorities in significant roles. More can be done, but I
think in terms of sensitivity, I agree with you about the question.
PAGENO="0394"
390
The networks and the producers for that matter may have been a
long time coming, but I think there is very substantial movement
now.
Mr. LELAND. Mr. Dunham, let me respond if I can* by requesting
you further, if I can. You just cancelled "Fame," as I understand.
Mr. DUNHAM. That is true.
Mr. LELAND. You also have Mr. T and you also have Gary Cole-
man.
Mr. DUNHAM. Yes.
Mr. LELAND. Are they the strongest role models that you can
produce in terms of leadership roles? I understand in those other
programs, the black participation and minority participation are
not necessarily strong role models, but they are, and we advocate
this, they are more character actors who are acting in roles that
are nontraditional black roles. We can appreciate that.
The problem we have, though, is that in those strong character
roles like Mr. T and Mr. Coleman, they project role models for chil-
dren. Can you respond to the lack of interest on the parts of the
networks in casting strong role models in those slots?
Mr. DUNHAM. Yes, I would like to. That is always the entertain-
ment media's dilemma. We do have, for example, in "St. Else-
where" Asian and black doctors. "Fame," we stayed with that pro-
gram a long time, black teachers, black performers. "Silver Spoon"
has a black lawyer. "Teachers Only" had black teachers. "Bay City
Blues" and others will have positive role models.
Mr. T is one of the more popular figures to arrive on the scene.
You see Mr. T talking with youngsters not on screen, but as he is
waiting for filming, and it is a very moving experience. That guy is
something else. He will say to the children "Do your homework,"
"Listen to your parents." Now, there is a limit, perhaps--
Mr. LELAND. Mr. Dunham, let me stop you--
Mr. DUNHAM. But he is a winner.
Mr. LELAND. He is a winner. Off screen he doesn't appeal to mil-
lions of young people as he does on screen. On screen he is a buf-
foon and his character is a buffoon. I don't understand your reason-
ing, because, you know, Stepenfetchit probably talked to young
people off screen. Amos and Andy, those people who played Amos
and Andy probably talked to hundreds of young people off screen
and told them to do their homework, but on screen, they are talk-
ing to millions of American young people and they project images
that probably would be followed by impressionable young people.
How do you respond to the question of where your responsibility
is as a network when you program these people with such horrible
and horrendous characters in the vacuum where there is no dra-
matic roles to speak of for blacks and other minorities?
Mr. DUNHAM. We do, as I say, try to work with producers both in
development of roles--
Mr. LELAND. Are you saying that the producers are at fault here?
Mr. DUNHAM. No, no. I think it is a problem of the entertain-
ment industry across the board.
Mr. LELAND. Do you think that you have done a commendable
job as far as minorities are concerned?
Mr. DUNHAM. I think we have made a good start. We have a long
ways to go.
PAGENO="0395"
391
Mr. LELAND. Mr. Dunham, that is not the question. The question
is have you done a commendable job in your history whereas mi-
norities are concerned?
Mr. DUNHAM. I would not lay claim to that.
Mr. LELAND. Can you answer "yes" or "no," Mr. Dunham?
Mr. DUNHAM. No. I would think that we can do better and we do
try to do better.
Mr. LELAND. Thank you. Mr. Coiloff, can you respond to the
same questions that I have asked.
Mr. COLLOFF. I would respond much as Mr. Dunham has respond-
ed. I think that the-I guess one of the most popular games around
this town is blame throwing on this question. As you indicated, the
networks blame the studios and the studios blame the networks. I
think we all have a responsibility, which I think we are exercising
and certainly take very seriously, to insure that both the manner
of portrayal and the quantity of portrayal, in addition to behind
the camera activities, are representative of the minority communi-
ties in this country. I think there is more to be done. I don't think
there is any question about it, but I think, frankly, it is a more con-
structive attitude to try to look at this as an issue and as a problem
which we should try to solve together, rather than to attempt to
throw. stones across the table.
Mr. LELAND. What kind of guarantees are both of you willing to
give minorities-and I have heard both of you talk about minority
production, if, in fact, the rules are repealed. You said that in-
creased minority production would be realized and all of this.
These are great things, but you make those overtures now that the
financial interest and syndication rules are in place.
What kind of guarantees do you give to minorities once, in fact,
if, in fact, FCC or the Congress would repeal the rules?
Mr. COLLOFF. I don't think the issue is a question of the specific
quota or guarantee. I think what we are saying and I think there
are minority producers who have testified to this effect, is that
repeal of these rules would open up opportunities by the simple
fact that you have three additional financing sources in the mar-
ketplace, that there would be three networks, which would then
have the financial incentive to help underwrite production by a
wide diversity of sources, including minorities.
Mr. LELAND. But historically, you have `not treated minorities as
equal partners, as equal people in the marketplace and how is it
that a minority member of this subcommittee can trust you by sup-
porting your side of this issue, when, in fact, your history doesn't
prove that you are willing to do or to guarantee roles for minori-
ties, whether we are talking about writing, directing, producing,
acting, et cetera. -
Mr. COLLOFF. All I can say is I think we are making a good-faith
effort to do that. I don't think that--
Mr. LELAND. Are you willing to sign a contract?
Mr. COLLOFF. No, we are not willing to sign a--
Mr. LELAND. Are you willing to sign a contract, Mr. Dunham?
Mr. DUNHAM. I think our record, Congressman, does suggest
more positivity, perhaps, than we are getting credit for. Not much,
but some. Under the rules that have existed for 10 years. I don't
know of any development of minority independent production
PAGENO="0396"
392
houses. Before the rules, one of the first contracts I worked on
when I came to NBC was to finance the development of a new inde-
pendent production house, Bill Cosby. Bill Cosby went on the air.
He became a big success, because in those days we could finance
production houses. We could get them started and then they could
sink or swim in the marketplace like everybody else.
Today, under the rules, economically that is not practical. Eco-
nomically, today, those same people have to go to the studios. Now,
they may be employed by the studios as producers, and many of
them are, but in terms of the ability of minorities to set up their
own independent production houses, the more buyers, the more
people able to finance, the more people interested in developing
new sources of program supply the better. I think that is the only
guarantee we can offer.
Mr. LELAND. Mr. Dunham, you have given only one example.
That is an isolated incident. I would suspect, if you can come up
with statistics better than what you have alluded to, that minori-
ties have not been, given the opportunities by your networks, and I
am particularly concerned about that. But I can only judge you by
your history, if we don't sign a contract with you, then, in fact, we
have no real guarantees and it is business as usual.
I would like to ask other panel members if they would like to re-
spond.
Mr. VALENTI. Yes, I would. Congressman Leland, I think the one
question that ought to be put to the networks are the following:
One, do you or do you not, Mr. Network, control casting on your
prime time shows? I would like Mr. Colloff and Mr. Dunham to
answer that question. "Do you or do you not control the casting"?
Mr. LELAND. Well, let me ask the question. They might not re~
spond to you.
Mr. VALENTI. You ask them. That is No. 1. No. 2, if the networks
want an all-black show or an all-Hispanic show or an all-Asian
show on prime time television, they can have it in a twinkling of
an eye because it is the networks and the networks alone who
make the decision as to what goes on the air, not the producers,
not the syndicators, not the major or the minor producers. It is the
networks. Therefore, if you come to them with an all-black show,
Congressman, they alone have the right to say whether it goes on
the air. But I would like them to answer the question. You may
want to post it, because it hasn't been asked. Do you or do you not
control casting? Do you or do you not control what goes on the air?
Mr. LELAND. Mr. Colloff, you can respond for all the networks, if
you will, and then I will be through.
Mr. Cou4opp. I think I would like to make two points. Number
one, the networks primarily are receivers of ideas from production
companies. We are generally not the initiators of such ideas. We
are the recipients of such ideas. No. 2, I think that the process of
casting and other, similar parts of the production process are a
joint process. It is a process that, hopefully, for the most part is col-
laborative. I know it is not always collaborative, but that is the
goal, and I think, again, what we are getting down to here is it is
wonderful to be able, for Jack or me, to point across this table and
say it is his fault, it is his fault. That, it seems to me, is not the
issue. There is a joint responsibility which we are trying to exer-
PAGENO="0397"
393
cise, which I am sure the production companies are trying to exer-
cise in order to increase the quantity and quality of the portrayal
of minorities on television. It is a joint responsibility. It is one we
should exercise jointly, and I think it is one which we are exercis-
ing.
Mr. LELAND. Mr. Chairman, I know that we don't have any more
time. I would like to ask unanimous consent that I be permitted
questions to the panelists and that their responses be entered into
the record.
Mr. WIRTH. Without objection.
In closing off this panel and thanking the six of you for being
with us, we will leave the record open for any further comments
that any of you might like to make and for questions to you for
answers from members of the subcommittee.
Two very specific items that have come up that I would like to
have clear in the record. Mr. Dunham, going back to the question
of pay versus free TV, I would like you to react to this. The finan-
cial interest rule, it doesn't seem to me, has anything to do with
the economics of pay versus free TV. The essence of pay TV is that
the viewer values the programing more than the advertiser values
the viewer. So, sports and movie programs may migrate to pay TV,
but that reflects on the underlying economics of the business and
would be the case whether or not the rules were in effect. Again, if
you could answer that for me and see if you can how the free
versus pay TV fits into this, please submit that for the record.
Also, Mr. Cassara, this morning, the networks have argued that
there are many highly rated first-run syndicated shows, which are
substitutable for off-network syndicated programs from the vantage
point of an independent station. I would appreciate it if you and
the independent television operators could respond to that also in
writing.
Those are two issues that have arisen, one very specifically today
and the other referred to indirectly. We would appreciate that if
they could be clarified for the record.
Thank you all very much for being with us. That record will be
open. We greatly appreciate it, particularly the many long dis-
tances many of you had to come this morning.
Thank you very much.
[Testimony resi,imes on p. 422.]
[The following material was submitted for the record:]
PAGENO="0398"
394
-~ - _IT TELEVISION STATIONS, INC.. 1200 EIGHTEENTH ST., NW. WASHINGTON, b.C. 20036 [2S2J 887-1970
September 7, 1983
Mr. Thomas Rogers
Counsel
SubCommitte on Telecommunications,
Consumer Protection and Finance
Committee on Energy and Commerce
U.S. House of Representatives
Washington, D.C. 20515
RE: Los Angeles field hearing on H.R. 2250 (Financial Interest
and Syndication Rules)
Dear Tom:
At your field hearing on June 1st, Tony Cassara of Golden
West Television was asked by Chairman Wirth why first-run
syndicated programming could not be substituted for recent, of f-
network shows. He promised to supply the subcommittee with
a written response for the record.
Enclosed please find Mr. Cassara's formal response to that
question. In addition, we would also like included in the
hearing record an affidavit signed by 57 INTV station general
managers which addresses the Financial Interest and Syndication
Rules. A copy of this affidavit, which was filed with the FCC,
is also attached.
Needless to say, I trust you will let me know if I can be
of any further assistance.
Very best regards,
4ame~ B. Hedlund
Vicej-President
Govdrnment Relations
JBH/amr
enclosures .
WASHINGTON, D.C.
NEW YORK CHICAGO
CW ANOEL FA
PAGENO="0399"
395
This latter figure suggests that affiliates might use even more of f-
network programming, and less first-run were it not for the restriction
imposed by the PTPI.
RATIONALE
The statistics I have provided above demonstrate that managers of
independent stations do not believe they can substitute first-run
syndicated programming for recent, off-network shows during their key
day-part, early fringe. There are some very logical reasons ~ as
managers, we know this is true.
First, it is important to understand that by necessity, the quality* of
first run syndicated programming is not comparable to that of off-network
shows. The cost of producing a network show is extremely high -- often
exceeding a half-million dollars for a single episode of a series.
That cost can be justified, however, by the fact that this episode will
run during prime time on a network capable of reaching the entire
population of the country.
When such a network show reaches the syndication market, a large proportion
of its production costs has already been recaptured from the orginal
network license fee. As a result, most of the money generated in syndication
(after deducting for distribution costs) represents profit for the owners
of that show.
On the other hand, a first-run syndicated show must recover all the cost
of production (as well as the distribution costs) before any profit can
be earned. Moreover, since a first-run show is sold market-by-market,
it is unlikely to be carried by as many stationê, reaching as many viewers,
as a network can achieve through its affiliate structure.
As a consequence, it is difficult for the producer of a first-run show
to create a program with network production values and, at the same time,
be competitive with a syndicator of off-network shows in terms of price.
To be competitive from the stand point of price, a first-run shows must
be produced at a substantially lower cost. This, in turn, requires the
adoption of less-expensive production formats such as talk-shows, quiz-
shows, or "soft-news" programs like "P.M. Magazine" or"Entertainlflent Tonight'.
* By "quality" we do not mean to imply that network shows are "better" than
first-run shows on a substantive basis, but rather that more elaborate
production techniques and the like contribute to substantially higher
costs ~ more and higher-paid performers, action sequences, more
on-location shooting, larger production crews, etc). In the trade this
is known as producing a show with "network production values".
I /
/ /
PAGENO="0400"
396
TO: Subcommitte on Telecommunications, Consumer Protection and Finance
Committe on Energy and Commerce
United States House of Representatives
RE: Field Hearing on the Financial Interest and Syndication Rules
June 1, 1983
Los Angeles, California
Written response of Mr. Anthony B. Cassara, President (Television
Division), Golden West Broadcasters, Los Angeles, California, to a
question asked by Chairman Wirth.
********** ** ** *** ** *
Question: For independent television stations, is first-run syndicated
programming a suitable substitute for off-network programming, especially
during the fxi~ige periods?
Answer: Because independents adopt a different programming strategy
from those of the network affiliates, first-run shows that may work
well for affiliates (particulary during the Prime Time Access period)
are inappropriate for most independents' early and late fringe period
schedules.
SURVEY DATA
If it were true that independent stations could substitute -- without
suffering audience erosion -- first-run syndicated programs for recent,
off-network material, then it is reasonable to assume that we would
have done so. This is particulary true in view of the fact that most
first-run shows sell for less than recent, off-network shows.
Using issues of TV GUIDE (for the week of March 19-25, 1983) for the
markets in which INTV h~s on-air members, the INTV staff measured the
relative use of first-run and off-network programming during the weekday
early fringe period (4-8pm in the Eastern and Pacific time zones; 3-lpm
in the Central and Mountain zones) for affiliates and independent~ alike.
The results are striking. Of the 82 independent stations included in
the survey, only 14 stations used any f.irst-run programming at all during
the early fringe. As a group, the independents carried off-network
programming in 70% of the time available during early fringe, while
utilizing first-run syndicated material for only 3% of the time (the
figures do not total~ 100% since some of the time period is programmed
with news, movies and other shows which do not fall in either catagory).
By contrast, the 168 network affiliates in the markets studied programmed
an average of 34% of their early-fringe time with off-network material,
and 23% with first-run syndication. Over half of the first-run shows
the affiliates did carry were run during Prime Time Access -- a period
during which they are prohibited from using off-network programming.
PAGENO="0401"
397
During early fringe, independents counter-program network affiliate
news blocks with recent, off-network shows assembled into blocks of
similiar programming (situation-comedies, adventure shows). The
rationale for this is that, as independents, we want to attract a
portion of the available audience at the beginning of the block and
hold it for the next several hours (at least until prime-time begins).
Given this strategy, it is simply impossible to shorten or interrupt
this programming block with a "soft-news" or quiz show: the flow of
programming is broken, causing viewers to switch channels.
A network affiliate, on the other hand, has attracted a different
portion of the available audience with its news block, and seeks to hold
that audience through to the start of prime time. Under these
circumstances, a "P.M. Magazine" or "Entertainment Tonight" can serve
as a logical bridge between the end of the mews and the start of the
prime-time network feed 30 or 60 minutes later.
In short, off-network and first-run programming are different beasts.
Each has advantages and disadvantages depending on when it is run, the
context within which it is run, and the type of audience the station is
trying to keep or attract. Current programming practices of independents,
reply heavily on blocks of recent, off-network series during the fringe
periods, and first-run syndicated programming is simply not an acceptable
substitute. This is not just a theoretical answer. The most important
reason independents stay clear of the available first-run syndicated
programs has been cited to me by other independent station managers,
whose experience re-enforces my own: we have tried it and it just
doesn't work!
32-540 O-84-----26
PAGENO="0402"
398
STATEMENT OF FACTS
BY INDEPENDENT TELEVISION BROADCASTERS
IN SUPPORT OF COMMENTS OF
TEE COMMITTEE FOR PRUDENT Q.~REGULATION
IN FCC DOCKET NO. 82~345.
1. Network television audience shares have declined
significantly in recent years. While much has been said about
audiencà losses to cable, subscription TV and home video alter-j
natives, the fact is that independent stations' audience shares
increased dramatically during this period. Because. of these
audience gains, advertisers now have attractive competitive
alternatives to network owned and affiliated stations for local
and national spot availabilities. The independent'growth has
been dramatic enough in some markets to achieve parity or even a
competitive edge over affiliated stations.
2. The audience gains for independents have been extra~
ordinary in fringe and access time periods: 4:00-8:00 p.m.
Eastern and Pacific; 4:00-7:00 p.m. and 10:00-11:00 p.m. Central
and Mountain zones. Even though audience and revenue gains are
occurring in prime time, the fringe and access time periods are
the economic backbone. of the independents. On average, over 40
percent of an independent station's net revenues are earned in
the fringe and access time periods. A significant reduction in
the net revenues produced during that day part could not feasibly
be offset by ~ncreases,in other day parts, and would, therefore,
lead to a net reduction in the financial and competitive strength
of independent stations.
PAGENO="0403"
399
3. The owned and operated stations and affiliates tend to
schedule news and information programs head to head in major
blocks of time during early evening hours. By stripping recent
off-network syndtca,tion (that is, showing episodes from the same
series at the same time each day) against these blocks, the
independents provide viewers quality programming alternatives.
Recent off-network syndicated programs are the high quality shows
which are still on the networks or have just recently completed
their network runs. `MASH,' `Happy Days,' `Laverne & Shirley'
and `Barney Miller' are examples, as opposed to older off-network
offerings such as `I Love Lucy,' the `Cisco Kid,' `Bonanza,' etc.
Recent off-network syndication is unique in that the stars and
ensemble casts of the shows are currently popular and produc-
tion techniques, pacing, scripts and humor are contemporary
enough to meet today's audience expectations. This has resulted
in audience gains in demographic groups that are attractive to
advertisers.
4. Successful stripping requires the availability of a
large number of episodes of a given program. While there are a
very few exceptional programs that can be stripped successfully
with sixty or fewer episodes, about one hundred episodes are
generally needed for such use.
5. Older off-network syndicated programs cannot be sche-
duled successfully in these time periods, as a rule, and still
attract the most desirable audience: young adult viewers.
PAGENO="0404"
400
Occasionally, older syndication products, which attract mainly
children, are shown; "The Flintstones," "Gilligans Island,"
"Brady Bunch" and "Scooby Doo" are examples.
6. First run syndication is rarely effective in program-
ining these time periods on independents. The costs of producing
first run products of the quality of prime time shows and the
quantity needed for stripping is beyond the economic capabili-
ties of the independents for prime time, much less early fringe,
because independent stations, even in the aggregate, do not reach
a sufficiently large audience to support the risk and expense of
such productions. In addition, running a first run syndicated
program in the middle of a block of off-network programming is
unlikely to produce satisfactory results in terms of attracting
audience. While there are exceptions, the first run syndicated
programs that have been available have generally failed to gener-
ate the audiences on independents that recent off-network syndi-
cated programs achieve. P.M. Magazine is an example of a success-
ful offering and that was primarily designed for atfiliates with
strong news audience bases.
7. While it is possible, in some markets, for one station
to run movies during early fringe, the experience of most mdc-
pendents has been that situation comedies or action shows of half
hour or one hour duration are the programs most responsive to
independent station audience desires during the early evening
hours.
PAGENO="0405"
401
8. At the present time there are approximately 30 sup~
pliers of off-network programming to independent stations. The
cost of this product has escalated dramatically in recent years,
yet the independent stations continue to buy because it is the
unique program material which meets the audience expectations
and generates demographic ratings that are attractive to adver-~
tisers. While varying from market to market, the prices per
episode probably have increased more than 100% in the past four
years, yet independents continue to buy because there are no
suitable alternatives. Given this absence of reasonable alter~
natives, a further price increase of five or ten percent would
not lead to significant purchases of alternative types of
programming.
9. The number of off-network programs sufficiently recent
and popular to warrant exhibition during the crucial fringe and
access time periods varies from year to year, but it is generally
the case that, in any given market, there are recent off-network
programs that a~re available for sale but not purchased.
10. If some of the shows actually being exhibited during
the crucial fringe and access time period referred to in Para-
graph 9 were Unavailable, independents would be most likely to
turn to other off-network shows to fill the gap, rather than to
theatrical movies, first-run syndication, news, or sports. This
replacement off-network programming might include recent but
less popular or slightly older shows.
PAGENO="0406"
402
11. Changing or repealing the Financial Interest and Syn~
dication Rule could eventually reduce the number of suppliers
and restrict the flow of product to independents. Audience
gains on independents would eventually be reversed and the
independents' attractiveness to advertisers diminished to the
point that many of the stations that are marginally profit-S
able today could fail.
Having reid the foregoing Statement of Facts by Independent
Television Broadcasters in Support of the Comments of the Commit~
tee for Prudent Deregulation in FCC Docket No. 83~345, the
undersigned hereby attest that the statements contained therein
are true and correct to the best of their knowledge, information,
and belief.
(Committee Note--The signature sheets have been placed in the files of
the Committee.)
PAGENO="0407"
403
RESPONSE TO QUESTION OF
CHAIRMAN TIMOTHY E. WIRTH
At the June 1, 1983 hearing on HR 2250 conducted in Los
Angeles by the House Telecommunications Subcommittee,
Chairman Timothy Wirth asked for a written statement from
NBC regarding the impact of the FCCs Financial Interest
and Syndication Rules on the ability of the pay-television
media to outbid the free television system for talent and
programs.
There is no question that the Rules work to accelerate the
loss of television programming to the pay media --
particularly cable and pay~cable -- in concrete ways that
have been clearly documented:*
1. First, the Rules diminish competition and
increase concentration in the program supply
marketplace, limiting the formation of new
independent sources of television programs for
the free television system.
* The burden the Rules place on the ability of the
broadcast networks to compete for programming with
the pay media is described more fully in the
attached economic analysis by David M. Blank, a
consultant to NBC.
PAGENO="0408"
404
This is the conclusion of every Government
1'
agency that has studied the question, including
the Justice Department, the Commerce
Department, the Federal Trade Commission and
the FCC's own Network Inquiry Special Staff.
By prohibiting the free television networks from
acquiring interests in the syndication of
television programs, the Rules limit the return
networks can expect to earn from successful
programs. This has the effect of reducing the
ability of the broadcast networks to invest in
free television program development, particu-
larly. the high risk ventures of new small
producers. Even if the prograni defies the odds
and becomes a hit, the network return will be
limited by these Government constraints. As a
result, the risk is generally too great to
justify network investment or co-venturing in
the projects of new program producers.
2. In this way, the Rules limit the ability of the
free broadcast networks to finance new
production entities who could become an
additional source of programming for the free
PAGENO="0409"
405
television system. Independent producers are
increasingly driven to the large~studios for
financial support. The studios, of course,
have no incentive to encourage the
establishment of independent production
companies to compete against themselves.
Instead, they absorb the producers they finance
into their own production operations, thus
limiting the available sources of program
supply for the free television system.
This has caused a dramatic shift in program
supplier relationships, with large increases in
the proportion of primetime programs supplied
by studios and studio joint ventures. At the
same time, there has been a sharp decline in
the proportion of primetime programs supplied
by independent producers. (See FTC Reply
Comments, pps. 42-43.)
3. The Hollywood studios and large production
companies have a firm hold on the finite pool
of producers, directors, writers and performers
needed to produce television programs. The
Financial Interest and Syndication Rules -- by
PAGENO="0410"
406
limiting network investment in new production
entities. -- help keep it that way.
4. The pay-television media are now bidding
against the networks for this limited pool of
essential television talent. And pay-TV brings
enormous resources to the bargaining table,
with subscriber payments already at the $3.5
billion level and projected to outstrip the
revenues of all three broadcast networks
combined within the next few years. Against
this formidable a~d.growing purchasing, power,
the free broadcast network that seeks .to outbid
pay now inust.sit at the bargaining table under
a severe Government handicap. Simply put, the
pay television network can invest in the
syndication values of television programming;
the broadcast network cannot.
Thus, the Rules limit the amounts'broadcast
networks can economically invest in such
pzogramming as made-for-TV movies, series
programs and theatrical films. All of these
program forms have aftermarket values in which
the pay media can, and do invest, but --. by
Government fiat -- the broadcast networks
PAGENO="0411"
407
cannot.* Thus, the pay-television media can
bid sufficient money to attract essential
production talent away from the free television
system.
5. The movement of programming talent to the
pay-TV media is already happening. Cable and
pay cable networks are already offering almost
100 original series, including sitcoms,
dramatic series, soap operas, children's shows,
women's programs, cultural, musical and
religious programs. Recently, Disney Channel
Productions announced its intention to expand
its programming service to 16 hours per day,
offering 12 original series. Similarly,
Showtime has annouiwed its involvement in
* For example, the June 23, 1983 Wall Street Journal
(p. 4) and New York Times (p. D4) report that
Metromedia has agreed to acquire the broadcast
television rights to at least eight made-for-pay
programs produced by or for HBO. In addition,
Metromedia plans to co-produce future programs for
HBO. The articles demonstrate that pay programming
does have value in the syndication market and that
pay networks can co-venture with program producers
in ways that the free television networks cannot.
Under the Rules, a broadcast network could not
co-produce a program with Metromedia and then share
in the program's syndication values, either through
sale of the syndication rights to a distributor or
by sharing in the profits or revenues of
station-by-station distribution.
PAGENO="0412"
408
development deals for pilots that could lead to
six ongoing original series, ~s well as a
magazine format program. Loriznar, the producer
of "Dallas', "Knots Landing" and other
successful network programs, is now producing
`Loving Friends and Perfect Couples," an
entertainment series for Showtime. Embassy,
Viacom, Twentieth Century-Fox, Henson
Associates, Hanna Barbera, Tomorrow
Entertainment Productions and other program
suppliers are all producing original series
programs for pay-TV, diverting talent and
resources from the free television system.
6. As the revenues and profits of the pay media
continue to increase over the years ahead -~
and as pay turns increasingly to original
television production -- each broadcast network
will need the ability to bid as much as
possible when it sits down at the bargaining
table to compete against pay for programs. The
Rules prevent this by limiting the broadcast
rights in which networks can invest.
7. As the existing pool of studio talent is
increasingly absorbed by the purchasing power
PAGENO="0413"
409
of pay, broadcast networks will need the
ability to finance new sources of television
programming. Again, the Rules prevent this by
limiting potential network return from the
high-risk ventures of new production companies.
8. The effect of the Rules on the ability of the
free broadcast networks to finance the program
ventures of independent producers not only
denies the free television system a new source
of talent and programs, it also denies
independent producers -- including many
minority producers -- the opportunity to obtain
an additional source of financing for their
production operations. That source was
available before the Rules, but is not now.
9. Despite the movement of talent and programming
from the free television system to the pay
media, pay is not an economically feasible
alternative for all viewers. For this reason,
numerous groups representing low-income
Americans have expressed concern that the Rules
may accelerate the movement of programming to
pay. It is significant that a large number of
PAGENO="0414"
410
organizations representing senior citizens,
various minority groups, organized labor and
religious groups have supported repeal of the
Rules and have expressed their support in
communications to the Commission and to
Congress. (A partial list of such groups is
attached.) These groups are fully aware of the
adverse effects the Rules have on the continued
availability of quality free television
programming. They believe it is inappropriate
for the Government to maintain restrictions on
competition that ~o directly injure lower
income Americans. Their concerns are real and
immediate and should not be ignored by the
Commission or by Congress.
***
PAGENO="0415"
411
PARTIAL LIST OF GROUPS SUPPORTING REPEAL
National Council of Senior Citizens
-- The Honorable Robert Garcia (Chairman of the
Congressional Hispanic CaucuS)
-- The American Federation of Grain Millers
-- The International Brotherhood of Electrical
Workers (IBEW), Local 1430
SER-Jobs for Progress, Inc.
-- The Amalgamated Clothing & Textile Workers Union
-- The American GI Forum of the United States
-- The League of United American Citizens (LULAC)
The United Rubber, Cork, Linoleum and Plastic
Workers of America (URw)
-- Hispanic Republicans of Michigan, Inc.
-- The International. Longshoremen's Association
Caballero Spanish Media Inc.
-- NBC Affiliate Stations
Rural American Women, Inc.
-- CBS Affiliate Stations
-- Ateneu Luso Americano
Broward County - Marcia Beach (Chairperson, Board
of Commissioners, Broward County, Florida)
-- The National Urban Indian Council
-- The National Congress of American Indians
-- The National Hispanic Arts Endowment
-- The National Coalition of Hispanic Mental Health
and Human Services Organizations (COSSMHO)
PAGENO="0416"
412
ABC Affiliate Stations
National Council of La Raza
-~ The Honorable Claude Pepper (former chairman of
the Select Committee for the Aging)
f
-- The International Longshoremen's and
Warehousemen's Union Association
United Marine Division of the International
Longshoremen' s Association
-- The Coalition of Labor Union Women
PAGENO="0417"
413
The Effect Of Retention Of The Financial
Interest And Syndication Rules On Competition
Between The Broadcasting Industry And'~Pay Cable*
Retention of the financial interest and syndication rules
improperly handicaps the broadcasting industry in its
competitionwith pay cable for viewer~s and for programming and
talent.
Free television is still the most inexpensive method of
distributing entertainment product to the public and has
sufficient economic advantages over distribution methods that
involve major capital expenditures and require substantial
payment from viewers to make the ultimate equilibrium between
these media still uncertain. Absent the rules, such a
resolution will result from free market competition, and the
two media will achieve an optimum balance between cost and
viewer satisfaction. The television networks must and will
take their chances in this competitive struggle.
The Loss of Efficiency Imposed by the Rules
There is, however, no reason why the networks and, indeed,
the whole broadcasting industry should carry an unnecessary
*By David M. Blank, Ph.D., aneconomiC consultant to NBC.
32-540 O-84--27
PAGENO="0418"
414.
burden imposed by the FCC in this competitive struggle. The
burden is the loss of efficiency enforced upon the broadcast
network industry by the FCC's Financial Interest and
Syndication Rules. These rules prevent the efficient sharing
of risks between the networks and producers. The consequence
of such a loss of efficiency is a reduction in program
investment and, therefore, a commensurate loss in the quality
of programs obtained by the free television system.
Pay cable has no such burden. It can negotiate with its
suppliers for whatever division of risks and allocation of
rights are mutually advantageous. For example, in exchange for
guaranteeing the financing of feature films through a limited
partnership to be known as Silver Screen Partners, Home Box
Office has obtained all of the syndication rights to the films,
as well as 25 percent of the revenue obtained from licensing
such films to the television networks.~1'
21 Daily Variety, March 31, 1983, pp. 1, 22. Indeed, the
practice of the investor in a creative project acquiring
some or all after-market rights in exchange for an initial
payment is so common in non-video creative industries that
it strongly supports the view that this practice is a
consequence of inherent efficiencies. See Reply Comments
of the Bureaus of Consumer Protection, Economics, and
Competition of the Federal Trade Commission, BC Docket No.
82-345, pp. 44, 45.
PAGENO="0419"
415
The costs and consequences of the disruption of efficient
risk-sharing arrangements are most clearly laid out in the
original commentsof the FTC Bureaus)' Their summary of the
consequences is as follows:
it appears that the rule may prevent the most
efficient risk-sharing arrangements in the production
of programming and may thereby increase the cost of
programming. This, in turn, may lead the networks to
exhibit less expensive programming and thus may also
reduce viewer satisfaction. It therefore appears
that, on balance, the rule may be more likely to harm
consumers than to benefit them.
And any reduction in consumer satisfaction derived from
network programming will burden the free television industry
in its competition with the pay medi~a.
According to the FTC Bureans analysis:
One possible cost associated with the financial
interest and syndication rule may be a decrease in
the ability of producers of t~levision programming to
share the risk they face in pr~oducing programming.
This inability to share risk ~fficiently may result
in higher costs for program pr~oduction, particularly
for small producers. As a re~ult, there say be a
reduction in the quantity, quality, or variety of
programming produced fQr network exhibition.
The FTC analysis goes on to identify the specific
efficiency with which the rules interfere:
Comments of the Bureaus of Consumer Protection, Economics,
and Competition of the Federal Trade Commission, BC Docket
No. 82-345.
FTC Bureaus Comments, p. 4.
.~J Id. at 29.
PAGENO="0420"
416
"A financial interest in syndication or the
syndication rights themselves could be sold to any
number of parties. . . . There is reason to believe,
however, that the network that purchases the first
run exhibition rights to a program is the most
efficient ~purchaser o1 financial interests or
syndication rights. "!i
Because of the restrictions imposed by the financial
interest and syndication rules, however, "program producers
must choose between bearing the risk associated with
syndication themselves or selling it to another party --
probably for less money than could have been obtained from a
network. If producers cannot realize as much revenue by
selling all or part of. the uncertain profits associated with
program production, they may sell a smaller portion of those
profits and carry greater risk themselves."~J'
This is bound to have an adverse impact on the market for
production of television network programming.
"Any increase in the degree or cost of the risk borne by
producers may increase the price of programming to
networks or other programming purchasers. . . . The
increase in the cost of programming may also result in
reduced purchases by the networks of relatively high cost
programming and increased purchases of lower cost
programming. If such changes result from the operation
of the financial interest and syndication rule rather
than shifts in consumer tastes, they may result in
FTC Bureaus' Comments, pp. 30-31.
FTC Bureaus' Comments, p. 32.
PAGENO="0421"
417
reduced television enjoyment by the viewing public --
i.e., consumer welfare may be diminished."~E1
Reduction of consumer welfare from network programming
clearly burdens networks and the free television system in
their competitive struggle with the new media, particularly pay
cable. And this burden is not a function of free-market
competition, differences in costs or inherent advantages of
either side. It is specifically imposed by the FCc's financial
interest and syndication rules.
Agreement about the reduction in efficiency of the network
system imposed by the rules is virtually unanimous. For
example, the FCC's Network Inquiry Staff reached exactly the
same conclusion.~ The Commerce Department Comments on the
rules also come to the same con~lusiom.V The Justice
Department presented similar Views.±"
The Rules Reduce Financing ~pt ions for Free evo~
Producers
New data obtained by ICF, economic consultants to the
Committee for Prudent Deregulation, in the course of preparing
ICF's Comments show more clearly than before the significant
effect of the rules upon the television industry's operations
and efficiency.
FTC Bureaus' Comments, p. 33.
V "New Television Networks, Entry, Jurisdiction,
Ownership and Regulation", Volume II, Network Inquiry
Special Staff, FCC, 1980, pp. 619-622, 730, 731.
21 Comments of the United States Department of Commerce,
BC Docket No. 82-345, pp. 12-16.
~i/ Reply Comments of the United States Department of
Justice, BC Docket No. 82-345, p. 5.
PAGENO="0422"
418
Before the imposition of the rules, small suppliers had
the choice of selling syndication rights an~ profit shares to
the networks or to the studios or retaining them. Since most
small producers needed financing and since the networks were
more efficient risk-bearers than studios, most small producers
obtained financing from the networks.
After the rules were enacted, the network option was
precluded. Since small producers continued to need financing,
the advent of the rules and the elimination of the networks as
buyers of after-market rights should have significantly
increased the dependen~e of the small producers on the
studios)1 And this is indeed what has happened.
Increased Dependence on the Studios has Resulted
ICF data, supplied to the FTC, show a substantial rise in
that dependence.~1 According to the FTC Bureaus:
"During the 1969-1970 television season, just prior to
the rule's implementation, only ten percent of prime time
programs were jointly produced by independent suppliers
and movie studios. During the same season, independent
suppliers accounted for sixty-six percent of prime time
programs without assistance from the studios. By the
1975-1976 seasons, the percent of joint ventures between
studios and independents rose to thirty-four percent and
the percent of programs produced solely by independents
fell to forty-seven percent. These differences have only
a one-in-twenty probability of occurring by chance.
See FTC Bureaus' Reply Comments, pp. 40-43.
These data are similar to, but not identical with, data
submitted by ICF to the FCC. See "Analysis of the Impacts
of Repeal of the Financial Interest and Syndication Rule",
ICF, Volume I, exhibits 1(d) and 11(d).
PAGENO="0423"
419
Interestingly, the 1981/82 season looks very much like
the 1975/76 season. There is no statistically
significant difference between the percentages of the
various categories in these two seasons. This result is
interesting because it increases our confidence that
these structural chan es are attributable to the rule and
er c anges occurring in communications at t e
time. If the latter had been true, we would probably
seen further changes in the 1981/82 season, changes
that differed from the structure ex~sting in the two
earlier seasons." (emphasis added)ii
Thus, the rules have dramatically increased the dependence
of small suppliers on the major studios, a result in full
accord with the analytic prediction that while the rules would
eliminate the most efficient risk-bearer the networks ~- the
need of small producers to shift a portion of their rights to
larger, more efficient risk bearers would temain.
Efficiency Reductions Have Burdened the Broadcast Networks'
Ability to Compete for Programs. with the ?ay-TV Media
All this reduction of efficiency and increase of small
supplier dependency on large suppliers has a marked impact on
the movement of programming from the free television system to
the pay-TV media. Elimination of the most efficient risk
bearers by governmental fiat clearly burdens the networking
industry and raises its costs. Increases in these cost burdens
eventually lead to less investment in network programming than
would otherwise occur. Pay-TV has no such burdens, so it can
11 FTC Bureaus' Reply Comments, p. 43.
PAGENO="0424"
420
invest in programming in the most efficient ways that the
marketplace can devise.Y
For the broadcast networks, smaller investment in
programming leads to a loss of high-cost programs to the pay
system and a schedule of lower-quality programming than would
otherwise occur; lower-quality programming leads to lower
consumer satisfaction than would otherwise occur; lower
consumer satisfaction leads to a further reduction in the
ability of the networking system to compete with the new media,
particularly pay cable. And this set of consequences is in
substantial part the result of these governmental rules~
The Anti-Competitive Effects of-the Rules Have Hurt the Public
The shifts in the relative competitive abilities of these
media have further results. The services of the commercial
television industry are free to its viewers, so lower-income
families have the same access to its services as upper-income
families. But cable and, particularly, pay cable servic5s
21 While some have argued that there may be inherent economic
characteristics of theatrical movies and some (but not
all) sports which favor pay television in its competition
with the free media for these types of programs, it does
not appear that there are any inherent economic advantages
for pay-cable (or basic cable) with regard to entertain-
ment series or made-for-television movies or, indeed, many
sports programs -- if cQmpetition is allowed to function
unencumbered by Government rules. Weakening the economic
structure of the free television system, however, through
these artificial Government constraints will work to
accelerate the movement of entertainment programming and
talent to the pay television system.
PAGENO="0425"
421
require consumer payments, and not everyone can afford these
Services. As a result, purchase of cable acid pay cable is much
higher in upper-income families than in lower-income families.
That, in good part, is why pay-cable penetration in markets in
which pay cable has been offered for some time typically
continues to fall well below 50 percent (of homes passed by
cable systems that offer pay services), compared with the
well-nigh universal coverage of commercial television.
The dependence of pay cable on higher-income families is
clear from HBO's experience. In 1982 54 percent of HBO*s
subscribers had family incomes of ~3O thousand or more, while
only 35 percent of the general population, roughly comparable
to the television household population, had such incomes.~
Conversely, only 25 percent of HBOs subscribers had ~l5
thousand in income or less, compared with 44 percent for the
general population~ It is clear that a shift in programming
strength from free television to pay television will
significantly hurt lower-income groups.
David M. Blank
!/~ Simmons Market Research Bureau, Inc., 1982.
PAGENO="0426"
422
Mr. WIRTH. Our second panel this morning, if we could have
them join us, in the order in which we have talked to them about
testifying, includes: Sidney Poitier from Verdon Productions in Bev-
erly Hills; Brock Peters from Delbro Enterprises in Los Angeles;
Robert Hooks, the founder and chairman of the National Alliance
for Black Advancement in Communications in Los Angeles; Bernie
Casey from Poobab Productions in Los Angeles; and Terry Carter
from Meta-4 Productions in Los Angeles.
Gentlemen, thank you very much for being with us. Let's have
order in the hearing room. If there are conversations that people
want to hold, please step outside.
I think all of you are familiar with the rules of the subcommit-
tee. We have asked all of our witnesses to summarize their com-
ments in 5 minutes. We have, as you know, a very full agenda
today.
Your statements will be included in full in the record and we
will also leave the record open for further comments that you
might like to make.
We greatly appreciate your being here. I will be keeping the
time. The last panel held very nicely to the time, and we would
greatly appreciate your understanding of the timeframe under
which we are operating.
Mr. Poitier.
STATEMENTS OF SIDNEY POITIER, VERDON-CEDRIC PRODUC-
TIONS, INC.; BROCK PETERS, DELBRO ENTERPRISES (LOS AN-
GELES); ROBERT HOOKS, FOUNDER AND CHAIRMAN, NATION-
AL ALLIANCE FOR BLACK ADVANCEMENT IN COMMUNICA-
TIONS; BERNIE CASEY, POOBAB PRODUCTIONS (LOS ANGELES);
AND TERRY CARTER, META-4 PRODUCTIONS
Mr. P0ITIER. Mr. Chairman, distinguished members of the com-
mittee, as you seek to properly discharge your responsibilities to
the people of our Nation on the important and urgent question
that awaits your good judgment, as you seek a decision that would
be in the best interest of the people of the United States, we offer
you our prayers and our best wishes.
It is truly a testament to the flexibility and resilience of our
democratic system that in matters concerning the public, the
public has input. The public is encouraged to offer that input and,
moreover, the public's views are given consideration that is genu-
ine, balanced, and thoughtful.
It is in this spirit that we respectfully wish to bring your atten-
tion to a condition central to the matter at hand that conceivably
might otherwise be overlooked, a condition of neglect; neglect to
the point of erosion and in too many instances to the point of calci-
fication of one of the principal virtues necessary to a robust,
strong, and just America; a virtue inextricably woven into the body
of our national life~
It was indispensable in our rise to greatness. It touched and en-
hanced all of our institutions. It energized individual freedom and
it nurtured our courage whenever a national crisis called on the
best within us.
PAGENO="0427"
423
I speak, gentlemen of the committee, of the tried and true Amer-
ican virtue, fairness. Fairness, gentlemen. Without it, it would be
all but impossible for us to lay claim to integrity in our national
life. Without it, honesty becomes a mere cosmetic. Without it, we
sow bad seeds in our families, in our businesses, in our schools, and
in our hearts.
It is indispensable in helping to cleanse the national body and
keep it healthy. It can also flood the mind with good thoughts and
lift our spirits. It is not expendable.
Without it, America will become another kind of place to our ev-
erlasting regret.
Therefore, on behalf of our compatriots, actors, actresses, writers,
producers, directors, dancers, musicians, technicians who are black
and brown, we would like respectfully to draw your attention to
the condition of callous and willful disregard of the indispensable
American virtue of fairness as it relates to the matter before you
that currently commands your committee's attention.
In the life of our Nation, black people represent 12 percent of our
total population or 30 million Americans. The contending forces
around the issue before are businesses. The three major networks
are businesses. The independent producers and studios, whether we
view them as individuals or as an association are businesses and as
businesses, I am sure both sides are in the habit of collecting data.
On behalf of black and brown Americans, we would like to give
you some data to exemplify the extent to which both these contend-
ing businesses have contributed mightily to the erosion of one of
America's indispensable strengths.
The black community of America supports both contending busi-
nesses in proportions greater than their percentage of the popula-
tion. The annual disposable income of black Americans is in the vi-
cinity of $164 billion, more than the combined spending of all the
people in Russia and China and is larger than the national budget
of many substantial nations.
We are 12 percent of America's population and we represent ap-
proximately 20 percent of the movie-going public, considerably
more than our percentage of the population.
By any evaluation, one wou'd have to conclude that we are
strong, loyal supporters of the independent producers and the
motion picture studios. We are no less loyal to the three networks.
We watch considerably more television than would be expected of
12 percent of the population and our purchasing fidelity to the
products manufacturers who advertise on the three networks is no
less impressive.
It confounds us, therefore, that they are so insensitive to our just
needs for jobs in their businesses, a need that has been articulated
to them time and time again with the net result of their response
being to consciously ignore us, to not play fair with us.
The networks are as guilty as the producers, for they, too, ignore
the practice of fair play when dealing with us, one of its most loyal
constituencies.
In bringing this condition to your attention, we are not asking
for quotas. We ask simply for fairness. Fairness. We are Americans
and we love this land of ours. Our blood, our sweat, our very lives
stand at the ready on her behalf. Our commitment to the principal
PAGENO="0428"
424
of fairness is illuminated by the fact that we remain loyal, faithful
supporters of the two businesses that today stand accused of ignor-
ing the practice of fairness in their dealings with us.
We have acted responsibly as a community. You are acting re-
sponsibly as Representatives of the Congress of the United States
in searching out and examining the facts as they exist on both
sides of the issue.
There is also a responsibility on the part of the networks, the in-
dependent producers and the studio to the public good. A part of
that responsibility is the exemplifying and safeguarding of fairness
and fair play as a principal that lies at the very foundation of our
Nation.
Because you are in this instance responsible for seeing that the
public good is protected, we have come to bring you abreast of this
very vital aspect of the matter under your scrutiny. We assume
that neither the networks nor the studios would bring it to your
attention with the same fervor of those who are directly afflicted,
if, indeed, they brought it to you at all.
It is our contention that without this input and a full feel of this
aspect from the people who are hurting, you may not have the ad-
vantage of a complete, full view of the question.
Finally, in conclusion, in anticipation of a response from the con-
tending parties that will surely include "how much progress has
been made in this area," I would like to leave you with the follow-
ing cold, hard, irrefutable statistics.
They represent the gross unfairness that continues to character-
ize the hiring practices of both the independent producers and stu-
dios and the networks. Of all the performers hired by Warner Bros.
in front of its cameras throughout the fourth quarter of 1981, less
than 1½ percent of the leading roles were black and less than 3
percent of all the supporting roles were black.
In the first quarter of 1982, again, Warner Bros., of all the on-
camera performers, no more than 2.6 percent were black in lead
roles and 5.3 percent were black in all of the supporting roles.
Bear in mind, gentlemen, if you please, blacks are 12 percent of
the population and they contribute in the vicinity of 20 percent of
the economic support received from the American public by the
motion picture industry.
In the second quarter of 1982, again, Warner Bros., there were
no black leads. There was merely 2.2 percent of all the supporting
roles allotted to blacks.
Twentieth Century Fox, third quarter, 1981, of all of the total on-
camera performers, 1.8 percent black leads; 3.7 percent supporting
cast.
Universal Studios, fourth quarter, 1981, total hired 1,274 per-
formers. No black leads and 3.9 percent of the supporting cast were
black.
Aaron Spelling, producer, third quarter, 1982, of 449 on-camera
jobs, 1.6 percent were black leads; 1.8 percent black supporting.
Columbia Pictures, third quarter, 1981, of the total hired on cam-
era, 1.1 percent black leads; 3.2 percent supporting.
MGM Studios, third quarter, of the total hired 0.5 percent black
leads; 3.9 percent supporting.
PAGENO="0429"
425
At all studios in each quarter of any year, the percentages
remain uniformly horrendous, even given the frequent fluctuation
up or down a fraction or two or even a point or two.
It is abundantly clear from the foregoing statistics that 12 per-
cent of the U.S. population whose support amounts to roughly 20
percent of the domestic revenues the producers enjoy receive in
some instances less than 3 percent of the available jobs.
Americans, gentlemen, in each of your constituencies and
throughout the rest of the 50 States would agree once given the
facts that these statistics unquestionably represent a flagrant un-
fairness in the hiring practices of the studios, of the producers and
of the networks.
We, therefore, ask on behalf of a faithful and loyal segment of
our American community that you encourage with whatever
means are at your disposal the producers, the studios, and the net-
works to adhere to the principal of fair play that must surely exist
as a requirement if they are to be honestly judged as having met
even the minimal requirements of their responsibility to the public
good.
To that end, Mr. Chairman, given your and the Subcommittee on
Telecommunications stated interest in assuring diversity of pro-
graming sources and full access to participation in the broadcasting
media for all citizens, we urgently request that the committee con-
duct a full-scale investigation of the flagrant discriminatory hiring
practices that result in the moral, almost total, exclusion of blacks
and other minorities from the communications industry.
Gentlemen, our presentation continues with a statement from
my. colleague, Mr. Brock Peters.
Mr. WIRTH. Thank you, Mr. Poitier.
Mr. Peters.
STATEMENT OF BROCK PETERS
Mr. PETERS. Mr. Chairman, members of the subcommittee, ladies
and gentlemen. We are here at the invitation of this Telecommuni-
cations Subcommittee not to witness a battle between industry
giants over the financial interest and syndication ruling, but to
place in the subcommittee's record our concern over the near com-
plete exclusion of blacks, Hispanics and other minorities from
meaningful participation in all phases of the communications in-
dustry.
In accepting this invitation, we are exercising a responsibility to
ourselves as men, as creative artists and as black Americans who
are representative of a large segment of the viewing public.
The fact that we are here to place that concern and its accompa-
nyiñg statistics on the record is itself testimony that something is
wrong.
In 1968, the Koerner Commission Report of the National Adviso-
ry Commission on Civil Disorders reported that media compounded
the exclusion of blacks from the larger society by failing to commu-
nicate their needs and concerns.
In 1969, the Equal Employment Opportunities Commission held
hearings in Los Angeles. The Commission turned its findings over
to the Department of Justice for action. In 1970, the Department of
PAGENO="0430"
426
Justice conducted its own hearings. In that same year the Associa-
tion of Motion Pictures and Television Producers and the Interna-
tional Association of Television and Stage Employees entered into
a voluntary settlement agreement with the U.S. Department of
Justice.
In 1976, the California Advisory Committee to the U.S. Civil
Rights Commission began a study and also conducted hearings in
1976 and 1977. In 1978, the Advisory Committee published its find-
ings. In 1977, the U.S. Civil Rights Commission published its find-
ings called "Window Dressing on the Set," and recommended that
the Federal Communications Commission take strong action.
In 1979, the U.S. Civil Rights Commission published an update
and repeated its recommendation to the Federal Communications
Commission.
In capsule, the hearings and the published reports of over 15
years all declared that the problem for blacks and other minorities
in this field has remained virtually unchanged. I ask where lies the
responsibility for that.
The networks have told us that their advertisers will not accept
or sponsor black programing; therefore, it is economically impracti-
cal. What seems impractical is that black Americans representing
the ninth largest consumer market in the world and at least 20
percent of the U.S. viewing audience should be so underrepresent-
ed and so ignored.
In their turn, major independent producers, whom we recognize
are subcontractors, have placed the blame for their lack of re-
sponse to the problem on the networks' door step and over the past
decade and a half have, with some exceptions, echoed the voice of
the networks.
So, our legitimate aspirations are shuttled back and forth like
ping pong balls between sponsors, networks and suppliers. I ask
again: Where is the responsibility in that?
The Nielson Ratings, an admittedly flawed system by which pro-
grams are rated, is cited as the final reason for not giving attention
to the problem. I must conclude that since advertisers are charged
according to the Nielson Ratings system, money is, therefore, the
real reason, or is it?
We are told that the multiethnic population of America is not in-
terested in other ethnic or black product. How does one explain
then the success of "Sounder," "Miss Jane Pittman," or the phe-
nomenon of "Roots," which remains the highest rated television
show in the history of the business.
This show, by itself, refutes all of the reasons given by the indus-
try for not doing serious black drama. Where then is the responsi-
bility to that consumer, whose first amendment rights are entrust-
ed to the networks and their suppliers. Is it responsible to ignore
public trust?
Blacks appear in films and on television as exceptions, when in
society they staff our hospitals, teach in our schools, sit as mem-
bers of local school boards. They serve in our judicial system from
the Supreme Court to the municipal courts in every capacity. They
serve in industry from top management to assembly line. They
serve as officers and members of American labor unions.
PAGENO="0431"
427
They serve in Federal, they serve in State, they serve in local
governments. We function in almost every facet of American socie-
ty. Yet, in American film and television we appear as the rare ex-
ception, without relationships, cut adrift from any cultural moor-
ing. Tell me, who is responsible for that?
Responsible acts are often tied to understanding. They are tied to
concern and in the ideal, they can certainly be tied to love. Con-
versely, the lack thereof fosters distrust, disorder and chaos. How
then is it possible in what appears to be a strong society, responsi-
ble behavior is regularly pushed aside. Business,, political, social
and religious leaders find responsibility troublesome when they are
running for the roses and have to beat the competition, as they
say, to stay afloat.
Responsibility becomes a convenience they wear when everybody
is watching. Everywhere you put the question the answer seems
the same. Money. Not the presence of money itself, but the love of
it, for the old adage is often misquoted.
However, the communications industry carries a special burden.
It mirrors our society both in front of and behind the camera.
Through television, it can speak to the imaginations and minds of
millions of human beings in a single moment. Its power to influ-
ence is awesome. Imagine that power and how that power is used
in a totalitarian state.
In our society, however, we are supposed to be free of such cen-
tralized control and there is minimal monitoring of television by
Government. Supposedly only enough to see that the marketplace
is open, competitive, and fair.
The public assumes that the inordinate success of networks and
major independents is the result of good management or corporate
responsbility. That estimate is certainly partially true, but only on
the surface. Below, there lies a continuing saga of irresponsibility,
self-interest and greed, which is manifested at every level, whether
by banks, unions, sponsors, independents or networks.
These attitudes have prevented whole segments of our society
from gaining access and contributing creatively to our citizens' air-
ways, a fact which has been thoroughly documented in studies time
and time again. Clearly, there appears to exist a gentlemen's agree-
ment designed to prevent any black American from gaining the
power to fund, produce, advertise or distribute product on a regular
basis, either in theatrical release or on television.
If this were not so, then Sidney Poitier, Bernie Casey, Terry
Carter, Robert Hooks and Brock Peters would not be testifying
before you this day.
How responsible are American filmmakers to truth? Not very,
when you consider that two films made decades apart, television's
"Winds of War" and Daryl Zanuck's D-Day epic, "The Longest
Day," both omit the crucial presence of the black soldier.
Now, it is known that an unusually high percentage of blacks
served in Viet Nam, but the movies, "Coming Home" and "Deer-
hunter," ignored this fact.
The phenomenal success of the Korean War television series
called M*A*S*H is undeniable. The series producers practically
overlooked the American black and minority presence in Korea. It
PAGENO="0432"
428
has been speculated that only the personal integrity of its star
saved M*A*S*H from much of the criticism it might have received.
In a multi-ethnic society does any of the above seem like respon-
sible video or flimmaking? Now, that the Nielson Ratings describe
smaller shares of the audience, the networks point to the new tech-
nology, for example, cable, satellite, video cassette recorders, et
cetera, as a source of their problem, rather than the programing
choices they offer to the public.
As a result of the fierce, competitive, commercial marketplace,
new shows must prove themselves in four or five airings. The old
13- or 26-week chance to build or develop an audience is gone.
Today, in place of creative market analysis, networks, buy comput-
er services to monitor our viewing and tell them why shows suc-
ceed or fail.
The documents from all these services insidiously tell us what
races, what religious groups and institutions are most saleable and,
thus, who, in effect, should be employed. Of course, we are not
privy to what information is fed to the computers, but curiously
the printouts from those services reinforce the old myths of racism.
The Los Angeles Times revealed the existence of a service whose
corporate acronym is T-A-P-E. The Times questioned the applica-
tion and use of this service. First, there were denials that it exist-
ed, then grudging admission of its use and the need for such a
market tool and, finally, in some quarters there were statements to
the effect that the service was no longer in use.
So, responsible men in the industry who make much of their fair
and liberal image relying on those computer printouts are found
holding the line against minority participation at creative and deci-
sionmaking levels. Again, I ask you where is the responsibility in
that?
Television has been described as the most pervasive tool of com-
munication in man's history. It rivals the telephone in shrinking
the size of our planet, outmatches radio and telephone through the
combined visual and aural images it evokes. On the surface, it can
be a peerless entertainer. It babysits our children while it informs
us. As a teacher, it has vastly expanded our knowledge of the trivi-
al as well as the profound. Its rate of growth is awesome. It has a
near cataclysmic effect on all our perceptions. Is it, therefore, any
wonder that there has been vital concern over the portrayal of mi-
norities and women, over the excess of television violence or the
effect of television, advertising on children, as well as adults.
The industry has resisted any idea of discussion on these con-
cerns, cloak.ing themselves with the protection of the first amend-
ment as its personal shield, as if the amendment does not provide
the same protection to us all.
The situation remains a Pandora's box, whose lid has still not
been closed. Perhaps, responsibility lies dead at the bottom of that
box.
As early as World War II, NAACP leaders started coming to Los
Angeles to try to persuade Hollywood studios that it was in the
country's best interest, as well as their own, to present a more bal-
anced picture of the American black presence. Nothing came of
that.
PAGENO="0433"
429
Recently, Benjamin Hooks, the NAACP's current executive direc-
tor, has come to Hollywood. He has managed to elicit some positive
response. The results are yet to be determined. Over all these years
of official hearings, public and private studies, and personal con-
frontations, there has not been enough industry commitment to ap-
proach being described as a sense of responsibility. Evidently, the
industry does not believe its contribution to a healthy social cli.
mate would pay off, but pay off it must. Since the black consumer's
buying power represents the ninth largest consumer volume in the
world, one thing can be certain stockholders will not forever
reward .the kinds of policies that jeopardize their holdings. Racism
is not good management, nor is it a sign of responsibility.
We are now in the age of communications, which is overlapped
by the electronic age. This has brought to our time a technological
explosion, which gives man capability beyond anything he has ever
experienced. Through thi~ ability to entertain, to teach, to inform,
to share with all mankind the planet's collected cultural experi-
ence, there should be no unlit areas of this Earth.
The irresponsibility which prevents this industry from taking a
pragmatic step into the future is at odds with what we expect of
American businesses doing business in a multi-ethnic world. It is
totally incompatible with responsibility.
Therefore, Mr. Chairman, I join with Mr. Poitier in requesting
that this subcommittee consider conducting a full-scale investiga-
tion of hiring practices that exclude blacks, Hispanics, Asians, and
native Americans in the communications industry. I thank you
Mr. WIRTH. Thank you very much, Mr. Peters. I would ask our
other three panelists to make sure to keep their comments to 5
minutes. That will give us the opportunity for questions before
moving to our third panel.
Mr. Hooks.
Mr. PETERS. My apologies. May I introduce my colleague, Mr.
Robert Hooks.
STATEMENT OF ROBERT HOOKS
Mr. HooKs. Thank you very much, Brock. Mr. Chairman, believe
me, that was the longest statement of this morning. The rest will
be shorter.
Over the years, the television and film industry has matured,
taking its place among the giant industries, which are pillars of the
American economy and suppliers to the entire world./ With that ex-
pansion and development, this industry has also become an incredi-
ble source of employment opportunities.
Yet, black and other minority participation is conspicuously
absent from the upper echelon of the motion picture and television
industry. This point is particularly important when we consider
the subjectivity that goes into choosing images, messages and infor-
mation that is to reach the public.
The impact and dominant influence of the media and particular-
ly television on social learning and subsequent behavior is stagger-
ing. Studies indicate a tendency on the part of viewers to accept
the overall perspective portrayed on television as reality.
32-540 O-84---28
PAGENO="0434"
430
Now, blacks make up more than 20 percent of the television
viewing audience. It is reasonable to state, therefore, that it is cru-
cial and equitable for more blacks to participate in the creative and
decisionmaking process of television to insure that the black com-
munity's interest is served.
Now, juxtaposing this reality to the current low levels of black
employment in the industry, an unbalanced and unfair reciprocal
relationship appears to exist between the black community and the
entertainment and communication industries it overwhelmingly
supports.
Increased black and minority employment makes good business
sense and must be strongly urged. The industry holds many oppor.
tunities. Beyond the creative endeavors of producers, directors,
writers and actors lie technical, craft, administrative, clerical,
legal, sales and other kinds of support positions which will help
keep the industry in good working order.
According to the 1981 employment statistics from the Federal
Communications Commission, over 150,000 persons work full time
in commercial and public television. Blacks account for only 9 per-
cent of the working force, while minorities in general comprise
only 15 percent of the total.
A closer look at the television industry shows a mere .9.2 percent
of minorities are employed as officials and managers. A key area of
our concern is the low number of blacks and other minorities staff
employees in programing decisionmaking positions. The following
statistics represent the employment picture for blacks behind the
scenes in the film and television industry.
Of the 250 network executives primarily responsible for enter-
tainment programing, 3 are black. The Writers Guild of America
West reportedly has a total of 5,700 individuals. Of these, approxi-
mately 70 are black and less than 7 individuals actually worked
during the season of 1981.
"Blackout in Television," Columbia Journalism's review of 1982,
reports that there are no black vice presidents responsible for news
programing at any of the network stations around the country.
The Directors' Guild of American statistics on seven major pro-
duction companies and studios, which include Universal, Twentieth
Century Fox, Spelling/Goldberg, Warner Bros., Lorimar, MTM and
Paramount, indicate that of the 1,767 directors utilized by these
companies during the 1980-81 period, only 27 out of that 1,767
were nonwhite.
Thus, it becomes abundantly clear that significant participation
in the television and motion picture industry is the exclusive prov-
ince of whites. The producers and studios would have you believe
that they are restricted by the networks in their desire to employ
more blacks and minority performers. If that were true, their con-
cern for fairness in employment would be clearly manifest in their
hiring practices behind the camera as well as in the non-TV prod-
ucts that they create. .
But the whites-only pattern of television is duplicated in their
theatrical films, where the handful of blacks and minority roles
that do emerge are either small or subordinate. Seldom dOes the
dramatic experience they depict include us. Even more s~ldorn is it
about us. It is clear to us that the television and mOtion picture
PAGENO="0435"
431
industry, the networks and the producers are guilty of unfair em-
ployment practices as it regards minorities and guilty of the dis-
torted depiction of those minorities on the screen.
We urge you to explore ways of making the industry accountable
to the public on which it depends for a considerable portion of its
vast profits. We urgently request, Mr. Chairman, that the commit-
tee conduct a full scale investigation of the bold, discriminatory
hiring practices and the exclusion of positive images of blacks and
other minorities from the communiôations industry.
Our presentation continues with a statement from my colleague,
Mr. Bernie Casey
Mr. WIRTH. Thank you, Mr. Hooks.
Mr. Casey.
STATEMENT OF BERNIE CASEY
Mr. CASEY. Thank you, Robert. Mr. Chairman, committee mem-
bers, I want to speak to an issue that is important because it deals
with perception or more rightly, misperception, and that is images.
Images. Images. Images.
If you say the word enough times repeatedly, the word itself
begins to create its own rythmic reproduction acoustically inside
your head. If you see an image repeatedly, it begins to reproduce
itself inside corridors of your mind. If that image is negative, there
can come about a destruction to the psyche that many times
cannot be repaired. Image. Image. What is it?
Well, Webster says it is a mental picture of something, concep-
tion, idea, conception, the concept of a person, product, institution
held by the general public. Often one deliberately created or modi-
fied by publicity, advertising or propaganda.
I guess Webster's interpretation is quite usable in this instance,
usable in that it is true, but there is an area that is not included in
his definition. That area is the devastation and rubble left by the
unattended misrepresentation, the callous disregard for the residu-
al effect upon the misrepresented and the arrogant posture as-
sumed by those who make the images and allow little recourse to
those maligned by their insensitivity and misunderstood because of
the misperception of the images they create.
Let us be constantly aware that thoughts are things. Images
become indelible in the minds of those who envision them. There is
no more powerful force in the universe than that of thought ma-
nipulation and the mind-altering process of the media. Therefore,
we are constantly victimized by the mirror effect of you misperceiv-
ing us misperceiving you misperceiving us and on and on. The
image makers are done a disservice, just as are those whose images
they assail.
If one continues to perpetrate lies and misinformation from one
generation to another and there is never the effort made to correct
the dissemination of the propaganda, then there is the distinct pos-
sibility that those lies will be perceived as the truth, at least the
truth as the image makers see them.
The kind of imagery that we* the viewers have to put up with has
inherent in it intent an abuse that is unkind in the extreme. It is
obvious that the limited inclusion of black performers is an exten-
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432
sion of other things, rather than the natural usage one should
expect in a multiracial society.
The limited usage or outright exclusion of people of color is so
impactful that the residual effect can and does manifest for genera-
tions. The untruths told are just as harmful to those that tell them
as they are to those that hear them and doubly harmful to those
persons about whom the lies are told in the first place. The very
premise of a story like "Tarzan" is odious. Yet, the image manipu-
lators continue to seek the enshrinment of their superiority by re-
telling their fantasy. There is never the concern about how the na-
tives really feel about Tarzan and/or his presence, only the telling
of how absolutely able and capable Tarzan is in an environment
that is completely the opposite of the one in which he was raised.
The white man prevails, even in the land of so-called Ooga Booga.
Images passed along from one generation to another, regardless
of how unfounded and harmful they may be, and, believe me, they
are harmful,. begin to seem normal because they are housed in the
abyss of irrationality and anxiety. Hence, we continue to suffer the
Tarzan syndrome. The premise is the same and just as odious. Only
the names have been changed to protect the insolent. They update
the stories, but lest you misunderstand, they tell you time and time
again, this is a white man's land.
I need not begin to chronicle the negative imagery by time or
date. There are books available that, contain all those things, in-
cluding statistics and photographs that will make your heart pale.
,The imagery is familiar because the image makers created it. The
simple truth is that from the beginning when this was just an idea
in someone's mind until this very moment when it can impact with
catastrophic conclusion, black people have only been an appendage
of a rather deranged montrosity called media. The industry looks
at black people not unlike a transplanted organ that the body poli-
tic continually tries to reject. There is almost a mania about it, as
if an honest and worthy inclusion at the marketplace might cause
some kind of disease.
If one begins to discuss the participation of black people with an
application of justice and honesty, one can hear the, cries and
moans of consternation throughout the industry. The objective of
fairness ~s hardly considered. What is considered is whether the ex-
clusion of blacks and business as usual is going to be confronted in
any manner. That possibility is only considered so that all involved
can get their lies together.
Image. Image. Image. A curious word in its implications. An im-
portant word in its application. A word that seems to suffer from
interpretation. It is a distressing fact that there are many in this
industry that feel that black people are portrayed fairly. God help
us. That only mirrors the knee-jerk racist mentality that manifests
time and time again.
It is a part of the institution. It is relentlessly distressing because
we all suffer, all of us. What is it that prevents the image makers
from touching the best in themselves? Why do they pass the buck
and not, accept the responsibility for their actions? Is it because
they don't think they will be held accountable or they just don't
think?
PAGENO="0437"
433
The image makers who participate in this charade and contrib-
ute to the mangling of minds for generations ought to be ashamed,
but, of course, there is no shame because no one is held responsi-
ble. That iS going to change.
I say to all of you, the legacy that is left is one of mistakes con-
founded by misinformation, complicated by an unwillingness to do
what is right and a disgusting lack of courage to touch the best in
themselves.
So, I say to you, Mr. Chairman, and committee members, I stand
fast in concert with our point of view that we trust you will con-
duct an investigation of the tawdry hiring practices in this indus-
try.
I give you now Mr. Terry Carter.
Mr. `WIRTH. Thank you, Mr. Casey.
Mr. Carter.
STATEMENT OF TERRY CARTER
Mr. CARTER. Thank you, Bernie.
Mr. Chairman and distinguished members of the subcommittee,
we have attempted with the statements of my colleagues to focus
your attention on the abuses and inequities imposed upon black
and other minority Americans by the networks, the studios and the
independent producers in their selfish, irresponsible quest for prof-
its.
The ones in disregard of the principle of fair employment, ramp-
ant in the industry, would not be tolerated in any other major in-
dustry in America and, yet, as we have seen the studios and net-
works resist offering opportunities for employment or significant
advancement to blacks and other minorities, despite our patronage
of their products.
We havQ also touched upon the apparent effects of black and mi-
nority exclusion from the mainstream of life as it is depicted by the
studios, producers and the networks. We have spoken of fairness as
we know it to be imbedded in the foundation of our Nation. We
have spoken of how the industry shucks off its responsibility to the
public and pursues only self-interest without respect to the injus-
tice of their practices.
The producers in the networks say that the American public does
not want to see dramas about black people. There is a certain un-
mitigated arrogance in presuming to know what the public wants
or does not want to see, particularly when you consider the high
failure rate among television series, recently the highest turnover
since the advent of television. All but one of the season's failures
were shows about white people; yet, they failed anyway.
But Heaven help a dramatic show dealing with black characters
if it doesn't catch on like wildfire. If it should fail, such failure
would be inevitably attributed to its blackness and will provide jus-
tification for avoiding the prompt production of any other shows
about black characters for seasons to come.
In the real world, we know there are black and brown scientists,
teachers, airline pilots, industrialists, mayors, fashion designers
and, yes, Members of Congress. What Hollywood allows us to see
PAGENO="0438"
434
on the television screen is a view of our world from a whites-only
perspective.
As a consequence, children of all colors grow up with a vision of
the world, which relegates nonwhite characters to comedic situa-
tions or to positions of secondary importance. The dramas are
almost always about white people. All others are mere shadows or
two-dimensional support servants, moving in the sidelines or back-
ground.
The fact is, gentlemen, it is easier .for a black man to become a
lawyer in real life than for a black actor to land a role portraying a
lawyer. It is easier for a black woman to become a head of a medi-
cal center, than to play the head of a medical center in prime time
television.
There have been a few television shows and theatrical motion
pictures, which do depict black and other minority characters in
central roles; namely, "Roots," "48 Hours," "Gandhi," "The Jéffer-
sons," "Different Strokes," et cetera. Their success is a tribute to
the unrealized potential which ethnic diversity in programing can
provide profitably, and at the same time, offering satisfaction and
inspiration to a `wide~and varied audience.
`Roots," that great drama that remains the highest rated mini-
series in television history, was aired several years ago with very
little followup in terms of dramas of black life. Why are there no
dramatic stories about Vietnamese, Puerto Ricans, Chinese-Ameri-
cans, Mexican-Americans, West Indians or Pakistanis? Are they
not part af the uniquely rich diversity, the constantly reshaping
cultural kaleidoscope that is America?
The networks have discovered that they can reap greater profits
by giving the public less. Whereas the standard used to be 39 epi-
sodes of original programing with 13 weeks of summer reruns each
year, that standard has deteriorated to `a situation in which the
public is presented with 22 original weekly, episodes and 30 weeks
of reruns, with an occasional special thrown in. Thus, the networks
pay for far less production, harvesting a bonanza off the rehash of
second- and third-run shows. The result is that the public is given
fewer choices.
Another result is that the job market for the television industry
has' fallen apart. Actors, directors, and technicians, who used to
make a decent living during the production season, spend a great
deal of time on the unemployment line. What does the situation
hold for actors and techniciai~s who are black or Latino or Asian or
Native American?
The earlier-mentioned Screen Actors Guild statistics showing
that only 10 black actors earned more than $50,000 in the year
1980 is one indication. Another indication is revealed when you list
all of the black actors who have starred in prime time television
series in the past 25 years and then try to figure out what they are
doing today. Answer: Most of them never work. Most of them have
been forced to leave the industry altogether, albeit unofficially.
One talented black actress who starred in a popular series some
seasons ago has been seen selling dresses in a North Hollywood de-
partment store. A distinguished black actor who played the title
role in a series became a real estate salesman in Hawaii. Others
have resorted to similar survival techniques.
PAGENO="0439"
435
In the Hollywood system a black actor is rarely considered for a
role unless the role is designated black by the writer. But writers
rarely think in terms of black principal characters because they
fear that such integration might be frowned upon by the producers,
who fear that it might be resisted by the networks, who fear that it
might be resisted by the advertisers, who fear that it might be re-
sisted by the public and so the injustice fIourishes~
What is the result of this cycle of fear? The normalization of seg-
regated images resembling South African style apartheid in the
American television screen. The trivialization or minimization of
the black experience. The relegation of people of color to secondary
status as they are portrayed in the life of television drama.
We are optimistic that you distinguished gentlemen of the com-
mittee will give serious consideration to the irresponsibility and
unfairness which prevail in our industry. We urge you to conduct a
full investigation into the discriminatory and racist practices of the
studios, the independent producers and the networks as a prerequi-
site to any disposition of the issues before you, to require both sides
to clean up their acts and institute and implement a plan of fair
employment and fair portrayal of people of color on the American
screen. The next move, gentlemen, is up to you.
Only with your intercession can the industry be made to fulfill
its responsibility and perhaps a share of its promise.
Thank you.
Mr. WIRTH. Gentlemen, thank you very much. Congressman
Leland and I have discussed this very issue at length, focusing on
programing fairness, images, employment, professionalism. Con-
gressman Leland, working particularly with Mrs. Collins and other
members has asked to work with the subcommittee and full com-
mittee staff, the networks and independent producers, the FCC
staff, this panel and with other available resources to outline an
approach to a careful and complete examination.
In those discussions, I said to Congressman Leland that it was
my concern that we not wind up with another study without any
specific focus. The goal of this effort should be to develop the kind
of legislative agenda and legislative approach that builds this in
fact into our historic American commitment to fairness.
Congressman Leland has asked for and will be developing that
agenda and.will be working,. I am sure, with all of you. I might ask
Congressman Leland if he has any comments that he might like to
make further on the agenda that you all have discussed this morn-
ing.
Mr. LELAND. I don't, Mr. Chairman, but I would like to just
thank this panel particularly for crystallizing what it is that I have
been trying to say not only to this subcommittee, but also to the
Members of Congress who I feel are close to and those who would
listen.
I also would like to thank them for bringing forth this issue not
only for blacks, but for other minorities. I think that their state-
ment is so clear that it is rather difficult to even evolve questions.
They have answered all the questions in their statements. It is the
most eloquent panel that I have been confronted with as I have
served in the Congress, from Sidney Poitier to Terry Carter. I think
PAGENO="0440"
436
that we have heard an interesting group of human beings who care
about people.
Mr. WIRTH. Let me make some further comments that relate to
this as well. First,. we had ~some discussion earlier about the ac-
countability and responsibility of the FCC. Congressman Leland,
and others on the subcommittee, have been pressing the FCC on
their hiring practices. We must insure that that regulatory agency
is reflective of the kind of goals that are shared by the subcommit-
tee.
The second agenda that has been much publicized in recent
weeks relates to the responsibility of radio and television stations
in license renewal. You all may have seen that there has been a
great deal of discussion about the question of comparative renewal
and the public interest responsibilities held by the broadcasters in
both radio and television.
We are embarked upon a very difficult, arduous and time-con-
suming agenda on the subcommittee, separate from the issues in
front of us today, in which we have agreed to attempt to quantify
the public interest standard. This will be aimed at assuring that
broadcasters serve their local communities, with emphasis on chil-
dren's pr9graming, minority programing, and so forth. These are
the types /~f programing that the public desperately needs and de-
serves, as Mr. Poitier pointed out, but that broadcasters do not find
particularly profitable. This is part of our general emphasis on a
diversity of sources, of programing, a concept that is at the crux of
the first amendment. This is the notion that the public is entitled
to a robust marketplace of ideas.
I raise these two issues as they relate to to what you all are talk-
ing about this morning, and they are of very deep concern to the
subcommittee, and to the Congress as a whole. We have a major
responsibility to try to make sure that our colleagues in the Con-
gress, who are thinking about a whole variety of other issues, real-
ize the importance of these issues. We believe that it is terribly im-
portant, especially as one notes the extraordinary power of tele-
communications as a socializing influence in our society.
Mr. Waxman.
Mr. WAXMAN. Thank you, Mr~ Chairman. .This has been an excel-
lent panel and your testimony is quite devastating. We realize the
points you have made about the underrepresentation of the minori-
ties in the employment in the communications area, as well as the
image that is projected to the public at large, both black and white,
whatever ethnic background, the stereotypes that are fostered and
continue to be perpetuated by television media is something that is
going to haunt us for generations to come.
We have before us an issue of some rules that deal with whether
the networks ought to be able to own a financial interest and be
able to control syndication rights for TV programs. This is a hotly
debated question. It, I think, will have an impact on the quality of
television and the potential diversity of television.
Ironically enough, I can't see, while I strongly support keeping
these rules, this is an answer `to the points you have been making,
nor do I see it as an answer to the poor quality of television pro-
graming overall. I think people are turning off their TV sets be-
cause they are not seeing anything worthwhile to tune in to watch.
PAGENO="0441"
437
On the specific question of whether we ought to allow the net-
works to own a financial interest, to be able to own the syndication
rights, I believe that will lead us in the wrong direction, that will
lead us to a centralization of decisions about television programing
in the hands of the three program producers at each of the three
networks and away from the diversity, as limited as it is now, with
many of the independent programers.
I wonder. if you have opinions on that specific issue or any
thoughts to share with us.
Mr. CARTER. The problem as we see it, and we do see the larger
picture, please understand. We see the concern that you have that
it is a rather difficult decision that you have to make, but we want
you to take into consideration that accountability to the public is
something that both sides must manifest and both sides have failed
to manifest.
What we are asking you to do is to take into consideration the
presentation that we have made today and compel whichever side
prevails-in fact, both sides-to be accountable to the public. The
airways belong to the public. We are the public. All of us in this
room represent the public and we are asking you, whatever deci-
sion you make on the basis of whatever other evidence and testimo-
ny you gather, you take this into consideration as an integral and
essential part of your deliberations.
We have carefully not taken sides on this issue, although many
of us may have our particular affinities, but those affinities have to
be qualified by the fact that we see that we have no friends on
either side, that neither side has taken into consideration that
which is a very essential responsibility.
And we-and when I say "we," I am talking about black and
other minority people-have just been left in the lurch and we are
saying whatever decision you make, please make sure that you
take that into consideration.
Mr. WAXMAN. Do any of you have an opinion on whether the sit-
uation is going to get better if the networks are able to control the
content of programs or whether you have a feeling on this issue
that we are going to find less of a movement toward diversity if we
have--
Mr. POITIER. I think, sir, that there will be business as usual the
next morning. I believe that the networks will go back to business
ignoring the questions raised today if they are victorious. I believe
it is within the very habit pattern of operations of both the net-
works, the studios and the independent producers that they will go
back to business the next morning.
You had this morning preceding us men who told you a lot of
half-truths. In some instances they actually lied. The responsibility
that you have is to make sure that the public airways and the re-
sponsibility to the public on the part of those who are granted
access to that airways is so strong that they cannot ignore their re*
sponsibility to the public.
Today, there is no sense of responsibility to the public over and
above that which brings them a profit. That goes for children's pro-
graming. It goes for minority programing. It goes for simply pro-
graming that is complimentary through the intellectual disposition
of the American people.
PAGENO="0442"
438
The lack of responsibility is dimensional.
Mr. WAXMAN. Do you think there will be a greater responsibility
if you only have the three networks to sell a program to as opposed
to an independent station that may be competing?
Mr. POITIER. If the independent studio-networks and the inde-
pendent studios are bartering for a program, if they go back to
business as usual, that program is going to be minus minorities.
That is why we are here. We do not want them to go back to busi-
ness as usual without an accountability in terms of their responsi-
bility to the public good, which includes diversity of programing,
but that goes for the networks as well as it goes for the independ-
ent producers and the studios.
The independent producers and the studios are guilty of exclu-
sion. They have been guilty of exclusion for 30 years. They contin-
ue to be guilty of exclusion and I think that you are, being the in-
telligent panel that you are, aware that unless there is some force
to encourage strongly that they do not go back to business as usual,
each side will do precisely that.
Mr. WAXMAN. Thank you, Mr. Chairman. I appreciate what this
panel has to say. I want to work with you and Members of Con-
gress who want to see some change in the direction you have out-
lined for us. It is an abysmal picture. I gather you really don't
want to make a specific recommendation on the question of net-
works versus the independent stations and the independent produc-
ers and I respect that because I realize, as you do, that this fight,
while it is. a very important one, is not going to be a dramatic
change unless there are other pressures on the media to change as
well and we will look forward to working on those questions also.
Thank you, Mr. Chairman.
Mr. WIRTH. Mr. Leland.
Mr. LELAND. Mr. Chairman, I would just like to thank you and
my colleague from California, both, for the opportunity to present
this panel in particular, but the whole question of financial inter-
est and the rules in general, because it has given us a forum to ex-
press ourselves about how minorities are being treated in the in-
dustry.
I would hope that those here today will take this back home, the
proceedings here today, to reflect in their minds and their souls,
for that matter, what it is that we are talking about because,
indeed, we have to come together and solve some problems.
It doesn't mean anything for these gentlemen or the people who
are testifying for them to make testimony and then we just place
this testimony on the shelf and there is no legislative mandate.
Your foresight and willingness to proceed with the request of these
gentlemen of this panel are just incredible to me and I think that
this will be the first time probably that this kind of opportunity
will prevail.
* I trust you and I trust my colleague from California and the ma-
jority of the members of the subcommittee, by the way, in their
wisdom and their compassion with this issue to do justice and in
the words of Mr. Poitier, to exhibit fairness to minorities in the
marketplace, who, by the way, represent such an incredible-and I
am really astounded by the statistics I have heard today-an in-
credible market share of the market buyers in our population.
PAGENO="0443"
439
Twenty percent black people coupled with-I don't know what the
percentage of buyers in the marketplace are Hispanics-coupled
with them is an incredible share.
It seems to me that something had better be done by the produc-
ers, by the studios, by the networks, if, in fact, the stark reality of
what it is that they are selling is being bought by such a high per-
centage of people. It seems to me that if, in fact, that pressure is
brought to bear by the buyers in the marketplace, something chaot-
ic might take place and I think that the time is coming. We are
seeing that in the political arena where we are now having the au-
dacity as black people to consider a black candidate for the presi-
dency.
We have seen the results of black people coming together and if,
in fact, coupled with the coalition of other minorities, Hispanics,
and others, the impact made is just absolutely tremendous. We re-
alized a near election of a black Governor of California, of this
State. We realized the election of Mr. Harold Washington, Con-
gressman Harold Washington, as mayor of the city of Chicago.
We realized now the Democratic nominee for mayor of Philadel-
phia and more victories in the marketplace. Those issues are no
more different than the ones that have been brought forth to us
today. Black people and Hispanics and other ethnic minorities have
suffered at the hands of racism for too long and we are not going to
abrogate our responsibility to ourselves and we welcome the oppor-
tunity for those people of good will, like yourself and my other
chairman, Mr. Waxman, to work together to resolve these very
critical problems.
Mr. HOOKS. Excuse me, Congressman Leland. Before we go away,
in reference to the request for full investigation, is it possible that
we can receive from the Telecommunications Subcommittee or
through the Committee on Energy and Commerce a response in
writing in relation to that request?
Mr. WIETH. Mr. Hooks, Mr. Leland and I, as I pointed out, have
discussed this and it will be his responsibility on the subcommittee
to put this together. As I said, there are limited resources that we
have on the subcommittee ourselves. It is a matter of orchestrating
the available resources to do the job. Second, my request to Mr.
Leland is that we not have another 2 years in a 15-year long set of
studies. We have had study after study on this. The challenge is
what concrete steps Congress can take to improve the situation
soon. I am quite sure that we will be in touch with you as to how
to go about doing this.
In closing, I want to thank you all very much. Let me summarize
the issues that the subcommittee has before it.
One of the issues, is the financial interest and syndication rules.
We have to deal with that.
Another question relates to the whole question of the deregula-
tion of broadcasting on which some of us have very defined posi-
tions. The airwaves do belong to the public, but sometimes that
comes as a surprise to many who use the airwaves. We need to con-
tinually remind them of that.
I would hope that all of you are aware of the fact that we do not
have the opportunity to start from a fresh state. We are starting
out after a history of FCC regulation from 1934 to today. We would
PAGENO="0444"
440
hope to. have your support and understanding of what we are at-
tempting to do in terms of encouraging diversity and competition,
which goes right back to the opening statement of your testimony,
Mr. Poitier.
Mr. WAXMAN. Mr. Chairman, as I understood, I think that it was
Mr. Carter who mentioned that there are various views this panel
may have on that subject and this panel wanted to present a mes-
sage to us that is separate from the narrower issue that we are
dealing with financial interest and syndication.
Could I suggest that if any of the members want to submit their
personal views on this specific issue, that the record be held open
for that purpose. If they want to personally express their position,
we would appreciate hearing about it.
Mr. WIRTH. We would like to hear from you.
Gentlemen, thank you very much for being with us this morning.
We greatly appreciate it and the subcommittee looks forward to
working with you in the future. Thanks very much for coming.
Our final panel of the morning includes Mr. Arthur Price, the
president of MTM Productions; Mr. Anthony Thomopoulos, the
president of ABC Entertainment in New York; Mr Joseph Waz for
the Committee Against Network Monopoly; Ms. Diane Asselin,
president of Asselin Productions in Los Angeles; Mr. David Ochoa,
president of Buena Vision Cable in Los Angeles; and Ms. Dolores
Sanchez from the Eastern Group Publishing in Los Angeles.
Again, thank you all for being with us and for your patience and
forbearance in this long morning of hearings. We greatly appreci-
ate your being here.
Again, I would remind you of the procedures and the rules of the
subcommittee. We would ask you to please summarize your testi-
mony in 5 minutes. We will include your testimony in full in the
record, and we will be leaving the record open for further com-
ments that any of you might like to make for the record and for
questions that the subcommittee may wish to submit to you.
So, thank you very much for being with us. We will start with
Mr. Price.
STATEMENTS OF ARTHUR PRICE, PRESIDENT, MGM PRODUC-
TIONS; ANTHONY D. THOMOPOULOS, PRESIDENT, ABC ENTER-
TAINMENT, AMERICAN BROADCASTING COMPANIES, INC.;
JOSEPH W. WAZ, JR., COUNSEL, COMMITTEE AGAINST NET-
WORK MONOPOLY; DIANE ASSELIN, PRESIDENT, ASSELIN PRO-
DUCTIONS, INC., AND ALSO ON BEHALF OF WOMEN IN FILM;
DAVID OCHOA, PRESIDENT, BUENAVISION CABLE CO.; AND DO-
LORES SANCHEZ, EASTERN GROUP PUBLISHING
Mr. PRICE. Good morning. I am Arthur Price, president of MTM.
I think I would first like to respond to panel 2, to a rather re-
markable and dramatic presentation, and also to Congressman Le-
land's remarks.
There is little doubt in my mind that the production industry
has to improve its record in the area of minority hiring. The televi-
sion production end of the industry-in the production end of the
industry, there has been a constant, but unfortunately very slow
improvement in hiring policies, subject in larger degree to the
PAGENO="0445"
441
extent our customers, the free networks, allow us such improve-
ment.
Cory Dunham referred to NBC trying to reason with suppliers to
hire minority actors. Mr. Dunham has never been in any of the
meetings that I have been in. That is an experience I have never
shared.
It is a fact of life in this industry that everything you see on net-
work television has been approved by the networks. I cannot say
that the producers are always as contentious as they should, but I
can tell you that MTM strives to have realistic and serious roles
for members of ethnic minorities and women, both on camera and
in production.
All aspects of this industry could stand improvement in this
issue. However, it is unfair to pin the blame solely on the produc-
tion community.
The networks are convinced that minorities do not draw viewers.
This attitude conspires to slow down the process. The repeal of the
financial interest and syndication rules, in my personal opinion,
will slow the process down to tokenism.
This leads me to the subject of this particular hearing and an ex-
amination of some of the effects of the repeal of the financial inter-
est and syndication rules and H.R. 2250.
In the opinion of MTM, if the rules are repealed, the delicate bal-
ance of creative independence $etween program supplier and the
network will be gone. It is diffi45ult enough at present to convince
the networks to try different programing concepts. If you further
complicate the process by legally giving the networks a vested in-
terest in the so-called back end profits, that vested interest, in our
opinion, becomes the driving force for a creative homogeneity that
would make "Ozzie and Harriet" look like an experiment in artis-
tic radicalism.
Mr. Colloff said that 10 years ago MTM would have liked to have
had the rules not in place. I made the CBS deal for "Mary Tyler
Moore." This is exactly what happened to me when I negotiated
the deal in 1959. CBS demanded and obtained 100 percent of all of
the distribution and syndication rights worldwide in perpetuity.
They did not finance MTM. The Bank of America financed MTM.
The existence of the rules allowed MTM to become more than a
one-show company. It allowed us to make shows such as "White
Shadow," "Lou Grant," "Hill Street," and "St. Elsewhere."
Lately we have heard that the network argument is that it is
unfair that they cannot share in the profits of a successful show. I
contend that they not only get profits from successful shows, but
get them quickly, while the producer has to wait 6 or 7 years, if, in
fact, he ever does get profits.
Let me give you an example based on "Hill Street." In the 1982-
83 season, "Hill Street" cost MTM $865,000 per hour to produce.
Our NBC license fee was $800,000, resulting in $65,000 per episode
loss. For "Hill Street" to become a viable show in syndication, we
need at least 100 episodes. This would give us a projected deficit of
approximately $6 million.
At the same time in the 1982-83 season, NBC charged advertis-
ers an average of $125,000 for 30 seconds of commercial time in
"Hill Street." There are 12 30-second commercials in an hour pro-
PAGENO="0446"
442
gram. That means that the network grossed a million and a half
dollars per first run of each program.
After deducting the license fee for the program, agency commis-
sions and affiliate compensation, the network is left with a pro-
gram profit of approximately $250,000 per hour. In addition, the
network will air approximately 26 reruns of the series this season.
NBC's gross program profit on these reruns will total in excess of
$550,000 per rerun ~for a total of $14 million for 26 reruns, making
the total program profit for the 1982-83 season in excess of $20 mil-
lion, a rather quick and handsome sharing.
Another network claim is that the new technologies are compet-
ing with them for new programing and taking audiences away
from them. The networks would have you believe that their audi-
ence loss is almost totally attributable to pay TV and that is why
the rules should be changed. They don't mention the tremendous
increase and effective competition from the independent stations, a
competition which is not only impacting on the network affiliates,
but more importantly on one of the networks' greatest single
sources of profits, the networked-owned and operated television sta-
tions.
The amount of money pay services have been able to spend in
licenses has been far below the network level, due to the obvious
difference in the size of the available audience and, therefore, lim-
ited the amount of production for pay TV. MTM has no plans now
or in the foreseeable future to produce the high quality type of pro-
gram, such as "St. Elsewhere" or "Hill Street" for pay television.
How fast and how much will pay TV grow and, what effect will
that growth have on broadcast television is an unknown piece of
the puzzle at this time. Therefore, I strongly urge Congress to
enact H.R. 2250, which would at least put a moratorium on the
repeal or alteration of the financial interest and syndication and
prime-time access rules. This moratorium would allow new produc-
tion companies and writers to develOp and with the existing compa-
nies be an ongoing force for development and production of diverse
programs for the public.
The moratorium would allow Congress at some future date to ob-
jectively look at the entire broadcasting industry and ascertain its
true state, its history and the future to deliver a diverse program-
ing menu to its public.
Thank you.
[Testimony resumes on p. 465.]
PAGENO="0447"
443
Oral Presentation by Arthur Price, President, MTM Productions,
in support of H.R. 2250 before the Subcommittee on Telecommunications,
Consumer Protection and Finance of the Committee on Energy and
Commerce, U.S. House of Representatives. Los Angeles, California,
June 1, 1983.
Mr. Chairman, members of the Subcommittee, I am the
President and one of three principal shareholders of MTM.
Enterprises, Inc., which is a privately owned independent
television proth~ction company.
MTM strongly urges Congress to enact H.R. 2250 which
would place a five-year moratorium on the repeal or altera-
tion of the financial interest, syndication, and prime time
access rules so that independent production companies like
MTM can survive and thrive, and new production companies can
be born to provide the networks and the American public with
high-quality and diverse programming. Because much of the
information contained in MTh's January 26, 1983 comments
filed at the Federal Communications Commission supplements
this statement, MTM requests that the attached pleading be
entered into the Subcommittee's record.
The period of existence of these rules directly coin-
cides with the period of growth and prosperity of MTM as an
independent production entity. As you know, MTM's first
program was the "Mary Tyler Moore Show." It was developed
in 1969 for CBS. If the rules had not been enacted in 1970,
it is quite probable that MTM would have been a one-show
company. There would have been no incentive to continue in
the television production business.
PAGENO="0448"
444
The following background regarding our negotiations
with CBS for the Mary Tyler Moore show is revealing. As an
express non-negotiable condition of getting our show on the
network, CBS demanded and obtained 100 percent of all dis-
tribution and syndication rights in perpetuity and thrOugh-
out the world as well as all subsidiary and merchandising
rights to the series.
MTM is frequently asked whether now, with our estab-
lished track record, the networks could still secure most or
all of the syndication rights from MTM absent the rules.
MTM's answer is absolutely and unequivocally yes. Nego-
tiations would resemble those NTM endured to have the "Mary
Tyler Moore Show" accepted by CBS. At the point in time
when syndication and financial interest rights a~e nego-
tiated, the producer is at its most vulnerable. For a show
to acquire any value, it must be accepted by a network. We
must get into the network theatre. Even though MTM may have
had numerous prior hits, the show we are promoting has no
guarantee of success~ Networks can simply demand signifi-
cant rights as the price of getting the show on the air.
Since the inception of the Financial Interest and Syn-
dication Rules MTM has produced several series which it has
put into syndication, such as "The Bob Newhart Show," "Rhoda,"
"The White Shadow," "WKRP in Cincinnati," as well as several
television movies.
PAGENO="0449"
445
MTM has had the freedom with respect to these programs
to choose its own distributor at substantially lower distri-
bution fees 1~Ehan those dictated by CBS prior to the rules.
In addition, MTM has maintained decision-making author-
ity over all aspects of the selling and distribution proc-
ess. The revenues derived from syndication have been used to
help offset the deficits incurred in the production of these
shows and other shows which have not been successful enough
to reach the syndication market, to fund the hiring of
established writers and producers under long-term develop-
ment contracts, to develop new programming, and to employ,
nurture, and support new and unknown writers and other
creative talent.
When "Hill Street Blues" was first produced by MTM, it
was recognized as one of the most unique television series
in recent years. The large ensemble cast and multiple-story
lines, complex photographic and sound effects gave the
series a realistic look and feel. It also made "Hill Street
Blues" unique and quite expensive to produce.
MTM was willing to risk a substantial amount of its own
capital to produce "Hill Street Blues" because NTM believed
it would become a successful show and ultimately bring a
return on its investment in the syndication market. The
fact that "Hill Street Blues" became a critical and popular
success, has given MTM further incentive to invest substan-
32-540 O-84--29
PAGENO="0450"
446
tial sums of money in the series week after week in the hope
that syndication revenue will provide a return on its in-
vestment as well as a reasonable profit.
Let me give you some actual figures concerning "Hill
Street Blues" to dispell two myths the networks seem to be
fostering.
The first myth is that the network pays the full cost
of television production. The second myth is that networks,
because they are restrained by the rules, are unable to
share in the profits of a successful show. Both myths are
untrue.
In the 1982/83 season, which is the third year of the
series, it cost MTM approximately $865,000 to produce each
one-hour episode. Our license fee from NBC this season is
$800,000, resulting in a $65,000 per episode deficit.
After producing 22 episodes this season of "Hill Street
Blues," MTM will have invested $1,437,000 that has not been
covered by the networks. The deficits incurred this season,
when added to the deficits incurred during the first two
seasons of the series, brings the total current deficit on
this series after three seasons to approximately $3,230,000.
As you know, MTM will need approximately 100 episodes
of "Hill Street Blues" before it becomes a viable commodity
in the syndication market. With the completion of produc-
tion this season, we will have completed 57 episodes. That
PAGENO="0451"
447
means that at the current rate of deficit we will have
accumulated a total deficit in excess of $6 million on the
first 100 episodes of the series.
While producers must wait five to six years, if ever,
to begin syndication sales in order to derive the hoped-for
syndication profits, networks do not have to wait. During
this season when NBC airs an episode of "Hill Street Blues"
it charges an average of $125,000 for each of the 12 30-
second commercials that appear on the program. That means
that the network has grossed $1.5 million for the first run
of each program, at a cost to them of $800,000. After
deducting agency commissions and affiliate compensation, the
network is left with a profit of approximately $250,000 per
hour.
In addition, the network will air approximately 26
reruns of the series this season for which we will be reim-
bursed by NBC only for the out-of-pocket guild and union
residuals which will total approximately $100,000 per epi-
sode. NBC's gross profit on these reruns will total in
excess of $550,000 per rerun, at a total in excess of $14
million for 26 reruns this season.
When added to NBC's profit on first-runs, their profit
on "Hill Street Blues" for the 1982"83 season will total in
excess of $20 million.
PAGENO="0452"
448
As you can see, ur~der the current rules the networks
more than share in the success of their programs. For
example, advertisers who wish to buy commercial time in hit
series such as "Hill Street Blues" are required to buy
commercials in less successful shows.
In addition, as shows attract more viewers, the net-
works increase their rates to advertisers to reflect the
program's popularity. Also, even on pilots that do not go
to series and on short-run series the networks sell commer-
cial time, which recovers their development costs and in
most cases also provides them with a profit on their in-
vestment. And on successful shows such as "Hill Street
Blues," the network makes a killing, as indicated by the
profit figures outlined above.
All of this is not to say that every MTM show has been
commercially and/or financially successful. MTM has pro-
duced several series, such as "Lou Grant," "The Mary Tyler
Moore Variety Hour," the "Betty White Show," "Phyllis," "The
Tony Randall Show," and several others on which it has also
incurred substantial deficits and on which it is unable to
make syndicated sales.
The pay television industry has not created such
changed circumstances as to justify modification of the
rules. Although there is a lot of talk of original pro-
PAGENO="0453"
449
gramming for pay television, and, indeed, some limited
amount of original programming has been produced, the
amounts of money available from pay services are so far
below what the networks will spend due to their enormous
audiences which generate billioi~s of dollars of advertising
revenues per year that MTM cannot now, nor in the foresee-
able future, contemplate production of high-quality experi-
sive programming such as "St. Elsewhere," and "Hill Street
Blues" for pay television.
The networks know that the real threat to their con-
tinued dominance for the foreseeable future are the inde-
pendent stations and not pay television.
I have no doubt that if independent stations do not
have access to high-quality off-network programming the
independent's growing audience share will diminish and the
networks and their affiliates once again will dominate each
and every market. The viewers will lose attractive free-
broadcast outlets, and without independent station compe-
tition, advertising rates will increase and ultimately the
consumers will be forced to pay even higher prices for the
products being advertised.
We at MTM are not economists, but we can say with
certainty that the rules have achieved the following goals.
One, increased the number of program suppliers. Two,
increased competition among program suppliers. Three,
encouraged top creative personnel to stay in the business of
producing high-quality and diverse programming. Four,
increased the number of independent stations and distribu-
tors. Five, provided the program suppliers and creators
with a degree of independence from networks that would not
otherwise have been available.
Ultimately, the consumer is the big loser if H.R. 2250
is not enacted and the rules are repealed. The quality and
diversity of programming will diminish when companies such
as MTM can no longer have the economic incentive to take the
risk necessary to develop and produce shows such as "Lou
Grant," "The White Shadow," "St. Elsewhere," and "Hill
Street Blues."
PAGENO="0454"
450
Before the
Federal Communications Commission
Washington, D.C.
In The Matter of:
Amendment of 47 C.F.R. & 73.658 (j); ) BC Docket No. 82-345
the Syndication and Financial
Interest Rule
These comments on the proposed amendment of the Syndi-
cation and Financial Interest Rules are being submitted by MTM
Enterprises, Inc. ("MTM"), a privately owned independent produc-
tion company, which is primarily in the business of producing
television series and television movies for prime time network
broadcast. Thesa comments will attempt to describe MTM's ex-
periences prior to the promulgation.of~.tJte Syndication and...
Financial Interest Rules, the changeI which have occurred since
the Rules were first adopted by the FCC in 1970, and the likely
result if the Rules are repealed.
The period *of the existence of the Syndication and
Financial Interest Rules directly coincides with the period of
growth and prosperity of MTM as an independent production entity
supplying prime time television programs to the networks.
Because of this fact, MTM may be considered an important example
of how a wide variety of high quality television programming
does result from the combination àf the efforts of (1) unique
creative talents; (2) sound business management which functions
synergistically with the creative talent; (3).profit motivation
through ownership and a degree of control over the creative pro-
cess and the resulting product; (4) and a regulatory atmosphere
which has given MTM a "fighting chance" in dealing with the net-
works.
PAGENO="0455"
451
Some of MTM's programs have been successful and profi-
table and some havebeen unsuccessful and have cost MTM enormous
sums of money which have never been recouped. MTM's successful
programs have varied widely from "The Mary `Tyler Moore Show" and
"The Bob Newbart Show", to "Rhoda", a half-hour comedy which
evolved out of the original "Mary Tyler. Moore Show": "WXRP'In
Cincinnati", a half-hour comedy placed in a radio station and.
generally regarded as out of the same mold as "The Mary Tyler
Moore Show", providing comedy with a social message; "The White
Shadow", a one-hour drama about an inner-city high school and
its white basketball coach, who must deal with' the problems of
minority teenagers, their parents, teachers and others in the
community; "Hill Street Blues", a totally unique undertaking
(To be discussed below) which came on the air to a singularly
passive response from the mass audience while at the same time
earning fourteen Emmys,.the George Poster Peabody Award and
numerous other awards; and this season, "St. Elsewhere", another
unique one-hour drama set in an inner-city hospital in BostOn,
which is meeting resistance from the `mass audience, hut which
has received general praise from critics. A recent article in
"Newsweek" (lanuary 17, 1983) described "St. Elsewhere as "this
season's most intelligent network effort as well as TV's most
realistic medical series ever."
These comments will strongly urge the FCC to retain the
Financial Interest and Syndication Rules so that companies like
MTM can survive and thrive and new independent companies can be
born to provide, the networks and the American public with high
quality and' diverse programming.
Historically, at present and for the foreseeable fu-
tOre, there has been and will continue to be only three viable
theatres (ABC, CBS and NBC) for the t.ype of entertainment pro-
gramming produced by MTM. With their. enormous mass audience,
these three networks generate billions of dollars of advertising
PAGENO="0456"
452
revenue each year which support a large portion of the enormous
production costs of this type of programming and which still
provides very healthy profits for the networks. (See "Daily
Variety" article dated January 24, 1983 entitled "NBC Puts
Brakes on Its Declining Fiscal Fortunes, attached as Exhibit #1
and Broadcasting Article dated January 24, 1983 entitled
"ABC-TV's first $2~Billion Year" attached as Exhibit p2). Be-
cause there are so many program suppliers all competing to get
into the same three theatres (ABC, CBS and NBC), these networks
have acquired enormous power and control over the production
community. The tetworks have historically exercised this power
and control to the fullest extent allowed under the applicable
rules in effect at any particular point in time. Since the
founding of MTM., the Syndication and Financial Interest Rules
and the recent Networh Consent Decrees have operated to create a
delicate balance to the unrestricted power and control of thb
networks in the negotiation process between the networks and
program suppliers. At the point that .MTM. and other program.-
suppliers are negotiating their lice~se fees with the network,
the program supplier i.e at its most vulnerable point in `the
creative process to the network's exercise of power. It MTM
wants to be on a network, it will have to accept the network
terms which the network will exact to the maximum benefit of the
network.
As an example of the network's exercise of power prior
to the imposition of the Rules we can go back to 1968. cBS
became interested in developing a half-hour comedy series to
star Mary Tyler Moore. However, as an express non-negotiable
condition of getting on the network, CBS obtained all' syn-
dication, subsidiary and merchandising rights to the series.
Although strongly resisted by MTM, CBS without permitting any
meaningful negotiation on these points, obtained all such rights
pursuant to an agreement which provided that CB.S would retain a
syndication distribution fee of 40% of gros3 receipts and a sub-
PAGENO="0457"
453
sidiary and merchandising rights fee of 50% of all such gross
receipts. Out of the remaining 60% and 50% respectively, MTM
was required to pay all expenses of distribution and syn-
dication, all residual payments to writers, directors, and
- actors, and finally, the remaining proceeds were used to recoup
MTM's deficit in the series and to generate profits for MTM and
its creative profit participants. CBS also controlled the.
timing of release in syndication and the selection of the sta-
tions to which the show would be sold. The "Ma~?y Tyler Moore.
Show" initially aired on CBS during the 1970 television season.
The series became one of television's most popular series with
both critics and the public. When the Syndication Rule was
imposed in 1970,. CBS assigned its syndication and subsidiary and
merchandising rights to The "Mary Tyler Moore Show" to VIACOM,
which has sold,.. and continues to sell, the series in syndica-
tion. MTM does not have any control or voice over the distribu-
tion and syn4ication process such as when, where and for how
much the series should be sold in each.ma.rket.
In connection. with the proposed repeal of the Financial
Interest and Syndication Rules, the networks contend that things
were not so bad prior to 1970, and that there is no reason to
believe that the development and existence of independent pro-
duction companies such as MTM will be jeopardized by the repeal
of the Rules. This position is astounding when one looks at
the findings of the Justice Department in connection with the
anti-trust cases against the.three networks, which found con-
sistent refusal of the networks to grant prime-time exhibition
to programs in which the networks had no financial interest
and/or in which the networks did not obtain the syndication
rights. The findings of the FCC and the Justice Department, as
well as the experiences of MTM and other program suppliers
prior to the Rules, provide the most compelling reasons to
retain the Rules, and provide nearly conclusive evidence that
repeal of.the Rules would draitically change the nature of the
PAGENO="0458"
454
development and production of television ~ogramming.
Since the inception of the Financial Interest and Syn-
dication Rules, MTM has produced several series which it has put
-into syndication such as "The Bob Newhart Show", "Rhoda", "The
White Shadow", and "WKRP In Cincinnatti" and several movies for
television. MTM has had the freedom with respect to these
programs to choose its own distributor and to maintain a voice
and decision making authority over all aspects of the selling
and distribution process. The revenues derived from thesyn-
dication of these shows have been used to help offset. the defi-
cits incurred in production of these shows and others which
have not been successful enough to reach the syndication
market. The profits which remain are used to carry the
substantial current deficits of series such as "Hill Street
Blues", "St. Elsewhere", "Remington Steele", and "Newhart", and
to fund the hiring of established writers and producers under
long term contracts to develop new programming and. to employ
and support relatively new and unknown wFiters so that they may
learn and develop their craft in àrder that they may ultimately
develop and produce new programming.
When "Hill Street Blues" was first produced by. MTM, it
was recognized as one of the most unique television series in
recent years. The large ensemble cast and multiple story lines
and complex photographic and sound effects which give the series
a realistic "look and feel" not only made "Hill Street Blues"
unique, but also made it expensive to produce and a very risky
investment if £t was not ultimately successful. NBC recognized
the potential for "Hill Street Blues", but did not compensate
for that risk in negotiating the license fee payable to MTM for
the network runs. MTM was willing to risk a substantial amount
of its own capital to continue to produce "Hill Street Blues"
because MT.M believed it could become a successful show and bring
a return of its investment in the syndication market. The fact
PAGENO="0459"
455
that "Hill Street Blues" won many Eutmys and became a critical
and popular success gives MTM further incentive to invest
substantial amounts of money in the series week after week in
the hope that syndication revenue will provide return of its
--investment as well as a reasonable profit.
Two years later MTM attempted another unique and expen-
sive series known as "St. Elsewhere". "St. Elsewhere" was the
most expensive program in MTM's history in terms of initial
startup costs. A license fee was negotiated with NBC, and MTM
* received an order for 13 episodes. Because of the complex crea-
tive structure of the series it was essential that the first
episode clearly set out the f~rmat of the series and introduce a
very large number of continuing characters while at the same
time telling an entertaining story, all in one hour. After
filming of the first episode was completed, MTM realized that
the initial episode did not successfully meet MTM's expecta-
tions. MTM informed NBC that MTM wished to revise the script
and re-shoot substantial portions of thefirst episode. NBC
agreed with MTM's creative evaluation of the first episode and
NBC indicated they would like the changes made but they were
unwilling to pay for these changes. Because MTM firmly believed
that these changes were essential to the success of the series,
MTM undertook these changes at its own expense. Thus after pro-
ducing one episode of "St. Elsewhere", MTM had incurred addi-
tional costs in excess of $1,000,000 and has since incurred
further substantial episodic deficits with the only hope of
recou~pment being that the series would become successful and
* remain on the ~ir for at least four years thereby allowing MTM
the opportunity to sell the show in syndication.
The "St. Elsewhere" experience demonstrates MTM'S phi-
losophy and belief that the American audience deserves quality
programming, and MTM is willing to invest its capital to bring
such programming to the networks. Without the ability to.
recover its investment and make a reasonable profit, there would
PAGENO="0460"
456
no motivation for MTM or any other production company to
create and produce unique and expensive series such as "Hill
Street Blues" and "St. Elsewhere". The loss of such profit
potential wou~d result in more programs which are of low
quality. The type of programming which far too often appears on
the networks today.
All of this is not to say that every MTM show has been
commercially and/or financially successful. MTM has produced
several ser,ies such as "Lou Grant", "The Mary Tyler Moore Varie-
ty Hour", "Texas Wheelers", "Paris", "The Last Resort", "Doc",
Paul Sand's "Friends and Lovers", The Betty White Show",
"Phyllis", "The Tony Randall Show" and several others on which
it is unable toniake syndicated sales. Although MTM would have
had smaller losses on these shows if the networks had paid
higher license fees, MTM has been willing to assume the risk of
such deficits because of the potential return of its investment
and profits in syndt~ation.. A company such ~ MTM, in theab-
sense of syndication profits, could not survive and would have
no motivation to assume the enormous economic risks involved in
innovative types of programming such as "Hill Street Bluel" and
"St. Elsewhere" if the only compensation for being in the busi-
ness of producing television programming were to be, for
example, a weekly production fee and a small portion of poten-
tial profits in syndication over which MTM would have no con-
trol.
MTM is aware that the networks contend that they will
be ahie to provide the program suppliers with larger initial
license fees if the networks are given a financial interest or
syndication rights in the programs. It is MTM's opinion that it
may indeed receive, for sønLe short perio4-of time, a modest
increase in license fees.. However, with the networks. in abso-
lute control of the three theatres, they will undoubtedly revert
to their pre-1970 position of extracting, as a condition to
putting a series on the. air, a significant financial interest
and/or syndication rights. This would deprive MTM and the
PAGENO="0461"
457
creative personnel who develop, write, direct, produce and
perform of the long-term upside potential now available in
television. This upside potential has afforded MTM the ability
to attract and retain the high quality creative personnel needed
to.produce its shows and to have the resources available to
develop new writers, producers, directors and new programs.
Historical evidence shows that neither the networks nor
the program suppliers can predict with any certainty the reac-
tion of the A~ierican public to a new television series. It is
also important to note that only between 5% to 10% of the pro-
gramming produced for the networks ever gets into syndication.
However, it's MTM's belief and corporate philosophy that quality
programmin.g will ultimately survive and prosper and MTM is
willing to invest its capital in support of this theory.
Without the potential profits from. syndication, oompanies like
MTM are not likely to evolve in the. future to support this
belief in quality programming. -
As a founding member of the Committee for Prudent De-
regulation (CPD), MTM strongly supports retention of the Finan-
cial Interest and Syndication Rules. The economic analysis
provided by CPD will more fully explain in technical terms the
effects of the Rules and their potential repeal. We at MTM are
not economists, but, we can say .with certainty, that in prac-
tice the Financi.a-llñterest &nd Syndication Rules have provided
increased competition among. program suppliers, encouraged diver-
s.ity of prograiming by MTM and others, encouraged top creative
personnel to stay in the business of producing television pro-
gramming of. the, highest quality, increased the number of mdc-
pendant distributors, and provided the program suppliers and
creators with a degree of independence from networks that would
not otherwise have been available. Even with the' Financial
Interest and Syndication Rules in effect, the networks maintain
many controls over MTM's programming. The networks ultimately
PAGENO="0462"
458
`choose the programs which are put on the air; the networks
approve the casting, writers and directors, and the networks
approve all scripts. The question must be asked whether these
influences would not increase to the detriment of the public
-interest if the networks controlled profits and syndication.
Doesn't logic tell us that' the networJcs wowld favor programs in
which they have the syndication rights and financial interests?
Doesn't the same logic tell us that the nitworkS would not per-
mit a show such a "WXRP In Cincinnati" or "M*A*S*H*" or "Happy
Days" to be, sold to a comp.eting'network's affiliate or tà inde-
pendent stations thereby competing with network programming or a
network affiliate's programming. The Nielsen ratings for the
month of November, 1982 show that "WKRP In Cincinnati" (1) was
the highest rated show in its time period in Buffalo, New York
on the ABC affiliate ~XBW which preempted, an ABC network series
entitled "St*r of the Family", and beat otit the CBS affiliate
WIVB and the NBC affiliate WGR; (2) was the highest rated show
in its time period in New York City, on Metromedia's independent
station WNEW beating out the CBS ownçd and operated station
WCBS, the ABC owned and operated station WABC, and the NBC owned
and operated station WNBC; (3) and in Los Angeles, on the
Metromedia independent station `KTTV for the period January 8-14,
1983 (the series premiered in Los Angeles, in January, 1983) was
tied for first place in its time period with the CBS owned and
operated station XNXT and beat the ABC owned and operated sta-
tion KABC, and the NBC owned and operated station rNBC. It is
pertinent to note that, while CBS was in the prOcess of can-
celling "W~RP In Cincinnati" last April, they were concurrently
trying to obtain from MTM the'right to strip the series on the
n~twork during daytime hours thixs preempting the series from
going into syndication. MTM did not grant the strippingrights
to the network and the series is now in syndication. Had there
been no syndication rules, the network would have acquired the
syndication rights to the series up front and they would not
have neede~ to obtain MTh's consent to the daytime stripping of
the series. The show would not be in `syndication today on com-
PAGENO="0463"
459
peting network affiliate stations or independent stations.
As a program supplier dependent upon exploitation of
its shows after the initial network runs for recoupment of its
investment and potential profits, MTM must be concerned with
these inherent coiiflicte. The networks already have multiple
exclusive options on our series, exclusivity clauses, control of
spin-offs, and other controls. Statistics provided by CPD show
that the networ3~5 do not lose money on even their unsuccessful
shows, while the independent production companies such as MTM
bear substantial deficits on the same shows. Because of the
pricing structure of network advertising time and the fact that
the networks do not share advertsing.revenues with the program
suppliers, the burden of a failed series is placed on the
suppliers such as MTh. MTM is willing to assume that risk
because the in~entive for potential future profits encourages it
and the creative personnel working with it to create new and
diverse programming to obtain such prof its.
The Financial Interest and Syndication Rules were
adopted by the FCC because of abuses by the networks. Such abu-
ses were verified by the Justice Department and resulted in
recent network Consent Decrees. There is no indication to MTM as
a program supplier that the new media have created such changed
circumstances that the Rules should be changed now. Although
there is a lot of talk of original programming for pay televi~
sion, and indeed some programming has been produced, the level
of payments available to the program suppliers does not approach
that available from the networks.. Even by the networks' own
projections, the networks will retain well in excess of a 70%
share of the audience through the 1990's.
The networks argue that one of the main reasons for
repeal of the Financial Interest and Syndication Rules is the
effect of pay TV on their share of the audience. However, as
mentioned above, even by the networks' own projections, they
PAGENO="0464"
460
will remain the dominant entertainment and information medium
well into the 1990's. If there is any significant erosion of
the- network audience such erosion is due to the competition from
the independent stations thoughout the country not pay television.
Since the inception of the Financial Interest and Syn-
dication Rules and the availability to independent stations of
high quality of f-'network programming, the number of indepehdent
stations haè doubled and their profits have increased dramati-
cally as they have attracted an increasing share of the audience
away from network affiliates thereby attracting enormous adver-
tising revenues. With a strong financial base derived in sub-
stantial part from the revenues earned from high quality of f-
network programming, independent stations have acquired the
economic strength to begin producing and purchasing high quality
original programmming such. as "Golda" and "Nicholas Nickelby"
both of. which were turned down by the. networks.
The networks are aware that the- -real threat to thdt~
continued dominance for the foreseeable future are the indepen-
dent stations and not pay television. It is this fear of con-
tinual erosion of their share of the audience to independent
stations which have caused the networks and their affiliateS to
actively support repeal of the Financial Interest and Syndica-
tion Rules. If the Rules are repealed, the networks will own
and control the øyndication rights and significant financial
interests in virtually all programs which they broadcast. With
this control and power the programming will be warehoused by the
networks as was the case prior to the Rules or it will be chan-
neled to their network affiliates and not to the independent
stations. If independent stations do not have access to high
quality off-network programming, the networks and their affiliates
once again will dominate each and every market with the strong
possibility that many independents may be driven out of business or
reduced to an insignificant competitor. Without healthy competition
in the market-place, the network monopolies, their owned and operated
PAGENO="0465"
461
stations and their affiliates will be a position to signifi-
cant].y raise advertising rates. (See "Daily Variety" article
dated January 24, 1983 entitled "Reep Financial Interest Syndie
Regs, Ad Group Asks" attached as Exhibit #3.) When the adver-
-tising rates increase, the increased costs will be passed on to
the consumer.
Ultimately, the consumer is the big loser if the rules
are repealed. The quility and diversity of programming will
diminish when companies such as MTM no longer have the economic
incentives to take the risks necessary to develop and produce
shows such as "Lou Grant", "The White Shadow", "St. Elsewhere",
and "Hill Street Blues". In addition, without a competitive
marketplace, the increased advertising costs exacted by the net-
work monopolies will be added to the costs of products and ser-
vices advertised on television.
In conclusion, MTM respectfully suggests to the Commis-
sion that the Financial Interest and Syndication Rules be main~
tained. Our experience tells us that dealing with the networks
even with the Rules in effect is one-sided at best, and any
increased leverage given to the networks can only adversely
affect the diversity and quality of programming and decrease
competition in the marketplace all to the detriment of the
public interest.
January 25, 1983
MTr~Ent~rprise~a, Inc.
.~
A~thu\r Price, President
Mel D. Blumenthal,
Executive Vice President
32-540 O-84--30
PAGENO="0466"
462
NBC Puts Brakes
On Its Declining
Fiscal Fortunes.
By JIM HARWOOD
After four years of decline,
NBC posted "significantly high.
er" earnings for 1982, parent.
RCA Corp. reported last Fri. I
day, noting Its own sales and
earnings were at record highs.
for the year, despite slippage in
the fourth quarter.
RCA did not provide figures
but said each~f its broadcasting
subsidiary's divisions "achieved
record sales, reflecting a con-
tinning strong advertiser de-
mand for time on the television
network and favorable market
conditions for NBC's owned-and-
operated television stations~"
For 1982, RCA said Its profits
were $222,600,000, or $2.03 per
common share. A~ year eai'lieF
the company earned~ $54,000,000,
which worked down to a loss of
19t a common share after pre.
ferred dividends.
Sales for the year totaled $8,-
237,000,000, up from $8,004,000,-
000 in 1981.
Net income for the fourth
quarter declined to $54,000,000,
or 48t a share, from $57,800,000,
or 54*~ a share, as revenues rose
to a record $2,180,000,000 from
$2,110,000,000.
Chairman Thornton F. Brad.
shaw blamed adverse economic
conditions for the trouble, add.
ing that "the fourth quarter re-
sults reflect a continuation of the
weak economy which may car-
ry over into, the first quarter of
this year.
"Nonetheless~ our operations
are positioned to make further
progress in 1983 with some help
from an improved economy."
Communication operations
continued to be paced by RCA
Americom Domestic Satellite
which posted "sharply higher"
revs andearnings, mainly due to
sale of tax benefits, the sale of
five transponders on Satcom IV
and sale of Satcom V to Alas-
corn Inc.
VidIsk sales were "brisk,"
RCA said, reporting shipment of
more than 3,600~000 albums. Best
seller was "On Golden Pond,"
followed by "Superman," "Star
Trek II: The Wrath Of Khan"
and "Rocky III."
EXHIBIT "1',
PAGENO="0467"
463
Duffy says his is the first
television network to hit
that mark; outlook for 1983
looks to be very upbeat
Despite the recession,. the ABC Telvision
Network last year scored a record year. and
according to network president James E.
Duffy. became the first of the three networks
to pass the "$2-billion mark." Duffy's obser-
vation came in an address delivered to sales
and marketing executives in Milwaukee last
Thursday. The ABC executive went on to
say that 1983 "is off to a strong start"-
reiterating the word ABC Inc. President Fred
Pierce gave BROADCASTING the week earlier
(BROADCASTING. Jan. 17) that the network
is 96% sold out in prime time, while adding
that ABC scatter rates are up 20% from up-
front pricing.
ABC. said Duffy. is also optimistic about
the second quarter of 1983-the second is a
quarter that is historically strong and "at this
time advertiser are picking up their options
with us at better than a 90% rate."
Duffy's t~emarks, which opened with a
pitch to the advertisers on the merits of tele-
vision in general as a single advertising me-
dium. and ABC "the largest single advertis-
ing medium in the world") in particular,
gave him an opportunity to take note of
ABC's latest affiliation gain-luring WDAY-
iv Fargo. ND. and its~ satellite. WDAZ-TV
Devil'~c Lake-Grand Forks, ND', from
NBC. The change, to take place within six
months, will give ABC 208.
.Duffy also took the opportunity to plug
the "novel for television" format, with ABC
not coincidentally having "Winds of War"
and "The Thorn Birds" waiting in the wings.
The former, he noted, cost $38 million to
produce.
Closing with a look ahead to. 1984. when
ABC will present both the Sarajevo winter
Olympics and the Los Angeles summer
Olympics. Duffy said that four of the L.A.
games, ABC has "practically sold out the
$450-million worth of commercial timç
EXHIBIT "2"
PAGENO="0468"
464
Keep Financial
Interest, Syndie
Regs, Ad Group Asks
New York, Jan. 23 - As ex-
pected, the Association of Na.
tional Advertisers has filed with
the Federal Communications
Commission in favor of retain.
ing the financial interest, and
syndication rules..
In its filing, the. ANA ex-
pressed little sympathy with the
networks' pitch for deregula-
tion, arguing that to rescind the
rule would force up prices to ad.
vertisers, reduce competition
and adversely affect the growth
and viability of independent tv
stations.
ANA said Its position re-
flected the "overwhelming"
opinion of its membership and
the "unanimous" vote of its
board.
Clearly, the ANA is looking out
for its own interest. In its filing it
said, "In those markets with
high levels of viewing to inde-
pendent stations, the cost per
thousand viewers paid by typi-
cal advertisers ranged from 20%
to 60% lower than the cost paid in
markets with llttle.or no inde-
pendent station viewlng.~'.
ANA went on to say that it saw
the situation "as ana~ogóu.i to
that which once existed In the
motion picture industry, when.
the producers could and did re-
strict the distribution of popular
films to their own theatres and
denied their best films to com-
petitive dIstributors~"
Finally, the ANA said, In the
past decade the power of the
webs have enabled them, since
1972, to raise unit prices..by about
200%, "a rate which Is signifi-
cantly greater than that of-other
national advertising media, and
some 60% above the rate of in.
flation
It~s that price thing that real-
ly burns the ANA. It tears that if
producers are forced to yield a
share of ownership and profit in
order to get the network to pick
up their show, they'll have to de-
mand a higher price for the
original network run. Resuft:
the network will pass this high-
er cost on the advertiser.
EXHIBIT "3"
PAGENO="0469"
465
Mr. WIRTH. Thank you, Mr. Price.
Mr. Thomopoulos.
STATEMENT OF ANTHONY D. THOMOPOULOS
Mr. THOMOPOULOS. Thank you, Mr. Chairman, Mr. Waxman, Mr.
Leland.
My name is Anthony D. Thomopoulos. I am president of ABC En-
tertainment, the ABC division responsible for entertainment pro-
graming on the ABC television network.
Thank you for the opportunities to present ABC's views regard-
ing the FCC syndication and financial interest rules.
As the subcommittee is probably aware, ABC has been an active
participant in the FCC current rulemaking proceedings looking to-
wards possible repeal or modification of the syndication and finan-
cial interest rules.
We believe that these rules should be repealed. We have also in-
dicated in response to a concern expressed by some parties in the.
FCC proceedings that networks as syndicators might warehouse
programs or otherwise discriminate against independent television
stations, that we would no objections-and I repeat, we would have
no objections-to a regulatory action directed to that specific con-
cern, even though we believe such a course is unnecessary.
The Department of Justice, which has recommended repeal of
the existing rules, suggested that the Commission consider such a
narrowly focused substitute rule. Five Government agencies, three
Federal and two State, are participants in the FCC proceeding. All
have urged repeal of the rules in their present form and, of course,
the FCC's own network inquiry special staff, which was appointed
and served and reported during the chairmanship of former Chair-
man Ferris, recommended repeal.
ABC believes that the syndication and the financial interest
rules are unfair and anticompetitive. They deny to ABC, CBS and
NBC the opportunity to bargain for an interest in the downstream
revenues from the programs which these companies largely finance
from inception to completion.
In so doing, the rules effectively raise the cost of programing to
the detriment of the networks, affiliated stations throughout the
country, and ultimately the viewers. At the same time, they impose
no like burden on any of the new and emerging networks like
Home Box Office with which we compete, and they deny to the syn-
dication market the benefits which would flow from three more
competitors. The syndication and financial interest rules are pro-
tectionist in character and we understand why established produc-
ers and syndicators would like to continue to enjoy the protective
status which these regulations provide.
But that does not mean the rules serve the public interest. Quite
the contrary. Protectionist regulations, such as those, distort the
marketplace process and cheat the economy of the very efficiency
which a free market provides. Contrary to the suggestions of some,
the rules do not contribute to program quality or diversity. By arti-
ficially inflating the cost of network programing, they work to di-
minish program quality.
PAGENO="0470"
466
By denying to the producers the options of selling to networks'
potential downstream revenues in programs, they make it more
difficult for new and untried producers to get a start in television
production. Some minority producers have so testified before the
FCC.
Potential entrants find themselves looking to their competitors,
the established producers for financial backing. It should come as
no surprise, therefore, that the FCC special staff found that the
rules tended to increase the concentration of the supply of network
programs.
Our nation has already entered a new era of video competition.
This new era has provided many new distribution networks; for ex-
ample, cable, pay cable, subscription television, multi- point distri-
bution service and within the next year, satellite to home broad-
casting.
Most of these new networks offer programing only for those able
and willing to pay for it. In just a few years, the pay services will
be spending more for programing than ABC, CBS and NBC com-
bined.
Whether justification may have existed for the syndication and
financial interest rules when they were adopted in 1970, surely it
does not exist today.
Thank you very much
Mr. WIRTH. Thank you.
Mr. Waz.
STATEMENT OF JOSEPH W. WAZ, JR.
Mr. WAz. Thank you, Mr. Waxman, Mr. Leland.
I am here today as special counsel to the Committee Against
Network Monopoly, an ad hoc coalition, whose supporting organiza-
tions include representatives of consumer, religious, labor, minori-
ty, elderly and other significant interest groups. The committee
was organized in conjunction with the creative community and in-
dependent broadcasters to support the retention of the FCC's finan-
cial interest and syndication rules. A roster of the 37 organizations
supporting the committee has been submitted for the record.
Gentlemen, just to give you a flavor of the organizations in-
volved, some of the members do include the American Association
of University Women, the American Civil Liberties Union, the Na-
tioñal Council of Churches, the U.S. Catholic Conference, the
Urban Elderly Coalition, the Hispanic Telecommunications Net-
work and the Association of Independent Video and Filmmakers.
Gentlemen, Chairman Fowler of the FCC is fond of saying that
what is in "the public interest" is that which the public is interest-
ed in. Well, clearly, the public is interested in this issue and in this
legislation, and they strongly concur that these rules should be re-
tained.
The financial interest and syndication rules and the complemen-
tary prime time access rule have helped make more aud diverse
viewing options available to the public by allowing greater creative
and financial independence to the creative community and by re-
ducing the three major networks control over what Americans may
view.
PAGENO="0471"
467
These rules have been a palliative, but not a cure. Network
dominance persists in the video marketplace. Despite rosy predic-
tions and buoyant rhetoric the video age of abundance is not, and
may not soon be, within the reach of most Americans.
Today, as at the time these rules were adopted, most Americans
still rely primarily on over-the-air broadcast services for most of
their news and entertainment. Barely a third of the Nation's TV
households are wired for cable. Fewer than one in seven house-
holds take any form of pay TV. As the litany of various new media,
to which Mr. Thomopoulos referred, find their way toward the
marketplace, their commercial prospects and their ability to serve
the diverse needs of American viewers are uncertain at best.
Already we are witnessing a major shakeout, with subscription
TV stations folding and major cable programing services, backed
by such substantial players as CBS and Rockefeller Center, disap-
pearing.
The combination of economics and ill-considered regulations has
prohibited the emergence of any delivery system with the audience
reach and financial clout of the three networks. The financial in-
terest and syndication rules were intended to offset somewhat this
unchallengable dominance. Yet, just as these rules have begun to
work by making independent broadcasting a viable enterprise and
by opening up the network programing marketplace to new ideas
and new faces, the current FCC proposes to pull the plug.
Gentlemen, a reasoned view of the state of the video marketplace
militates in favor of retaining these rules, but reason hasn't dis-
suaded the networks' from letting loose a stream of hyperbole and
myth urging repeal. The networks nominal goals are to save "free
TV" from the threat of pay media and to bring improved program-
ing to special audiences.
Let's consider the first of these myths, that failure to repeal the
rules will mean "the end of free TV" or, as Mr. Dunham hastily
rephrased it this morning, the loss of a "level of service" free TV
provides.
What is far more likely is that repeal of these rules will mean
the end of competition in advertiser-supported television. The rules
do not affect the networks' ability to bid for any programing or to
produce news and public affairs programs. The rules affect only the
networks' right to syndicate entertainment series and specials.
The rules have caused no perceptible harm to the networks. Net-
work profits climbed 550 percent during the first 10 years the rules
were in effect. They raked in $6 billion in ad revenues last year
and they still hold a combined 80-percent share of TV homes in
prime time.
By the end of the decade, by the networks' own estimate, they
will still retain a combined 70-percent audience share, a command-
ing portion of what will then be a much bigger total audience.
And consider the recent remarks of RCA chairman Thornton
Bradshaw that were alluded to earlier, "I don't believe in 100 chan-
nels any more. In 1990, I do believe that three networks will be
here and very, very strong." That, gentlemen, is the attitude of an
industry with little to fear from fledgling competition.
The networks have trotted out "the demise of free TV" before,
Mr. Chairman, when they tried to delay or deny the growth of
PAGENO="0472"
468
cable in the sixties. In fact, cable has provided merely supplemen-
tary service to the American public and has lured little programing
of consequence away from the networks.
No competitor, not cable, not independent stations, not the new
media remotely threatens the networks.
Gentlemen, repeal, not retention of these rules, is more likely to
result in loss of program service to the public. Deprived of their fi-
nancial independence, producers will be far less likely to take cre-
ative risks. Deprived of access to popular programs to build their
audiences and revenues, independent broadcasters cannot serve as
additional outlets for competitive newscasts or local public affairs
programs addressing community concerns, for local sports and local
and first-run syndicated programing aimed at minorities, children
and other specialized audiences, which the networks too often
ignore.
That brings me to the second network myth, that if only these
rules were repealed the networks would be free to invest in "risk-
taking" programing to serve special audiences. A look at the record
unfortunately deflates this promise.
Under these rules and the networks' consent decrees, the net-
works have been free to produce a substantial number of hours per
week of entertainment and information programs in all dayparts,
including prime time. And, in fact, the networks have increased
the percentage of the broadcast day during which they provide
feeds to affiliates from 50 percent in 1970 to 69 percent in 1982.
But even so, the networks have done precious little to serve mi-
nority, handicapped, children and other special audiences. Organi-
zations concerned with the failure of the networks to serve these
audiences have gone on record in opposition to repeal. Action for
Children's Television and the National Education Association, the
National Council of Churches and the Urban Elderly Coalition all
agree that repeal of these rules will perpetuate this indifference
toward significant segments of the public.
Many new and would-be entrants into the video marketplace
want the opportunity to serve these audiences and do not feel that
repeal of the rules will open up opportunities for them.
The National Institute for Low-Power Television, Black Enter-
tainment Television, the Hispanic Telecommunications Network,
Mestizo Production Associates, the Association of Independent
Video and Filmmakers and many more agree that reimposition of
network monopoly would reduce their ability to compete.
Despite their ability, indeed, their obligation as public trustees,
the networks have failed to serve special audiences. Repeal of the
rules should not be some sort of quid pro quo for the networks to
provide service they and their affiliates are already obligated to
provide. Indeed, only from the competition which the rules inspire
are opportunities for greater diversity and service to special audi-
ences likely to grow.
Only by curbing network control over the programing market-
place will we give these fledgling producers an opportunity to suc-
ceed and serve the public.
Gentlemen, broadcasting remains a highly imperfect market-
place in which the three networks reign supreme. In carrying out
its statutory charge to promote diversity and competition, the FCC
PAGENO="0473"
469
adopted these rules as a check on network power. The Commis-
sion's public interest obligation has not changed, although the tem-
perament of those who set its agenda may have.
The historical accident which has given three big companies con-
trol over the video marketplace should not be ratified by an agency
charged with promoting diversity and competition. When a regula-
tory agency ignores its statutory mandate, congressional action
may be compelled.
Federal communications policy should not abandon the public in-
terest to economic Darwinism, but should instead nurture competi-
tion and diversity in media. To that end, the Committee Against
Network Monopoly wholeheartedly endorses H.R. 2250 as a means
of protecting procompetitive regulations.
Thank you.
[Testimony resumes on p. 659.]
[Mr. Waz' prepared statement follows:]
PAGENO="0474"
470
COMMITTEE AGAINST NETWORK MONOPOLY
SUITE 600
1317 F STREET. NORTHWEST
WASHINGTON. D.C. 20004
(202) 638-2121
June 1, 1983
Statement of Joseph W. Waz, Jr., Special Counsel, Committee
Against Network Monopoly, before the House Subcommittee on
Telecommunications, Consumer Protection and Finance, Los Angeles,
California, June 1, 1983
The Committee Against Network Monopoly is an ad hoc non-
partisan, single issue coalition whose 37 supporting organizations
include representatives of consumer, religious, labor, minority,
elderly and other significant interest groups. The Committee ~as
organized in conjunction with the creative community and indepen-
dent broadcasters. A roster of CANM's supporting organizations
is submitted herewith.
The Committee strongly supports H.R. 2250, a bill which would
place a five-year moratorium on any action by the Federal Communi-
cations Commission to modify the financial interest, syndication,
or prime time access rules.
The Committee believes that the retention of these rules would
serve the public interest by offsetting the dominance of the three
major networks in television broadcasting, and by enhancing diversity
and competition in program production and distribution,*/
*1 This committee was organized expressly to respond to the FCC's
proposed repeal of the financial interest and syndication rules.
However, because of all three regulations which are the subject
of H.R. 2250 were adopted by the FCC at the same time and for
the same pro-competitive purposes, the organizations which com-
prise the Committee Against Network Monopoly support the reten-
tion of all the regulations in question.
PAGENO="0475"
471
These rules have served the public well over the past twelve
years. The rules have contributed significantly to increased com-
petition in independent production for network and syndication,
and to the steady improvement in the number and financial viability
of independent television stations. More voices, nore ideas, and
more options are available to the viewing public as a direct result
of these rules.
These rules are modest and self-enforcing regulations entirely
consistent with the Federal Communications Commission's statutory
mandate to regulate in the public interest. Were the rules to be
repealed, the three networks would be poised to diminish or destroy
their fledgling competitors in the broadcasting industry, and to
constrain further the creative independence of program producers.
Repeal would undo the gains achieved under the rules during the
past decade.
There are simple facts and figures supporting retention. The
goals of the Communications Act and the First Amendment have been
served by the proliferation of independent TV stations, program
producers, and program distributors, all of which owe their existence
in great measure to these rules.
By placing those who create and produce television programming
in an improved bargaining position vis-a-vis the networks, the f in-
ancial interest rule has increased producers' financial and
creative independence. Producers can more freely buck the "lowest
PAGENO="0476"
472
common demoninator" attitudes of the networks when given that kind
of independence. When producers can take their own creative and
financial risks, they are better able to stick to their creative
guns on issues such as casting and the coverage of controversial
subject matter. And because of the syndication and prime time
access rules, producers now have an outlet for shows which might
not interest the networks, including a variety of mini-series
and special audience programs.
By reducing the networks' ability to restrict the availability
of popular off-network syndicated programming to independent TV
stations, the syndication rule has allowed independents to satisfy
viewer needs, build larger audiences, and achieve financial stability.
As independents have grown and prospered, Americans have been pro-
vided with more outlets to which to turn for original programming,
popular reruns, notion pictures, sports and community service
programs.
While these rules have helped open up competition and diversity
in broadcasting over the past decade, they will also remain impor-
tant as network dominance persists in the years ahead.
Despite rosy predictions and buoyant rhetoric, we find that
the vast majority of Americans do not yet share in the much-bally-
hooed "video abundance." which new technologies are meant to bring.
We need to confront the realities of the video marketplace, and to
recognize that the video age of abundance is not, and may not soon
be, within reach of most Americans.
PAGENO="0477"
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Most American TV households today still rely primarily
on over-the-air broadcast services for most of their news and enter-
tainment. Barely a third of the nation's TV households are wired for
cable, and many of these cable systems are still merely retransmitting
local broadcast signals, with a handful of distant signals thrown
into the mix. Fewer than one in seven TV households subscribes
to any form of "pay TV" service, whether STy, MDS, or pay cable.
On an average night, over 80 percent of all American TV
households are tuned to the three major networks. A growing
percentage of TV households, currently estimated at 11 percent,
are tuned to independent TV stations. The fractional remainder
of sets are tuned to public broadcasting, or pay or basic cable.
These numbers demonstrate compellingly the continued dominance
of the networks as the primary source of video programming for most
Americans. Independent TV stations, whose access to key programming
is protected by these rules, currently provide the only real com-
petition for audiences. These independents, whose continued exis-
tence would be jeopardized by hasty repeal of these rules, have
provided important new outlets for programming aimed at specialized
audiences such as minorities, children and the elderly -- audiences
which the networks have too often ignored. If network dominance
is expanded further by repeal of these rules, American consumers
stand to be deprived of their only current, genuine viewing options.
PAGENO="0478"
474
Too many barriers stand in the way of real competition with
the networks. Some of these barriers were erected by the federal
government, particularly the FCC's Sixth Report and Order allocating
TV channels. Some are the result of economics or technology --
neither has yet permitted the emergence of a delivery system which
has achievea the critical mass of audience reach, viewership, and
revenues which the three networks have attained. Yet, just as
federal regulations intended to overcome some of these barriers
to diversity and service are beginning to work -- just as independent
broadcasting is becoming a viable enterprise the Commission
proposes to pull the plug, leaving the programming marketplace
entirely at the mercy of the networks.
A reasoned view of the state of the video marketplace militates
in favor of retaining these rules. But reason has not dissuaded
the networks from waging a vigorous, and often misleading, campaign
to remove these regulations, thus to reimpose their monopoly in
full force.
The networks have let loose a stream of hyperbole and myth
intended to convince the public that retaining the rules will mean
"the end of free TV", and that only with repeal of the rules will
the networks be able to improve their programming to specialized
audiences.
Let us consider the first of these myths: that failure to
repeal the rules will mean "the end of free TV".
PAGENO="0479"
475
It is far more likely that repeal of these rules will mean
the end of competition in advertiser-supported television. The
rules have caused no neasurable financial harm to the networks.
The. development of competition fostered by the rules has only
modestly diminished the networks' overall dominance. The rules
have brought -- and will continue to bring -~ more diversity to
advertiser-supported television (and thus more "free TV" to the
viewing public) than would be likely were the rules to be repealed.
It must be recognized that the rules have nothing to do with
the networks' ability to bid for major sporting events or feature
films, or their ability to produce news and public affairs programs.
The rules affect only the right to syndicate entertainment series
and specials.
The networks remain dominant in every sense of the word. As
noted earlier, the networks today continue to draw over 80 percent
of the total prime tine audience. Reduction in the networks'
total prime time share will remain very gradual... CBS estimates
that the networks will still have 70 percent of the.prime time
audience in 1990, and that actually represents millions more
TV households than they reach today.
Additionally, the rules are causing no measurable financial harm
to the networks. As CBS said in a recent study, "For the foreseeable
future, at least, network television will continue to be the pre-
dominant national advertising medium." Indeed, the networks enjoyed
PAGENO="0480"
476
a "six billion dollar year" in 1982, based on total ad revenues.
And network profits have risen precipitously during the years
the rules have been in effect... a 550 percent climb between
1970 and 1980.
The networks have suggested that they are in imminent danger
of losing series programming and sporting events to pay cable and
other competitive media. These "siphoning" arguments have a familiar
ring -- they were frequently invoked by the networks during the
Sixties in their effort to deter the coming of cable television.
They are as improbable today as they were fifteen years ago.
Those television series which the networks characterize as
"taken away" by cable are in fact series which the networks discarded
because they did not deliver the "numbers" the networks wanted.
They resurrection of such series as "The Paper Chase" and "SCTV"
by two of the largest cable program services hardly represents
a raid on network programming. In both cases, the cable program
services has committed to far smaller series runs than would the
TV networks, at smaller budgets, according to press reports.
But the key point is that these programs would have been denied to
the American public because the networks were dissatisfied with
their ratings performance; it appears that when the networks have
played the executioner, they don't want anyone else to try to
revive what they have condemned.
PAGENO="0481"
477
Moreover, there is no indication that cable series develop-
ment will begin to approach the networks any time soon. All of
the original, "network-quality" (when measured by production
cost) series programming currently on all cable channels combined
would barely fill a couple of evenings on any one of the big
three TV networks. With rare exceptions, cable programming is
still a losing business proposition. The only viable outlet for
the foreseeable future for the sort of series programming con-
templated by the financial interest and syndication rules will
be the three TV networks.
A most peculiar assertion by the networks is that failure
to repeal these rules will lead to the loss of local sports
programming to cable. But a quick review of the TV listing
in Los Angeles, Chicago, New York, Boston, or most anywhere
else in the nation will show that it is independent TV stations
who are responsible for home team basketball, baseball, and hockey
coverage. And cable has not succeeded in creating a massive "shift"
of sports coverage from ad-supported TV to pay. In fact, in a
recent instance, the Detroit Tigers baseball team pulled out of
its pay TV contract to stay with advertiser-supported television.
For the foreseeable future, "free TV" and the networks in
particular will go nowhere but up. Consider the recent statements
of RCA chairman Thornton Bradshaw, speaking with regard to his
subsidiary, NBC: "I don't believe in 100 channels any more...
(T)here's not room for many narrow channels... (In 1990,) I do
32-540 O-84----31
PAGENO="0482"
478
believe three networks will be here and very, very strong...
The networks are supplying basic P~znerican culture, and they're
getting better and better at it." That is not the attitude of
an institution on the ropes. That is the attitude of an industry
giant with little to fear from growing competition.
Now let's consider a second network myth: the assertion
that if only these rules were repealed, the networks would be
free to invest in "risk-taking" programming to serve specialized
audiences.
A look at the record deflates this promise.
Under these rules and the networks' respective consent decrees
with the Justice Department, the networks have been free to produce
a substantial number of hours per week of entertainment and informa-
tion programming in all dayparts, including prime time. And, of
course, the networks were completely free to produce and control
all program rights prior to these legal actions. But even with
this freedom to produce, then and now, the networks have done
precious little to serve minority, handicapped, children and
other special audiences.
In fact, the networks have increased the percentage of the
broadcast day during which they provide feeds to affiliates... from
50 percent in 1970 to 69 percent in 1982. But even with this
increased control of the broadcast day, the networks have left
specialized audiences underserved.
PAGENO="0483"
479
Organizations concerned with the failure of the networks
to serve specialized audiences, and their failure to offer network
access to new ideas and new faces, have recorded their concern
that repeal of these rules cannot inprove the situation.
Action for Children's Television told the FCC that the
networks have evidenced "indifference" and "backsliding" on
children's programming, and noted that limited public access to
new media requires retention of the rules to encourage competition.
The National Education Association expressed similar sentiments.
The National Association of Black-Owned Broadcasters has
observed: "(T)here is nothing in the record of programming pro-
duction by the networks which would suggest that repeal of the
rules will create any new diversity in programming, particularly
for minority audiences. The networks have consistently adopted
a policy of programming designed for attracting the largest
number of total viewers without regard to the tastes and inter-
ests of minority audiences. Repeal... would only permit the networks
to continue this manner of programming on a large scale."
Representatives of nascent competitive media, who wish to
enter the marketplace and attempt to provide service for under-
served audiences, support retention of the rules as an important
adjunct to the development of this marketplace. The National
Institute for Low-Power Television has told the FCC that repeal
of the rules at this time would be premature, and should await
the development of "an economic environment in which LPTV and other
PAGENO="0484"
480
emerging technologies can compete and survive." Black Entertainment
Television told the Commission: "(The rules) are a good example
of federal policies which encourage more varied fare for the
nation's television audience while placing minimal restriction
on those who dominate the marketplace... The rules have helped
pave the way for increased minority participation in network
programming, and have helped open up the syndication marketplace
to growing numbers of programs targeted at the Black audience by
increasing the outlets available to syndicators." A great many
other current and would-be entrants into the video marketplace,
including the Hispanic Telecommunications Network, New Citizen
Productions, Inc., Children's Television Workshop, Media Alliance,
Mestizo Production Associates, and the Association of Independent
Video and Filmmakers, Inc. have expressed similar sentiments.
The networks have failed to serve special audiences, despite
their ability -- indeed, their obligation -- to do so. Repeal
of the rules bears no correlation whatsoever to the networks'
ability to program for minorities, children, the elderly, and
other significant elements of the viewing public. Repeal of
the rules should not be a quid pro quo for the networks to provide
the kind of service they and their affiliates are already obligated
to provide.
It is not for lack of opportunity, nor for lack of profits,
that the networks have failed to provide special audience programs,
PAGENO="0485"
481
They have been the gatekeepers to the nation's TV households,
but they have thrown away the key when it comes to special
audiences. Thus, their arguments that repeal of the rules will
bring an abundance of such programs rings hollow. Only from the
competition which the rules inspire are opportunities for greater
diversity and service to special audiences likely to grow. Only
by curbing network control over the programming markeplace will
we give these new competitors an opportunity to succeed.
The networks claim they are hamstrung by these rules from
competing with new media not subject to the same regulatory limitations
But one need only ask "where are the new media?" and `who owns
them?" to appreciate just how non-competitive they really are.
Where are the new media? The average American has yet to
see them. As I have noted, barely a third of all American TV
homes are wired for cable, and nearly 70 percent of all cable
systems still have 12 channels or fewer. Single-channel subscrip-
tion TV stations have been folding in. startling numbers in recent
months. Single-channel MDS is available in only a handful of
markets. Only a few dozen low-power TV stations have signed
on to date. Direct broadcast satellites are still a long way off.
In short, these competitive media the networks claim to fear are no
more threatening to the broadcast giants than a flea to an elephant.
Who owns the new media? Among the biggest investors in these
emerging media to date are the three networks. CBS, and NBC's parent
PAGENO="0486"
482
corporation (RCA), are applicants for DBS authorizations. All
three networks have tried their hand at cable programming services.
CBS has begun acquiring cable systems. RCA controls much of the
satellite distribution system which make the new media possible.
ABC will soon inaugurate TeleFirst, an overnight home video record-
ing service. If and when these new media come, they will be
wearing the same old faces.
*****
Broadcasting remains a highly imperfect marketplace in which
the three networks reign supreme. In, carrying out its statutory
charge to promote diversity and cOmpetition, the FCC adopted these
rules as a check on network power. By enhancing the financial
and creative independence of the program production industry,
and by assuring independent broadcasters access to the programming
on which they have built their audience and financial base, the
rules have worked efficiently, and caused no perceptible harm to
the networks.
In adopting these rules, the FCC attempted to carry out its
statutory charge to promote diversity and competition. These remain
vital public interest concerns. Federal action which would undercut
the networks' only significant competitors and suffocate the video
marketplace in its infancy would be anti-competitive and anti-consumer.
When a regulatory agency ignores its statutory mandate,
Congressional action may be compelled. The Committee Against
Network Monopoly wholeheartedly endorses H.R. 2250 as a means of
protecting pro-competitive regulation. Federal communications
policy should not abandon the public interest to economic Darwinism,
but should instead nurture competition and diversity in media. These
rules contribute to that goal.
PAGENO="0487"
483
COMMITTEE AGAINST NETWORK MONOPOLY
SUITE 600
1317 F STREET. NORTHWEST
WASHINGTON. D.C. 20004
(202) 638.2121
SUPPORTING ORGANIZATIONS June 15, 1983
Action for Children's Television (Newtonville, MA)
American Association of University Women (Washington, DC)
American Civil Liberties Union (New York, NY)
Association of Catholic Television and Radio Syndicators (Chicago, IL)
Association of Community Organizations for Reform Now (Little Rock, AR)
Association of Independent Video and Filmmakers (New York, NY)
Center for Non-Broadcast Television (New York, NY)
Center for Population Options (Washington, DC)
Chicago Consumer Coalition (Chicago, IL)
Children's Television Workshop (New York, NY)
Citizens Committee on the Media (Chicago, IL)
Committee for Community Access (Boston, MA)
Congress Watch (Washington, DC)
Consumer Federation of California (Los Angeles, CA)
Cooperative League of the U.S.A. (Washington, DC)
Council for American Indian Ministries (Minneapolis, MN)
Council of Churches of the City of New York (New York, NY)
Fairfax Cable Association (McLean, VA)
Hispanic Telecommunications Network (San Antonio, TX)
Local 111, Communications Trades Division, International Brotherhood
of Teamsters (New York, NY)
Maryland Citizens Consumers Council (Baltimore, MD)
Media Access Project (Washington., DC)
Media Alliance (San Francisco, CA)
Montanans for Quality Television (Missoula, MT)
National Association for Better Broadcasting (Los Angeles, CA)
National Association of Black-Owned Broadcasters (Washington, DC)
National Coalition on Television Violence (Champaign, IL)
National Council of Churches of Christ in the United States, Communications
Commission (New York, NY)
New Citizen Productions (San Francisco, CA)
New York SANE Peace Council (New York, NY)
North Carolina Consumers Council (Chapel Hill, NC)
People for the American Way (Washington, DC)
Public Media Center (San Francisco, CA)
Seattle Consumer Action Network (Seattle, WA)
Urban Elderly Coalition (Washington, DC)
U.S. Catholic Conference, Department of Communication (New York, NY)
Washington Area Film and Video League (Washington, DC)
Association of Mexican-American Educators, Inc. (Los Angeles, CA)
Mestizo Production Associates (Santa Ana, CA)
International Association of Machinists and Aerospace Workers, AFL-CIO
(Washington, DC)
PAGENO="0488"
484
~tJ ~
FOR RELEASE:
Wednesday, January 26, 1983, 10:00 am.
ACT SUPPORTS FCC SYNDICATION RULES
Arguing that diversity of control promotes diversity of service, Action for Children's
Television (ACT) has filed formal comments with the Federal Communications Commission (FCC)
in support of the FCC's Financial Interest and Syndication Rules. Speaking today at a press
conference in Washington, D.C., ACT President Peggy Charren stated ACT's belief that to repevi
these rules and thereby concentrate more power in the hands of the three commercial networks
is to reduce television program diversity and threaten the survival of programming for
young audiences. Said Charren:
"The Financial Interest and Syndication Rules cannot guarantee TV program diversity,
but repealing the rules would automatically concentrate more power In the hands of the
commercial networks. That can only lead to less diversity, less concern for the public.
and less programming for young audiences. During the past decade, the networks have
proved that, left to their own devices, they will maximize profits at the expense of
program choice. All three networks have failed to demonstra*e that choice for children--
or, indeed, for any audience besides the 18- to 49-year-old consumer--is a priority..
CBS's treatment of `Captain Kangaroo' is a conspicuous example of the kind of network
decision making that focuses exclusively on the bottom line; that children's show was
juggled around the early morning schedule and eventually cancelled on Mondays through
Fridays because in CBS's view it didn't have an audience.
"ACT has always supported structural regulations that increase diversity in the
television marketplace, because diversity of control leads to greater diversity in
programming. Stronger independent stations and a greater variety of programming sources
can, with luck, result in better service for young audiences; strongernetwork control
never will.
`ACT's vehement stand in this debate over the Financial Interest and Syndication
Rules shows that this is not simply a battle between industry giants for a bigger slice
of the pie but also an issue with important consequences for the public interest. If
the public is to be served, the Financial Interest and Syndication Rules should stand,"
0~I
PAGENO="0489"
485
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
AMENDMENT OF THE COMMISSION'S ) BC Docket No. 82-345
SYNDICATION AND FINANCIAL ) FCC 82-300
INTEREST RULE
Action for Children's Television (ACT), a nation-wide
advocacy organization deeply concerned with television
programming for children, opposes the proposed repeal of the
Syndication and Financial Interest Rule (SF1) under
consideration by the Federal Communications Commission (FCC).
Since i~ts inception, ACT has strongly advocated diversity
in t~levision programming directed to children. ACT believes
that the Syndication and Financial Inte~.est Rule plays an
important part in ensuring that creative competition in
television programming will not be unduly restricted. This rule
constitutes the kind of structural regulation that promotes such
diversity by encouraging the development of independent stations
and of multiple programming sources. ACT is filing its comments
to underscore that this debate on the SF1 Rule is not only a
battle among giants for a larger share of the market, but is an
issue with important consequences for the public and for young
audiences.
PAGENO="0490"
486
Although the Rule cannot guarantee program diversity, its
repeal would concentrate even more control in the hands of the
networks. Children's television programming on the three
commercial networks, for example, is extremely limited. The
elimination of `Captain Kangaroo,' the only daily network
program for children, from the weekday television schedule is a
conspicuous example of the indifference and backsliding that
have characterized children's television in recent years.
Repeal of the SF1 Rule will clearly limit even further the
sources of programming available to th~ public. For children,
this will turn a bleak landscape into a desert.
Nor do the `mew technologies' such as videodisc, tape and
cablevision offer a panacea. Today, two thirds of the country
does not have access to cable. It is therefore premature to
repeal the SF1 Rule because of illusory diversity from and
access to the `new media.'
The SF1 Rule was promulgated by the FCC after an in-depth
study of the networks' television dominance. The Rule was not
hastily adopted; rather, it was the result of a careful and
thorough analysis of sophisticated problems which had long
existed in the television industry. The underlying problem that
the Rule was designed to address - the monopolistic control of
television program production and distribution by the networks -
has not vanished in the twelve years since the Rule's adoption.
PAGENO="0491"
487
Indeed, if the problem has been partially ameliorated, it is
because of the existence of the SF1 Rule. The FCC would be
remiss in its duty to protect the public interest if it were to
abandon carefully developed and designed regulation that
minimizes network control.
The public interest in telcommunications is best served by
diverse programming from multiple sources. Thus, the FCC,
pursuant to its mandate to protect the public interest, should
retain the Syndication and Financial Interest Rule as it
currently exists.
Respectfully submitted,
ACTION FOR CHILDREN'S TELEVISION
By its attorneys,
GITLIN, EMMER, KAPLAN & BONN
Honora Kaplan, Esq.
160 Milk Street
Boston, MasschusettS 02109
(617) 451-1380
Dated: January 25, 1983
PAGENO="0492"
488
AMERICAN
BUSINESS
MEDIA -
COUNCIL 721 Second Street NE Capitol Hill Washington DC 20002 202-546-4088
April 25, 1983
Mark S. Fowler, Chairman Presl,~.nt&cEo
Federal Communications Commission LYONS
1919 N Street, NW
Room 814
Washington, DC 20554 ~oardof~r.cton
Dear Mr. Chairman: MICHAELA VALERIO
PAUL M WEYRICH
We respectfully offer the following written comments for your consider- `OHN~' rATALDO
ation and that of your fellow Commissioners in the matter of the Financial ~
Interest and Syndication Rules. GORDON J.HUMPHRE~
GEORGET RYAN
In the less than one year that our Council has been working with the
business community as a positive force to bring about fair and accurate NadonalAdvl,ory
accountability by the media, we find that the three major networks (ABC, Commtttee
CBS, NBC) almost daily display an anti-business bias in newscasts, public EDWINAANDERSON
affairs shows and prime-time entertainment programming. We do not ANDREINAVRO~
advocate boycotts or censorship -- just fairness. se,, ` -
While ABMC strongly favors most of the administration's efforts to bring
about federal deregulation, we just as strongly oppose the repeal of the ~`~EDTURNER
Financial Interest and Syndication Rules that now limit the three networks cs.s,..
further control over what we are fighting. Having looked at all aides of ~
the issue before your commission, we respectfully join those who favor
retention of the Rules and suggest clarifying language that the rules
are in place to keep ABC, CBS, and NBC from becoming a "monopsony" again.
If the Commission, after years of study, felt it necessary in 1970 to
adopt the Rules, and the Rules have proved to serve in the best interest
of the public, then we cannot understand why repeal is necessary or even
begin considered by FCC at this time.
ABMC believes in the free market system, and we support any business
system making a fair profit under that system, but not if it is against
the public good and interest. Yes, we even agree that the three networks
are `business,' but repeal of the Rules would be injurious to the very
group the FCC was established to protect -- the public.
We ask that each of you give due consideration to repeal of a regulation
that has proved its effectiveness. By copy of this letter, we are also
conveying our opinions to members of Congress should they become involved
in the issue.
Sincerely,
Âme can Business edia Council
Paul N. Lyons, President
PML:jed
Honorable Gordon 3. Humphrey
Honorable John Warner
Honorable Paul Tribble
Honorable Prank Wolf
Members of the Senate Communications Subcommittee
Members of the House Subcommittee on Telecommunications
PAGENO="0493"
489
~Scuz ~aL~i.d~ q/aL'L'~~)
~/urnan d?d'aLIon~i eom,nILL~, ilizc.
P.O. BOX 596
WEST COVINA, CALIFORNIA 91793-0596
May 31, 1983
Congressman Henry Waxman, Member
Sub-committee Tele Communnications
Consumer Protectors and Finance
B331 Rayburn House Office Building
Washington D.C., 20515
Dear Congressman Waxman,
As an active organization in the San Gabriel Valley
which addresses the concerns of the community at large,
we are concerned about the current movement by the
networks to repeal the financial interest and syndication
rule of the Federal Communnication Commission.
In order to insure a diversity of voices it is of
extreme importance that the rule be retained. It is
the only hope of the minority community as it affords them
the opportunity to address issues of extreme importance.
Your consideration and support of this request
will by greatly appreciated.
Sincerely,
Richard F. Hernandez
PAGENO="0494"
490
NATiVE AMERICAN MEDIA
~ *.~ ~ ~ ~
11275 MASSACHUSETTS AVE.
LOS ANGELES, CA 90025
May 27, 1983 (213) 475-6025
Congressman Henry Waxman, Member
Sub-Committee on Telecommunications - -
Consumer Protection and Finance
B-331 Rayburn House Office Building
Washington, D.C. 20515
Dear Congressman Waxman,
I am writing to you with respect to the "Financial Interest
and Syndication Rule", as this issue is o~ major concern.and
interest to the American Indian community.
We are in support of the Independent Producers and their efforts
to keep the system working the way it has so successfully over
these last ten years.
Since approximately 1970, there has been more opportunities for
Native Americans as actors, craftsmen, tec~hnicians, and creative
staffing consultants. Prior to 1970, all the three major
television networks have offered the American viewer, is the
stereotype image of the American Indian - - fighting the cowboys
and the cavalry, living in teepees, and behaving like savages.
The Independent Producers have made a sincere contribution to
showing the American Indian in a realistic and accurate portrayal,
a far cry from the feeble and exploitative efforts of the
major television networks.
Please, Congressman Waxma~, support the Independent Producers
in this fight, and you will help support more opportunities for
Native Americans in the television industry.
Mike Roberts
Director, Corporate Communications
MR/dc
PAGENO="0495"
491
EASTERN GROUP PUBLICATIONS, INC.
509-1/2 EcHANDIA STREET
Los ANGELES, CALIFORNIA 90033
(213) 225-2362
May 31, 1983
Mr. Joe Waz
Committee Against Network Monopoly
1317 F. Street, N.W., suite 600
Washington D.C. 20004
Dear Mr. Waz,
This letter is to support your efforts to retain the FCC's
Financial and Syndication rules" which the FCC has decided
to abolish.
I also heartily endorse Hk 2250, which seeks to delay
any change in these rules by the FCC for a period of five (5)
years.
It is my feeling that the best interests of Hispanics,
along with the rest of the population are best served by fostering
a greater number and diversity of those providing television
programming for the television audience.
Sincerely,
//~
~
N~GING EDITO /CHIEF EXECUTIVE
PAGENO="0496"
492
June 1, 1983
Congressman Henry Waxman, Member
Subcommittee on Telecommunications
Consumer Protection and Finance
B-33l Rayburn House Office Building
Washington, D.C. 20515
Dear Congressman Waxman:
I write to express my concern regarding the attempt to
repeal the Federal Communications Commission's Financial
Interest and Syndication Rule.
As a Hispanic in the entertainment industry, and for many
years involved in the community, I am concerned that the
strides that have `been made by Hispanics in the media will
suffer a seriOus setback, should the networks be successful
in this attempt. The networks have had the opportunity to
reach out to the community at large, but instead have chosen
to follow their primary premise, that of making money.
Their concern has not been of social issues, nor of
encouraging young and talented minorities to pursue careers
in the entertainment industry, but only to reach out when
they have felt it would be in their own best interest.
It is interesting to see the courtship currently taking place
in my community by the networks and various Hispanic organizations.
My only question to the networks is: "Where were you before?"
The independent producers have been there. They have been
reaching out into the community. They haiie addressed issues
of concern to the community at large. We have afforded
opportunities to young and talented minorities, and will
continue to do so, because it's the right thing to do.
I encourage you, Congressman Waxman, to help guarantee the
diversity and the opportunities, for all within the entertain-
ment industry, by your support of the existing Financial Interest
and Syndication Rule.
Sincerely,
~ /j~~
"Helen Hernandez
PAGENO="0497"
493
MARTHA VELEZ JOHNSON
MAY 27, 1983
Congressman Henry Waxman
Member, ~ub Committee
On Telecommunications
Consumer Protection and Finance
Dear Congressman Waxman,
I am a staunch supporter of the retention of the
FCC Financial Interest and Syndication Rules,
Docket # 82-345.
As a formet performer and a member of the Hispanic
American community, I am aware of the twofold damage
that Network control could impose. First.,by monopol-
izing the taste of the country in general and having
omnipotent power over who gets to perform. Second,
by limiting the representation of minority groups,
homogenizing their'across the board'appeal and ignor-
ing the specific needs of specific communities.
I urge you to do whatever is in your power to retain
the existing rule and continue the hope for creative
independence in television programming.
Thank you for your attention to this letter.
Sincerely,
32-540 O-84----32
PAGENO="0498"
494
~SSOCIATION OF MEXICAN AMERICAN EDUCATORS, INC. _____
STATE OF CAUFORPIIA _____
1148 Garsden Ave.
Covina, CA 91724 19651983
May 27, 1983
Congressman Henry Waxman
Member Subcommittee Telecommuni cati ons
Consumer Protection, and Finance
B 331 Rayburn
House Office Building
Washington D.C. 20616
Dear Congressman Waxman,
On behalf of the Association of Mexican American Educators, Inc.,
California (AMAE), I am writing this letter of support for the re-
tention of F.C.C. Financial Interest and Syndication Rules.
AMAE reaffirmed its position at the May 21, 1983 Executive Board
meeting to support these rules that have helped enhance the financial
and creative independence of independent producers. As educators,
working in the schools directly with youth, we feel the repeal of these
rules would consequentially restrict, the competition and diversity
needed in representing the Chicanos /Latinos experience - protection
against imbalanced coverage is crucial.
I appneciate your consideration in reviewing this most critical issue.
If you have any further questions regarding AMAE's position, please
dont hesitate to call me at 213-332-0321 or 213-967-6211 Ext. 343.
Sincerely,
Jimmy Benavides
State President
JB:jb
cc: Joe Waz, Special Counsel
PAGENO="0499"
495
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Amendment of 47 CFR § 73.658(j); ) BC Docket NO. 82-345
the Syndication and Financial
Interest Rule
REPLY COMMENTS OF
AMERICAN CIVIL LIBERTIES UNION
The American Civil Liberties Union is a non-profit
organization organized in 1920 to protect the civil liberties
of all Americans. In furtherance of that goal it has partici-
pated in a numbet of proceedings before the Federal Conununi-
cations Commission and in litigation relating to freedom of
expression in the mass media. It has reviewed the comments
filed in this proceeding and herewith submits these reply
comments.
The broadcast media, and television particularly,
present unique First Amendment problems because of the strict
legal restrictions on their use. In this respect they are
fundamentally different from the print media. The ownership
PAGENO="0500"
496
and operation of full-power television stations is limited in
effect by law to less than a thousand persons. Competition for
the limited number of facilities has inflated the prices of
licenses. It is difficult for new enterpreneurs to finance the
acquisition of licenses which has led to a high degree of
concentration of ownership of television outlets. Virtually all
of the television licenses in the top 50 markets in the United
States are held by multiple owners. In First Amendment terms
the result of ownership concentration is that the selection of
programming is controlled by fewer persons in violation of the
strong constitutional policy for maximizing program sources.
Associated Press v. U.s., 326 U.S.l(l945).
Commission licensing policies understandably place the
highest priority on diversity of control of the mass media. Corn-
p~rative Broadcast Hearings, 1 FCC 2d 393(1965); F.C.C. v. N.C.C.B.,
436 US 75(1978). Nevertheless, the prohibition against compara-
tive hearings on station transfers (49 USC S 310(d)) and the
scarcity factors discussed above inevitably lead to greater and
greater concentration of ownership, thereby frustrating Commission
policies and First Amendment goals.
The three networks are, of course, the archetypal
multiple owners in that they control the finest technical facil-
ities in the largest markets through their owned-and--operated
stations and thus have significant control over programming
even apart from their network operations.
PAGENO="0501"
497
Television networking has important advantages in
spreading the cost of producing and distributing programs to
television stations and in marketing television audiences to
advertisers. However, networking has serious disadvantages from
a First Amendment viewpoint. During the most valuable (highest
audience) hours the most desired channels throughout the nation
are used for programs prepared to meet the requirements of only
three programmers which closely regulate all aspects of their
production. Moreover, it is inherent in the competition of ad-
vertisers for mass audiences that minority tastes cannot be
served. Thus the rich diversity of the American culture reflect-
ed in its manifold regions and its distinctive ethnic groupings
(not to speak of differences based on age, education, vocation,
religion, etc.) is not adequately represented in network programminj.
The network system is one in which enormous numbers of persons
have access to a very small number of homogenized program
choices. The Commission has acknowledged that its basic allocation
structure effectively limits the number of networks to three.
Sixth Report and Order, 41 FCC 148(1951).
The networks have never hesitated to use their economic
power to maintain the full lineup of affiliates for their entire
program schedules)' In setting network reimbursement rates,
The support of the affiliates in this case was openly pur-
chased by a network commitment not to seek rescission of the
Commission's Prime Time Access Rule. The very fact that
affiliates feel the need for this Rule to retain access time
is a demonstration of the n~'~"~rks' economic power.
PAGENO="0502"
498
the networks can recognize the loyalty of affiliates who take
the full network schedule and punish affiliates who preempt net-
work programming for local or syndicated programs.
Thus it is not surprising that the Commission has been
conducting network inquiries, analyzing network studies and
reports and reviewing network rules almost non-stop since the
Communications Act was adopted. The Commission has long been
concerned with the Networks inability to provide service to local needs
and other special tastes and this is probably the principal
reason it adopted its Chain Broadcasting Rules in 1941. Justice
Frankfurther quoted the Commission in his opinion for the
Supreme Court upholding the rules:
Chain broadcasting makes possible a
wider reception for expensive entertainment
and cultural programs and also for programs of
national or regional significance which would
otherwise have coverage only in the locality of
origin. Furthermore, the access to greatly
enlarged audiences made possible by chain broad-
casting has been a strong incentive to adver-
tisers to finance the production of expensive
programs. * * *
[But]
* * * A station licensee must retain sufficient
freedom of action to supply the program and
advertising needs of the local community. Local
program service is a vital part of community life.
A station should be ready, able, and willing to
serve the needs of the local community by broad-
casting such outstanding local events as community
concerts, civic meetings, local sports events, and
other programs of local consumer and social
interest.
National Broadcasting Co. vf U.S.,3l9 US 190 at 198, 203(1943)
PAGENO="0503"
499
Almost nothing could be worse from a First Amend-
ment viewpoint than a system in which the federal government
licenses the right to speak to a minute number of persons
representing a very narrow segment of American society. Clearly,
constitutional principles require that such severe constraints
on freedom of expression be accompanied with measures to assure
that the favored few share their facilities with others so as to
provide the public with access to a diversity of "social,
political, aesthetic, moral and other ideas and experiences."21
For like reasons metwork control of programming should
extend no further than necessary to provide mass audience service
to the majority. First Amendment principles require that a reason-
able balance be maintained between the demands of the majority
for service to its tastes and the rights of the minority to diver-
sity of service2! and that the supply of programming tome from
as many sources as possible4 In practical terms, this means
that network control of programming should be confined to
network operations. If the Commission permits networks not
2/ Red Lion Broadcasting Co. v. FCC, 395 U.s. 367 at ~9O
(1969).
2/ We note here that the print media are better adapted to
the service of minority needs and interests. Thus daily
newspapers are published in New York City in all of the
languages used significant ethnic groups. Not so in
broadcasting. For example, there are at least six daily
newspapers serving the rapidly 9rowing Chinese community
but no full-time broadcast service in Chinese.
± Associated Press, supra.
PAGENO="0504"
500
merely to constrain diversity of service by their normal operations,
but to use the leverage of their mass audience service and their
owned-and~.operated stations to extend their progranuning hours
and tO gain control of the programming available to independent
stations and affiliated stations in non-network hours, the
government implicates itself in private constraints in violation
of First Amendment principles.
The networks' and their affiliates' principal argument
in this proceeding is that the rules under review impede compe-
tition by penalizing three competitors in a free economic
market.
There are at least two major flaws in this argument.
The first is that it deals with this rule exclusively in economic
terms when the Commission's concern has never been economics but
diversity of program sources and opportunities for local self-
expression. The second is the assumption that the market for
television programming is free. On the contrary, it is the
networks which have foreclosed competition by establishing what
amounts to exclusive dealing arrangements with hundreds of
stations with the best available technical facilities. They
have established effective control over the hours of maximum
audience and reduced the role of advertisers and others in
program selection. They have tightened controls over scripts,.
casting and other details of program production. The rules
under review were adopted to arrest these trends. At the
PAGENO="0505"
501
time the rules were adopted syndication rights were worth a
small fraction of what they are worth today. If pre-rule trends
are taken as a guide, it can be confidently predicted that once
the rules are removed the networks will establish control over
parts of the television program markets which were not worth
their attention in the 1960's thus dominating the production and
distribution of programming even in station time.
Whether the pre-rule network tactics were predatory,
good business or "efficient" in an economic sense is irrelevant
in terms of First Amendment policies. The critical considera-
tion is that more and more programming was squeezed through the
"network funnel." The opportunities for others to express their
"social, political, aesthetic, moral and other ideas and exper-
iences" were steadily reduced. That is the primary evil to
which the rules are addressed.
CONCLUSION
Because the Syndication and Financial Interest Rule has
opened the doors to a broader diversity of independent procedures
and distributors it should be retained.
Dated: April 25, 1983
Respectfully submitted
AMERICAN CIVIL LIBERTIES UNION
By: Alan Reitman
Associate Director
132 West 43rd Street
New York, N.Y. 10036
PAGENO="0506"
502
Association of Catholic blevislon and Radio Syndicators
Chads E. Hinds, President
(Cfl4/C CNe~
Jeenne Glynn, Vice President
(csinewø~. New ~)
Fr Paul Newpawsr Vice Prssiden$
(Mw~nid, New ~)
March 22, 1983
As independent producers and syndicators of a wide variety of religious
and general programming, we add our voices to those of other concerned
Americans in urging the Federal Communications Commission to retain the
financial interest and syndication rules.
In .a climate of wholesale broadcast deregulation, we believe that it is
possible for the Commission to lose sight of its mandate to safeguard
the public interest. The financial interest and syndication rules were
enacted solely to uphold this public trust, and we believe that they
have proven to be both prudent and effective. They have fostered a
healthy competition in the television programming marketplace and
encouraged a lively diversity in program development -- at no detriment
to any sector of broadcasting.
We believe that the repeal of the financial interest and syndication rules
would result in an unfair protectionism, restricting the financial and
creative control of television broadcasting to those players which already
maintain, by nature and history, a disproportionate share: the major
networks. Those groups which have labored long and well to provide the
American public with quality alternatives to the narrow universe of
network-originated programming -- independent television stations,
independent producers and syndicators, minority, educational, and
religious broadcasters -- would be effectively disenfranchised by a sus-
pension of the rules.. .as would millions of American viewers.
We believe strongly that this issue must be regulated at the national
level, because it is precisely the richness of broadcasting as a national
resource -- to entertain, enlighten, educate and energize -- that is at
stake. To limit or weaken that richness, to deny all players reasonable,
equitable access to the programming and syndication universe, would be a
flagrant denial of the public interest, a betrayal of the public trust.
We urge the members of the Commission, then, to act as they have been
directed to act by the voice of the public, and in the public interest.
We urge that the financial interest and syndication rules be retained
as they stand: fair, sensible, and simple regulations by which all of
us are served.
Cordially,
Charles E. Hinds
CEH : fk
PAGENO="0507"
503
I ~: OAAM
9.0S*ti3SSllb 04$/26,'03 Id IPMRNCZ COP LOAB
11)90?buII MGM TORN AZUSA CA *9 09-16 oeae~ LOT
HELEN HERNANDEZ, DIRECTOR PUBLIC AFFAIRS
100 UNIVERSAL CITY PLAZA
UNIVERSAL CITY CA 91*00
THIS 1$ COPY OF ORIGINAL SENT TO MR FOWLER
DEAR MR FOWLERI
AP4AE SUPPORT THE RETENTION OF FCC FINANCIAL INTEREST AND SYNDICATION
RULES.
AS EDUCATORS WE FELL THE REPEAL OF THESE RULES WOULD CONSEQUENTIALLY
RESTRICT THE COMPETItION AND DIVERSITY NEEDED IN REPRESENTING THE
CHICANOS/LATINOS EXPERIENCE TO OUR YOUTH, PROTECTION AGAINST
IMSALANCED COVERAGE IS CRUCIAL,
SINCERELY YOURS
JIMMY BENAVIDES, PRESIDENT
ASSOCIATION OF MEXICAN AMERICAN EDUCATORS INC
STATE OF CALIFORNIA
10199 LOT
MG MC OMP
TO REPLY BY MWLGRAM MESSAGE. SEE REVERSE SIDE FOR WESTERN UNIONS TOLL~ FREE PHONE NUMBERS
PAGENO="0508"
504
April 25, 1983
~: BC Docket No. 82-345
Doar Mr. Chairman:
Black Entertairmant ~levision is a satellite delivered, basic cable
service providing six hours per night (8 PM - 2 AM EST) of quality progralmling
for Black audIences. BST began operation in 1980, and today reaches over 3.5
million cable householda nationwide.
The growth of services such as BE'r has been in large part the result of
pro-carpetitive federal policies which have opened up the vidso marketplace to
new programing services. The arergence of cable as a significant national
mediun in the mid-Seventies was directly related to a Cc~rmission decision to
foster carpetition and diversity in media, in order to provide genuine alternatives
to the three daninant ccnnercial television networks.
The financial interest and syndication rules are a good exanple of federal
policies which encourage tore varied fare for the nation's television audience
while placing minimal restriction on those who daninate the marketplace. The
rules spurred the growth of independent television stations, and kept the networks
fran controlling the programing pipeline to the new media. The rules have helped
pave the way for increased minority participation in network progranining, and have
helped open up the syndication marketplace to growing nuirbers of programs targeted
at the Black audience by increasing the o~ntlets available to syndicators.
It should be clear to the Ccsrrnission that emerging ccspetitive media are striving
to serve the audiences which the networks tend to ignore. We concur with the ccsment
of the National Association of Black-Q~ned Broadcasters that "there is nothing in
the record gf prograrrening production by the net~rks which would suggest that
repeal of the rules will create any new diversity of programing, particularly for
minority audiences." We also concur with the observation of the National Institute
for Low-Power ~levision that the rules are needed to maintain "an eooncxnic envirorerent
in which LPPV and other arnerging technologies can crnrpete and survive."
m~M~
1060 31st Street. N W. 2nd Floor
Washington. D.C. 20007 (202) 3375260
1~he Honorable Mark Fowler
Chairman
Federal Oxsunications Ccxmrission
1919 N Street, N. W.
Washington, I). C. 20554
PAGENO="0509"
505
As a ~petitor in the videc marketplace, we are no sore enanx)red of undue
regulation than are our fellow oarpetitors. But we do recognize that this
marketplace still has a long way to go until it is truly ocapetitive. Because
the networks ranain the dczninant information and enterta.irurent source for the
vast majority of Anrerican viewers, and because that daninance will persist at
least through the end of this decade, this O~nnnission reeains obligated to
pursne policies which will assure the growth and survival of new caiipetitors.
Wtien the bargaining power of the three networks is not inordinately greater
than that of their oc*npetitors in broadcasting and other nedia, and when the
networks no longer have the power to control the nost popular programing in
the syndication marketplace, these rules will be ripe for repeal.
We look forward to the arrival of full and fair cczrpetition in the mass
nedia. Until that day arrives, we strongly urge the Casnission to retain
sensible regulation which helps correct an inperfect marketplace. We respectfully
re~uest the Cczrnission to preserve its financial interest and syndication rules.
Warns Regards,
Bubert~ L. Johnson /
President
PAGENO="0510"
506
Cater for
[bp~iation
Options
April 12, 1983
Mark Fowler
Federal Communications Commission
1919 M Street, NW
Washington, D.C. 20054
Dear Mr. Powler:
The Center for Population Options (CPO) is a national non-profit
organization based in Washington, D.C., which focusses on reducing the
incidence of unintended teenage pregnancy both in the United States
and overseas.
For the past eight years, CPO has worked with producers, writers,
actors and executives of the prime-time television industry to encourage
programming with themes of responsible sexual behavior. The increasing use
of sex and sexual innuendo on popular television, without portrayal of the
need for responsible contraceptive behavior, is a significant influence
on teenage sexual knowledge and values, a serious concern given the high
rate of teenage pregnancy in this country.
For the sake of program diversity and the encouragement of competitive
and positive programming that does not pander to the mass market only, CPO
supports the current FCC syndication rules. The elimination of these rules
will further reduce the possibility for programming that is produced in
the public, rather than in the profit, interest.
Sincerely,
th Sende itz
~xecutive Director
JS/syd
Board of Directors
:>qr~ Stewart Mott
`1 a, `,` Karen Mu.r'at,nr
0 u , :~r' B L " r~ iDs M D Jane 0 Rer'iy
ic' c' r' (`:3 ,`,`Fr ` `a iche' Foreman Lynn Roth ii,3: 3'' .,~
Mary, ` F i,'", 3: ~ it'," ` in J.r'A W,lt,am 1,,rnh,,ii `a ,
Vice C i. Ma, A Cia F .rc L,Cberman MD a.:' ~. a
PAGENO="0511"
507
STATE OF CONNECTICUT
DEPARTMENT OF ECONOMIC DEVELOPMENT
April 25, 1983
Mr. Joseph W. War, Jr.
Special Counsel
Committee Against Network Monopoly
Suite 600
1317 F Street, N.W.
Washington DC 20004
Dear Mr. Waz~
The Tourism Division of the Connecticut Department of Economic
Development supports the effort of the Committee Against Network
Monopoly to retain the FCC regulations described in your letter of
April 11, 1983.
In the interests of fair competition throughout the TV production
industry, and optimum business and employment for independent
producers and film makers, we agree with you that the proposed repeal
of the rules against unfair competition by the networks will mean
less, not more, opportunity" for Connecticut's producers, crafts
people and allied service personnel.
Sincerely yours,
~ ~
Barnett D. Laschever
Director of Tourism &
TV/Film Coordinator
BDL :amd
210 WASHINGTON STREET * HARTFORD. CONN 06106
An Equal Oppor:unit.~ Employer
PAGENO="0512"
508
Consumer Federation of Cal jfornia
P.O. Box 27940, Los Feliz Station, Los Angeles, California 90027
April ~ 1983
President
Mary Solow
827 Tigertail Road
Los Angeles, Calif. 90049 To Members of `the Federal Communications Commission
472-5884
Mark Fowler, Chairman
Secretary
Dora Mitzi" Rodriguez James Quello
Mimi Weyforth Dawson
Treasurer Joseph Pogarty
Jackie Walsh Ren~y Rivera
Anne Jones
Vice Presidents
Albin J Gruhn Steven Sharp
Regene Mitchell
Gerald Rubin From: Mary Solow Pr
Consumer Federation of li
Policy Board
Joe kelardi
Frank Brown Re: Amendment of the Commission'S Syrx cation,
Marjore Caldwell and Financial Interest Rule
William Demers BC Docket No. 82-3~; FCC 82-300
Treesa Drury
Barbara Erickson Ø~ behalf of the Consuitter Federation of California,
Susan Giesberg
a stat&wide federation of organizations and individuals,
Shirley Goldistger representing millions of Californians working for
Berneice Gord
C. Annelle Grajeda program~ of consumer education and protection, I am
Anne Greer fo~rding our comments against repeal of the
Ruth Jernigan Financial Interest and Syndication Rules.
Roy Kiesling
John B. Kinnick
Robert Medina We have studied this issue and ask you to work with
Max Mont us to protect the public interest in the use of the
Jim Patton air waves.
James Quillan
Belva Roberts
George C. Soares In studying the available data, we have reached a
Geri Stone conclusion that the existing rules have been of
Dan Swinton great benefit to the American public since theil'
Jeane Thom
Jerry Vercruse ~ssage in 1970. The current rules have stimulated
competition and diversity of progravmning in the
marketplace. It has been good for the p~iblio, for
the independent producers and television stations,
and for the advertisers, as well as f or the networks.
We ask that you resist any effort to repreal the
existing rules because we think such action would
be harmful to Californians arid, to all Americans,
would eliminate competition and narrow the public's
access to progranwiing.
PAGENO="0513"
509
Consumer Federation of California
P.O. Box 27940, Los Felia Station, Los Angeles, California 90027
President Beforetkc.
Mary Solow
Los Angeles, Calif 90049
472-5884
Secretary -- -. -
Dora "Mitzi" Rodriguez
Amendment of the Commission's ) BC Docket No.
Jackie Walsh Syndication and Financial 82-3~5
Interest Rule
Vice Presidents ___________________________________ FCC 82.300
Albin J. Gruhn
Regene Mitchell
Gerald Robin The Consumer Federation of California, a
Policy Board
Joe Belardi state-wide federation of more than 150 organiZations
Frank Brown
~orie~aldwell and representing millions of CalitoThians interested
Treesa Drury
Barbara Erickson in programs of consumer education and protection,
Susan Giesberg
Shirley Goklinger is writing to ask that you not eliminate the
C. Annelle Grajeda
Anne Greer fixi~ncia1 interest and syndication rules.
Ruth Jernigan
~ We support a regulatory policy of the broadcast
~obe.~M~dina media which enhances d.tversity of programming
Jim Patton
James Quillan cQntent and a competitive jearketplaoe for program
Belva Roberts
geor~e C. Soares providers, to provide service options available to
Dan Swinton
Jeane Thom all segments of our society.
Jerry Vercruse
The Consumer Federation of California has
looked into the proposed repeal of the Syndication
and Financial Interest Rule. We are concerned that
the public interest is being overlooked and believe
this rule would have the effect of squashing competition.
It would be, we believe, bad. public policy, and
would limit the choice of the public. 8ather
than stimulating more diverse and better programming
for all consumers, the repeal would narrow consumer
choice.
32-~54O O-84--33
PAGENO="0514"
510
The fight involved in this repeal, we suspect, is control
of, the product, not television versus cable. At the present time,
a vast portion of America, perhaps as much as two-thirds, can't
afford~ to be wired, for cable. Do we want to return to the pre-1970
period, when 97% of all evening television programs were controlled
by the networks * We think not.
This issue isn't just a case of the networks ABC, C~
and NBC - wanting the repeal, and the independent program
producers wanting things to stay as they now are.
The Consumer Federation believes that this repeal could
determine what the public will be able to see when they turn on
their television sets. We fear that access by the public into
prograz~ing policies is slowly eroding and that the repeal would
speed up that process.
Before the 1970 rules were adopted, the networks dominated
programming. Since that time, there has been a 26% increase in
the number of independent producers, and a doubling in the
number of independent television stations,
If the three networks dominated all programming, we are
concerned that advertising rates could rise. Under the current
rule independent stations can bid for programs to attract viewers
and advertisers * For advertisers the current rule has been
beneficial and has meant lower costs because of more outlets, and
therefore more competition.
Since the rules were adopted in 1970, the networks have
prospered; their revenues rose by 312 per cent and. their proftts
by 550 per cent. We applaud that the three major networks
have prospered and. believe they will remain the dominant cultural
PAGENO="0515"
511
and informational influence in America at this time.
The major ingredient to the success of the independent
station has been progranuning. Shows such as nN*A~S*E" have
attracted ~tewers and advertisers, and stimulated the market
place conpetition.
Before 1970, the independents had to deal with the networks,
who dominated syndication rights on a significant part of the
programming. Today, the independents can deal directly w~.tb the
distributors and the producers.
The Consumer Federation of California believes that the
present rule is a healthy state of affairs, stimulating competition,
offering vast consumer choice and developing an attractive
advertising market. As a result, the independent stations can
provide real competition and offer the consumer genuine choice.
The proposed repeal of the Syndication and Financial
Interest Rule would not serve the public interest, and. should
be rejected. The benefits the consumer has received under the
rule are genuine and real and should be continued.
The Consumer Federation of California asks that you do what
you can to protect all Californians in this issue, to keep the
rules intact to protect t~e competition and diversity that the
public interest renders necessary.
PAGENO="0516"
512
Cooperative League
of the USA
A Vole. for America's Cooprativ*s
March 3, 1983
Mr. Mark Fowler, Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554
Mr. Fowler:
I sin writing to express my grave concern regarding possible repeal of the
financial interest and syndication rules established by the FCC in the
late sixties.
The Cooperative League of the USA is a national trade association repre-
senting cooperatives of all types, and my own work has included efforts
to establish cooperative ownership of cable television frat~chises and
channels in major U.S. markets.
One of the fundamental tenets.of the cooperative philosophy iS that of
democratic representation, out of which stems another key pngoing belief
in local initiation. We have concerns froin the standpont~both of pro-
gramming diversity in general and single markets in ~a±ticular.
The financial interest and syndication rules were"set up to prevent networks
from gaining premature control of television programming. Everything I
have read confirms that the rules are suc9eSsful. In the initial stages
of programming production, the independent producer is able to take more
of a risk in creating quality work,~for he knows that he will be able to
recoup his investment through lat~e~ resale of his product. The independent
television station which later'~purchases rights to air this progranuning
increases the value of its advertising space, and this in turn helps provide
financial resources for producing local programming. Evidence points to
greater diversity in terms of the nunber of independent producers contri-
buting to network programming, the quality of that work, and the increase
in the nunber of independent television stations successfully competing
with the networks in major urban markets.
Diversity and local programming are desirable from the standpoint of the
viewer, and later re-runs of network-produced shows provide advertising
time that is desirable, yet not prohibitively expensive for the local
merchant, including community-based cooperatives.
Should the financial interest and syndication rules be repealed,, these
relationships would be greatly skewed in favor of the networks. It would
1828 L Street, NW., Suite 1100' Washington, D.C. 20036 (202)872.0550 . Cable: CLUSA
PAGENO="0517"
513
be less feasible for the independent producer to invest his own money in
production, for he would have less assurance of returns on his investment
through later resale. Producers would have to toe the line with the networks
in~order to have their material produced, as the networks continue to have
the major production studios. With regard to the independent television
station, there is nothing to prevent the networks from buying up rights to
and shelving new programming, this to some extent controlling the indepen-
dents' ability to compete with them. Certainly the networks are bound to
favor their own affiliates for the initial air rights. Neither of these
situations benefit the viewer or the smaller advertiser.
These developments will also have clear implications for local program-
ming by independent television stations. Their advertising time will
either drop drastically in value due to the non-availability of
competitive programming, or will skyrocket in proportion to the fees
extracted by the networks for broadcast rights of popular material. In
either case it will be more difficult for the independent stations to
fund programs targetted to the needs of the local audience, and local
merchants will lose an important advertising outlet.
Recently several new cable television cooperatives have been formed -
at least two of them for the express purpose of providing community-based,
local origination programming. It is important to the success of these
fledgling efforts that they have access to many types of programs to
present over these new community-controlled cable channels. We favor
increasing programming competition rather than restricting it, as would
be the result of your proposed action.
I cannot support efforts to repeal the financial interest and syndication
rules, but must instead protest this action vigorously.
Respectfully,
carol L. James
Vice President
Financial and Program Development
~rwt
PAGENO="0518"
514
I ~
4.0544445114002 O4~26/S3 ICS !PMRNCZ CSP L$AB
I 2132251342 MOM TORN LOS ANGELES CA 04~lo 0413! UT
EASTERN GROUP PUBLICATIONS INC
509.1~? EHANDIA ST
LOS ANGELES CA 40033
THIS MAILGRAM IS A CONFIRMATION COPY OF THE FOLLOWING M5$SAGEi
213282342 MOM TORN LOS ANGELES CA 184 04.24 0413P ES?
ZIP
JOE WAZ
1317 F ST NORTHWEST SUITE 400
WASHINGTON DC 20004
(tHIS IS A COPY OF THE MAILORAM SENT TO COMMI$SIONER MARK FOWLER,
CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION, WASHINGTON, DC)
DEAR COMMISSIONER FOwLER,
IT HAS COME TO MY ATTENTION THAT THE FCC IS ABOUT TO CONSIDER A
CHANGE IN THE FINANCIAL AND SYNICATION RULES ADOPTED IN 1470,
THE HISPANIC COMMUNITY ALONG WITH THE REST OF THE COUNTRY WOULD SE
- BEST SERVED IF THESE RULES WERE TO REMAIN AS IS. THE HISPANIC
COMMUNITY HAS HAD LITTLE OPPORTUNITY TO BECOME FULLY FAMILIAR WITH
ANY HARMS OR REDUCTION IN PROGRAMMING AVAILABILITY WHICH WOULD SE
BROUGHT ABOUT IF THE RULES ARE ELIMINATED, SINCE MOST HISPANICS
WHETHER IN PRODUCTION OR PROGRAM WOULD MOST PROBABLY HAVE GREATER
OPPORTUNITY WITH INDEPENDENT PRODUCERS THAN WITH MUCH LARGER NETWORK
COMPANY, WE BELIEVE THIS MATTER REUIREB FURTHER STUDY. WE URGE YOUR
HONORABLE COMMISSION TO DELAY ITS DECISION FOR THE TIME BEING. WE
ALSO SUPPORT CONGRESSMAN HENRY WAXMAN'S HR.2250 WHICH WILL DELAY ANY
CHANGE IN THE RULES FOR A PERIOD OF FIVE YEARS.
I REMAIN SINCERELY,
DOLORES G SANCHEZ, PUBLISHER
EASTERN GROUP PUBLICATIONS INC
EAST LOS ANGELES, CALIFORNIA
SPECIAL 30.DAY OFFER
GET $1.00 OFF ON YOUR NEXT MAILGRAM ORDER
TO REPLY BY MAILGRAM MESSAGE. SEE REVERSE SIDE FOR WESTERN UNIONS TOLL FREE PHONE NUMBERS
PAGENO="0519"
515
I~fTEN~7UL~i~armc c c/cc~1mmwI~ i1~ws ~~`iJrL'/I:
April 25, 1983
The Honorable Mark Fowler
Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554
RE: BC Docket No. 82-345
Dear Chairman Fowler,
The Hispanic Telecommunications Network strongly supports
the retention of the FCC's financial interest and syndica-
tion rules.
HTN is a syndicator of programming intended primarily
for the Hispanic-American audience. About 25-30 percent
of our programming has been in English or bilingual, and
the balance has been in Spanish. We have produced
variety series, Christmas specials and documentaries
which we have syndicated on a market-by-market basis
both to independent TV stations and to local affiliates
of the major networks. Currently, we distribute a half-
hour weekly program, Nuestra Familia (Our Family) through
SIN, the Spanish internationa1~Network. Nüestra Familia
presents critical issues affecting the I{ispi~fc ~family
today, including husband/wife communication, education,
drug abuse, alcoholism, gangs, and immigration.
We take pride in our programming and our message. But
the only way we can communicate that message effectively
to our potential audience is through access to the broad-
cast medium. The greater the number of broadcast outlets
in the marketplace, the better our opportunity to reach
a substantial number of viewers.
The significant growth of independent broadcast stations
in competition with the three major networks has benefit
ted us and numerous other syndicators of specialized
programming. The financial interest and syndication
rules have been an important component in the growth of
independent TV stations--the only medium that is truly
competetive with network affiliated stations in audience
1828 Grandstand Dr.* San Antonio Texas 78238 `(512)680-7777
PAGENO="0520"
516
reach. The financial interest and syndication rules
help assure that independent stations will have access
to the mass appeal programming that earns them most of
their revenues. More and stronger independent TV sta-
tions means syndicators with unique programs to offer
have far greater prospects of reaching audiences nation-
~wide.
According to a study of the Hispanic audience by
Yankelovich, Skelly & White, Hispanics are very heavy
viewers of television. On average, adult Hispanics
report spending nearly twenty hours weekly watching TV,
divided about half-and-Half between English and Spanish-
language stations.
Hispanic viewers are entitled to diverse and varied
viewing fare, just like all American viewers. Spanish-
language TV stations are not available yet in many
markets with sizeable Hispanic populations. Program pro-
ducers wishing to reach Hispanic or other specialized
audiences must rely on the competitive desires of broad-
casters in those markets to serve these audiences. The
fewer competitors there are, the less likely Hispanic or
other special audiences will be served.
The financial interest and syndication rules will not be
necessary forever, but they are needed today. Not until
there is real competition in the video market, not until
program producers have numerous, realistic alternatives
to reach the viewing public with their wares, not until
the dominance of the three networks gives way to real
competition for viewers, would it be appropriate for the
Commission to consider revoking these important public
interest regulations.
We join with scores of organizations representing all
aspects of the communications industry, labor, religious
groups, public interest groups, minority organizations,
and many others in calling upon the Commission to keep
its financial interest and syndication rules working for
all of us, and for the entire American public.
Very truly yours,
Oja1~tJ~d
Adán Medrano
President
AM: dv
PAGENO="0521"
517
Local 111
s~1iated with the
gaternational ~3rotAerAood of ccJeamsters
CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA
111 BROADWAY, NEW YORK, NEW YORK 10006 * (212) 267-1374
,~,I76
D. J. Kass
Ptsssd.ø: March 4, 1983
A. SAsIIso Federal Communications Commission
*cram~-Trsmstee Mr. William J. Tricarico, Secretary
F M. Posemo Room 222, 1919 N Street, N.W.
Ve.Pessds,u Washington, D.C. 20554
N. CHRISTENSEN
Rs~ord,n~Ssc,.:.ry Re: FCC Docket 82 345
F Fox Financial Interest and Syndication Rule
Pica Truis.,
R BOSALL This statement, opposing proposals to rescind the Financial Interest
Sscoudl,*u., and Syndication Rule, is filed by Local 111, American Communications
Association, International Brotherhood of Teamsters. Local 111, with
Thi~dTruji,, offices in New York City, represents 1,200 telecommunications workers
worldwide, employed by WUI Inc., TRT Telecommunications and NCR Corp.
L.P. ELLIS Additionally, we speak for the families of our members who comprise
eeJ4Agei; an incrementally larger group of television viewers and consumers.
We join with the Committee for Prudent Deregulation, The National
Council of Churches of Christ in America, Action for Children's Tele-
vision, The Association of National Advertisers, The Caucus for Produ-
cers, Writers and Directors, The Consumer Federation of America and
The Inter-Guild Council of Talent Guilds of the Notion Picture and
Television Industry, to oppose rescinsion of the Financial Interest
and Syndication Rule which would, in our view:
1. Return to the three major networks economic and creative domination
and monopoly control over production, distribution and financing
of supplemental and syndication markets.
2. Undermine the public policy expressed by the FCC itself, "that it
was not desirable for so few entities to have such a degree of power
over what the American public may see and hear over so many television
stations; and, that a diversification of economic interest and power
in this area was a Cardinal principle of the public interest standard
of the Communications Act." (47 FCC 32959)
3. Create a situation where the networls will be comp~ting with them-
selves in a revenue race for first-run/rebroadcast pcQgrallfllliflg.
4. Foster a climate which crushes creativity and diversity in program
content, lessens the diversity and financial renumeration of produ-
cers, creative talent and the workers involved with such productions.
PAGENO="0522"
518
Local 111 believes the public interest is being well-served by
the Financial Interest and Syndication Rule. We note that network
revenues are up 312% and network profits have risen 550% since 1970.
The Rule haa worked well and we consider any move toward its' rescinsion
unwise.
Your consideration of our views in this matter will be appreciated.
Yours truly,
John lozia
Legislative Director
Local 111 ACA-IBT
enclosures
JI/ek
PAGENO="0523"
519
~ OR~G1NA'~ ~t~~=ngbOS
~«=!JJLIJ~2JJ LJr~*~k.~E23~ flI..F MediaFile Editor: Bernard Ohaniari
Ccirrie Anders Nancy Hicks Mark Paul
William Carlsen Ken McEldowney Amy Rennert
Carolyn Craven Milton Moskowitz Ray Telles
Tracy Gary Emiko Omori Michelle Ggnes
Board of Directors Herb Chao Gunther Richard Parker David Weir
April 17, 1983
Federal Communication Commission
1919 M Street, N.W.
Washington, D.C. 20554
Dear Friends,
I writing to express the opposition of Media Alliance to any
attempt to repeal your financial interest and syndication rules.
The rules, adopted in 1970, provide what little curupetition
there still is in the production, distributi~n and broadcasting
of programs. Without the rules the big three networks would be
able to have even more control than they currently have over in-
dependent productions. Without the rules independent stations
would be at the mercy of the networks when they attempted to pur-
chase the right to rerun shows that originally appeared on net-
work shows.
As part of the Committee Against Network Monopoly we urge that
the rules stay in effect.
Media Al]iancc is S 2r000 mcnsber organization of journalists
working in radio, television and print.
Sincerely,
Ken McE 1 do,~ncy
Presid:rrt
PAGENO="0524"
520
MESTIZO PRODUCTION ASSOCIATES
ALFREIX) UG() * LINA T. VASQUEZ S HARRY RATNER * JOSE LIIS SEDANO
April 27, 1983
The Los Angeles Times
Times-Mirror Square
Los Angeles, CA 90053
Dear Mr. Editor:
I write in response and to correct the glaring
misinformation contained in David Ochoa's article of 4/3/83
"Bringing Minorities Back Into Focus." Mr. Ochoa stated that
Reagan appointee FCC Chairman Hark Fowler's proposal to
eliminate the commission's financial interest and syndication
rule will benefit Hispanic interests. As an Hispanic film maker
and video producer I am painfully aware that with every new
season the networks have grown more contemptuous and unresponsive
to Hispanic Americans. And before Alex Healy's~ "ROOTS" produced
by an independent David Wolper Productions the networks did not
show the least bit of concern with programming to any audience
which does not fit their view of Corporate "middle America." If
the FCC ruling is repealed the networks will be free to own and
control virtually everything they air and we would no doubt lose
what few gains we have made, real or imagined, and forfeit our
opportunity for future gains.
These federal regulations have really benefitted the
public at large (and Hispanics) since 1970. By prohibiting the
networks from taking a financial interest in shows made by non-
network producers, -the rules have given producers greater
financial and thus creative independence. Just at the time that a
number of fledgling Los Angeles based Hispanic production companies
like ours are about to break into the nation's prime-.time airwaves
with progressive and original programming on, by and about
Hispanics the repeal would mean sure death of these hopeful
independent projects. The handful of minimal gains in minority
casting and minority Hispanic Storylines in prime-time TV have
largely been the result of independents like Embassy, MTh or
Lorimar taking creative risks in the face of network resistance.
And the independent non-Hispanic producers' willingness to innovate
is very much a function of the ability of the Hispanic community
to persuade or cajole then to be more sensitive to our needs and
portrayals. Dare we count on network generosity in their windfall
deregulated profits?
843 NORTH BROADWAY - a204 * SANTA ANA CALIFORNIA 92701 - (714) 83~8732
PAGENO="0525"
521
Mr. Ochoa points out that in 1969 the year before the
current rules were adopted, there were 60 suppliers of prime-
time entertainment programming, Today ~Eere are only 41. And
maffana there would be a dramatic improvement only 3. T~e big
three: NBC, CBS and ABCI
Mr. Ochoa went on to say that the "networks operate
under FCC regulations and that big entertainment producers in
Hollywood do not."
If the networks fail to meet their mandate to provide
equal progrananing opportunities for minorities and women their
broadcasting licenses are in jeopardy?"
What mandate? The only mandate they seem to have is to
make more money than the year before. For the record: networks
have no mandate from the FCC of any kind only individual stations
do. What Mr. Ochoa probably meant was that network owned and
operated stations have a mandate for equal programmii~T~r
minorities etc
By prohibiting the networks from deciding which stations
would get local syndication rights to off-network programs, the
rules contributed to a dramatic growth in independent, non-network-
affiliated stations over the past decade. These stations have
built their audiences--and their revenues- - on offering popular
off-network shows. As these stations have grown, this has meant
more potential markets for programming aimed at specialized
audiences--Hispanics, children, blacks, the aged--and more
community service programming.
The networks have done nothing to earn our faith. They have
been free to produce or co-produce substantial hours of entertain-
ment programming, yet the record shows they have done virtually
nothing for specialized audiences. And the stories of network
refusal to consider series or special programs with Hispanic lead
characters and nonstereotypical portrayals of the Hispanic
conanunity are legion.
Mr. Ochoa based his support for repeal of these rules on the
premise or should I say the promise that the networks would use
their freedom to own and control programming to serve the minority
market, and that the existence of other federal regulations would
help assure the networks were responsive. But it is impossible
to consider this piece of deregulation separate and apart from the
broader deregulatory agenda of FCC Chairman Mark Fowler.
PAGENO="0526"
522
The same man who favors repeal of these rules is slso
on record as opposed to FCC oversight of equal employment
opportunity and affirmative action by broadcasters; opposed
to the fairness doctrine, the public's only protection against
imbalanced coverage of important issues; opposed to
reviewing the programming performance o~ broadcasters, to see
if they have served the needs of their community; and opposed to
virtually every other regulation intended to protect the
interests of the powerless against those who enjoy monopoly
control of the airwaves. Mr. Ochoa supports the abolition of the
very same rules that along with his talent and hard work gave him
access into the network positions he's held.
The sort of deregulation Mr. Fowler proposes will not lead
~o greater competition or improved service. Those of us in the
production community who seek increased opportunitites to
demonstrate our wares to the Vublic recognize that reposing
greater control of the nation s airwaves in three dominant
companies cannot possibly increase those opportunities.
There remains ample need for improvement in the ability of
the Hispanic creative community to reach a wide diversified
audience. Repeal of the financial interest and syndication rules
is not the way. The greater the competition in broadcasting, and
the more numerous the pressure points, the better our chances for
progress, and the greater the chances for independent Hispanic
producers to become an important supplier of prime-time
programming.
Sincerely,
~/ Jose' Luis Se~S~d~~
Los Angeles
PAGENO="0527"
523
`~~iV1~ç~ nr
FEB ?1O~~'CI4J~E
`ww,.FJ
BEFORE THE oF TH~
FEDERAL COMMUNICATIONS COMMISSION £ C. SECRETARY
In the Matter of ) j
BC Docket No. 82-345/
AMENDMENT OF 42 C.F.R. ~73.658(j); )
THE SYNDICATIOI~2 AND FINANCIAL INTEREST
RULE
COMMENTS OF THE
NATIONAL ASSOCIATION OF BLACK OWNED BROADCASTERS, INC.
INTRODUCTION
The National Association of Black Owned Broadcasters (NABOB)
by its attorneys, hereby presents its comments in the above-
captioned proceeding. NABOB is a trade association which was
formed in 1976 to represent the interests and concerns of
Black broadcasters throughout the United States. It represents
the interests of the licensees of more than 130 radio and tele-
vision facilties across the country. Its membership is extremely
diverse with respect to the size of the markets represented and
the number of companies and individuals involved in media
related activities, such as station brokerage, equipment sales,
program and management consulting, and advertising.
The purposes of the Association include fostering the
development of broadcast ownership by Black entrepreneurs,
promoting practices which will strengthen and maintain the
operation of broadcast facilities by Blacks, serving as a
resource for the dissemination of information about electronic
PAGENO="0528"
524
media matters, participating before the FCC and other regulatory
bodies on issues of concern to Black broadcasters, and promotin9
the regulation and operation of broadcast stations in the public
interest.
Black owned companies now own eleven television stations,
four of which are independents. Several Black owned companies
have construction permits for new UHF stations which will also
be independents. Additionally, many Black entrepreneurs have
applicatons pending for new UHF television stations and for
low power television staions.
In recent years, the members of NABOS also have begun
to expand theareas of the communications industry in which
they are involved. In April, 1982 NABOB amended its By-laws
to permit standard membership in the organization to Black owned
cable systems, satellite program suppliers and other operators
of the new media delivery systems. NABOB now includes within
its membership owners of cable television franchises and companies
engaged in or becoming involved in the distribution of video
programming via satellite. Consequently, the issues involved
~in the instant proceeding are of particular concern to NABOB.
The central issue which the Commission must address in this
proceeding is expansion of opportunities to increase the diversity
of video programming to the viewing public. As entrepreneurs
involved in all facets of providing video programming, the
members of NABOB are very interested in assuring that the
Commission develops policies which will further this important
goal.
PAGENO="0529"
525
SUMMARY OF POSITION
Having reviewed the Commission's notice of proposed
rulemaking in this proceeding, NASOB submits that there
is ho record to justify repeal of the Syndication and Financial
Interest Rule. The Commission suggests that repeal of the
Rule would be consistent with its overall statutory obligation
to assure diversity of programming. However, there is nothing
in the record of programming production by the networks which
would suggest that repeal of the rules will create any new
diversity of programming, particularly for minority audiences.
The networks have consistently adopted a policy of programming
designed for attracting the largest number of total viewers
without regard to the tastes and interests of minority audiences.
Repeal of the Rule would only permit the networks to continue
this manner of programming on a larger scale. If Slack audiences
and other minority audiences are to ever receive programming
designed to their particular tastes and interests it will
come to them from minority controlled programming companies
seeking to program directly to that audience. Repeal of
`the Syndication and Financial Interest Rule will only permit
the networks to continue their inordinate control over programming
and will delay the day when minority controlled companies
provide programming to minority audiences. The Commission should
not consider repeal of the Rule until distribution systems and
programming sources providing programming to minority audiences
32-540 O-84----34
PAGENO="0530"
526
have had an opportunity to develop and become viable in the
marketplace. Repeal of the Rule at this time would be premature
and would permit the networks to resume the anticonpetitive
practices which thwarted development of diverse sources of
progranuning prior to adoption of the Rule.
DISCUSSION
The Syndication and Financial Interest Rule reads
in pertinent part as follows: CN]o television network shall:
["Syndication"] 573.658 (j) (1) (i) after June
1, 1973, sell, license, or distribute, tele-
vision programs to television station licensees
within the United States for nonnetwork television
exhibition or otherwise engage in the business
commonly known as "syndication" within the
United States; or sell, license, or distribute
television programs of which it is not the
sole producer for exhibition outside the United
States; or reserve any option or right to
share in revenues or profits in connection
with such domestic and/or foreign sale, license,
or distribution; or
("Financial Interest"] §73.658(j) (1) Cii) after
August 1, 1972 acquire any financial or proprietary
right or interest in the exhibition, distribution,
or other commercial use of any television program
produced wholly or in part by a person other
than such television network, except the license
or other exclusive right to network exhibition
within the United States and on foreign stations
regularly included within such television net-
work , , .
The Commission adopted these rules because of the network
domination of the supply of television programming. In its Notice
PAGENO="0531"
527
of Proposed Rulemaking (NPRM)1 in this proceeding the Commission
summarized the factors which led to adoption of the rule as
follows:
After reviewing comments filed in (the
Network Program Inguir~y, 45 FCC 2146 (1965)]
~ié Commission concluded that the market was
unbalanced to the disadvantage of independent
producers and a freer, more diversified television
production and distribution process. Network
Television Broadcastin~g, 23 FCC 2d 382~ 3~T[l97O).
~is inequality in the marketplace was found to
affect the terms of market entry even for
such major motion picture companies as
Metro~~GoldWyfl-Mayer, Paramount, Screen Gems,
Twentieth Century Fox, United Artists,
Universal Pictures, Walt Disney and Warner Bros.,
Id., at 388. The Commission found that the
networks abilities to acquire subsidiary
interests in the programs chosen for network
distribution posed a conflict of interest for
the networks in selecting between programs in
which such rights could be obtained and
potentially better programs in which such rights
were not available. Similarly, we concluded
that the presence of networks as significant
domestic syndicators was inherently undersirable
since it was thought that networks would thereby
be in the position of selling programs to
independent stations which would be competing
for audience with local network affiliates. Id.
at 394.
1
Amendment of 47 CFR ~73.658(j)7 the Syndication and Financial
Interest Rule, BC Docket No. 82-345, Mimeo No. FCC 82-300, released
July 21, 1982
PAGENO="0532"
528
NPRM at para. 18. The Commission went on to state:
We concluded that it was not desirable for
so few entities to have such a degree of
power over what the American public may
see and hear over so many television
stations; and, that a diversification of
economic interest and power in this area
was a cardinal principle of the public
interest standard of the Communications
Act. Therefore, the Commission believed
that a rule was needed to: broaden compe-
tition in the market supplying television
programming, remove the networks from the
syndication market; and limit the networks'
abilities to acquire financial interests in
programs they select for presentation.
This, the Commission believed, would promote
a healthy independent production industry
as well as diversify the sources of program
production.
NPRM at para. 19. The Commission, in its NPRM, however, suggested
that there has been a significant change in the market place for
television programming which justifies reconsideration of its Rule.
NPRM at para. 32. specifically, the Commission noted that in 1964
only 26% of all television households received 7 or more signals
and 78% received 4 or more. Today about 90% ~f all television
households receive 4 or more `television signals and 65% receive
7 or more signals. The Commission also noted that the availability
of cable television has grown rapidly. since 1964. Id at para.
33. Finally, the Commission noted the growth of cable television,
STV, MDS, video c.assettes, video-disc players and the emergence
of LPTV and DBS as being further outlets for distribution of video
programming. Id at para. 34-37.
Next the Commission pointed out that the concern of the Rule
to address the inequitable bargaining position of independent pro-
ducers in dealing with the networks may not be as significant as
PAGENO="0533"
529
previOUSlY contemplated. The Commission noted that several major
corporations such as Universal, Warner, Spelling Goldberg, Lorimar,
MTM, Columbia, MGM, Paramount, Aaron Spelling and 20th Century
Fox were the top 10 prime-time network program suppliers during
the 1977-78 season. Id at para. 39. The Commission questioned
whether companies of this size need any additional assistance from
the Commission in obtaining an equal bargaining position in dealing
with the networks. *The Commission further suggested that the smaller
program suppliers are also not benefitted by the rule. Id at para.
40. The Commission suggested that the rule prevents a small producer
from bargaining away the syndication rights or a financial interest
in a project and thereby may force the producer to make other conces-
sions, even though he would prefer to bargafn away those rights
instead. Id at para. 40.
Finally, the Commission suggested that other large communications
companies, which are in the business of producing programming nay
have an unfair competitive advantage over the networks. Those
entities, such as 20th Century Fox, MCA, Inc., Walt bisney and
Warner communications, can obtain syndication profits from their
programming while the networks are barred from so doing. Id at
para. 42.
The above outlined concerns of the Commission appear to be
based upon a misimpression of the overall state of the programming
marketplace. The Commission's NPRM suggests that the three over-
the-air television networks ABC, CBS and NBC no longer dominate
the video programming marketplace. However, this is incorrect.
The major networks continue to reach virtually all households in
America and reach a large portion of those households through their
PAGENO="0534"
530
owned and operated (0 and 0) stations. Further, the networks are
still the principal source of almost all off-network programming
purchased by independent television stations. As Commissioner Quello
noted in his concurring statement to. the NPRM, the networks have every
expectation that their dominance of the programming marketplace will
continue unabated at least until the end of the decade. Commissioner
Quello provided the following information:
In May, the President of the NBC Television Network
stated to an affiliates annual convention:
`Today, the commercial television
networks are the largest and most
dynamic entertainment, information and
advertising medium to ever exist. And
they will remain the dominant comxuunica-
tions medium of the future. . . . (T]he
future is not passing us by. The future
is ours to take. The lion's share (of the
video business] will be our business.'
Later in May, the President of CBS, Inc. was quoted
at the CBS affiliates meeting:
`I sin increasingly convinced that
there is less change on the horizon than
most are predicting. That is a theme
that may sound a little different (these
days]. I suggest that (changes in the
media universe] will be not as large, not
as threatening and not as soon as most
predict.'
The CBS/Broadcast Group VP in charge of research was
paraphrased in Broadcasting stating:
`Television network affiliates have
nothing to worry about. They are now and
will remain - at. least until 1990 - the
dominant video medium of the United States.
Indeed, in absolute audience and dollar terms,
their dominance will be greater than ever eight
years from now.'
PAGENO="0535"
531
The growth of independent television stations over the
years since adoption of the Rule is clearly related to the
ability of those stations to receive syndicated series and
other programming which have completed their network runs.
However, independent stations and other buyers of syndicated
programming are a long way from achieving the market position
to bargain on an equal footing with the networks for programming
in the syndication market. The networks would have no great
incentive to sell syndicated programming to independent stations
and other programming outlets which compete both with their 0
and 0 stations and their affiliate stations for audience share.
Commissioner Rivera's concerns expressed in his concurring
statement to the NPRM are well founded: The Commissioner stated:
I do question, however, whether the
structure of the television industry has
changed materially since these rules were
adopted. There may be a greater number of
programming outlets today, but the mere
existence of some additional competition
for viewers does not mean that the dominant
players no longer can exercise undue leverage
in program procurement. There is considerable
prospect for change, but today the three net-
works are still the most pervasive television
programming outlets; no other entity even
approaches their audience levels or their
buying power. Given that reality, I am
troubled by the contention that repeal of
the rules would jeopardize the viability of
the independent television stations and other
video service providers, by making it again
possible for the networks to unreasonably
withhold programs from general distribution.
Commissioner Rivera's perception is quite accurate. There is
no record to demonstrate t~iat the programming market place has
PAGENO="0536"
532
changed so substantially since adoption of the Syndication and
Financial Rules to justify their repeal. The competition discussed
in the NPRM is much more future conjecture than established fact.
At best, the Commission's proposal is premature. The
Commission has set this NPRN for "fast-track" consideration with
no need for such rapid action. The NPRM in this proceeding was
released on July 21, 1982, and the Commission has indicated an
intent to issue an order by mid-year 1983. However, other more
needed iniatives, such as implementation of the Low
Power Television decision, the FM Drop-In Rulemaking, and the
UHF Drop-In Rulemaking continue to languish at the Commission.
Nevertheless, there apparently is sentiment at the Commission
for some modification oUthe Rule. Should the Commission move
forward with modification of the Rule it should do so in such
a manner as to maintain its ability to restrict network domination
of syndicated programming. Further, the Rule, if modified, should
be modified to require the networks to provide programming diversity
in the syndication of any programming. For example, the Commission
could require the networks ~to demonstrate over a period of 3-5
years that they have accomplished the objectives for which they
seek Commission approval. The networks should be required to
demonstrate that they have increased the diversity of program-
ming available to all segments of the viewing public as a result
of relaxation of the Rule. They should be required to demonstrate
that they have provided programming to the Black community and
other minority communities and have contracted with Black producers
and production companies for creation of programming for the
Black and other minority communities.
PAGENO="0537"
533
CONCLUS ION
The networks have done nothing to provide programming to
appeal to the tastes and interests of Black and other minority
communities or in working with Black and other minority producers
and program suppliers which justifies this precipitous bow to
their wishes. At a time when Black and minority programming
suppliers are just beginning to develop new products, and are
beginning to own and operate independent television stations,
satellite distribution services and other distribution outlets,
it would seriously disserve the public interest to unleash the
major networks to engage in the fame anticompetitive policies
which previously thwarted these diverse new programming sources.
Respectfully,
National Association of Black
Owned Broadcasters, Inc.
BY~~~tZ
mes . Winston
Executive Director and
General Counsel
1730 M Street, N.W.
Suite 708
Washington, D.C. 20036
202/463-8970
January 26, 1983
PAGENO="0538"
534
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RE CE IV ED
JAN 26~83
OFFICE OF THE
SECRETARY
Mr. William J. Tricarico
Secretary
Federal Communications Commnf.ssion
Room 222
1919 N Street, N.W.
Washington, D.C. 20554
January 26, 1983
S DUPLj~~j~
RE: Proposed Admnendment of Section 73.658 (j); (Docket No.
BC 82:345.)
Dear Mr. Secretary:
The National Coalition on Television Violence (NCTV) hereby
submits the attached formal comments in the above reference
proceedings.
Sincerely,
SA~A~,&~ /~Le
Sanira Ball
Washington Director
SB/sab
PAGENO="0539"
535
NATIONAL COALITION ON TELEVISION VIOLENCE Jt~ 26 i~J3
U~FICE o~ liE
BEFORE THE SECi~~T;~y
FEDERAL COM-IUNICATIONS COIEIIS S ION
WASHINGTON, D.C. 20554
In the Matter of
Amendment of CFR Sec. 73.658 (j); the ) BC Docket No. 82-345
Financial Interest and Syndication Rule
COMMENTS
The National Coalition on Television Violence (NCTV) is a
non-profit organization committed to reducing the present high
levels of violence in the media. NCTV is,in:orporated in the
District of Columbia and has offices in D.C. and Champaign,
Illinois. NCTV has thousands of contributors from throughout the
United States who are deeply concerned with the quality-of
television and want to see significant reduc:ions in the amount
:of violence on television. -
Organized in 1980, NCTV has primarily devoted its efforts
to monitoring prime time programnEing and Saturday morning cartoons
for violence content. NCTV uses a scientifically based. method
of monitoring which is an outgrowth of a system developed by a
grant from the American Medical Association in the mid 1970s.
Our purpose is to identify for the consumer high violence programs
and their advertisers. Our goal is to help the public
and the networks realizo the need for limited television violence
PAGENO="0540"
536
in today's society. It is al~;o the goal of NCTV to encourage
networks and producers to produce more non-violent programming.
The National Coalition on Television Violence strongly
opposes repeal of the proposed regulations. The networks,
the primary proponents of reoeal, have clearly demonstrated that
they do not have the capacity or responsiblity to produce high-
quality, low-violence programming. Decades of unnecessary and
gratuitous violence in prime time televisioi can not be erased
in a few months of promises by the networks to do better in the
future.
NCTV believes that high quality, low-violence programming
can be produced and can achicve high rating.s for the network.
Ne also believe that such programming is mu:h more likely to be
produced when it is not commissioned by net';orks. High-violence,
lowest common denominator network programmi~g is viable only so
long as the networks continue to have a monopo~ly control over
distribution and audiences. The goal of thuse rules has been to
increase competition to the r.etwoxks. Indeed, one of the ideas
was to promote the production and distribution of programming
that would increase the competition and reduce the market shares
of the network. It appears that these rules, when combined with
the tech~iology that makes distribution more economic, are having
their intended effect. It would be wrong to repeal the rules
right in the face of the sec-r~ing success of the rules.
Finally, the networks simply continue i~o demonstrate an ir-
PAGENO="0541"
537
responsible attitude toward the impact of their programming on the
public. For example, in 1982 the National nstitute of Nental
Health released a report on ten years of research on television
and Lehavior. The conclusion of the study was that aggression
in children and teenagers was increased after watching violent
television. Nevertheless, the networks have either denied or
ignored this study. Their reiction points to their callousness
to this serious issue. This behavior is akin to the tobacco
industries continued disingenuous claims that smoking is healthy.
Simply, NCTV believes thut the networks are not qualified to
receive any further control oi responsibility over programming.
Respectfully s ibrnitted,
NATIONAL COALI~ION ON TELEVISION VIOLENCE
By4~7
Sandra Ball
Washington Director
Lawrence A. Pinder, Jr.
Legal Intern
Dated: January 26, 1993
NATION?~L COALITION ON TELEVISION VIOLENCE
P.O. Box 12038
Washington, D.C. 20005
PAGENO="0542"
538
COMMUNICATIONS SERVICES
Pooer E ~ D~rec:or
NATIONAL EDUCATION ASSOCIATION 1201 16tt~ St.. N.'.. WaLnr.gt~n. DC 2003~ * (202)8227200
WILLARD H. McGUIRE. Prestoent TERRY HERNDON. Euecutive Director
BERNIE FREITAG. Vice President
MARY HATWOOD FUTRELL. Secretary*Trea surer
January 26, 1983
The Ibnorable ?~ark S. Fowler, Q'iairman
Federal Cc*rsunications Ccztinission
1919 M Street, NW
~shington, DC 20554
Dear thaixinan Fowler:
Ld~ National Education Association supports the retention of the network
financial interest and syndication rules, 47 C.F.R. 73.658(j). These
rules, which prevent the three television networks fran obtaining dcitestic
or foreign syndication rights or any financial interest in the subsequent
non-network broadcast of network television programs, are vital to the
access opportunities of special interest producers who design television
programs. As you know, the NE~ is concerned about the dearth of good
television programs targeted to children and minority audiences.
The Ccimnission has suggested that the availability of alternative broadcast
sources, such as cable, SW, DBS, etc., will cczipensate for specialized
programing that may be reduced or eliminated fran the networks as a result
of the repeal of these rules. No evidence supports that suggestion. With
only 30 percent of all `IV households wired for cable, and an unknown future
for new technology penetration, it is unrealistic and premature for the FCC
to eliminate current regulation. The very audiences who will be forced to
seek programning on a pay `IV service instead of a free network are the trost
disadvantaged and disenfranchised audience-low incate families and children.
Since NEA presented concerns about children' s television last January,
there has been a severe decline in the quantity of children's programs on
network television. Indeed, the only sustaining programs designed for
children which are broadcast in ccxrmunities around the country during the
week are syndicated programs. If the financial interest and syndication
rules are repealed, we believe that the independent producers, many of wixin
are financially dependent upon the profits fran the distribution of their
programs, will not be able to capete with the major networks in distrib-
uting programs to local `IV stations. Since the networks have already proven
their disinterest in producing good programning for children, we have
little doubt that they will change that attitude in distributing to the
child audience. The local stations, which have financially supported the
syndication of "The Great Space Coaster," "Mr. Moon' s Magic Circus," "Lorne
Greene's Adventure," to nane a few, may find that the nenu of children's
programs offered to them by network syndicators are nerely a duplication of
the programs which are currently available to children during the week on the
networks-soap operas.
¶I~refore, the NEA would like to be included in the record of cclruents for
FCC BC Docket No. 82-345 in support of the retention of the network finan-
c3.al. interest and syndication rules.
Sincerely,
Robert E. Harman
/1w
CC: Honorable Henry A. Waxman
Honorable Timothy E. Wirth
PAGENO="0543"
~C:.~uJpj
~
~
Dear Mr. TricaricO:
On behalf of the Natioaal Institute for Low Power
Television, enclosed please find an original and eleven
(11) copies of the Institut&s Comments on the ~otice of
Proposed Rule Making relating to the above-captioned
` matter. If you have any questions concerning this filing,
~ please contact the undersigned or Michael Glaser of this
office.
S~flcere~y,
539
GARDN~R,CARTON~DOUGLAS
) 875 LYE SrPELr.N.W.~ 5UITt 050
WASHINGTON, 0. C. zoooe
- (202) 872-0200
£J~ 8ORMAN ~ATh4V J. BI~I.C January 26, 1983
William J. Tricarico, Secretary
Federal Communications Cotnm:.ssion
Washington, D.C. 20554 /
Re: In the Matter of Amendzn~t of
47 CPR §73.638(j); th~/'Syndication
and Financial Intere~t Rule
BC Docket No. 82-34F~
E145/dle
PAGENO="0544"
540
BEFORETHE
/1
3J~irraI QInmmuxt~ratthn~ ~nmmt~thn~'. ~
WASHiNGTON, D.C. 20554
In the Matter of
Amendment of 47 CFR Sec. BC Docket No. 82-345
73.658(j); the Syndication _________
and Financial Interest Rul~
TO: The Commission
COMMENTS OF
TEE NATIONAL INSTITUTE OF
LOW POWER TELEVISION
The National Instituta of Low Power Television (`the
Institute") is an organization devoted to providing the low
power television industry with a forum for education and in-
formation. Presently, the Institute has over 1,000 members.
Of the approximately 140 construction permits and licenses
for low power television stations issued to date by the Federal
Communications Commission ("the Commission"), nembers of the
Institute have received almost two-thirds of these permits and
licenses. The Institute is pleased to have this opportunity to
comment on the significant issue involved in this proceeding.
The development of low power television service is one
of the most significant actions undertaken by the Commission
in recent years. In its Notice of Proposed Rulemaking on low
power television broadcasting, the Commission stated that low
power television service is "the first new broadcast service
*1
considered by the FCC in 20 years," - The Commission expressed
*/ Low Power Television Broadcasting, Notice of Proposed
Rulemaking, 82 F.C.C. 2d 47 (1980).
PAGENO="0545"
541
the hope that low power television service would "bring
television service to locations that otherwise are unserved
or underserved. . .by regular, full-service television eta-
*1
tions" and "attract a new breed of.. .broadcast networks." -
On April 26, 1982, the Commission released its Report
and Order in "An Inquiry into the Future Role of Low Power
Television Broadcasting and Television Translators in the
National TelecommuniCationc System." 51 RR 2d 476 (1982)
("Report and Order"). This Report and Order was adopted by
the Commission on March 4; 1982. The Commission's Report
and Order also enphasi~es the potential importance of the
new Low Power Television Service as an integral part of the
newly burgeoning video transmission, entartainment and infor-
mation delivery market:
In today's telecommunications environment,
we are witnessing. the rapid development of
a multitude of new and competitive technolo-
gies designed to deliver entertainment and
information services to the public. The
low power servic~ will permit fuller utili-
zation of the broadcast spectrum in service
to those ends. It is fitting that we engage
in initiatives that will allow broadcasting
to maximize its ~otential to maet the needs
of consumers as ~ze also open the regulatory
doors to purveyors of alternative technolo-
gies that will attempt competitively to meet
similar needs. FCC 2d at , 51 RR 2d
at 480 (1982).
In order for low power television service to participate
in the effort to "allow broadcasting to maximize its potential,"
this emerging service must develop in an economic atmosphere
*/ Id. at 80 (separate statement of Chairman Ferris).
82-540 O-84---35
PAGENO="0546"
542
which will permit it to compete with other media of mass
communication. It is for this reason that the Institute
urges the Commission to proceed with extreme caution in its
deliberations concerning modification or repeal of the syndi-
cation and financial interest rule, 47 CFR S73.658(j) ("the
rule'). The factors which bear on whether it is in the
public interest to retain, modify or repeal the rule are
numerous and complex. In addition, the potential impact of a
change in the rule on a na.3cent service such as low power tele-
vision is unclear. For th~se reasons the Institute believes
that it is premature for i: to express a final position on the
issues raised in this procaeding until after it has had an oppor-
tunity to review the detailed economic studies which have been
commissioned and will be filed by other principal parties sub-
mitting comments herein.
In the absence of complete economic data, the Institute
is concerned about any change in the rule which would adversely
affect the already tough market conditions which the low power
television industry will be facing in its formative years. The
Institute deems it significant that when the Commission adopted
the rule, it was motivated by the television networks' "virtual
*1
domination of television program markets." - Among the com-
petitors, the low power television industry must face, will
be all existing full-service television stations, including
network-owned and network-affiliated. The Institute fears
*1 Notice of Proposed Rulemaking, 45 FCC 2146 (1965).
PAGENO="0547"
543
that any re~emergeflCe of network domination over programming
would surely stunt, if not totally prevent, the development of
a healthy low power television industry.
The basis for the Institute's concern is the history of
abusive practices by the wetworks prior to the rule and the
absence of any mechanism to prevent or control such abuses
if the rule is modified or repealed. Prior to the adoption
of the rule, the three television networks misused their market
*1
power to achieve "domination of television program markets." -
In 1965, the Commission co~icluded that
...the three~ national network corporations
not only in large measure determine what the
American people may see and hear during the
hours when most Americans view television,
but also'would appear to have unnecessarily -
and unduly foreclosed access to other sources
of programs. ~/
In 1970, when the rule was finally adopted, the Commission
hoped that the rule would "eliminate a potential for competi-
tive restraint," and provide for "fairer competition." -
Yet, just two years after the rule became effective,
the United States Department of Justice filed antitrust suits
against each of the three networks alleging the same anticom-
petitive and abusive behavior which motivated the Commission
to adopt the rule. The Institute also deems it significant
*1 Notice of Proposed Rulemaking, 45 FCC 2146 (1965).
**/ Id.
~ Network Television Broadcasting, Report and Order,
23 FCC 2d 382, 398 (1970).
PAGENO="0548"
544
that when the Department of Justice accepted consent decrees
from the networks in 1980, the Department insisted upon re~
strictions on network operations which, in part, include the
restrictions imposed by the rule.
The Commission now seeks to determine whether market
conditions have changed so that it is in the public interest
to modify or remove the rule. At this time, the Institute
is not of the opinion that market conditions have changed
sufficiently to ensure that the networks would not again
control the vast majority cf programming if the rule were
repealed. Although network audience share has declined re-
ceatly, the networks still account for 81% of the viewing
*1
market. - Moreover, while the Coimnission motes in its Notice
of Proposed Rulemaking herein, that broadcast income of the
three networks has declined from 1977 to 1980, the president
of ABC, Frederick Pierce, recently stated that "ABC expects
to report that 1982 was its second best year in history."
In this regard it should be noted that 86% of ABC's 1981 reve-
nues were from broadcasting and all of its profits were essen-
tially from the same sourca. -
The Commission's Notice of Proposed Rulemaking also raises
the issue of whether the development of other television view~
ing outlets (cable, pay-TV, multipoint distribution service,
video cassettes and video-discs, direct broadcast satellite
~/ Nielsen Report on Television, 1982.
~/ Washington Post, January 16, 1983, F3.
PAGENO="0549"
545
service and low power television) has so changed the market-
place for progra.miàiiig that the rule is no longer needed. The
Institute believes that fOr low power television and most of
the other developing technologies, it is far too early to re-
move a restraint on the networks that was deemed necessary in
1970 by the Commission and in 1980 by the Department of Justice.
Unless these emerging technologies can compete fairly with the
networks, they will never~ fulfill the promise that they hold
for the public as expressed by the Conimission when low power
*1
television was first autho'~ized. -
Furthermore, the networks are staking out positions in
each of these new areas. In the January 16, 1983 (Sunday)
edition of the Washington cost, the lead story on the first
page of the Business and Finance section was entitled:
ABC'S WIDE WOELD OF RISKS
Network Boldly Moves Into Cable, Pay TV Ventures
The article reports how ABC is moving "aggressively into
its new media activities" which includes "new efforts in
advertiser-supported cultural, sports and women's cable
programming" and ` negotiations to purchase an interest
in Showtine, the Viacom International Inc. cable service
that is second only to Hone Box Office in the lucrative pay
television world. ` The article also reports:
*1 Report and Order, - FCC 2d , 51 RR 2d 476,
480 (1982).
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546
* since the ABC (new ventures) subsidiary
was established 3-1/2 years ago, it has
entered a joint venture with The Hearst
Corp. to.produce the Alpha Repertory
Television Service (ARTS)--a high-brow
performing and visual arts service--and
Daytime, a four-1-~our afternoon video
`magazine' designed for women, which
is set to double its air time this year.
ABC also is operating--in a joint venture
with Westinghouse Broadcasting & Cable Inc.
--Satellite News Channel, a 24-hour cable
headline news service. In conjunction with
Getty Oil's Entertainment and Sports Pro-
grainming Network (ES?N), ABC is sharing
some of its sports programming and, more
importantly, may offer later this. year a
pay-per-view service, in which cable sub-
scribers would be charged a fee for watching
individual prize:!ights or other major events.
Further, in an agreement with Cox Cable
Communications, the fourth largest cable
operator, ABC is testing a variety of in-
formation, transactional and pay services,
an operation about which little has been
said to date.
In perhaps ABC's most dramatic and risky
new venture, the company has announced
plans to launch The Home View Network, a
service that will utilize the signals of
ABC affiliates to transmit scrambled pay
television to subscribers' video recorders
during the statiDns' off hours, (On the
East Coast, for axample, transmissions would
occur between 2 a.m. and 6 a.m.) Testing of
that venture begins this year, with ABC
hoping to reach large numbers of the esti-
mated 12 million to 15 million video record-
ers expected to be in the market in 1985, a
tripling of the current recorder count.
As to the plans of CBS and NBC the article states:
PAGENO="0551"
547
Meanwhile, CBS, I~aving abandoned CBS
Cable, is diversifying in other ways,
planning other vantures, including a
proposal to start a pay-television micro-
wave service. CBS also is making a major
move into the movie business with its new
$400-million studio venture, while RCA Corp.,
third-ranked NBC's parent, is a partr~er in
a pay televisiOn network, The Entertainment
Channel.
And, both NBC and ABC have filed applications for low power
television stations in New York, Los Angeles and Chicago as well
as other major markets. ~`hey apparently recognize that low power
television offers them an additional opportunity to deliver en-
tertainment programs and other information services to the public.
Finally, as to the motion that the new technologies will
erode the network's audience the Post reported:
The standard netuork line, however, is that
even with the development of other technolo-
gies, no other means will exist to reach that
nuxnber~f people- (Emphasis added).
In the Notice of Proposed Rulemaking in this proceeding
the Commission notes that several producers of programming
have grown to become "powerful actors in today's program
*1
marketplace." - From the viewpoint of low power television
broadcasters, however, there is a significant distinction
between powerful independent producers owning syndication
rights and powerful networks owning syndication rights. In
negotiations between low power television stations and pro-
ducers, the major issue would be price; but, as between low
power television stations and powerful networks who control
syndication rights, certain non-price, anti-competitive
considerations would always be present. The Institute is
*1 Notice, at Para. 39.
PAGENO="0552"
548
concerned about the networks willingness to offer and sell
syndicated programming rights to low power television networks
whose affiliates may compete directly in many markets with net-
work affiliates. In this regard, the Commission should note
a recent statement by B. Donald Grant, President of CBS
~ntertainment:
Producers should be aware it makes a Network
uneasy when a show such as "M.A.S.H." is on
as many as seven times a day in some independent
markets as well as on the Network (CBS). It
sure doesnt hel3 it.
This is true industry-wide, not just at CBS,
the exec cornnient3d, noting that other Network
series in many instances are also in syndica-
tion. */
The Institute intends to examine clcsely the economic
studies and other comments which will be filed in this mat-
ter. At this time, the Institute believes that it is pre-
mature to repeal the financial interest and syndication rule.
The issue, as framed by the Commission, is "whether the public
interest would be served by the deletion or modification of
the syndication and financial interest rule." The public
interest will be best served by the maintenance of an economic
environment in which low power television and other emerging
technologies can compete and survive.
~/ Variety, April 27, 1982.
PAGENO="0553"
549
The Institute believes that the current rule is justified
and should be maintained so that the low power television in-
dustry has the chance to develop to the limits envisioned by
the Commission when it authorized low power television service.
Respectfully submitted,
THE NATIONAL INSTITUTE OF
LOW POWER TELEVISION
~( (
Michael L. Glaler
~
B~Z~
- Elliot M. ~n~.tzer ~
Its Attorneys
GARDNER, CARTON & DOUGLAS
1875 Eye Street, N,W.
Suite 1050
Washington, D.C. 20006
Tel. (202) 872-0200
January 26, 1983
PAGENO="0554"
550
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D. C. 20554
In the Matter of
Amendment of 47 CFR Section ) Docket No. 82-345
73.658(j); the Syndication
and Financial Interest Rule.
To: The Commission
COMMENTS
These comments are submitted by Mark Litwak, Esq., an
independent producer and President of New Citizen Productions,
Inc., a California corporation. The following remarks will
discuss how abolition of the Syndication and Financial Interest
Rules will affect small independent producers. These comments
will not attempt to comprehensively cover all objections that
have been raised over abolition of the rule.
PREFACE
Despite the confident predictions made by parties on both
sides of this issue, the truth of the matter is that it is very
difficult to accurately foresee the actual impact of a change in
these rules. The communicationa industry is in great flux due to
a variety of technological, economic, social and regulatory changes,
and the Commission must therefore assess not only the impact on
the existing industry, but try to predict how such rule changes will
mesh with many other possible changes in a rapidly evolving business.
PAGENO="0555"
551
Notwithstanding, the uncertainty involved in making predictions,
these comments will attempt to foresee the most likely consequences
from a change in the Syndication and Financial Interest Rules.
1. In reviewing the Commission's Notice of Proposed
Rule Making released on July 21, 1982, the Special Staff states
at paragraph 30 that "the Syndication and Financial Interest
Rule does not affect the potential for network exercise of undue
influence in the purchase of network prograxnming". The Special
Staff further concludes that the rule "could increase concentration
in the program supply market by limiting involvement only to those
entities large enough to bear the great risks involved".
With all due respect to the Special Staff, these statements re-
flect a naive view of how the network television business operates.
The Special Staff would have gained a better practical understanding
of how the industry works by spending a few afternoons at the
Polo Lounge.
In the network television business there is no competition
between networks vis-a-vis the snail independent producer. There
are over a hundred potential network suppliers and only three
buyers. Much of the time am independent producer will find that
there is only one network open to his program proposal. This
situation arises because each of the networks have their own
particular program needs to fill at any time, and these needs are
often quite different. Granted all the networks desire programs
that will be rating's hits. Nevertheless, each network has certain
PAGENO="0556"
552
prior comittaents to studios and/or talent that it must fulfill,
and only a limited number of timeslots available. Furtheri&re,
a potential program must be compatible with adjoining programs in
order to build good audience flow. Finally, a perfectly good
program may be rejected by a network simply because talent attached
to it is not one of its own, a similar program is already in
development, or the program demographics or content are not
compatible with advertisers.
With only one network open to his project, a producer is often
in a "take it or leave it" situation. Either the producer accepts
the terms offered and agrees to any changes desired by the network,
or the project dies. Contrary to the ballyhoo accompanying the
growth of cable television, cable does not offer an alternative
buyer for the product. Cable channels spend most of their money
on pre~-existing programming. What little money is available for
original product is spent on projects that are unique to cable.
All of the pay cable channels want to give their subscribers programs
of a type they cannot get on free T.V., usually because the program
would not pass the network's Programs & Practices Department or
because it is not a mass appeal program. Advertiser supported
cable channels simply cannot afford network-type programming.
With no alternative, an independent producer has to accept
whatever the network offers. The network will usually allow the
producer a respectable producer's fee in the budget for producing
and developing the program but often will want the producer to
deficit finance the show. Nowadays that means the producer makes
PAGENO="0557"
553
an agreement (if there is no pre-existing one) with a studio to
provide such funding, and the producer and studio wait to see
their profits from syndication, if they should be lucky enough
to have a product that can be successfully syndicated.
It is this possibility of a lucrative syndication sale
that drives a producer. It is the "gold at the end of the rain-
bow". Granted, only one out of every hundred projects nay get
developed by a network, with one out of four of these eventually
produced, and only a few last long enough to syndicate, but if
you have a piece of "I Love Lucy", or a "Happy Days", you will
make millions from it.
Now if the networks are allowed to hold onto syndication
rights, what will happen? Why should the network give up these
lucrative rights if it doesn't have to? Will the independent
producer have to settle for a modest producer fee and maybe a small
slice of the syndication rights? While it is difficult to predict
how generous the network may be with producers in regard to
syndication rights, it's apparent that the producer is in a vul-
nerable position. It is in fact similar to the relationship that
the networks have with new talent. When an actor first signs up
for a network series he has no bargaining power and must accept
whatever the network offers. Later when he is a star, he can
negotiate his contract because the show camnot go on without him.
The actor can get conveniently ill or difficult to deal with until
he gets a better deal. While the actor may have been taken advantage
of (sometimes by the producer) in his first deal, he can quickly make
PAGENO="0558"
554
up for it later. However, how will th. producer fare again8t the
network? Once a program is up and running, the producer can be
easily replaced with littl. evident change on the screen. And the
producer does not even have minimal guild protections in regard to
royalties, residuals , etc., that an actor has when negotiating
his deal.
If a producer could so easily be taken advantage of by the
networks, why is he not so exploited today by the studios, one
may ask? The reason is that while there is no competition among
the networks vis-a-vis the independent producer, the studios do
strongly compete with each other for agreements with independent
producers. An independent producer with a network committment for
his program will be aggressively courted by all the studios, as well
as larger production companies. In this situation, the independent
producer can usually get 25-50% of the net profits from the show
as well as lucrative producer fees and such in kind services as
office space and secretarial assistance.. Even if the producer has
not network committments, but only his reputation and experience to
sell, many studios will be interested in affiliating with him.
(Granted, studios may later try to cheat the producer through
creative accounting, but the producer has legal remedies available
to him.)
Nevertheless, opponents of the rule contend that adding networks
to the syndication game will only increase competition by bringing
in three new players. But this is not so because the studios can-
not compete against the networks, since they have to ultimately deal
PAGENO="0559"
555
with the networks in order to get their programs distributed. If a
network decides to keep 80% of all syndication profits for itself,
then it is irrelevant what the studios and independent producers
want. Only in the event that all program suppliers effectively
unite to demand a larger share of profits, could they possibly
succeed. Such unity is highly unlikely and would raise serious
anti-trust issues besides.
The networks point out that when they were in the syndication
business, they owned on average, only 25% of such rights. While the
industry has changed a great deal `since 1970, with syndication rights
much more valuable today due to the growth of independent stations,
cable television and home video markets, if the networks do not
intend to acquire large financial interests in their programming,
then they should not object to a limitation on the size of their
interests. The Commission, likewise, if it believes that it is in
the public interest to repeal the Sydication and Financial Interest
Rule, should safeguard the independent producer's interests by
promulgating a new regulation limiting network ownership of syndi-
cation rights to 25% or less of all rights.
2. In determining whether to abolish the Syndication and
Financial Interest Rules, the Commission should also consider what
mpacø such a rule change would have on program diversity on network
television. If a network owns syndication rights to a show, it will
have an incentive to keep shows on the air until they have syndication
value, which for episodic television usually occurs after the fourth
PAGENO="0560"
556
or fifth year. Therefore, if a network has a marginally successful
series that only needs another year or two to be able to be
syndicated, the network will have a financial incentive to keep
such a show on the air. With marginal shows kept on the network
longer, there will be fewer slots for new programs.
Likewise, the networks will have an incentive to prolong the life
of long running series that have begun to drop in the ratings. Instead
of dropping the show after eight seasons, the network may try to
milk the show for another year to make it more valuable for syndication.
How one feels about such changes will depend on one's attitude
toward the ratings system and the present rate of turnover in the
network programming. On one hand, those Who think the networks are
too quick to axe a marginal series will approve of the change. On
the other hand, fewer new programs each year may upset viewers.
As for the producers, the decrease in new programs will adversely
affect those who are trying to get a series on the air. Conversely,
producers and studios who are already established as network
suppliers, will benefit from a longer run of their programming.
3. The Commission must also consider the potential conflicts
of interests posed by network ownership of programs to be syndicated
to network affiliate and non-affiliate stations. Will the network
favor its own affiliates when syndicating a popular series? Will
the negotiations between the network and an affiliate be at arms
length? Will studios and producers who share such rights with a
network unfairly lose revenues if the network does not get the highest
PAGENO="0561"
55?
price that a fully competitve market could bear?
4. The networks argue that they need to throw off the
shackles of regulation in order to get a share of syndication
revenues that arise from shows they have funded. They contend that
they are losing revenue and market share to cable television and
need an additional source of revenue to remain healthy; and such
health can only benefit the independent producer and the industry
as a whole.
The networks may be surprised to learn that most independent
producers are not lying awake at night worrying about the network's
health. Producers feel that while the networks may be facing some
stiff competition from cable television, the networks are in no
danger of going under and will remain the predominate distributors
of television programming for the foreseeable future. Any increase
in network profits will not necessarily benefit the independent
producer. Only one who believes in such maxims as "What is good for
GM, is good for the country", or agrees with such doctrines as the
"Tricke-Down Theory", could make such an argument.
32-540 O-84--36
PAGENO="0562"
558
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Amendment of 47 C.F.R. BC Docket No. 82-345
S 73.658(j), the Syndication
and Financial Interest Rules
COMMENTS OF PEOPLE FOR THE AMERICAN WAY, NEW YORK
CITIZENS COMMITTEE FOR A RESPONSIBLE MEDIA, THE RADIO
AND TELEVISION COMMISSION OF THE NEW JERSEY COUNCIL
OF CHURCHES, THE COUNCIL OF CHURCHES OF THE CITY OF
NEW YORK, AND BLACK CITI ZENS FOR. FAIR MED IA
Introduction and Summary
People for the American Way, et al., hereby submit
these comments on the Commission's proposal to repeal the
financial interest and syndication rules.
The rules were adopted in 1970 after years of study and
after the television networks and every interested party had
numerous opportunities to file arguments and supporting
data. The statistics and other information persuaded the
Commission that the rules were needed to overcome the
dominant role that the networks played in determining the
television programs made available to the American public.
It is axiomatic that the Commission should not retain
rules that were misguided in the first place or no longer
serve a beneficial public purpose. As one court observed,
"[A) `regulation perfectly reasonable and appropriate in the
PAGENO="0563"
559.
face of a given problem may be highly capricious if that
pr~lem does not exist.'" Home Box Office, Inc. V. FCC,
567 F.2d 9, 36 (D.C. Cir. 1977) (citation omitted).
Although the communications world has experienced many
changes since the rules were adopted, none of those changes,
either individually or jointly, undercuts the factual and
policy bases for the Commission~s action. More
specifically, the known facts show that (1) the Commission
was justified in trying to maximize the diversity of
television program sources, (2) the networks had exercised
overwhelming financial and creative control over television
programs, (3) since the rules' adoption, the number of
participating producers has increased and the economic
health of independent television stations has improved
markedly, (4) the networks have continued to prosper despite
the existence of the rules, (5) although there is some
competition from new video technologies, most of those new
sources are still in the embryonic stages, (6) the networks
are still the overwhelming force in television programming
and probably will remain so for at least the next five to
ten years, (7) therefore, the networks could engage and
probably would engage in the same kind of practices that led
the Commission to adopt the rules in 1970, and (8) the
public is likely to benefit from the rules for as long as
the networks retain their dominant position.
These conclusions are qualified by one overriding
point. The FCC's notice contained few statistics and other
PAGENO="0564"
560
facts to support its sweeping generalizations with respect
to the rules' adverse impact on the networks and,
ultimately, the public. To be sure, if the comments provide
concrete data to show that the public interest will benefit
by repeal of the rules, that course would be advisable. But
the Commission should not accept parties' theories and
general philosophies as a substitute for specific
information. Otherwise, the Commission will be unable to
know whether its action will in fact serve the public's
interest.
Parties
People for the American Way, founded in 1980, is a
nationwide, nonprofit, educational association designed to
advance First Amendment interests and to assure that a
diversity of views and opinions are presented on television
to the American public. As the producers of a half-hour
television documentary ultimately aired on independent
stations last Fall, People for the American Way has a strong
interest in the financial health of independent and diverse
programming outlets.
New York Citizens Committee for a Responsible Media is
a coalition of civil rights, church, minority and
professional organizations who have joined together in New
York City to work on issues of common concern with respect
tq telecommunications policy.
PAGENO="0565"
561
The Radio and Television Commission of the New Jersey
Council of Churches utilizes opportunities afforded by the
broadcasting industry in the region to present the views of
the New Jersey Council of Churches (an organization
representing seventeen Protestant denominations and
independent congregations) on contemporary social and
ethical issues.
The Council of Churches of the City of New York is an
organization comprised of congregations and denominations
who share an interest in assuring diversity of television
program sources.
Black Citizens for Fair Media is a voluntary citizens
organization of more than 250 community organizations, which
seeks to assure that the image of minorities portrayed in
television is positive. Black Citizens for Fair Media, like
the other four groups submitting these comments, has a
strong interest in maximizing the diversity of television
program sources and in assuring the economic health of
independent television stations.
I. The Basis and Purpose of the Rules
The financial interest and syndication rules are
contained in 47 C.F.R. § 73.658(j). They provide that no
network shall
(i) . sell, license, or distribute
television programs to television station
licenses within the United States for
nonnetwork television exhibition or otherwise
engage in the business commonly known as
"syndication" within the United States; or
sell, license or distribute television
programs of which it is not the sole producer
PAGENO="0566"
562
for exhibition outside the United States; or
reserve any option or right to share in
revenues or profits in connection with such
domestic and/or foreign sale, license, or
distribution; or
(ii) * * . acquire any financial or
proprietary right or interest in the
exhibition, distribution or other commercial
use of any television program produced wholly
or in part by a person other than such
television network, except the license or
other exclusive right to network exhibitions
within the United States and on foreign
stations regularly included within such
television network.
In essence, the rules prohibit the three major television
networks -- ABC, CBS and NBC -- from (1) syndicating network
programs for broadcast by television stations and (2)
obtaining any financial interest in programs produced in
whole or in part by a party other than the individual
network. The networks were, in effect, compelled to use
their own production resources or to restrict their
financial involvement in independently-produced programs to
the purchase of rights for first-run showings.
The financial interest and syndication rules were
adopted when the Commission concluded, after years of study,
that the networks dominated the television program
production process. This dominance was made possible
because the networks, through their affiliations with
television stations across the country, controlled access to
the overwhelming majority of television stations in the top
fifty markets. Network Television Broadcasting, 23 F.C.C.
2d 382, recon. denied, 25 F.C.C. 2d 318 (1970), aff'd
sub nom. Mt. Mansfield v. FCC, 442 F.2d 470 (2d Cir.
1971).
PAGENO="0567"
563
The nature and scope of the networks' dominance here
was reflected in the innumerable statistics cited in the FCC
reports. For example, the data showed that the networks had
a~financial interest in ninety-three percent of the programs
they aired in one five-year period, that they were acquiring
"an increasingly strong position in syndication," and that
even "[tihe admitted great bargaining potential of major
motion picture companies was inadequate to extract terms of
entry to the network television market more favorable than
those obtained by other producers." 23 F.C.C. 2d at 388,
392-393.
The Commission was particularly disturbed by the
conflicts-of-interest that suffused the networks'
involvement in the production and syndication markets. As a
theoretical matter, it could be expected that the networks
would air whatever program was of the highest quality and
offered to secure the widest audience; as a practical
matter, however, the networks aired virtually no programs
except those in which they had a financial interest. As a
theoretical matter, the networks had an obligation and a
financial interest in furthering the market positions of
their affiliates; as a practical matter, however, the
networks were selling off-network prog~rams to independent
stations who competed with the affiliates. 23 F.C.C. 2d at
394.
The Commission was not concerned with the
profitability of the networks or the lack of profitability
of program producers. Nor was the Commission interested in
PAGENO="0568"
564
comparing the quality of programs produced by the networks
with those that had been or could be produced by others.
Rather, the Commission took a structural approach to the
problem that was premised on First Amendment interests. By
adopting the rules, the Commission hoped to maximize the
number of independently-produced programs and the health of
independent stations in order to provide the widest possible
choice of programming for the American public. See 23
F.C.C. 2d at 400, citing Red Lion Broadcasting Co. v.
FCC, 395 U.S. 367, 390 (1969); NBC v. United States, 47
F. Supp. 940, 945, 956 (S.D.N.Y. 1942). As the Commission
explained on reconsideration, "The stated purpose of the
rules proposed was to multiply competitive sources of
programming and lessen network control by placing
limitations on the network activities which tended to
confine areas of competition." 25 F.C.C. 2d at 319.
To this end, the rules were designed to serve three
subsidiary purposes. First, by precluding the networks from
obtaining financial and syndication interests in
programming, the rules would eliminate the networks'
conflicts-of-interest. Second, by decreasing the networks'
financial control of the development and syndicated showings
of programming, the Commission hoped to multiply the sources
of television programming. And third, by increasing the
sources of television programming, the Commission hoped to
make available to independent television stations the kind
of programming that would enable them to compete with
PAGENO="0569"
565
network affiliates and network-owned stations. See
especi~fly 23 F.C.C. 2d at 382, 397-98.
II. The Need to Retaill the Rules
A. The Rules Were Not Misguided
In 1977, the FCC established a special staff to
investigate network practices and to assess the wisdon of
FCC regulations affecting the networks. Commercial
Television Network Practices, 62 F.C.C. 2d 548 (1977).
After two years of study, the special staff concluded that
the financial interest and syndication rules were "misguided
at best." Network Inquiry Special Staff, New Television
Networks: Entry, Jurisdiction, Ownership and Regulation
(Final Report, October 1980) ("Network Inquiry Report")
Vol. I at 510. AlthOugh the special staff made a valuable
contribution to an understanding of network practices, there
are several shortcomings in the analysis it used to justify
its conclusion here.
1. Networks' Retention of Leverage
The special staff concluded that, as a theoretical
matter, the financial interest and syndication rules could
not undercut the considerable leverage the networks exercise
in negotiating for programs from independent producers. The
special staff emphasized that the networks' leverage
reflected their control over access to the vast majority of
television outlets in the top fifty markets. The
PAGENO="0570"
566
special staff concluded, though, that nothing in the
syndication and financial interest rules would affect the
networks' control of that access or their ability to exploit
tk~at power in extracting favorable terms from program
producers. The only effect of the rules, according to the
special staff, was to preclude the use of certain options
when exercising that power. The networks would remain free,
under the special staff's analysis, to compensate for that
loss through other means. One obvious route would be to
reduce the amount of money the networks would pay for the
first-run showing of a program on the network. Network
Inquiry Report, Vol. II at 607-08, 732.
As a theoretical matter, the special staff is of course
correct. The facts underlying the networks' leverage --
principally their control over access to affiliated stations
-- was unaffected by the adoption of the financial interest
and syndication rules. Theory, however, does not always
comport with reality. While the networks might have the
same potential leverage, that does not mean they were able
to translate it into other contract terms that would totally
compensate for the loss of profits derived from syndication
rights and other financial interests in programs. Here it
is important to emphasize that the special staff did not
investigate the differences in network bargaining practices
before and after the adoption of the financial interest and
syndication rules. Therefore, the special staff was unable
PAGENO="0571"
567
to offer any concrete evidence or analysis concerning the
actual changes in network bargaining practices and the
extent to which those changes enabled the networks to retain
wt~atever financial benefit they secured prior to the
adoption of the rules.
The conduct of the principal parties also belies the
special staff's theoretical conclusion that the networks'
leverage was unaffected by the rules. The networks have
made repeal of the rules their number one priority. One of
their principal arguments is that the rules deprive the
networks of vast resources needed to obtain quality
programs. Thus, one NBC executive observed that "(t]he
rules hinder the networks' ability to bid for programs
because they limit what we can get out of the programs we
finance." Robert E. Mulholland, "Drop the Rules,"
Advertisiflg Age (December 20, 1982). A CBS executive
similarly obèerved that the rules deprive the networks of
hundreds of million~ of dollars a year in revenue and that
repeal of the rules is "financially imperative." Quoted
~ Jane Mayer, "Heated Battle Grows in TV Industry as
Networks Fight for Rule Repeal," Wall Street Journal,
November 5, 1982. The program producers are also expending
substantial resources on a belief that the rules do have
an impact on bargaining positions and financial rewards.
These shared views are also reflected in the Commission's
statement in its Notice of Proposed Rulemaking that the
PAGENO="0572"
568
rules handicap the networks' ability to obtain quality
programming. Amendment of 47 C.F.R. Section 73.658@),
FCC 82-300 (July 21, 1982) ("Notice") at ft 41-42.
Clearly, if the networks' leverage remained intact
under the rules, the networks would not be concerned about
the loss of revenue, the producers would not fight to retain
the rules, and the Commission would not have any basis for
concern that the networks were being unduly handicapped. In
short, the conduct of parties driven by self-interest
plainly shows that, contrary to the special staff's
theoretical conclusions, the rules have had and do have an
impact on the networks' leverage.
2. The Plight of Producers
The special staff criticized the financial interest and
syndication rules as reflecting a concern with the plight of
program producers. More specifically, the special staff
observed that a public agency should have no interest in
protecting or advancing the profitability of private
companies (here the producers), that the rules were
economically inefficient because they excluded the networks
from sharing in the financial risk of developing programs,
and that the ultimate result would be to foster giant
production companies. Network Inquiry Report, Vol. II at
726-31. At first blush these arguments have some appeal.
PAGENO="0573"
569
Upon inspection, though, they all seem to rest on faulty
premises or insufficient evidence.
To begin with, the FCC did not adopt the rules because
it was interested in making private companies richer. At
the time the rules were adopted, Metro-GOldwin-Mayer,
Paramount, United Artists, and other major production
companies were already endowed with considerable resources.
The Commission found, however, that even these giant
companies were forced to bow to the networks' demands for a
financial interest in programs -- even if the network did
not provide any financing for the programming. Thus, the
Commission found that between 1959 and 1964 the networks
obtained financial interests in seventy-six programs
produced by the major companies even though the networks did
not offer any developmental financing for those programs.
Here it bears repeating the Commission's conclusion about
the power exercised by these giant production companies in
negotiations with the networks: "The admitted great
bargaining potential of major motion picture companies was
inadequate to extract terms of entry to the network
television market more favorable than those obtained by
other producers." 23 F.C.C. 2d at 388. Accord 25 F.C.C.
2d at 324 n. 11 (" . .*. even the major motion picture
companies, with their size and resources, fare little if any
better than one-shot producers in bargaining with the
networks").
PAGENO="0574"
570
The rules, then, were not designed to enhance the
profits of major production companies. Rather, it was hoped
that the rules would endow the production companies with
additional resources to take risks in program ventures and
to compete effectively with the networks as a source of
programming. As the Commission explained,
Relieved of the need to grant a network a
large portion of his potential profit(,] the
producer's ability profitably t~ operate in
network television will be greatly enhanced.
With the expanded syndication market as a
feasible alternate to network exhibition his
bargaining position will be improved and he
can be expected to develop into a stable and
continuing alternate source of programs and
ultimately to compete for network time.
23 F.C.C. 2d at 398.
In this context, it is unclear why the special staff
criticized the financial interest and syndication rules as
inefficient. The special staff was concerned that the
exclusion of the networks from the risk-sharing business
would increase the costs of programming because producers
would be less able to bear the risk of production and,
therefore, would demand more from the networks to compensate
for their added burdens. Network Inquiry Report, Vol. II
at 730-31.
At the outset, this observation seems inconsistent
with the special staff's other conclusion that the rules had
no impact on the networks' bargaining leverge. For here the
special staff seems to be saying that under the rules, the
PAGENO="0575"
571
networks are obligated to yield to the producers' pressures.
Aside from the inconsistency, the impact of any inefficiency
here on the public interest seems negligible. The only
public concern with inefficiency is that it will result in
the production of fewer programs and/or programs of lower
quality than would otherwise be possible. But there is no
evidence that the rules have precluded the development of
network programs or affected the quality of network
programs. Nor is there any indication that the major
production companies are unable or unwilling to assume the
added risks of program development.
Here it might be useful for the Commission to
concentrate on the plight of the small independent producer.
Prior to the adoption of the rules, the small producer could
have approached the networks and, if his proposal were
sufficiently attractive, obtained developmental financing
from the network in exchange for syndication rights and/or a
financial interest in the program. Now that door is closed
to the small producer. But the small producer has the
option of making the same deal with a major production
company. And if that small producer is successful, he can
presumably become sufficiently independent to deal with the
networks directly.
If programs are indeed costing more -- as allegd by
the special staff -- the small producer should be the one to
feel the pinch first. Therefore, the Commission should make
PAGENO="0576"
572
particular efforts to determine whether the small producers'
viability and independence has been jeopardized by the
rules.1
It may be true, as the special staff observed, that
the rules have not increased the production companies'
profitability (although, given the number of factors that
affect profitability, it is difficult, if not impossible, to
isolate the impact of the rules alone on the companies'
financial status). Network Inquiry Report, Vol. II at
729. Since the rules were not designed simply to advance a
private company's profits, the rules cannot be criticized
for their minimal impact on the production companies' net
income. The real test is in the diversity of programming
being developed, and it is here that the evidence before the
special staff and the Commission is most equivocal.
3. Impact on Program Availability
Perhaps the harshest criticism of the special staff is
its claim that the rules failed to generate programming
different from that produced by the networks. On this basis
alone, the special staff concluded that the rules had had no
public benefit and were unlikely to produce any public
benefit in the future. Network Inquiry Report, Vol. II at
735-36.
1/ In its Regulatory Flexibility Act analysis, the
Commission had no basis for concluding that repeal of
the rules would in fact benefit small producers.
Notice at § 43.
PAGENO="0577"
573
There are two basic problems with the special staff's
conclusion here: first, it misconceives the Commission's
goals in adopting the rules; and, second, it ignores one of
the primary bases for adopting them.
a. The Production of Competitive Programming
There is no formula that has been identified or that
can be identified to determine the precise impact of the
financial interest and syndication rules on program
development. The variables that affect program production
are too many and too complex. A producer's willingness and
ability to finance programs could depend on the subjective
judgment of individuals whether a proposal is sufficiently
appealing to attract advertisers, to pass muster with
television executives, and to deserve higher priority than
other projects in the making or otherwise available to the
producer. Other factors are also influential. General
economic conditions, for example, can affect a producer's
willingness to risk money in new programs, and those same
economic conditions can affect the networks' and independent
stations' receptivity to new programs.
In this light, different people looking at the same
developments in television program production can draw
different conclusions as to the causes of those
developments. Nonetheless, there can be no doubt that,
whatever the cause, the television program industry is
producing the kind of results that the Commission sought
32-540 O-84---37
PAGENO="0578"
574
when it adopted the rules in 1970. Among these developments
are the following:
(1) The number of program producers involved
in the industry has increased dramatically.
In 1981 there were 184 distributors providing
programming to local television stations, a
fifty-one percent increase over the 122
operating in 1971. Arbitron SPA (November
1971 & November 1981). In 1981 there were
forty-two producers involved in the production
of access programming, a 320 percent increase
over the ten involved in 1971. Comments of
NATPE, Docket No. 21049 (January 8, 1982) at
4. There were twenty-nine producers supplying
network prime time programming in the 1981-82
season, a twenty-six percent increase over the
twenty-three involved in the 1970-71 season.
Variety (September 16, 1970 & September 30,
1981).
(2) Independent stations are gaining access
to off-network programs earlier than they
would have if the networks controlled
syndication rights. "M*A*S*H~ and "Happy
Days" are two popular examples. These
programs were made available while original
episodes2were still being aired on the
network.
(3) The number and profitability of
independent stations has increased
dramatically. In 1970 there were
seventy-seven independent VHF and UHF
stations, only twenty-three of which reported
a profit. Broadcasting (September 6, 1971)
at 57. In 1980 there were 110 independent
stations, sixty of which reported a profit.
Broadcasting (August 10, 1981) at 44. The
increase in profitability reflects the growth
2/ This earlier access may be a reflection of the
exclusivity provisions in a contract. But the networks'
ability to obtain favorable exclusivity protection is a
function of bargaining leverage. As indicated above,
however, the rules have diminished that leverage to some
extent and this in turn might enable producers to limit
the networks' exclusivity protection.
PAGENO="0579"
575
of the audience share which independent
stations now capture. As of 1981,
independent station viewing in prime time had
increased to seventeen percent, a seventy
percent increase over the viewing share in
1970.
(4) The major production companies have
generated feature films and other specials of
high quality that have been aired on
independent stations. These programs include
"A Woman Called Golda" (Paramount), "Dream
Merchants" (Columbia), and "The Rebels" and
"The Seekers" (MCA/Universal). This
programming provides strong competition to
network showings and is the very kind of
program development the FCC hoped would
evolve after the adoption of the financial
interest and syndication rules. 23 F.C.C. 2d
at 394, 398; 25 F.C.C. 2d at 322.
It may be, as the special staff observed, that the
programming generated for off-network showings is not
materially different than the programming produced by the
networks before or since the adoption of the rules.
Network Inquiry Report, Vol. II at 735-36. All that,
however, is irrelevant to the Commission's responsibilities
and intentions. The Commission did not make any comparative
judgment that programs produced by independent companies had
been or would be "better" than those produced by the
networks. Nor did the Commission state that it would make
such comparative analyses in the future to determine whether
the rules were working. Rather, the Commission's only goal
was a structural one -- "to multiply competitive sources of
programming and lessen network control . . . " 25 F.C.C. 2d
at 319.
PAGENO="0580"
576
This structural approach is premised on a belief that
the creation of diverse sources of programming will
ultimately benefit the public. This faith in diverse
program sources is a matter of principle that can be
debated; but there can be no question that there has been a
dramatic increase in the sources and availability of
independently-produced programs since the adoption of the
rules.
Here it may be useful to focus on the comments of
independent stations. Diversity in programming ultimately
requires diverse outlets and, for the moment at least,
independent stations are providing the strongest competition
to the networks. If the independent stations have reason to
believe the rules help them obtain and retain audiences,
that would be a significant factor. If, on the other hand,
the independent stations assert that the rules are
inconsequential, that would be equally telling. In either
case, however, the Commission should demand that judgments
be supported by fact -- not guesswork.
b. Networks' Conflicts-of-Interest
The special staff's conclusion about programming
development in the 1970's also ignores the networks'
conflicts-of-interest -- conflicts that provided a principal
motivation for Commission action in 1970. The first
conflict-of-interest concerned the networks' participation
in the syndication market. Off-network programs had been
and still are a principal source of programming for
PAGENO="0581"
577
independent television stations. These independent
television Stations are in competition with network
affiliates. Therefore, the networks' participation in the
syndication market meant that the networks were selling
programs to stations who would be in competition with the
networks' own affiliates.
The Commission was appropriately concerned tnat the
persistence of this conflict-of-interest could have an
improper influence on the programming available to the
public. 23 F.C.C. 2d at 394. Subsequent events seemed to
confirm the Commission's concern. As mentioned earlier,
off-network programming is now made available to independent
stations even while original episodes are being aired on the
network. If the networks controlled syndication rights,
they would be unlikely to make such programs available so
early -- and, if they did so, it would be at the expense of
their own affiliates.3
It is possible to conceive of circumstances in which
the networks could sell syndicated programming to
independent stations without violating any ethical or
legal obligation to their affiliates. For example,
there would be very little, if any, conflict, if the
independent agreed to show the syndicated programming
during day-time hours when there was no network feed and
before audiences selected a channel for evening viewing.
However, it is unlikely that the Commission could
formulate, let alone enforce, a rule that could account
for and distinguish between situations in which there
was no conflict from those situations in which there was
a conflict.
PAGENO="0582"
578
This conflict-of-interest is an inherent one that will
necessarily be revived if the rules are repealed. Nothing
in the special staff's report disputes that fact. Nor does
the special staff's report provide any argument or evidence
to undercut the Commission's earlier conclusion that the
financial interest rule was necessary in order to prevent
the networks from indirectly doing something that they were
prohibited from doing directly. As the Commission
explained, "[L]ittle would be accomplished in expanding
competitive opportunity in television program production if
we were to exclude networks from active participation in the
syndication market and then permit them to act as brokers in
acquiring syndication rights and interests and reselling
them to those actively engaged in syndication." 23 F.C.C. 2d
at 398.
The other conflict-of-interest concerns the networks'
reluctance to air programs in which they do not have a
financial interest. As the special staff pointed out, from
a theoretical perspective the networks should air programs
of the highest quality that will command the largest
audiences -- regardless of who has provided the financing.
Network Inquiry Report, Vol. II at 733. Monies expended
on program development, the theory goes, are sunk costs that
PAGENO="0583"
579
can never be recovered; therefore, the network should always
be willing to take ~ program that will generate the
largest advertising revenues, even if it requires the
rejection of a network-financed venture.
In theory, this description of network program
selection practices sounds reasonable. The circumstantial
evidence, however, plainly shows otherwise. As one
advertising executive explained,
The networks generally took a 50 percent
profit participation in programs they
accepted for broadcast. Before the FCC
rules, a standard question asked of an
independent packager by the network was
whether he was willing to give a piece of the
program to the networks if the advertiser
purchased it for exhibition. The networks
attempted to justify this practice by
claiming that they created the value of the
show by putting it on the air.
Statement of Norman Glenn, Young & Rubicam, United States
v. CBS, Civil Action No. 74-3599-RJK (C.D. Cal. 1974);
United States v. American Broadcastin9 Companies, Civil
Action No. 74-3600--RJI< (C.D. Cal. 1974), Attachment 2 to
Identification of the Evidence in Support of the
Government's Contention that CBS and ABC Have Violated
Sections 1 and 2 of the Sherman Act, at 2. After exhaustive
study of data supplied by the networks themselves, as well
as others, the Commission found that this observation had
broad application: "[W]e believe on the basis of the record
PAGENO="0584"
580
before us that networks do not normally accept new, untried
packager-licensed programs for network exhibition unless the
producer/packager is willing to cede a large part of the
valuable rights and interest in subsidiary rights to the
program to the network."4 23 F.C.C. 2d at 398.
As a practical matter, it is not surprising that the
networks favored programs in which they had a financial
interest. Trying to predict a successful program is very
tricky business. Moreover, human nature being what it is,
people are likely to believe in things to which they have
already made a commitment. Consequently, there is no ready
formula for a network to say conclusively that a program
Like the FCC, the Department of Justice concluded on
the basis of this and other evidence that the networks
improperly dominated the program production and
selection process. Since the Department has the
principal responsibility for enforcing the antitrust
laws, and since antitrust policies are a vital concern
of FCC regulation (see 47 U.S.C. ii 313), the
Department's views are entitled to considerable weight.
It may be, as the special staff observed, that the
remedies sought by the United States are inconsistent,
and present enforcement difficulties. Network Inquiry
~port, Vol. II at 713-14. Such observations, of
course, affect the weight to be accorded the consent
decrees ultimately obtained by the Department. But, in
the end, the Commission should not become the arbiter of
the legal theories employed by the Department. The
Commission's responsibility extends beyond finding
antitrust violations and goes to the broader issue of
adequate diversity of programming for the public.
PAGENO="0585"
581
of fered by an independent producer (even one with some
network financing) is clearly better than one in which the
network has a very substantial financial (and perhaps
ethotional) interest.
For all these reasons, then, the rules remain an
effective vehicle for prohibiting conflicts-of-interest in
network practices, and the special staff did not provide any
evidence or argument to show otherwise.5 The issue, then,
is whether there have been or are likely to be any changes
which reduce the need to prevent those conflicts.
S. Changes in Circumstaflc~
1. Networks' Economic Position
In its Notice, the Commission cites declining income
For facts, the special staff had relied on an article
by Robert W. Crandall, The Economic Effect~~
Television-Network Program "Ownersbj~p", 14 J.L. & Econ.
385 (1971). The article, however, neither argues nor
shows that networks accthpted programs in which they had
no financial interest. The article contends that the
networks had an interest in maximizing their viewing
audiences and that they would cancel programs that had
low ratings. Nothing in the Commission's report is at
odds with those observations. The facts before the
Commission -- which the article does not dispute --
showed that the networks would rarely consider a program
unless they had a financial interest in it; of course,
they could still cancel the program if it proved
unsuccessful and replace it with another one in which
they also had a financial interest.
PAGENO="0586"
582
and audience shares for the networks as a basis for concern
that the financial interest and syndication rules have
outlived whatever usefulness they may have had. Notice at
138. The Commission's concern here is misplaced for at
least two reasons.
First, if the financial interest and syndication rules
were to have any impact, the Commission had to have expected
that the networks' share in viewing audience would decrease.
Obviously, if independent stations were to become an
alternate source of viewing -- one of the primary goals of
the rules -- it would necessarily have to mean a decrease in
the viewing of network fare. And it necessarily would
follow that, if there were a decrease in network audience
shares, the networks would probably incur a loss of
revenues. Consequently, contrary to the Commission's
suggestion, a decrease in network audience share and network
revenues is a sign that the financial interest and
syndication rules have begun to have the very impact that
was intended.
There is a second problem with the Commission's
reliance on the networks' declining audience share and
revenues: the isolated figures cited ignore the fact that
the networks are in extremely healthy financial condition.
In 1980, the networks earned $325.6 million, a 550 percent
increase over their earnings in 1970 when the rules were
PAGENO="0587"
583
adopted. During that same interval, all television
stations' earnings, collectively, increased only 229
percent. Broadcasti~g (August 21, 1972 & August 10,
1981). In other words, network profits equalled twenty
percent of all industry profits in 1980, whereas in 1970
network profits accounted for only eleven percent of all
industry profits -- hardly the basis for concern that the
networks are in financial trouble now.
Nor is there any reason to believe that network
economic health is in any jeopardy in the near future. In
July 1982, for example, the networks reported that advance
advertising sales for the forthcoming Fall season had been
very strong and that they amounted to a twenty-two percent
increase over sales from the previous year -- a development
all the more significant in light of fifteen percent rate
increases and a lingering national recession. Jane Mayer,
"Networks Expectup-FrOnt Sales Rise to Be 22% This Year,"
Wall Street Journal, July 28, 1982. As one network
observed, "[T]hose of us who are riding the network dinosaur
find the big beast very much alive -- and healthier than
ever. The three television networks completed a strong
1981, with revenues estimated at $5.3 billion, following
PAGENO="0588"
584
a decade of growth which saw advertising revenues expand
from $1.7 billion in 1970 to $4.8 billion in 1980. In 1982,
three-network sales growth is expected to continue at a
significant rate. . . . You and CBS: a Market~g
Partners~4p (March 1982).
It should be emphasized here that there is no
indication that the financial interest and syndication rules
have had any adverse impact whatsoever on the nature or
quality of programming available from the networks. There
was, for example, some concern expressed that adoption of
the rules would result in decreased news and public affairs
programming; however, there is no indication that that is so
-- indeed, the networks made attempts to increase the
amount of news programming they would make available to
their affiliates. See Marvin Barrett, Rich News, Poor
News: Alfred I. DuPont - Columbia University Survey of
Broadcast Journalism Chapter 3 (1978).
In its Notice, the Commission concluded that the
rules nonetheless restrict the networks' ability to obtain
programming from independent producers. Notice at ¶ 40.
The Commission did not cite any data or otherwise identify
the factual basis for this conclusion. It was certainly not
the Network Inquiry Report, though. After two years of
investigation, the special staff stated (largely on theory)
PAGENO="0589"
585
that the networks' programming-purchasing ability was not at
all hampered by the rules. If the networks have concrete
evidence of such impediments, it should be considered
carefully. But the problem, if it exists, cannot be
significant. For there is no indication that network
program fare has deteriorated in the last ten years. Quite
the contrary. Multi-million dollar productions like
"Roots," "The Blue and the Gray," "Holocaust," and "The
Winds of War" show that the networks are able and willing to
improve the quality of programming being made available.
One other matter deserves mention here. When the
rules were adopted concern was expressed that they would
have an unduly harsh impact on small market stations.
However, this concern too proved to be unfounded. In 1980,
80.7 percent of all VHF stations and 46.4 percent of all UHF
stations in markets 100 and below reported a profit.
Broadcasti~q (August 10, 1981) at 43. This compares
favorably with the profitability of all stations in 1970,
when 82.3 percent of the VHF stations and 32.2 percent of
the UHF stations reported profits. Broadcasting
(September 6, 1971) at 57,
In sum, there is no evidence whatsoever that the
financial interest and syndication rules have undermined the
programming abilities of the networks or the nation's
television stations.
PAGENO="0590"
586
2. New Technolog
The remaining question is whether the emergence of new
video technologies undercuts the need for the financial
interest and syndication rules, whatever the status of the
networks' economic health and the programming being made
available to the public at present. The Commission has
already concluded that the rules have created an "imbalance
in the ability of networks and nonnetwork outlets to compete
for the products of independent producers." Notice at
§S 41-42. This conclusion echoes the criticisms voiced by
the networks themselves. One executive, for example,
observed that many sporting events are already offered by
non-television sources and that popular events, like the
Wimbledon Tennis Championship, were almost lost to cable.
Robert E. Mulholland "Drop the Rules," ~
There may of course come a time when the evolution of
new technologies warrants a relaxation or repeal of the
financial interest and syndication rules. But that time is
not now. None of the new technologies cited in the
Commission's Notice is mature now or poses any threat to
television viewing patterns in the immediate future.
For example, cable, perhaps the most mature of all the
new technologies, is estimated to serve only twenty-seven
percent of all television households in the country and will
reach only fifty percent by 1985. Notice at ¶ 34.
According to recent Nielsen Reports, however, most cable
households spend far more time viewing television than they
PAGENO="0591"
587
do cable. And most viewers in prime time watch network
programs. Thus, in November 1980 networks and their
affiliates had a 54.1 rating, as compared to a cumulative
2.3 rating for pay cable programs and other cable
originations. And, in 1981, networks and their affilaites
had a 51.5 rating, as compared to a cumulative 3.3 rating
for pay cable and cable originations. Nielsen Televisi~zi
Report, 1982.
Subscription television and Multipoint Distribution
Services (SMDS~~) command even less of the market. As the
Commission itself noted, subscription television reaches
only 1.3 million subscribers, and the total number of MDS
subscribers is only approximately 550,000. In a country
with almost 100 million television households, the networks
cannot reasonably view these developments with alarm.
The other new technologies are also in the embryonic
stages, and it is unclear to what extent, if at all, they
will pose any economic competition for networks. Low power
television stations, for example, are not yet operative, and
it is very uncertain to what extent they will prove
commercially viable. The same is true of direct broadcast
satellite service, which is not even scheduled to become
operational until the mid-1980s.
The inchoate nature of competition from new
technologies is reflected in a recent congressional report:
We are headed for a competitive video market;
we are not yet there today. Many scoff at
PAGENO="0592"
588
the scarcity rationale as no longer being
valid. Yet their claims that it has been
overcome are based on sweeping
generalizations regarding a "revolution" in
video communication services, rather than any
thorough analysis of the availability of
video conduits on the local level. The
revolution has clearly started, but the
fighting is just now moving to most of the
major urban centers. To claim a new order at
the outset of the revolution may rally the
troops, but it does not mean the lot of the
public has yet been changed.
Telecommunications in Transition: The Status of Competition
in the Telecommunications Industry, Majority Staff Report
of the Subcomm. on Telecommunications, Consumer Protection,
and Finance, Comm. on Energy and Commerce, House of
Representatives, 97th Cong., 1st Sess. 376 (1981). No
doubt, the fact that the competition from new technologies
is still in the potential rather than actual stage helps
explain why network executives are able to remain optimistic
about the economic health of their particular companies.
CBS, for example, stated that "[f]or the foreseeable future
at least, network television will continue to be the
predominate national advertising medium. . . . By the end
of the decade, the television landscape will look
significantly different. But the CBS Television Network
believes that the predominate share of television audiences,
and the bulk of advertising revenues, will continue to be
where they are today -- in commercial broadcasting." ~
and CBS: a Marketing Partnershsip (March 1982).
PAGENO="0593"
589
In this setting, it is difficult to understand the
networks' concerns, which are reflected in the Commission's
Notice, that they are placed at a disadvantage with cable
programmers and other nonnetwork sources in bidding for
independently-produced programs. The networks' financial
position is far superior to those of any cable programmer,
including HBO (apparently the only cable programmer that is
turning a profit now). In other words, the networks have
the financial resources to match any bid advanced by a cable
programmer or other nonnetwork source. For the Olympic
Games, movies, and other offerings which are not syndicated,
this is especially true. It is equally true for programs
like Wimbledon, where the producer does not need financing
to develop the project. Therefore, if a nonnetwork source
outbids a network for a programs like these it is not
because of any handicap created by the financial interest
and syndication rules but because one bidder (the nonnetwork
source) places a higher value on the product than the other
bidder (the network).
The situation may be different where the independent
producer wants to sell both the syndication rights and the
first-run showing rights simultaneously. In those
circumstances a producer might reject a high network offer
for first-run showings in favor of a package deal that
provided less for first-run showings but included a
substantial amount for syndication rights. Theoretically,
32-540 O-84--38
PAGENO="0594"
590
substantial amount for syndication rights. Theoretically,
this kind of situation could deprive the networks of access
to programming that they would otherwise like to purchase.
However, neither the Network Inquiry Report nor the
Notice presents any data to indicate that this is a real
problem, let alone a serious one requiring remedial action
by the Commission.
C. The Need For a Record
If the Commission wants to change its policies with
respect to network financial interest in and syndication of
programs, it must provide a reasoned explanation why such
changes are necessary. See, ~ CBS v. FCC, 454
F.2d 1018, 1026 (D.C. Cir. 1971); Greater Boston Television
Corp. v. FCC, 444 F.2d 841, 844-45 (D.C. Cir. 1970). The
Commission is not required to provide irrefutable evidence
that it can, with certainty, predict the future and identify
all the problems that will arise if any course of action is
or is not followed. Telocator Network of America v. FCC,
No. 78-2218 (D.C. Cir. October 5, 1982) slip op. at 27-35.
Nonetheless, the Commission must make an effort to find some
evidentiary basis for its public interest judgment and must
take into account evidence that runs contrary to its
proposals. Home Box Office, Inc. v. FCC, ~
Here the Commission should be wary of the proverbial
"parade of horribles" that interested parties can proffer to
PAGENO="0595"
591
urge a particular course of action on the Commission. The
Commission should require that parties with the facts --
e~pecially the producers and the networks -- provide
specific case histories and other data to support their
conclusions. It is worth recalling here that virtually none
of the risks advanced by opponents of the rules in 1970 have
come to pass. ~ at 27-28.
In this context, the Commission should give particular
attention to the views of independent television stations
and small independent producers, like People for the
American Way. They are among the intended beneficiaries of
the financial interest and syndication rules. If they have
evidence and otherwise express concern about retention of
the rules, it would indicate that the rules may not be
working as intended. Conversely, if those groups urge
retention of the rules, it would indicate that the rules are
having their intended effect.
Finally, the Commission should not act now merely
because there is a possibility such action would be
appropriate in the future. Many network executives and
authorities believe that, by the end of the decade, the
network share of audience will stabilize at about sixty
percent. See, ~ Speech by Thornton Bradshaw,
Chairman, RCA Corporation, to the Academy of Television Arts
PAGENO="0596"
592
& Sciences (April 12, 1982). If this forecast materializes,
it may -- or may not signal that the networks have lost
their dominant position and that the rules are no longer
necessary. Any judgments on that score, though, should rest
on established facts -- not speculation about future
developments.
The need for facts is especially important since the
nature of any corrective action should depend on the
specifics of the actual circumstances. For example, a
future record might warrant only modification rather than
total repeal of the rules. Thus, the Commission might allow
the networks to obtain passive financial interests in
syndications and other off-network runs. Under this type of
proposal, the network would have no role in determining the
timing or contractual terms of any off-network sales; that
would remain within the producer's domain. This kind of
proposal would minimize the networks' conflicts-of-interest
but still allow them to share in the profits of programs
that they thought were "good bets."
Conclusion
WHEREFORE, in view of the foregoing, it is
respectfully recommended that the Commission retain the
financial interest and syndication rules unless the record
evidence overcomes indications that the rules are
benefiting the production and availability of programs from
diverse sources.
Respectfully submitted,
Grove, Engelberg & Gross, P.C.
2033 M Street, N.W.
Washington, D.C. 20036
202/452-1930
Attorneys for People for the
American Way, et al.
By:_____
Lewis Pap
laudia Ribet
January 26, 1983
PAGENO="0597"
593
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PAGENO="0598"
594
Before the T
Federal Communications Commission
Washington, D.C.
In The Matter Of:
Amendment of 47 C.F.R. ~ 73.658(j); ) BC Docket No. 82-345
the Syndication and Financial
Interest Rule )
COMMENTS OF THE COMMUNICATION COMMISSION OF THE NATIONAL
COUNCIL OF THE CHURCHES OF CHRIST IN THE U.S.A. AND THE OFFICE OF
COMMUNICATION OF THE UNITED CHURCH OF CHRIST
Introduction
On July 21, 1982, the Commission issued its Notice of
Proposed Rulemaking to review the network financial interest
and ~syndication rules, 47 C.F.R. ~ 73.658(j). These rules,
adopted in 1970, prevent the three television networks from
obtaining domestic or foreign syndication rights or any
financial interest in the subsequent non-network broadcast of
network television programs. The Commission invited comment
on whether the rules should be repealed. modified, or retained.
It cited the analysis of the Network Inquiry Special Staff
("Special Staff"), who argued in their 1980 Report 1/ that
the rules were misguided and had not achieved their intended
results. The Commission also noted the impact of tech-
nological developments in television since the adoption of
1/ An Analysis of Television Production, Acquisition, and
~istribution, Preliminary Report in Docket No. 21049, June
1980 (hereinafter, "Staff Report").
1609 CONNECTICUTAVENUE NW. WASHINGTON, D.C. 20009
(202)232-4300
PAGENO="0599"
595
Dear Friend:
Media Access Project considers the pending rulemaking concerning pos-
sible repeal of the FCC's network financial interest and syndication rules to be
one of great potential significance. Our comments, filed on behalf of the Communi-
cation Commission of the National Council of the Churches of Christ in the USA and
the Office of Communication of the United Church of Christ may well be of interest
to you.
Broadcasters are licensed to serve the public interest, which the
Supreme Court has equated with the right to receive information about the moral,
esthetic and cultural diversity of elements which make up American society. The
FCC's financial interest and syndication rules are not perfect, but they have
worked. As a direct consequence of their adoption in 1970, the American public has
received television programming which better reflects the values of the many
different communities in our culture. The rules have also contributed to the
strength of independent television stations. For all their weaknesses, the inde-
pendents have proven to be more responsive to community needs, and only they have
sought to serve the special audience segments - such as minorities, the old and the
young - which have generally been ignored by the networks and their affiliates.
Sincerel
Andrew Ja17~~Ertzman
Executive D~ector
1609 CONNECTICUTAVENUE, N. W. WASHINGTON, D.C. 20009
(202)232-4300
PAGENO="0600"
596
the rules, and solicited comments on whether these develop-
ments made the rules unnecessary.
The Communication Commission of the National Council of the
Churches of Christ in the U.S.A.* and the Office of Communica-
tion of the United Church of Christ,** by their attorneys,
Media Access Project, oppose repeal. The rules were adopted
to promote competition and diversity in the television pro-
gramming available to the public. The Commission quite
properly recognized this as a matter of public interest
concern; without competitive and diverse sources of programming,
television -- the most pervasive communications medium in our
society -- impairs the fundamental First Amendment "right of
the public to receive suitable access to social, political,
esthetic, moral, and other ideas and experiences." 2/
* The National Council of the Churches of Christ in the
USA is a cooperative agency of 31 Protestant and Orthodox
communions in the United States. Its menber communions
have charged the NCC "to study and to speak and act on
conditions and issues in the nation and the world which
involve moral, ethical and spiritual principles inherent
in the Christian Gospel." The governing board does not
claim to speak for all the members of its member churches,
but they express the considered judgment and position of
the representatives of those churches sitting for that
purpose as the governing board. The Communication Commiss-
ion is the agency of the Council which speaks for the
Council in the area of communication in the mass media.
** The Office of Communication is a national instrumen-
tality of the Church which is charged by the Church
Constitution to conduct a ministry in the mass media. The
Office of Communication has participated in numerous pro-
ceedings of the Federal Communications Commission over
several decades to further the goals of equity and
diversity in broadcasting and cable television.
2/ Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969).
PAGENO="0601"
597
The National Council of the Churches of Christ and
the United Church of Christ consider it vitally important
that the television program marketplace be structured to.
insure maximum protection of this right. Repeal of the
rules on the basis of pure speculation would be dangerously
disruptive.
PAGENO="0602"
598
I. Factual and Theoretical Basis For The Rules
Any discussion of 1~ow the financial interest and syndi-
cation rules have worked during the past decade requires a
careful assessment of what they were intended to do. Critics
of the rules have claimed they were "misguided" from the
start. But the argument is based on a subtly slanted view of
both the problems which gave rise to the rules and the intent
of the rules themselves. This allows for a theoretical "crit-
ique' of their function which quickly becomes little more
than tautological.
A. The Commission's 1970 Factual Findings Were
Conclusive
The FCC adopted the financial interest and syndication
rules after over a decade of inquiry into the networks' role
in programming and syndication. In its initial Notice of
Proposed Rulemaking 3/ and its eventual Report and Order, 4/
the Commission described in great detail the evolution of
network power in these areas. It relied upon data supplied
by the networks themselves, as well as by other sources, to
document the harmful effects of this power. The evidence
was conclusive:
3/ Competition and Responsibility in Network Television
Broadcasting, 30 Fed, Req. 4065 (March 27, 1965).
4/ Competition and Responsibility ~in Network Television
Broadcasting, 23 FCC 2d 382 (1970), modified on reconsidera-
tion, 25 FCC 2d 318 (1970).
PAGENO="0603"
599
(1) With the decline in advertiser-licensed pro-
gramming on the networks, producers were
compelled to bargain directly with the net-
works to get their programs on the air. 5/
(2) I~etworks used their monopoly powers in the
bargaining process to extract valuable rights
from producers, and then systematically se-
lected programs in which they had obtained
those rights. 6/
(3) This not only prevented producers from recoup-
ing costs, but also allowed the networks to
exercise extraordthary predatory power in the
syndication market at the expense of their
major competitors, the independent television
stations. 7/
The Commission's conclusions were strongly stated, well
grounded and decisively adopted. The action withstood comp-
rehensive judicial review. 8/ It was further buttressed by
the Justice Departments similar assessment of the evidence,
5/ 23 FCC 2d at 387. See also, 30 Fed. Reg. at 4067-4069.
6/ 23 FCC 2d at 389, 393.
7/ Id. at 392-394.
8/ Mt. Mansfield Television, Inc. v. FCC, 422 F.2d 470 (2d
air. 1971).
PAGENO="0604"
600
which led to lawsuits against the three networks and consent
decrees forbidding anticompetitive practices. 9/
Notwithstanding this history, the Commission's current
rutemaking seems to raise the whole question all overagain.
The Special Staff suggests that the Commission was theor-
etically misguided in its perception of the television in-
dustry. Similarly, the networks now argue that they did not
wield any pernicious power over programming and syndication
before the rules were adopted.
This is an exercise in historical and regulatory revis-
ionism. It is both misleading and inappropriate. Any Com-
mission attempt to second-guess its own factual findings of
twelve years ago flies in the face of an overwhelming record.
It requires the Commission to overthrow carefully considered
precedents for the sake of theories which are at best murky
and sometimes suspect. This can only detract from efforts
to maintain stability and predictability in the regulatory
environment.
9/ U~iited States v. National Broadcasting Co., 449 F. Supp.
1127 (C.D. Cal. 1978), aff'd mem., No. 77-3381 (9th Cir.
April 12, 1978), cert. denied sub mom, CBS, Inc.v. U.S.
District Court for Central District of Calif., 48 U.S.L.W.
3186 (1979); United States v. CBS, Inc., Civ. No. 74-3599-RJK
(C.D. Cal. July 31, 1980), reprinted in 45 Fed Reg. 34,463,
34,466 (1980); United Statesv. Ameri~in Broadcasting Companies,
Inc., Civ. No. 74-3600 RJK (C.D. Cal.) reprinted in 45 Fed.
~ 58441 (1980).
PAGENO="0605"
601
In fact, the suggested reasons for reexamining the
pre-rules environment were addressed directly by the Commis-
sion twelve years ago. A number of these claims share an
important flaw -- they ignore that the rules were designed to
stop incipient problems before they got worse. For example,
the networks have argued that they did not "dominate" the syn-
dicatiori market before the rules, noting that there were many
programs in which they did not acquire full syndication
rights. 10/ This raises a false issue because the Commission
did not claim that such total domination had yet occurred.
Nonetheless, it found the situation to be extremely "unhealthy~'.
The networks ~`accepted virtually no entertainment program
in which they did not have financial interests in syndi-
cation and other subsequent use," even if they did not obtain
the rights in full. 11/
Even more disturbing, the situation was deteriorating.
Commission action was needed because network involvement in
syndication was increasing rapidly and app~rent1y without
limits. In the 1960's, syndication was still a relatively
small part of the program industry, but the Commission was
10/ See, Network Syndication - Financial Interest_Rules, CBS
~ pa~ presentation to the Commission, June 1982.
11/ 23 FCC 2d at 394, 392.
PAGENO="0606"
602
well aware that the growing market would make future syndica-
tion rights even more valuable to the networks. If syndica-
tion were to become more profitable, nothing would stop the
networks from taking as big a share as they desired. 12/
Sound policy is predicated on preventing harm before it
happens: the Commission did not have to await catastrophe
before taking action.
Similarly, the Special Staff argues that the networks
did not "extort" program rights and interests from the pro-
ducers, but legitimately paid for them by supplying more
up-front financing and reducing producer risks. 13/ Quid
pro quo arrangements of a sort did exist, 14/ but the Commis-
sion found that in practice producers got very little in
12/ The Commission's concern about the future was evident in
1965: "CI]t . . . appears that the potential expansion of
both domestic and foreign markets for American television
programs is great. . . . Unless more competitive opportunity
is provided for independent television program producers, it
seems inevitable that network corporations will expand their
control of these markets." 30 Fed. Reg. at 4070.
In 1970, the Commission again noted: "While they do not con-
stitute a principal part of overall revenues, revenues accru-
ing to networks from syndication acitivities are substantial
and are increasing." 23 FCC 2d at 392.
History has justified the Commission's apprehension. If
anything, the potential for network domination of the syndi-
cation market is greater now than ever before, because of
the tremendous explosion in revenues from syndicated programs
-- a tenfold increase in the last decade.
13/ Staff Report at 253, 474-475.
14/ 30 Fed. Reg. at 4068.
PAGENO="0607"
603
exchange for what they gave up. Even when the networks had
the incentive to pay more "up front," according to the theory,
producers still could not recoup their costs from network
exhibition alone. 15/ Even more damning, the Commission
found "no necessary relation between networks providing
developmental financing and their acquisition of syndication
* . . and/or profit-sharing rights." 16/ The socalled
"risk sharing," which the rules now prevent, worked less
well in reality than in theory: the networks took more of
the profits without meaningfully reducing the producers' risk.
B. The Rules Are Modest In Scope And Not Overly
Intrusive.
Given the strength of the Commission's own findings, and
the vast amount of evidence subsequently amassed by the Jus-
tice Department, the Commission cannot credibly conclude
that network power over programming and syndication was not
a problem in the first place. However, there has also been
theoretical criticism of the rules on a different, and some-
15/ 23 FCC 2d at 398. The Special Staff argues that the
networks must have been paying enough for the producers to
survive on, making it irrelevant whether they paid enough to
make up the producer's costs after the network exhibition.
Staff Report at 265. However, the issue is no whether
producers can somehow survive on the network's terms, but
whether producers will be able to generate more quality and
diversity in programming if they cannot retain rights in
their programs. As the Commission stated: "The fact that
over the years the producers have perforce adjusted their
methods of doing business and have learned to live with this
situation in no way changes the essentially oligopolistic
nature of the situation." 23 FCC 2d at 389.
16/ 23 FCC 2d at 388.
PAGENO="0608"
604
what inconsistent basis. The Special Staff argues that if
the networks were exercising monopsonistic power in the
program market, the rules could not alter this fact. *The
rules remove several issues from the bargaining table,
the Staff asserts, but they do not affect the fundamental
bargaining power of the networks. Interestingly, the Staff
Report suggests that the only way to reduce network power
over programming is to go to the source of that power --
i.e., to break up the network monopoly. 17/
This argument has some merit. The networks have an
inherent advantage as buyers of programs because of their
historically unique access to virtually the entire universe
of television viewers. Only the networks have been able to
use simultaneous interconnection of affiliates in all major
markets, supported by a nationwide advertising base. This
structural advantage has little to do with the free market,
but is the result of regulatory decisions made by the Commis-
sion thirty years ago which effectively limited the possible
number of permanent television networks to three. 18/ For
better or worse, the rules (and the Justice Department's
17/ Staff Report at 226, 270. The Special Staff voices
similar criticism of the Justice Department approach: "If
the network practices attacked in the decree reflect the
exercise of monopsony power, the only sensible remedy is to
strike at the source of that power." Id. at 461.
18/ See Fowler and Brenner, A Marketplace Approach to Broad
cast Regulation, 60 Texas L. Rev. 207, 223-224 (1982).
PAGENO="0609"
605
consent decree) do not tamper with the structure of the
networks themselves. No one disputes that the networks have
retained much of their inherent power under the present
regulatory scheme.
However, it is a mistake to fault the rules as "mis-
guided' for not being able to bring about more fundamental
alterations of the television marketplace. This incorrectly
implies that the Commission intended to stimulate radical
change. The structure of the rules themselves and the Com-
mission's statements upon adoption suggest otherwise. This
does not mean that the rules have worked exactly as intended,
or that all the Commission's objectives have been realized.
But it is easy to turn the argument into a tautology: asser-
ting "objectives" which the rules were not expected to achieve,
and then faulting the rules for failing to achieve them.
The Commission adopted the financial interest and syndi-
cation rules as part of a package, which also included the
prime time access rule ("PTAR'). (Although PTAR is not an
issue in this proceeding, it is important to remember that
the Commission considered all three rules to be essential
to the accomplishment of its objectives.) The simultaneous
adoption of the three rules, the Commission hoped, would
lead to a more vigorous and independent program supply indus-
try, able to provide diverse and creative programs both on
the networks and in first-run syndication. Network control
0 O-84--39
PAGENO="0610"
606
of its own programming would be reduced, and competitive
non-network alternatives would develop as well. 19/
These goals may seem far-fetched. In hindsight, it
appears that the Commission on occasion indulged in wishful
thinking: e.g., its speculation in 1965 that the rules might
lead to creation of a fourth network. 20/ But the Commission
was certainly not as woolly-headed as some have made it out
to be. It defined its actions as "modest" 21/, and it care-
fully noted that the three rules were not intended to tamper
with the basic function of networks as programmers. 22/
If one examines the rules in this perspective, their
suitability to the Commission's objectives becomes much
clearer. Just as important, the rules are compatible with
current regulatory theory and objectives. The Commission
did not attempt massive interference in the marketplace, or
highly technical and complex rules which would create serious
enforcement problems. Instead, it adopted a modest, self-
enforcing, structural approach, which would redirect the
forces of the marketplace without trying to transform them.
19/ 23 FCC 2d at 398.
20/ 30 Fed, Reg. at 4071. However, there was at least one
serious attem~p~ to create a fourth broadcast network in the
1970's by Paramount and Hughes Television. The attempt was
considered feasible in large part because the rules were in
place.
21/ 23 FCC 2d at 395.
22/ 30 Fed. Reg. at 4071.
PAGENO="0611"
609
respect to their competitors' programming, they should have
no influence çver program selection or content at all. 24/
Therefore, the Commission eliminated these built-in conflicts.
Once again, the intent of the rules is limited: the Commis-
sion did not tamper with the networks' prerogative to select
their own programming and make content-based decisions about
it. 25/ But even a limited rule could circumscribe still
greater creative interference by the networks, and give
diversity in programming a fighting chance.
This aspect of the rules must be stressed because so
much theoretical criticism of the rules has been based exclu-
sively on free market theories and currently fashionable
considerations of economic efficiency. The Special Staff
and others have argued that the rul~es were economically
unnecessary because supply and distribution of the "product"
24/ "[T]he presence of the networks as domestic syndicators
Ii inherently undesirat4~. They are in the position of
selling programs to independent stations in competition with
their . . . affiliated stations, and they compete against
independent syndicators in the affilliated-station market
where they have a permanent advantage...." Id. (emphasis
added). Even if the networks do not dominate the syndication
market, their very involvement inevitably affects the avail-
able supply of programs which stations can select as non-
network alternatives. Not only can the networks use their
position to affect competition, but they also have a poten-
tial role in deciding the content and diversity of all over-
the-air programming, not just original network programming.
The Commission felt these were decisions best left ot others,
free from network influence.
25/ 30 Fed. Reg. at 4071.
PAGENO="0612"
610
-- television programs -- already met conventional standards
of market competition and efficiency. 26/ Aside from the
merits of this argument, it completely overlooks the Commis-
sion's other, larger concerns in adopting the rules.
The Commission did not enter the program arena merely to
promote economic competition for its own sake, but to protect
the public's right to receive diverse and competing ideas in
its television programming. To do so, it was necessary not
only to regulate the networks' economic power, but to insu-
late creative competition from the possible effects of that
power. If the Commission were dealing with soybeans or
silicon chips, such considerations would be irrelevant, and
the conflict of intex~est rationale would make little sense.
But the Commission is responsible for protecting the market-
place of ideas, in which diversity and competition are ends
in themselves, not just the means to a more efficient system
of distributing a "product." The public interest in receiv-
ing competing ideas is not necessarily served by the pur-
chase of programs from the lowest bidder in a market which
responds only to economic forces. Other values must be
protected, both in the promotion of competition among poten-
tial suppliers of programs, and in the process by which
programs are selected,
26/ Staff Report at 272-301.
PAGENO="0613"
611
The present Commission can, of course, decide that the
public interest would be adequately protected by a "pure" free
mat~ket approach. However, such an approach must be openly
declared and justified for what it is: a major departure
from the policies and objectives upon which the Commission
based the rules in 1970. This is not done by restating the
objectives of the rules to fit current theoretical predelic-
tioris, so that they can then be superficially dismissed as
"misguided." If the Commission does not deal squarely with
the rules in terms of their original purposes, it substitutes
sophistry for policymaking, and conceals the fact that many
of those purposes have been achieved.
II. Im~pact0f The Rules
The question of whether the financial interest and syndi-
cation rules have worked is strenuously debated. Various par-
ticipants in this proceeding argue that the rules have had a
positive effect, a negative effect, or no effect at all.
Although the question is in many respects highly technical,
several general conclusions may be drawn which indicate that
the rules have made an appreciable difference for the better
in the television industry. They have accomplished some,
though not all, of the Commission's objectives. In contrast,
the negative consequences predicted by some opponents of the
rules, these simply have not occurred. Had the rules not
PAGENO="0614"
612
been in existence, the state of diversity and competition in
the industry would be considerably worse. 27/
A. The Rules Have Contributed To A Changed Marketplace.
There is considerable dispute about whether the rules
have worked in the public interest, but there should be
little disagreement that the television industry has changed
considerably since they were adopted -- and that some of
these changes are directly attributable to the rules them-
selves. In a strictly mechanical sense, the rules have
"worked~ -- that is, they have been adhered to by the net-
works. 28/ As a result, the networks are no longer involved
in syndication or foreign distribution of programs. The
`vacuum' left by the networks has allowed producers, syndi-
27/ Some of the comments in this section are based on inter-
views by the Media Access Project with producer, syndicators,
and distributors of television programs. The repsonses by
no means represent a statistical cross-section of the industry,
but many of the issues addressed in this proceeding require
more than statistical analysis -- if indeed statistical anal-
ysis is even possible. If the Commission is to thoroughly
understand the impact of the rules and the possible impact of
their repeal, it must look beyond theory to the actual exper-
iences and attitudes of those who will be providing the
public with programs.
28/ This does not mean there has been no disagreement over
interpretation or application of the rules. Current program
contracts routinely include long-term option and exclusivity
clauses, which producers contend should be prohibited by the
rules. See Staff Report, Appendix B. Notably, the Cominis-
sion hasiimited the effectiveness of the rules by adopting
a narrow interpretation of their scope. See CBS, Inc., 87
FCC 2d 30 (1981), aff'd sub nom, Viacom International v.
FCC, No. 814119 (2d Cir., Feb. 9, 1982); Christian Broadcast-
i~ Network, 87 FCC 2d 45 (1981).
PAGENO="0615"
613
cators, and competing stations to benefit from the distribu-
tion of successful network programs in the foreign and domes-
tic syndication markets. Under the rules, the economic poten-
ti~l of these markets has burgeoned. In particular, the
independent television stations have increased in number and
competitiveness, especially in cities where network owned sta-
tions have been dominant, further improving the market for
both new and off-network syndication. 29/
Obviously, other factors besides the rules have contri-
buted to the changed environment. As the Commission intended,
the expansion of first-run syndication has been aided primar-
ily by affiliate prime time access programming. PTAR has
also enhanced the position of independent stations by giving
them a respite from network competition (though it should be
pointed out that the prime time access period is also the
most lucrative daypart for network affiliates). The inde-
pendent stations have benefitted from advances in technology,
the growth of the overall television audience, and increasing
advertiser acceptance of independent stations. Similarly, the
foreign television market has expanded in part for independ-
ent reasons.
Still the rules have contributed significantly the to im-
proved marketplace. They have made off-network programming
29/ Staff Report at 148.
PAGENO="0616"
614
more freely available, particularly to independent stations.
Before the rules, the networks could determine when to release
syndicated programs, could channel them to affiliates instead
of independents, and could control the time and frequency of
broadcast. Now, however, the market is open, and the result
is much improved sources of program supply for the independ-
ents. This has contributed vastly to their ability to com-
pete on fair footing with the networks. In turn, greater
competition has contributed to the expanded value of the
syndication market, which magnifies the impact of the rules
further.
Of course, the more pertinent question is whether these
developments have furthered the Commissions higher object-
ives. The rules were not adopted merely to reallocate prof-
its for the sake of private interests, but to protect and
generate diverse sources of programming in the public inter-
est. The Commissjbn intended reallocation as a means to
certain ends, and it is on the accomplishment of those ends
that the rules must be judged.
Not suprisingly, opponents of the rules contend that
none of the Commission~s higher objectives have been achieved.
In particular, the Special Staff argues that the rules have*
not improved program diversity or competition in the supply
mai~1cet. 30/ In the wake of the rules, a great deal of syn-
30/ Id. at 468-469.
PAGENO="0617"
615
dicated programming (outside the prime time access period)
has continued to be off-network reruns, with less new devel-
opment of first-run syndication than the Commission had
hoped. In the network programming market, the networks
claim producers have been harmed by the rules. Because the
networks no longer offer a `premium" for syndication and
subsidiary rights, it is asserted that smaller producers
have been squeezed out of the industry for lack of adequate
financing. The major beneficiaries, argue the networks,
have been the major Hollywood studios, who have grabbed a
greater share of the market because only they have the where-
withal to sustain the enormous risks of production. 31/
These argunents distort both the intended and the actual
impact of the rules. In the first instance, they overlook
the rules' preventive function, discussed previously. 32/
It is misleading to confine the issue to how the rules have
changed the program industry. The other half of the issue
is what would have happened without the rules in place. By
definition, the networks have been unable to continue prac-
tices that they were using with increasing frequency during
31/ See Network Syndication - Financial Interest Rules, CBS
ex parte presentation to the Commission, June, 1982.
32/ See pp. 13-17, supra.
PAGENO="0618"
616
the 1960g. But there is ample reason to believe that the
competitive situation would have worsened substantially if
no-action had been taken.
Certainly there was nothing to prevent the network from
engulfing the competition in the syndication industry. Syndi.-
cators in business before the rules went into effect remain
adamant about the threat which the networks posed. Some com-
petitors went out of business, and others faced a very bleak
future. The networks could take as much as they wanted, and
they had increasing incentive to take more and more. Sim-
ilarly, producers who dealt with the networks before the
rules lacked the leverage to protect their syndication rights,
even as these rights were becoming more valuable and attract-
ive to the networks. Of course, as the Staff Report suggests,
producers could always "threaten" to go out of business rather
than accept network terms. 33/ Unfortunately, this is the
sort of "leverage" that operates more effectively in econ-
onists' classrooms than in the actual marketplace.
Speculation about "what would have happened' has its
risks, but the pattern of the network behavior before the
rules were adopted could not be clearer. With syndication
becoming more valuable and competition from independent
stations increasing, it would be naive to assume that the net-
works would not have tightened their grip on the production
and syndication market -- no one had the power to stop
33/ Staff Report at 334.
I-
PAGENO="0619"
617
them. The rules eliminated this risk entirely. Simply by
protecting these markets from further depredation, they
"worked" to preserve competition and alternatives to the
networks.
Beyond this, though, the rules have generated substan-
tial positive changes in television programming. Not only
have they improved economic diversity and competition in the
program industry, they have improved the creative climate in
which producers operate. Both indirectly, by aiding independ-
exit syndicators and stations, and directly, by aiding produc-
ers themselves, the rules have moved the program production
industry in the direction intended by the Commission. The
networks remain strong, of course, but they no longer threaten
the public with an economic and creative stranglehold over
television.
B. Today's Independent Syndication Market Is Vigorous
And Diverse.
The independent stations, clearly, have reaped a direct
benefit from the rules. Whatever the role of other factors,
the independents would be in considerably worse shape if the
rules had not made network programs more freely available for
off-network syndication. The ability to obtain programs such
as "Barney Miller" and "Happy Days' without network interfer-
ence has contributed vastly to their competitive position.
The availability of these programs is in itself a signifi-
cant accomplishment of the rules: they are generally programs
of higher-than-average quality and are clearly a popular
PAGENO="0620"
618
alternative for much of the public. But it is a mistake to
assume that this is the 2!~~ real consequence of the rules
--: and a questionable one at that, given the Commission's
misgivings about off-network syndication at the time it
adopted the rules. 34/
In fact, the importance of off-network syndication, as
it has developed under the rules, lies as much in the second-
ary consequences it generates. Under the rules, more of the
benefits of off-network syndication have been diverted to
independent stations, instead of the networks and their
affiliates. This is essential in order to promote a better
market for other types of syndication as well. As the Com-
mission accurately noted, the independents are necessarily
the "backbone" of the syndication industry. 35/ To the
degree that they become healthier and more competitive,
they will be more able to buy better quality original pro-
gramming to compete with the networks. Thus, the freeing up
of off-network shows has not simply forced the networks to
compete more often with their own schedules of five years
before; indeed, it has allowed the independents to foster
other forms of competition.
As evidence of this, one need only look at the present
state of the syndication industry. The advent of PTAR and
34/ 23 FCC 2d at 385.
PAGENO="0621"
619
the departure of the networks from syndication left a consid-
erable 0vacuum" for others to fill. The vacuunt was filled
by a wide variety of established and new syndicators, all
competing in a more wide-open environment because of the
absence of network competition. Although there has been some
"shakeout' among syndicators since the early 1970s, the en-
vironment remains vigorous and competitive. 36/ Furthermore,
the increase in competition has had important consequences.
Many syndicators are providing first-run syndication in the
improved market provided by independent stations. Some of
these are off-network syndicators as well, who can in effect
use off-network revenues to finance original programming. 37/
This would not have happened if syndication were controlled
by the networks instead of independent syndicators: they are
hardly likely to underwrite programming for the competition. 38/
36/ Staff ~eport at 293-301.
37/ The number of off-network syndicators who produce first-
run syndication as well is still small. Universal and Para-
mount have produced programs for syndication. and others
such as Norman Lear have experimented with it. The fact
that this is happening at all, however, is significant.
Furthermore, there is the possibility for first-run syndica-
tion to expand as long as the independent stations maintain
a secure revenue base from off-network programs.
38/ Perfect examples of this are Viacom and Worldvision,
created from the syndication arms of the networks when the
rules required the networks to divest them. Both are now
producing first-run programming, which competes against that
of their former network `parents.'
PAGENO="0622"
620
It is difficult to assess the qualitative changes that
have taken place in syndicated programming since the rules
were adopted. However, independent stations are not simply
filling their schedules with off-network programs; original
syndication has occurred, and indeed has diversified. Be-
sides off-network, independent stations are running talk
shows, documentaries, specialized music shows, original
specials, and other formats with greater frequency than was
likely before the rules were adopted. In a non-regulatory
framework, one can quibble about the quality of some programs
-- for example, the much-maligned game shows -- but the in-
crease in diversity is the best indication of higher quality
over the long run.
Obviously, the rules have not been totally successful.
The Commission most likely would have preferred less reliance
by independents on off-network syndication and more develop-
ment of first-run programming. Another Commission goal that
has run up against obstacles is the development of first-run
syndication on network affiliates (outside the prime time
access period): although ventures such as Operation Prime
Time and Mobil Showcase Network have made headway, affiliates
remain highly unlikely to desert their network suppliers on
more than an occasional basis. But the existence of unreal-
ized objectives should not obscure the changes that have
occurred. The financial interest and syndication rules
PAGENO="0623"
621
have aided independent stations and stimulated a more vigor-
ous syndication industry. In conjunction with PTAR, they
have created a stronger program market for first-run syndica-
tion, creating more opportunities for program producers.
This has led to a greater diversity of program types, and
considerably more flexibility in the non-network program
"menu.~'. The general trend is in the direction intended by
the Commission, and there is room for change and experimenta-
tion in the future.
C. The Rules Protect Creative_Incentives For Producers.
The rules were intended not only to stimulate non-
network programming alternatives, but to promote competition
and creative diversity in network programming as well. In
fact, the rules have benefitted network producers directly
in several ways which have furthered the public interest.
Although critics of the rules insist this is economically
impossible, it is important to remember that more than pure
economics is at stake. The economic changes brought about by
the rules are significant not only for their own sake, but
for the creative consequences which ensue.
The Staff Report may be accurate in depicting one way
in which the rules have affected the network-producer rela-
tionship. 39/ Under the rules, the producer cannot use
syndication and subsidiary rights as a means of spreading
39/ See generall_y Staff Report at 347-359.
32-~4O O-84--~-4O
PAGENO="0624"
622
the risk" with the networks. By retaining these rights the
producer retains the risk that they will be worthless,
preventing him from recouping production costs and turning
a profit. The risk is substantial: only a small percentage
of program ideas are developed into network series, and
only a small percentage of those series become suitable for
syndication. Superficially, the inability of the networks
to pay a premium in advance and share this risk would appear
to make the producer market less attractive and therefore
less competitive, than it was before the rules.
However, reality has apparently ignored the theory. For
a variety of reasons, the advent of the rules has not brought
about less competition among network program producers. One
reason is that very little meaningful risk-sharing went on in
the first place. 40/ From the producer's point of view, pro-
ducing network programs has always been a fantastioally
speculative business. The network could take a share of
the profits before the rules, but this did not make produc-
tion a "safe bet" for the producer. For the financially
prudent and cautious, program production has never been a
low-risk investment, even when the networks supposedly
could take away some of the risk. For those willing to
compete as producers in spite of the odds, there was really
very little to lose by the rules. Quite the contrary: the
40/ See pp. 7.~8, supra.
PAGENO="0625"
623
creative community seemed to welcome whatever additional
risk it was taking on, and it continues to flourish in spite
of, or perhaps because of it.
This suggests another reason why the rules have not
brought about the predicted negative consequences. With the
possible exception of casino gamblers and professional sports
team owners, there is perhaps no group less likely to behave
like the ostensibly rational beings of economic theory than
the people who create and produce television programs, par-
ticularly those who have not firmly established themselves.
The odds against being successful are such that, facetious-
ness aside, one has to be a little bit crazy to try. 41/
Nonetheless, indications are that there are plenty of people
41/ The Staff Report generally assumes that program produ-
cers and the three networks are -- to use standard economic
jargon -- equally risk averse. The Report cites no evidence
of this. Indeed, it appears to ignore the simple fact of
life that producers must take risks of an entirely different
magnitude from those which the networks take. For producers,
the obstacles to success are such that they simply cannot
afford to be risk averse. For the networks, even an unsuc-
cessful program is not an extraordinary risk, because adver-
tising revenues will absorb much if not all of the cost.
The Staff Report briefly considers that producers night
not be risk averse, and argues that the rules have "rio effect"
in such a case because the networks will certainly allow pro-
ducers to take all the risk -- i.e., retain syndication
rights -- if they really want to. Staff Report at 474, note
2. This misses the point entirely: syndication rights do not
carry unwanted risk which the networks assume out of generos-
ity; they are a valuable commodity which the networks are
eager to take even from producers who willingly take the risk
inherent in keeping them.
PAGENO="0626"
624
who do try. This includes minorities, women, and purveyors
of nontraditional or sensitive ideas: underrepresented
groups who have traditionally had trouble breaking into pro-
gram production. It also includes a large number of small,
independent producers, some of whom have had intermittent
success getting programs on the air, but all of whom still
face considerable obstacles. Cost/benefit analysis alone
does not dictate the decisions of these people. Such non-
economic considerations as prestige, ego commitment to a
cause, and desire for exposure, even in a money-losing yen-
ture, also motivate their conduct.
For the Commission's goal of diversity in programming
to be realized, these are the people who must have the incen-
tive to remain in the business. Without them, there is a
loss of creative ferment in the industry, and a diminution
in the number of ideas competing to become programs. This
is exactly what the rules have prevented. They have helped
a few small production companies to become well-established
and successful, because they were able to translate initial
network success into substantial returns in syndication and
subsidiary markets. Even more important, though, it is the
possibility of such success --- despite the odds -- which
has encouraged many others to stay in competition. Without
the rules, the networks would be able to buy programs out-
right, and would be particularly likely to do so when dealing
PAGENO="0627"
625
with a small or untried producer. The rules,guarantee that
no producer need give up full ownership of a program idea in
order to get it on the air. According to many people in the
creative community, this is an essential protection. 42/
Without the guarantee of a proprietary right in one's work,
there would be no prospect of capitalizing on its success.
Although the networks would still be able to obtain program-
ming, the incentives for producers would be such that fewer
of them would compete to supply it.
D. More Financing Alternatives Are Available To
Producers.
The rules have provided an incentive to the creative
community by making entry more attractive, notwithstanding
that economic theory insists it should not matter. Of
course, incentive alone is not enough to sustain creative
competition; financial support is necessary as well. In
42/ A prominent producer is quoted as saying: "I would
rather take the risk and get the reward than go into a system
where they own my soul, protect my down side, but there's
nothing meaningful on the upside." "Repeal Worries Hollywood,"
Electronic Media, Dec. 23, 1982, at 3, 22. This was the
overwhelming consensus of producers interviewed during the
preparation of these comments. The prospect of more finan-
cial support from the networks was greeted with considerable
skepticism. While the networks might finance a few new
ventures if allowed back into syndication, this would amount
to little more than the creation of a small "stable" of
house producers, and far smaller chances for entry by anyone
else. Furthermore, increased support from the networks
means increased dependency upon them. If the network owns
the subsidiary rights in a successful program from a new
producer, the producer remains dependent on the network per
capital if it is to become a continuing supplier.
PAGENO="0628"
626
this area, too, the rules have had an impact. Even if the
availability of network financing has diminished somewhat,
other sources have arisen to provide support for producers.
In4eed, the producer has many more options than before,
because the departure of the networks has led to greater
competition among potential bankrollers of creative ven-
tures.
Without question, entry into the market and procurement
of financing remains extremely difficult for smaller, less-
established producers. But the networks have made much of
the supposed "squeezing out" of smaller producers since the
rules went into effect. In fact, there is no evidence that
this has happened. The Staff Report, cited in support of
this proposition, actually found no significant decrease in
competition among producers of network prime time programs
after the rules took effect. 43/ Moreover, the Special
Staff acknowledged the difficulty of ascertaining the full
scOpe of competition: they necessarily focused on successful
producers, and had no data to calculate the number of poten-
43/ The Staff Report cites precious little hard evidence of
the harm to competition supposedly caused by the rules. It
finds only the slightest increase in concentration among suc-
cessful producers, most of which it attributes to the coinci-
dental increase in the number of programs provided during a
given year by a single supplier. Staff Report at 286. While
the Report goes on to insist that the financial interest and
syndication rules may have had a "small" impact on concentra-
tion, it undercuts this conclusion by noting the instability
of the market and the lack of barriers to new entry. Id. at
286-287.
PAGENO="0629"
627
tial entrants into the marketplace. 44/ Yet the latter is
critical to determining whether the marketplace is foster-
ing creative competition and diversity.
Some members of the creative community think that there
are more potential entrants than would exist without the
rules in place. The question is not easily susceptible to
statistical proof. But the networks present a distorted ver-
sion of events by claiming that the only competitors left
are the major Hollywood studios, the networks attempt to
obscure the true nature of competition in the industry.
Institutional labels are deceptive in Hollywood; while there
are certain companies who are clearly "major players" in
production, the actual flow of creative talent is much more
fluid. The major studios have their own "in-house's creative
staffs, but a great deal of production is done by joint
ventures between the studios and smaller independent produ-
cers. It is seriously misleading to categorize these differ-
ent types of transactions as representing economic and
creative monopolization of production by a few monolithic
studios.
44/ "[C]ompetition in the development stage is more extensive
than that for exhibited programs and . . . by focusing on
exhibited programs, we may be overstating the extent of
concentration in program supply." Id. at 288.
PAGENO="0630"
628
Quite possibly, the amount of major studio involvement
in joint ventures has increased under the rules. 45/ For
some small producers, this is not an attractive prospect:
inevitably, they will lose some financial control and crea-
tive autonomy to the larger partner. Nonetheless, there are
advantages as well -- particularly when the alternative for
a small producer is total dependence on one of the networks.
Even the Hollywood "giants's are essentially producers and
promoters of programs, not selectors and buyers. As well-
established suppliers, the studios have both the resources
and the credibility to take some creative risks and aggres-
sively promote them to the networks. 46/ Moreover, there is
some tradition of their doing so -- more so than the net-
works, who are inevitably more susceptible to the pressures
of advertisers and ratings.
Undoubtedly, established producers have not done all
they could to foster and promote the entry of new ideas and
original sources of network programming. They are of course
4~t If this is the ca~, the networks must bear some of the
responsibility. Much as\they may deplore joint ventures, it
is often the networks whc~ insist on them in order to insure
that an untried producer will producer a "network quality"
program. See Id. at 26.-2\7.
46/ Id. at 53.
PAGENO="0631"
629
affected by what the networks are willing to buy, not moti-
vated by pure idealism. 47/ Nonetheless, some producers
find joint ventures with even the largest studios to offer
creative advantages. One reason for this is that all pro-
ducers, large and small, operate in a competitive market-
place. There is more than one major studio to deal with,
and they are all quite competitive with each other. There
are also small and middle-sized production companies, which
have flourished, not disappeared, under the rules. Finally,
there is the large network of syndicators and distributors,
also beneficiaries of the rules.
For the independent producer trying to sell a program,
the road is still difficult, but the marketplace under the
rules offers a variety of options and a little leverage.
Instead of having no choice but to render syndication rights
to the networks on demand, the producer can use them to seek
financial support from larger, more established producers,
or from independent syndicators. Similarly, foreign distri-
bution can bring a direct return to the producer, rather
47/ Many of the major studios are themselves the subject of
legitimate criticism for their failure to address the con-
cerns of minorities, women, and other groups which have
traditionally been ignored or disparaged in film and televi-
sion. But the fact remains that the networks are primarily
responsible for selecting mass-appeal, "lowest common denom-
inator" programming which satisfies national advertisers
but not the interests of underrepresented groups.
PAGENO="0632"
630
than more profits for the networks. 48/ These rights are no
longer hostage to the networks~ demands, but valuable commod-
ities that can be offered in a competitive market. A produ-
cer can solicit many sources of support instead of just one,
making it far more likely that the terms will be equitable
and financial control not completely centralized.
All of this could easily disappear if the rules were
repealed. The Commission did not take syndication rights
away from the networks simply because they were large and
powerful institutions, but because they were the 2!i~ insti-
tutions with the ability to control nationwide programming.
The networks can and will use this leverage on small and
large producers alike, to the detriment of the creative mar-
ketplace. Instead, the rules have enhanced the competitive-
ness of producers at all levels. Large producers have cer-
tainly benefited, but not at the expense of their smaller
competitors. The entire industry has benefited at the
expense of network power.
By generating additional revenues for the creative
marketplace, the rules have had subtle but important effects
on creativity and diversity in programming. There are, of
course, the "success stories: small producers who have
48/ Staff Report at 149, 120.
PAGENO="0633"
631
have become well-established sources of programming with the
help of syndication revenues. But there is also a broader
pattern of creative competition which the rules have encour-
aged. They provide an important incentive to producers, and
they reduce the likelihood that producers will depend on a
single concentrated source for their livelihood. It is of
course hard to measure qualitative changes in television
programming -- though even some of its critics insist that
television quality has improved since the rules were adopted.
49/ That aside, however, the marketplace seems to be doing
just fine under the rules. There are many sources of pro-
gramming and an equivalent variety of program types. There
is no indication that creative competition has declined,
and the creative community has clearly benefited from the
elimination of predatory network practices.
49/ See, ~ Stein, "How To Make TV Worse,' Washington
Post, Dec. 5, 1982, at A24.
PAGENO="0634"
632
III. The "New Medias" and the Rules
In its 1982 Notice of Proposed Rulemaking, the Comnii.s-
sion suggested an alternative rationale to the Staff Report
arguments for repeal. Noting the wide variety of new tech-
nology which has entered the television marketplace, the
Commission posed the possibility that the rules are no longer
necessary. The emergence of new competitors for programming,
such as cable, STy, and DBS, could make it impossible for the
networks to dominate the program market. Thus, the artifi-
cial protection offered to producers would be superfluous:
if the networks continued to use predatory or oppressive
tactics, the producers could always take their programs
elsewhere. 50/
The three networks have taken this rationale one step
further. Not only are the rules superfluous, they argue, the
rules are counterproductive and harmful to the public inter-
est because they undercut the ability of the networks to
compete for quality programming. Cable and other new media
can pay more for programs because they are allowed to pur-
chase syndication and subsidiary rights in those programs.
Therefore, they can pay the "premium" which the rules prevent
the networks from paying. This allegedly draws creative
talent away from "free" -- that is, advertiser-supported --
50/ Amendment of the Syndication and Financial Interest
Rule, Docket No. 82-345 (rd. July 21, 1982), at 14-16.
PAGENO="0635"
633
television to various forms of viewer-supported television
The networks contend that if they are not allowed to compete
for programs on the same terms as the new media, the best
programming will soon be unavailable to those who cannot
afford to pay for what they watch. 51/
This argument raises serious public interest concerns.
If advertiser-supported television is indeed superseded by
viewer-supported television, many segments of the American
public could be threatened with virtual exclusion from the
informational benefits which television provides. The threat
would be greatest for the poor, and would have a dispropor-
tionate impact on underrepresented groups such as minorities
and the elderly. 52/
At the same time, the apocalyptic rumblings of the net-
works bear close scrutiny. Historically, the networks have
worked hard to retard the development of legitimate forms of
51/ See, ~ "The Unsettled Future of Free Television,"
NBC Memorandum (Oct.8, 1982).
52/ The networks display considerable hyposcrisy in champ-
Taming interests for which they have had little concern
historically. It is also demagoguery to cast the new broad-
casting, and other technologies have vastly enhanced the
prospects for specialized and diversified programming respon-
sive to the interests of many different segments of the popu-
lation. Thus, whatever the dangers that cable could deprive
some of programming they now can see for free, such efforts
as the Black Entertainment Network or the Spanish Interna-
tional Network would not exist without cable.
PAGENO="0636"
634
competition, even when network power was not seriously threat-
ened. 53/ The same question arises in the present instance:
is this a threat to "free television," or simply a challenge
to the overwhelming dominance of the networks? The former
is a serious concern, but the latter is a primary objective
of the rules. The Commission must take great care to dis-
tinguish the public interestfrom the networks interests.
A. The Networks Indisputably Dominate the Current
Television Marketplace.
Without question, the overall structure of the televi-
sion industry has changed considerably since 1970, and has
done so in many ways the Commission could not foresee at the
time. The emergence of new technology is a major part of
this story, particularly in the past several years. However,
nothing about the present state of the industry suggests
that the rules are superfluous or counterproductive. The
networks are indisputably the dominant institutions in tele-
vision, as they have been for thirty years. It is simply
ludicrous to contend that the rules have already outlived
their usefulness because of the anticipated or postulated
emergence of the new media.
The facts and figures cited by the Commission in its
1982 Notice suggest a very different conclusion. In terms
53/ Pearce, The Economic and Political Strength of the
Television Networks, reprinted in Sotein and Rice, Network
Television and the Public Interest.
PAGENO="0637"
635
of competition to the networks, the most significant devel-
opment over the last decade has been the emergence of the
independent stations, not the proliferation of new technol-
ogies. 54/ The independents, of course, are no "threat" to
free television -- they are a valuable addition to free
television. As discussed previously, the growth of the inde-
pendents is consistent with the spirit of the rules and is a
sign of their success. 55/
The development of new technologies has, up to now,
made much less difference to the networks' competitive posi-
tion. The dizzying array of new transmission nodes is im-
pressive, but technological potential has not yet translated
into economic reality for many of them. Some of the "alter-
natives" mentioned by the Commission, such as DBS and lower
power television, have not even reached the marketplace;
others such as MDS are mere infants. 56/ To suggest that
these are already alternative markets for program producers
is absurd. To predict their future impact on the marketplace
is for soothsayers, not regulators.
54/ At a recent conference on the future of television,
sponsored by Television Digest, "[ijt was agreed that today
the primary beneficiary of [the networks' gradual loss of
audience share] is not cable, but rather the independent
television stations." "The Future of Television," Access,
Oct. 8, 1982, at 8.
55/ See pp. 17-19, supra.
56/ Amendment of the Syndication and Financial Interest
Rules, at 15.
PAGENO="0638"
636
Even the proliferation of cable has not yet seriously
threatened the networks. Clearly, both basic and pay cable
have made a difference in the marketplace; their expansion
haè been significant and rapid. At this point, though,
three quarters of the television households in America still
have no form of cable. 57/ The quarter that do have it can
of course watch a wide variety of channels besides the net-
works. But so far, many of these channels have competed
more with each other then with the networks -- indeed, a
great many cable services are in financial trouble. Only a
few have clearly established footholds in the marketplace.
There are several areas in which cable has made signif-
icant inroads against traditional broadcast television.
Most obvious of these areas is the first-run movie market,
which has been for the most part captured by Hone Box Office
and several competing pay services. 58/ The networks have
also faced serious competition for sports programming, al-
though they still carry most sports events of national sig-
nificance. But in both of these areas, the financial inter-
est and syndication rules have had little to do with the
competitiveness of cable against the networks. The primary
57/ The Commission cites estimates of 23 million cable
subscribers as of June 1982, or 27% of all U.S. television
households. Id. at 14.
58/ Perhaps more accurately, cable has created a market
where the networks could not. it is not the rules which have
led to this development, but the ability of cable services to
run movies without editing or commercial interruption.
PAGENO="0639"
637
value of both movies and sports events comes from their
initial or "live" broadcast. This is especially true for
cable, which builds its subscriber base by providing movies
and sports before they appear on the networks. The ability
to obtain syndication or subsidiary rights is of little
consequence to cable, and probably adds little to the price
tag it is able to pay.
In original programming, particularly series program-
ming, cable has made much less headway. In this area, syn-
dication and subsidiary rights can be considerably more
valuable, because the success of the initial broadcast is
much more speculative than it is for first-run movies and
live sports events. However, cable has devoted a relatively
small portion of its resources to the development of original
programming, particularly network-quality programming. De-
spite the advantage supposedly conferred on cable by the
rules, cable services can normally pay only a fraction of
what the networks pay for original programs. 59/ Some tele-
vision producers have gravitated to cable for the creative
freedom it offers, 60/ but few if any have left the networks
because they could make better money elsewhere. Despite
59/ Producers interviewed said they could receive between a
fifth and a tenth of what the networks normally pay for
programs of the same length.
60/ See, ~ "Programming Shift Seen," Electronic Media,
nov. 11, 1982, at 1 [comments of HBO producer who prefers
creative autonomy in pay TV].
32-540 O-84---41
PAGENO="0640"
638
several well-publicized attempts to take already established
series away from the networks -- in two cases after a net-
work had already cancelled the series -_ cable has simply
not become a competitive alternate market for network program
producers. 61/
The networks, meanwhile, show many signs of continuing
health and dominance in television. In spite of a slight
decline in their audience share over the past several years,
largely due to independent stations, the networks continue to
take the lion's share -- over 80% during prime time. 62/ In
spite of a slumping economy and greater competition for
advertisers, the networks have dramatically increased their
advertising revenues each year. 63/ At the moment, the net-
works spend about eight times as much as all of cable on
programming, and they attract much of their audience from
61/ HBO has tried to obtain "Taxi" and "Hill Street Blues,"
while Showtime made a bid for "Paper Chase" after its network
cancellation. Notably, all three efforts were unsuccessful,
in spite of the fact that the bids were substantial. However,
these attempts are widely interpreted as symbolic, and not
indications that cable intends to produce original, untested
programming on a scale comparable to the networks.
62/ Amendment of the Syndication and Financial Interest
Rule, at 16.
63/ Even in a recession period, the networks are expected to
increase their advertising revenues 12% to 14% this year.
"Paine Webber Media Seminar Searches for Answers," Broad-
casti~, Dec. 13, 1982, at 78.
PAGENO="0641"
639
people who have cable or other alternatives available to
them. 64/
Taken as a whole, the present state of the television
industry seems to make a -case `for retention, not repeal, of
the rules. The networks remain essentially healthy, as the
Commission insisted they would in 1970. At the same tine,
both broadcast and non-broadcast alternatives are emerging
which have chipped away at network dominance but have not
yet firmly established themselves. Some of this change
should be attributed to the rules; some is the result of
developing technology. However, the initial appearance of
competition does not eliminate need for Commission concern:
adninistrative remedies are not self-cancelling at the first
sign that they are succeeding. Moreover, technological
change cannot accomplish everything the rules were supposed
to do. This argument mistakes consistency for redundancy:
the rules have primarily promoted one type of competitoin,
through independent stations, while technology offers an
entirely different type, through cable and its companions.
The two are not mutually exclusive. In facta, the claim
that new technology has obviated the rules sounds suspi-
ciously like a network stalking horse -- an argument which
64/ "Cable to Dominate Hollywood Buying,'~ Electronic Media,
Dec. 9, 1982. at 1, 21. Even in pay cable homes, the net-
works retain better than 60% of the audience during the
first-run portion of their season.
PAGENO="0642"
640
disguises the princapal network goal of undermining inde-
pendent stations.
B. ~he "New Media" Face An Uncertain Future
The absence of a present threat to network strength --
much less network survival -- clearly reveals how much the
question of "new media" deals with the future. This is of
course perfectly legitimate: the Commission can look at
trends and projections -- as it did in 1970 -- as a basis for
action. However, policymaking based on projection should be
carried out cautiously. In 1970, the Commission adopted the
rules based on over a decade of careful monitoring of the
television industry. The current debate over the impact of
new media, by contrast, is very recent, because technological
development has been so rapid in the last several years.
The Staff Report hardly dealt with these issues; the Commis-
sion first considered them in the context of the rules in
its 1981 CBS decision. 65/
The Commission, therefore, is entering an area where
speculation abounds and hard data is scarce. No one disputes
that the new media will continue to expand: more households
will acquire cable, more people will subscribe to pay ser-
vices, and numerous alternatives to both traditional broad-
cast and cable will become more available in the marketplace.
65/ CBS, Inc., 87 FCC 2d at 39 (Statement of Commissioners
Fowler, Lee, Fogarty and Quello).
PAGENO="0643"
641
In all likelihood, the changes which occur in the next sev-
eral years will have an important effect on the long-term
future of both the networks and their competitors. However,
knowing that change is likely is a poor substitute for know-
ing what form that change will take, or what consequences it
will have. The proliferation of new technologies is still in
such an early phase that the range of future possibilities
remains wide open.
This is not the picture painted by the networks, of
course. In dramatic terms, they are proclaining the inevitable
demise of free television as we know it in a matter of years.
The major reason for this, they argue, will be the rapid ex-
pansiort of pay cable, which will become the dominant purch-
aser of high-'quality programs because of its disproportion-
ate market power. 66/ According to studies commissioned by
the networks, the gap in earnings between pay cable and the
three networks will be about $3 billion in 1990. This means
that all pay services combined could spend as much as $l/5
billion more on programming than the three networks com/~ined. 67/
A major factor in this gap, the networks claim, will b~ their
66/ "Free television is facing the greatest challe e in its
~many years of contributions to American culture and/society.
The chalI~en~ge of this competition may be healthy, t~&it only if
free ~and pay TV are placed on a fair footing. . . ~f not,
the federal' government bias for pay television wi]/l increas-
ingly diminish the service now av~ilable to all A$tericans."
"The Unsettled Future of Free Tele ision," at 10/
67/ "Cable to Dominate Hollywood uying," Elec~(ronic Media,
Dec. 9, 1982, at 1 [citing ABC stu y]; Communic~~ions Da~y,
Nov. 29, 1982, at 2 [citing NBC at dy]. //
PAGENO="0644"
642
their inability to offer more to producers because the rules
prohibit their acquiring syndication revenues. The result
will be a siphoning of quality programs away from the net-
works for the sake of a narrower, more exclusive audience
which can afford to pay for them.
These arguments and projections should certainly be
taken seriously, but there is ample cause for skepticism
about them. First, they disingenuously ignore the role the
networks are themselves playing in theexpansion of new media.
Each of the entworks is investing heavily in various types of
new technology, and all three are exploring joint ventures
with major film studios and pay television companies. This
is perfectly appropriate, for it is to the networks' advan-
tage to "buy into" potential competitoin and thereby control
its development. But such activity undercuts the notion
that the networks face monolithic opposition by forces beyond
their control. Judging by the current business climate, the
networks may have as much interest as any one else in devel-
oping pay television at the expense of free television.
Setting aside the networks' new media investments, their
projections of future competition against them are inconsist-
ent depending on their audience and the issue under discus-
sion. In the first place, their arguments .are significant
for what they exclude. Whatever the future of network com-
petition with pay cable, the networks are consistently opti-
mistic about their own overall future in terms of audience
PAGENO="0645"
643
share, ability to attract advertisers, and profitability.
They appear unconcerned with many of the other new technol.-
ogi~es cited by the Commission as possible alternate markets
for programs. The networks generally assume that their
share of the audience will continue to decline, but very
slowly -- perhaps to 70% by 1990 -- and with the overall
size of the audience expanding at the same time. 68/
In short, the networks have no doubt that they will
continue to be "the networks," the only institutions capable
~f consistently reaGhingthe_entire nation through televi-
sion. The independents, advertiser-supported cable, low-
power television and other potential competitors will largely
be left tofight among themselves for the remainder of the
market. Moreover, newmedia programming will by and large
be more specialized than network programming, making them
less l~Lkely to compete for producers of network-quality
programs. This view of the future certainly does not suggest
that the proliferation of technological alternatives is
going to have a salutary effect on the networks, making the
rules somehow superfluous. The networks profess not to be
68/ See, ~ comments of Grant Tinker, Chairman of NBC:
1Tw]e all know we're talking in our business about a smaller
piece of the whole, a declining share [of audience], but
because that universe is growing, we're going to absolutely
[stand] about as well in 1990 as we do now. And it's going
to be a dynamite business." Communications Daij~y, Dec. 6,
1982, at 8 [brackets in original].
PAGENO="0646"
644
worried by many competitors, only by one. Their new media
rationale boils down to the competition they expect from pay
cable.
C. The Networks Are Inconsistent About The Threat Of
Pay Television.
However, in this area also, the networks have not been
consistent. At the same time that they have been touting
studies which show the apparent threat of pay cable, they
have released projections which tell quite a different story.
The "worst case" suggested by the networks so far projects
revenues of a little over $16 billion for pay cable in 1990,
compared to about $13 billion for the networks. 69/ Yet the
Chairman of NBC, which commissioned the study, predicted
$29 billion in revenue for advertiser-supported television in
1990, of which the networks would take the lion's share. 70/
This inconsistency is compounded by CBS' figures, which ~`
project no more than $8 billion in 1990 pay cable revenues,
N
and perhaps as little as $5 billion. This would not put the
networks in serious danger, because CBS projects their reven-
ues at a healthy $15 to $20 billion. 71/ Similar inconsist-
encies crop up when the networks translate revenues into
69/ Id., Nov. 29, 1982, at 2.
70/ Electronic Media, Oct. 28, 1982, at 2-3; Communications
Daiiy, Nov. 8, 1982, at 7.
71/ Communications Daily, Sept. 17, 1982, at 4: Id., Oct.
20, 1982, at 2.
PAGENO="0647"
645
purchasing power. One network study gives cable a $1.5
billion margin in purchasing power by 1990 -~ although it
does so by lumping together both basic and pay cable. 72/
Another study flatly says that the economics of original
production by pay cable are "`not encouraging'" because,~
costs will go up without "`a corresponding increase in rev-
enues. " 73/
These wild variations in network projections suggest
that the networks are manipulating their numbers to present
an alarmist scenario for the purposes of this debate. At the
very best, they suggest that the networks know less than they
claim about what is going to happen, because of the large
number of variables and assumptions which go into these pro-
jections. However, the networks have no cause for the sort
of unbridled pessinism they are professing. It is worth
noting some of the assumptions that are implicit in their
gloomier projections. First, cable and pay cable must in-
crease their penetration at a rapid rate -- with pay cable
reaching about thre'~ times its present number of subscribers
by 1990. This is probably a reasonable assumption, but the
networks' revenue projections then assume that all of these
72/ Electronic Media, Dec. 9, 1982, at 1.
73/ "CBS Eyes Future pole in TV World," Broadcast Week, Dec.
13, 1982, at 26 [quoting CBS study].
PAGENO="0648"
646
subscribers will pay perhaps six times as much as current
subscribers do for pay service. 74/
Even if this assumption is reasonable, there is the
question of how revenues will translate into buying power.
Aggregate revenues will be divided among different services.
How many pay services will there be, and how will they com-
pete? The more services there are, the more likely that pay
cable revenues -- and therefore buyi~ng power -- will be
fragmented, not concentrated. Furthermore, these competing
services will have to contend with each other as well as the
networks. Even if viewers are willing to subscribe to more
than one service at a tine, there still will be considerable
competition among different services for the subscriber
market. In sports and first-run novies, the limited amount
of available material makes fierce competition especially
likely. This casts doubt on the assumption that pay cable
will be able to use its buying power collectively as a mono-
lithic force against the'networks.
At least one network study predicts just such fragmenta-
tion in the competition, making it difficult for any pay-cable
service "to challenge the networks on a regular basis.'~ 75/
74/ An HB0 subscriber currently pays about $100/year.
Assuming that there are 100 million television households by
1990, and that 45% of them are pay cable subscribers, it
requires an average payment of over $700/year per subscriber
to generate $16 billion in revenues for pay cable services.
75/ The Video Marketplace in 1990: Diversity and Growth in
Perspective, CBS Broadcast Group report, March 1982.
PAGENO="0649"
647
Aside from this, there is little evidence that the presence
of the rules will make any more difference to pay cable -- or
any other new technology, for that matter -- than it has in
the past. Movies and sports are likely to be the continuing
staples of pay-cable fare. 76/ While the amount of made-for-
television programming may also increase, it takes a major
leap of logic to assume that pay cable will be able or an-
xious to take over from the networks in this area as well.
Realistically, there is little reason for them to invest
heavily in original program development, with or without the
possibility of acquiring syndication rights, since their
competitive position is better served by other formats. 77/
Conceivably, cable could make further attempts to "pirate"
successful network series, but their ability to acquire
syndication rights will not be attractive to producers,
since success on the networks will give producers incentive
to retain those rights.
Given the contradictions in the networks' view of the
future, their claims of an imminent threat to ` free televi-
sion" are clearly overwrought, and more than a little suspi-
cious. There is a distinct undercurrent of network optimism
76/ Id.
77/ Even if cable does invest in original programming,
acquisition of syndication rights makes sense only if the
programs are suitable for over-the-air broadcast. This would
seem to exclude any program with "adult" content, such as
nudity, extreme violence, or profanity. If cable does seek
network producers and talent to produce programs which are
unmarketable in broadcast syndication, the rules will give
cable no advantage over the networks.
PAGENO="0650"
648
present and many corresponding signs of tentativeness and
pessimism among the new technologies While there continues
to be rapid evolution in the new media it is interesting to
note how quickly conventional wisdom about the future changes
Talk of a video revolution several years ago has been
replaced by talk of slow growth and shake-outs For net-
work producers the prospect of a strong competing market
provided by new media seems to have receded
The uncertainty of the marketplace suggests another
reason for retaining the rules Even if the Commission
concludes that network projections are credible it cannot
ignore the fact that they are no more than projections. The
threat to the networks and to the public is still a
thing of the future based largely on speculation in an
industry that is undergoing constant and rapid technological
change This change may well bring about significant shifts
in the marketplace but predicting those shifts is inevitably
risky when so little solid information is available. As.has
happened in the past unexpected technological or economic
developments can make the most reliable projections instantly
obsolete
Therefore the Commission should consider not only the
apparent direction of future events but also the wisdom of
taking action of any kind based largely on projections and
speculation The pattern of rapid evolution in the market-
place creates a strong argument for regulatory stability
PAGENO="0651"
649
changing the rules in the middle of f fas~-moving game can
contribute to further uncertainty an~ confusion. Repeal of
the financial interest and syndicatio~i rules is likely to
have just such an effect in the present marketplace. It
will eliminate a purely speculative threat from new technol-
ogies which still offer more promise than performance. At
the same time, the obvious benefit conferred on the networks
will enhance the uncertainty which already exists among
their competitors. If the Commission wishes to promote
competition, as it professes, it should consider the advice
of one of its members and stop reacting to assumed dangers. 79/
As the marketplace develops, there will be ample time to deter-
mine whether new technology truly threatens free' television,
and to take action accordingly.
78/ Cf., Comments of Commisioner Anne Jones: `[It's) high
time that the Commission stop overregulating . . . new ser-
vices on the basis of their assumed threat to established
services." Quoted in CommunicatiO~ Da4y, Nov. 22, 1982, at
9. Conversely, it is not necessarily wise to deregulate the
networks in the face of a purely speculative and prospective
challenge.
PAGENO="0652"
650
Conclusion
Twelve years ago, the Commission determined that the
three networks were using their immense power in the program
ma~ketplacce to increase their dominance over television
programming, and not to serve the needs of the public.
Existing marketplace distortions were increasing because
networks wielded this power anti-competitively. Since the
networks had benefited from the Commission-enforced reglatory
structure, which inhibited competition, the Commission recog-
nized the necessity for another form of regulation to protect
competition.
These principles apply as much today as they did twelve
years ago. The dominance of the networks remains the funda-
mental fact of life in the television industry. Thus, main-
tenance of the current regulatory scheme promotes diversity
and is in keeping with the Commission's current objectives.
Repeal does not open up greater competition through the "magic
of the marketplace"; it would simply allow the primary anti-
competitive force in television to operate more freely.
The financial interest and syndication rules have demon-
strably aided the climate of competition. They have promoted
more open entry into the program industry, and have created
alternatives to total dependence on the fletworks. The rules
can be faulted for not fully realizing t1~eir objectives, but
this merely highlights the continuing power which the networks
hold. The gains realized under the ruleS have been import-
PAGENO="0653"
651
ant, but they are still comparatively fragile. If the rules
are repealed and the networks allowed to reestablish their
historical position in syndication, the progress of the last
decade could easily be reversed.
By contrast, the asserted public interest benefits of
repeal do not hold up under careful scrutiny. These bene-
fits. depend exclusively on a tenuous web of theory and specu-
lation. The public interest will be proteccted, repeal
proponents argue, through the largesse of the networks, who
will use their expanded power to nurture new and competitive
sources of programming. This analysis ignores the past
history of network behavior. Alternatively, assert the
rules' critics, the presence of new forms of competition
will insure the networks' good conduct in the marketplace.
This argument assumes a "new media" marketplace which does
not now and may not ever exist to seriously challenge the
networks.
If the rules are repealed, the only certain benefit is
to the networks, not the public. The networks will be able
to monopolize another portion of the program market, while
the public is left with the less than comforting assurance
that private economic benefits will translate miraculously
into the public good. The proponents of repeal have the
burden to come up with a clear public interest justification
for repeal. By advancing suspect theories and projections
riddled with dubious assumptions, they have conspicuously
failed to do so.
PAGENO="0654"
652
Balanced a~ainst the improbable benefits of repeal,
retention of the rules protects known benefits to competition
and diversity. These benefits have worked in the public
interest as the Commission intended. At the same time, there
is no evidence that the rules have worked against the public
interest in any way: they have not harmed the networks or
reduced competition among producers. The asserted "costs" of
retention are as illusory as the "benefits" of repeal.
Current conditions in the television program marketplace
argue decisively against repeal of the rules at this time.
However, there is no need to resolve the questions permanently.
As both critics and supporters of the rules have recognized,
the television industry is in the midst of rapid and dynamic
change. This evolution has not so far made the rules any
less necessary, but future developments may justify their
re-evalulation. Indeed, the Commission should carefully
monitor the development of the marketplace, and particularly
the evolution of the "new media" as competitors with the
networks. The best available evidene currently points to
continued network dominance, but that picture could change.
As discussed previously, it is good policy to promote
regulatory stability when the marketplace is volatile or
uncertain. In keeping with this principle, the Commission
should proceed cautiously rather than reacting to changes
which have not yet occurred. For example, it needs to define
more fully the competitive conditions which, if realized,
would justify modification or repeal of the rules. More
PAGENO="0655"
653
comprehensive analysis of new industry developments, prefer-
ably by supplemental rulemaking, will help the Commission
recognize and respond to any genuine threat to quality net-
work programming.
Similarly, gradual modification is preferable to sudden
repeal of the rules. If conditions change to make the rules
less necessary, a gradual response will adequately compensate
for the change without disrupting the regulatory environment.
Thus, the rules can be modified on a phased or contingent
basis, tied to the amount of competition for programs actu-
ally faced by the networks. The Commission can set limits
on the networks' share of the syndication market, and then
adjust those limits if it is warranted by new competition.
This approach will serve the public interest far better than
a hasty repeal based on ill-considered assumptions.
Respectfully submitted,
Andrew Jay Schwartzntarl
Law Student Intern; MEDIA ACCESS PROJECT
1609 Connecticut Avenue, N.W.
David Furth Washington, D.C. 20009
Stanford Law School (202) 232-4300
Attorneys for The CornmuniCa-
tion Commission of the
National Council of the Churches
of Christ in the U.S.A. and the
Office of Communication of the
United Church of Christ
January 26, 1983
32-540 O-84--42
PAGENO="0656"
654
I I1~4~ URBAN
EUtL.I ELDERLY
L~ I COALiTION
April 26, 1983
Mark Fowler, Chairman
Federal Communications Division
1919 M Street, N.W.
Washington, D.C. 20554
Dear Mr. Fowler:
The Board of Directors and membership of the Urban Elderly Coalition, on March
14, 1983, voted against the elimination of the financial interest and syndication
rul es.
The television networks, have in UEC's judgement, inappropriately alarmed the
aging community of the alleged impact upon older television consumers if the
rules are not repealed. Suggestions that the end of `free' television is close
at hand, or, that programming for special audiences is not possible under the
rules, are not only misleading but have frightened many elderly persons un-
necessarily. We object to that kind of approach to gaining support of the
aging community.
The Urban Elderly Coalition is in support of the retention of the rules which
have proven effective in providing opportunities for creative programming and
which allow smaller production companies to participate in the program produc-
tion and distribution business.
This is an instance where deregulation will not encourage competition or enhance
programming; it would allow for greater network control and dominance of the in-
dustry.
UEC's membership is made up of urban based organizations, agencies and City Of-
fices on Aging serving older persons in our nation's largest cities. For many,
the television is their major source of information, education and enjoyment.
In the future, we believe, all forms of media, but particularly television may
become increasingly important as a means of communicating special information to
older people within the context of the aging service delivery system. We do not
favor any resfrictions on the exploration of unique and special programming on
behalf of older people. We add our support to the many consumer groups and aging
organizations which have notified you of their oppoisiton to the elimination of
these rules.
Thank you for your attention to this letter.
Sincerely,
Pearl Somaini-Dayer
Executive Director
600 Maryland Avenue, S.W * West Wing 204 * Washington, D.C. 20024 * 202/554-2040
PAGENO="0657"
655
ATTACHMENT III
At the FCC'S oral arguments on the Financial Interest
and Syndication Rules on March 14, there was a particularly
Interesting exchange among Commissioners Dawson, Jones &
Rivera and Chairman Fowler commenting on statements by
several public interest representatives who express concern
over the potential demise of free television and, therefore,
the need to repeal the rules.
Participants in this panel were:
Favoring repeal
Pluria Marshall, National Black Media Coaltion
William Hutton, National Council of Senior Citizens
Bill Guilford, Comma/OCC Media Department
Emma Bowen, Black Citizens for Fair Media
Bill Juie, Office of Media Communication for Presbyterian
Church in the U.S.
Peter Bommarito, United Rubber, Cork, Linoleum and
Plastic Workers of America
9pposing Repeal
Joseph Waz, Committee Against Network Monopoly
Mary Ledding, Women in Film
Samuel Simon, Telecommunications Research & Action
Center
A transcript of the exchange among the commissioners
follows:
PAGENO="0658"
656
Commissioner Dawson - I'm absolutely astounded by the: amount
of education that must have gone on to get this group
together to talk about the immediate demise of the three
networks. I'm just astounded. I mean the scare tactics
we have seen today are rather frightening. And the networks
themselves talk about having a dominate position into
1990. If they're going to be in new technologies their
competitors are going to be themselves. I didn't come
here to take sides one way or the other in this issue.
I'm here to learn from you, but I'm concerned in terms
of the information that has been given out on this
subject matter. Unless the information that I have
on this subject is totally wrong and what we have been
doing in all the new services and what I know to be the
financial viability of the new technologies and how long
it takes to launch them and who the major investors are
likely to be there's some very wrong information going
around here today,and I would urge everyone here to
look further into these questions.
Commissioner Jones - I would think even some of the comfl~ents
by network executives today would allay alot of the
fears that are expressed by this group. I admire
Commissioner Dawson for raising it. I think someone
has been doing a hard sell in the guise perhaps of
an educational program. I think there is more fear
than there need be.
PAGENO="0659"
657
Commissioner Fowler - I think though that just to state the
other side and just compare we heard many of the CPD
people talking about the dominance of the networks
we ye heard that all day too and I think that dominance
may be -- there are different ways of defining dominarce
Looking at the map over here where NBC reaching 68 million
TV homes each week ABC 69 and I think CBS is something like
71 and some would say that that dominance is another word for
efficiency Efficiency means that you provide services
to people at the lowest cost and the highest quality
and some would say that the networks with that dominance
actually have served the peonle poor people median
income people and yes wealthy people very, very well
over the years And I think what they `re saying here
is that some of them are very concerned at the lower
end and Mr Stigler the noted economist makes the point
that when you re talking about large entities that are
very efficient such as automobile makers or in this case
the networks and efficiencies are dominance the poor
may be the ones that lose the most if you either eliminate
those efficiencies or through regulation preclude them
from being as efficient as they could be because that
translates into a lower quality of service or higher prices
And I think therefore what I m picking up from some of
these people here is not scare tactics but simply an
honest concern on their part We may or may not agree
with that and that's uo to us to evaluate that But I
think we do a diservice if we say that they're being
used necessarily as tools for their scare tactics and I
think we ought to be careful of that
PAGENO="0660"
658
Commissioner Dawson - I didn't call them tools.
Commissioner Fowler - I'm not saying that you said that, but
I'm just saying that we need to be careful the other way
too. I think it's valid of you to bring that point up,
but I just wanted to state the other side. I don't
want then to think that we're just brushing off what
they're saying.
Commissioner Dawson - Well, I'm rather concerned about what
they're saying. I'm very concerned by what they're
saying. I think that reasonable people can differ over
what network dominance is, what exists and whether we
are not intruding ourselves into a marketplace situation,
but I'm concerned about the suggestion that the demise
of over the year free television is before us and I think
sugcxesting that is a much stronger statement than
the economic argument about what is dominance and what
a relevant market is. I think that's a much
Commissioner Rivera I agree and I think that that's way
Mr. Simon's points were very well taken if we uncover
in this proceeding that the free television system as
we know it is about to collapse then we should institute
a proceeding to look into that.
Comissioner Jones - I think that's the message I would want
to give you too. I really don't think that you should
sit here or leave here with the feeling that we are
not mindful of your concerns. I think that what we're
saying is we don't think that that is necessarily involved in
this proceeding and as Commissioner Quello said the day that
we see that as a real threat will be the day that a lot of
us will be very concerned. We're not dismissing it,
and we don't really think it's involved here and we don't
want you to be concerned whatever action we take, that
that's going to deprive you of free, over-the-air television.
Commissioner Dawson - Absolutely.
PAGENO="0661"
659
Mr. WIRTH. Thank you very much, Mr. Waz.
Ms. Asselin.
STATEMENT OF DIANE ASSELIN
Ms. ASSELIN. Thank you. It is a pleasure to be here today and I
would like to start off by saying that I was very touched by the pre-
vious panel, their human concerns, and I know your concerns in
trying to sort out exactly how these rules apply to that finally
much larger issue.
I know there are people in the room here who do take the posi-
tion, from what they have said-I have previously been in conver-
sations with Mr. Esparza, who I see in the audience, and I have
read what Mr. Ochoa has said they feel about the financial interest
and syndication rules. As I sat here listening to those very articu-
late gentlemen, I continue to feel so strongly that their concerns
are not going to be answered by the change in this particular rule
and that comes out of my own experience.
I am here officially today as the owner of a small independent
production company which sells television programs to the net-
works and as an officer of Women in Film, an organiiation of 900
professional women working in the film and television industry in
Los Angeles. In those two roles I very much appreciate your efforts
here in Congress to pass H.R. 2250, which would place a 5-year
moratorium on the repeal of the financial interest and syndication
rules.
Women in Film have gone on record by filing comments and
reply comments to the FCC strongly supporting the retention of
the rules from the standpoint of their membership. That was a well
thought out, much discussed decision and our membership cuts
across the various job categories within the industry. We as an or-
ganization felt strongly that we wanted to be on the side of the
Committee for Prudent Deregulation.
Congressional interest in this issue underlines the importance of
promoting program diversity and healthy competition within the
broadcast industry for the good of the general viewing public and I
know the public interest is what you people are mainly concerned
with here.
Let me talk about my own experiences in my own production
company and the business experience that I have had since the
rules have been in effect. In fact, my company is only 6 years old
and so I have only been in business with the rules in effect.
Asselin Productions concentrates its efforts in the area of chil-
dren's dramatic specials, such as ABC After School specials, which
deal with social issues important to teenagers. I have also produced
CBS Library specials, which encourage children to read and CBS
Mystery Theatre series, which encourages deductive reasoning
through the story lines that are presented.
Because of the rules, I am guaranteed ownership of the programs
which I sell to the networks and which I produce. I have had with
the rules in force an incentive to continue to speculate on the de-
velopment of these specials. What I mean by "speculation" is-let
me give you an example.
PAGENO="0662"
660
I produced the premiere broadcast of both the CBS Mystery The-
atre series and the CBS Library specials. It meant that I participat-
ed in the shaping of these program concepts with the networks and
I spent a lot of time and energy before the programs were commit-
~ted to production in that effort.
Both those series proved successful in terms of attracting an au-
dience and they went on to win Emmy awards. These films now
have a value in the foreign market, in the educational market and
in domestic syndication for my company. Because of the revenues
that they earn, I can reinvest in the development of future chil-
dren's programing.
The rules as they now stand have worked for me and as an inde-
pendent I do not seek the protection that was offered on the earlier
panel this morning from the networks. I believe Mr. Dunham said
that small companies such as mine would be more protected under
the rules and when we grew up, if we ever did, to be MTM, we
would no longer want the rules. I don't feel that. I don't want that
protection now. I would rather submit to the competitive arena as
it stands.
I believe that the rules have fostered the growth of numerous
production companies like my own whose business it is to develop a
variety of programs reflecting diversity of taste and style, in my
case, an emphasis on children's programing.
It is true that the networks continue to select which programs
actually appear on the airwaves. That has been well-documented
here, but if the networks were allowed to become totally free to
control content, cost, production, distribution and ownership of the
programs, there just would be no incentive for independent produc-
ers like myself to present program ideas from which the network
executives would select. I simply would go out of business. There
would be no reason to continue.
The number of independent producers have increased under the
rules, as well as the number of independent television stations. I
view that as the free marketplace. That is the way I see freedom in
terms of this particular issue. I believe it creates diversity and it is
in the public interest.
The issue of cable has come up here and I have been asked why I
can't simply sell the films that I make to cable or sell ideas in that
arena. Today, my own experience is that if I were to do that, the
budgets would be less than one-sixth of what the network offers me
to make a film. This would make a project not economically feasi-
ble for me to produce.
But in the larger issue of whether-going on beyond whether my
company could exist under cable as it stands now in terms of what
I could sell there, I think it is more important to say that the qual-
ity, because there would be fewer dollars on the screen, that what-
ever positive message we are trying to pass along to children in
terms of their viewing habits, it just wouldn't be feasible, just be-
cause of the pure dollars offered. I obviously believe that children's
specials fill a need and have a right to continue at the budgets that
they now are produced at, even though those are considered low
budgets in terms of the television industry and certainly very low
in terms of prime time numbers.
PAGENO="0663"
661
I started by saying that I have a small production company and I
want to be specific about that, so you understand the kinds of
people you are dealing with in terms of the broader scope of the
economics of the business. The company is myself, an associate,
and a secretary. I employ writing help when I need it and a pro-
duction team when I am actively filming a show. But I believe this
company has made a difference by initiating children's programing
in the last 6 years and I look forward to a healthy industry where I
can continue to do the kind of work that I have done and compete
for the air time as I have done in the past.
I appreciate your efforts.
[Testimony resumes on p. 767.]
[The statement of Ms. Asselin follows:]
PAGENO="0664"
662
ASSELIN PRODUCTIONS, INC.
Oral Presentation by Diane Asselin, President, in Support of
H.R. 2250 before the Subcommittee on Telecommunications, Consumer
Protection and Finance, Los Angeles, June 1, 1983.
As the owner of a small independent production company which
sells television programs to the networks and as an officer of
Women In Film, an organization of 900 professional women working
in the film and television industry in Los Angeles, I appreciate
your efforts in Congress to pass HR 2250 which would place a
five year moratorium on the repeal of the Financial Interest and
Syndication Rules.
Congressional interest in this issue underlines the importance
of promoting program diversity and healthy competition within
the broadcast industry for the good of the general viewing public.
Let me use my production company as an example. Asselin Produc-
tions concentrates it's efforts in children's dramatic specials
such as ABC After School specials which deal
important to teenagers, CBS Library specials
children to read and the CBS Mystery Theatre
ages deductive reasoning. Because the Rules
of the programs which I sell to the network,
incentive to speculate on the development of these specials.
As an example, I produced the premiere broadcasts of both the CBS
Mystery Theatre and the CBS Library series. This meant that I
speculatively participated in the shaping of these programming
concepts with the network. They proved succesful in terms of
attracting an audience and they went on to win Ernmy Awards.
These films now have value in the foreign market, the educational
market, and in domestic syndication. Because of the revenue they
with social issues
which encourage
series which encour-
guarantee ownership
I have an economic
8489 WEST THIRD STREET * LOS ANGELES, CALIF. 90048 * (213) 653-6190
PAGENO="0665"
663
earn I can reinvest in the development of future programs.
The Rules as they now stand have worked for me and have fostered
the growth of numerous production companies whose business it is
to develop a variety of programs reflecting diversity of taste and
style.
It is true that the networks continue to select which programs
appear over the public airwaves but, if the networks are allowed
to become totall~' free to control content, cost, production,
distribution andownership of programs, there will be no incentive
for independent producers to present diverse possibilities from
which the networ]~ may select. The number of independent producers
has increased under the Rules as well as the number of independent
television stati4ns. I believe this diversity is in the public
interest.
I started by saying I have a small production company. Let me be
specific. The cc~mpany is myself, an associate and a secretary. I
employ writing help when I need it and a production team when I am
actively filming~a show, but I believe my company has made a
difference by in4tiating children's programming in the last six
years and I woulc~ like to look forward to a healthy industry where
the kind of work~I have done can continue to compete for airtime.
DIANE ASSELIN
DA/ 5
8489 WEST THIR STREET * LOS ANGELES, CALIF. 90048 * (213) 653-6190
PAGENO="0666"
664
i~i~U~L~
NON-PROFrr CORPORATION
WOE WuIERSON
BOARD OF DIRECTORS
ANNE1TE WELLES
EVANPWES.WANIFFIANU.As. April 25, 1983
CINDY DUNNE
Sn~sey
JOU'INEOANTONO Chairman Mark S. Fowler
Federal Communications Commission
Room 814 - 1919 M. Street N.W.
Washington, D.C. 20554
MARCANESATS Re: Financial Interest & Syndication Rules
5-,'-
Dear Chairman Fowler:
Before you complete your evaluation of the Financial Interest and
Syndication Rules, I would like to underscore two points which were raised
on the panel on which I spoke at the oral arguments March 14, L983.
First, contrary to the views of some members on the panel the
- retention of the Rules will not mean the losa of `free' television. As was
apparent that day, it appears that many special interest groups, including
the elderly and some black viewers groups have been convinced that the
issue before the Commission relates to the life or death of network
television. This simply is not the case.
The networks themselves have indicated that they are economically
strong. Their profits and income bave increased over the years that the
Rules have been In effect. They all have a sufficient economic base to
participate extensively in the new media, Including pay cable. There has
been no evidence presented In this proceeding to indicate that any of the
three networks are facing economic ruin.
More importantly, none of the networks has indicated, were they to
be permitted to become involved In the syndication of television programs,
that they would reinvest the profits into network broadcasting. On the
contrary all have indicated a desire to participate more fully In new
media. It is irony for those who fear the loss of free TV, if the Rules are
not repealed, that the windfall of income received by the networks from
such syndication rights would most likely be reinvested not in network
televison but In cable, subscription, and other pay services.
8489 West 3rd St.. Los Angeles, California 90048 * (213) 651-3680
PAGENO="0667"
665
But the greater irony for such minority groups would be the effect
on the strong independent stations that have grown up over the years.
Repeal of the Rules would render such stations defenseless against the
monopoly power of the three networks-turned-syndicators. "FreeS
televisors has flourished as a result of the Rules by fostering the growth of
them now would be, as someone has said, like taking down a stoplight at an
intersection just because there has been no accident during the years the
stoplight was in place.
Secondly, the Rules have promoted program diversity by promoting
the growth and entry of program producers in the market place. The
commission has been told that the Rules have failed to promote diversity
because the networks are still the `gatekeepers5 in the selection of what
programs get made and what do not. The argument goes on to conclude
that since the networks continue to pick the programs the Rules do not
achieve their stated goal of promoting diversity of content and therefore
they can and should be repealed as surplus government regulation.
The argument fails in the shallowness of its approach. The content
of programming is much more than a network executive choosing among
three or four items an a menu of prograths served up to him by the
producers. Network executives are no longer limited to picking their fare
from limited program menus, like some fast-foods junkie. The Rules,
through their economic incentive to producers, have fostered the
development of many new producers who bring their own taste and style to
the programming menu. These producers include companies like Lorimar,
MTM Enterprises, Tandem and the independent producers who affiliate with
them who distinguish themselves in the creation of quality programming
that audiences enjoy.
As the number of producing companies has grown so has the number
of individuals who are involved in creating programs for network
consumption. The number of women employed in the television industry
and the number of women producers has increased dramatically over the
years the Rules have been in force. Women in Film's women producer
members fear that repeal of the Rules will impact directly and adversely
on the creative content of network programming. We believe that the
repeal of the Rules will create a concentration and uniformity of creative
approach to program content by forcing all but the very powerful producers
to work `in-house' at the networks. (Many of our producers have already
noticed an increase in `in-house' production, presumably in anticipation of
repeal,) Independent producers Will be rendered mere employees, carrying
out network-dictated content guidelines and concepts. The independent
thinker in a bureaucracy is not rewarded because she doesn't fit in with the
PAGENO="0668"
666
corporate mentality and corporate goals.
It is true that the networks continue to select which programs
ap~pear over the public airwaves. But the proliferation of producers has
increased the variety of programs from which the networks may select.
Many of Women in Film's producer members have been network executives
themselves and they believe that their work is more creative and diverse
once they were freed of the status of `employee' and became independent,
entrepreneurial voices.
Much has been made in this proceeding about the efficiency of
production risk-taking which might be gained by repeal of the Rules,
permitting the networks to participate in program production. Aside from
the serious issue of whether there would in fact be any true compensation
paid to the producer in return for givin~up syndication rights and
ownership, the major oversight of this `efficient risk-taking' argument is
that what may seem economically efficient will not be qualitatively
beneficial. Bigger is simply not better when it comes to content. To allow
the networks, with their vast resources, to become totally free to control
content, cost, production, distribution and ownership of programs will
silence the small independent voices of producers who might otherwise
become the MTM, Tandem and Lorimar of tomorrow, serving up diverse and
varied fare for the public to enjoy.
TheRules have worked. They have increased the number of
producers supplying programs and thereby the number of viewpoints
reflected in such programs. They have increased the number of
independent stations and the variety of programming available to such
stations. They cost very little, if anything, to enforce and the networks
have not been financially harmed as a result.
The Rules were promulgated in the public interest and we believe it
Is in the public interest that they be retained.
Sincerely,
Mary S. Ledding
2nd VicePresident
MSL:cr
cc: William S. Tricarico, Laurence Harris
PAGENO="0669"
667
Before the
Federal Communications Commission
Washington, D.C.
In the Matter of:
BC Docket No.82..3145
Amendment of 247 C.F.R. Sec. 73.658(j)
the Syndication and Financial Interest Rule)
These comments are submitted for' consideration in this
rulemaking process by and on behalf of Women in Film of Los
Angeles (hereafter "WIF"). WIF is a non-profit organization
comprised of qualified professional women with at least three
years' experience in the entertainment industry. It's purpose is
to serve as a support group for such women and to educate and
Inform Its members and the general public regarding professional
women in the entertainment industry.
WIF has been in existence since 1972 and since that time has
grown from a group of twel~re women to a major organization with
over 800 members in 65 job categories.1 Many members have
experience in more than one category and have worked in all areas
of the television industry, including on screen, in development,
in independent production as well as studio-affiliated
PAGENO="0670"
668
production, and in executive positions at the networks and at
studios. Our membership includes women who earn their living on
the technical, behind-the-camera side of the business such as
production managers, editors and sound recordists as well as
women who are involved in the executive and conceptual side of
the business (such as network and studio executives, story
editors, writers and producers). Independent groups of WIF
(which are not party to these comments) exist in New York,
Atlanta, New England, Northern California and Washington, D.C. as
well as in 15 foreign countries.
Despite its size WIF is an entirely voluntary operation,
funded by membership dues and fundraising events which are run
during the year by member volunteers. Except for an office
administrator *and her part-time assistant, no one involved in WIF
is paid and there are no corporate members of any kind.
Since WIF is not in the business of producing or buying
television product it perhaps is unique in its participation in
this, rulemaking proceeding. The outcome of this proceeding will
not directly affect the continued existence of WIF as a voluntary
support organization.
PAGENO="0671"
669
However, the Board of Directors of WIF believes that the
issues of network ownership of profits and/or syndication rights
in television programs are ones which will have a direct and
detrihental impact on a majority of WIF members. For the reasons
outlined below the Board urges that the Commission act to retain
the existing Financial Interest and Syndication Rules now under
examination.
In preparing these comments, the Board sought the input of
those members whom it felt would be most directly impacted by the
elimination of the Financial Interest and Syndication Rules. The
three largest categories of membership in WIF are performers,
writers and producers. Both performers and writers are covered
by the provisions of collective bargaining agreements which
insure that their services are paid for at not less than
prescribed minimum rates of compensation. These members
therefore would not be immediately affected by a change in the
Financial Interest and Syndication Rules (although their ability
to obtain jobs and their earnings from syndication residuals may
be a~ffected). WIF's producer members, however, do not have such
protection. There is no recognized union providing for minimum
compensation to be payable to producers. Because of this and
because producers are the ones whose profits and syndication
revenues will be diminished if the Rules are abolished, WIF
32-540 O-84--43
PAGENO="0672"
670
decided to survey certain of its producer members for their
comments on this rulemaking. Thirty-two producer members were
selected who were chosen because of their extensive backgrounds
in the television industry. Most had been in the television and
motion picture industry at least 10 years, had produced both
movies for television and series, and all had direct contact with
the networks, many having worked as network executives
themselves.
These comments do not purport to provide the type of
economic analysis that will be presented in other comments before
the Commission. They are instead the personal comments and
fears - of individuals whose livelihoods are affected daily by
the networks and whose very existence may be threatened by the
abolishment of the Rules. We do not speak for any corporate
entity, but for the individuals who create the product which the
networks accept or reject. Unfortunately, because of their
dependence on the networks, many producers felt vulnerable in
participating in our survey, fearing reprisal from the
networks. Because of this, some agreed to participate only on
the basis of anonymity. That, in itself, is a comment on the
power the networks already wield. They not only control the
content of programming that goes out over the public airwaves but
they exert such substantial economic control over program
PAGENO="0673"
671
suppliers that there is a perceived threat of retribution against
those that speak out in opposition to network goals. One such
producer could see the obvious extension: "My biggest worry (in
the event of deregulation) is censorship. It will lead to ~~j-'
censorship (on the part of the network employees)." New or
controversial ideas may never be raised if employees believe they
are at odds with the network's corporate philosophies or
guidelines. The independent voice will vanish.
In most cases, our producers were independent and
unaffiliated with any studio or network on an exclusive basis.
The independent producer lives, normally, from project to
project. Her livelihood depends upon having enough projects in
development that, hopefully, there will be at least one or two
projects picked up by a network during the year. In most cases
they have their own production companies (usually consisting
solely of an office and perhaps a secretary and script reader)
which, on a project by project basis may affiliate with a studio
or a network once a production commitment has been obtained from
the network. In between productions, however, they must fund
their own operations from the profits they obtain from prior
productions. They are not guaranteed salaries like an employee
but are, instead, independent contractors.
PAGENO="0674"
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The distinction between being an employee and being an
independent entrepreneur was mentioned many times in our
survey. Producers take financial risks; just as in any business,
their day-to..day overhead is not covered by anyone except
themselves; when they make a deal with the network to produce a
show, the license fee is fixed and if the production costs exceed
the license fee, the producer must provide the deficit, whiøh
could amount to hundreds of thousands of dollars. The potential
of having to supply such deficit funds is a very real risk that
producers face day-to-day. To actress-turned-producer Susan
Clark2 it meant she and her husband had to mortgage their house,
their cars and their savings to provide the completion bond for
the television movies they produced. They were literally risking
the roof over their heads to create projects about which they
felt strongly and which they could own and control.
Yet the elimination of the Rules will mean that the profits
and program ownership from such risk-taking will now have to be
shared with the networks who don't assume such risks. Producer
Naney Malone3 put it "Why should our business be different (from
other businesses). We need profit for research and development
just like other businesses. If you make shoes you use the
profits to buy leather to make more shoes. Anyone who knows
anything about how American business is run understands
PAGENO="0675"
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this.. .you must have profit to continue. You need money for raw
material and our raw material is developing new ideas for shows."
Another producer stated "If the rules are overturned, the
less powerful producers will suffer. You risk so much along the
way in developing product that doesn't succeed, that when you
finally get a winner it's only fair that you should be able to
reap the profits, not have the networks take it away."
Many producers pointed out how the networks are currently
increasing the risks that producers have to assume in order to
get a show on the air. As indicated above, the networks do not
assume the risk of production costs exceeding the license fee.
There may be a multitude of reasons why a production may go
overbudget, including weather, performer disputes, creative
delays and simply underestimating the cost. Lin Bolen,~ a former
network executive turned producer, pointed out that it is very
hard to make a pilot these days without deficit financing on the
part of the producer, the studio, or some other independent
sour~e. The networks have reduced the size of their pilot fees,
she says, and because a single unsuccessful pilot is impossible
to be used in syndication it means the risk a producer takes is
all the greater.
PAGENO="0676"
674
Bolen also pointed out another increased risk in that the
networks have made numerous deals with their series actors,
guaranteeing them acting commitments in unnamed television
movies. The commitments often include commitments to engage the
actor's manager or associate as executive producer, for example,
and commitments for costly perquisites. When a producer develops
a project for such stars, Bolen says, the networks often do not
cover the cost of these additional commitments; the producer must
absorb them within a fixed license fee, again increasing the risk
of going into deficit. Since such commitments to stars are
really a cost incurred by the network in connection with
obtaining the stars' services on a series it is another instance
of the networks' current business practice of increasing the risk
which producers are required to assume. Rather than absorb such
costs the networks would rather lay them off on the producer.
Another example of how the networks increase the risk to a
producer is the increased use of short~~orders (e.g. an order of
four to six episodes) on television series. Fern Field5 pointed
out that orders for fewer than 13 episodes of a series preclude a
producer from making long~term deals for facilities and
performers, thereby increasing the cost of production and the
risks associated therewith without a corresponding increase in
the license fee.
PAGENO="0677"
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Produces a'so pointed out that a network will increase a
producer's costs by involving itself in the engagement of actors
on series. A network may, for example, direct a producer to hire
a particular star for a role against the producer's wishes. Even
if the network agrees to pick up the differential In salaries
between that star and the one the producer wanted, the network
may have in fact taken away the producer's leverage and ability
to control the star. Once the actor is aware he or she is
"indispensible" to the network, he can become unreasonable,
arriving late, causing production delays, making creative
demands, all of which can lead to production overages which the
producer must bear.
The Commission has requested input on whether the rules
restrict the ability of the networks and producers to freely
allocate risks and rewards in program production and
distribution. As can be seen from the above comments, none of
the producers surveyed expressed the opinion that the risks were
fairly shared with the network. Most felt just the opposite,
that a network would take every opportunity to lay-off risks on
the producer. No one that was surveyed expressed any belief that
the networks, if entitled to participate in ownership, profits
and syndication rights, would increase producer fees up front in
PAGENO="0678"
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return for participations in those areas. Instead, the feeling
was that "The networks want it both ways, they want it all. It's
contrary to the free enterprise system" according to one producer
of a 1~it television series (who asked not to be identified for
fear of network reprisal). "No matter what they get in
advertising revenue, no matter what they save in deficit, THEY
WANT IT ALL.. .. .The networks don't reward you if the series sells
you don't get a greater license fee now if it succeeds." She
believes that since you can judge the future by what has happened
in the past, there is no reason to expect that greater financial
benefits would be offered to her by the networks in return for
profits or syndication rights. "You have to judge the future by
the past and we know they take all they can get".
Many producers surveyed felt the elimination of the Rules
would mean that the networks would take away the profits these
producers had struggled so hard to achieve. "It's anti..incentive
in a sense, anti-entreprenuerial. almost un~.American" said one.
"It you take 90% of the risk and do all the work, you should be
able' to take the profits," said producer Bonny Dore6. "By
repealing the Financial Interest and Syndication Rules, the FCC
is striking a blow against free enterprise" echoed producer
Cynthia Cherbak7. Participation in profits was, as Cherbak put
it "My only form of residual as a producer. Participation in
PAGENO="0679"
677
profits Is my future.. .participating more fully in profits is my
goal. To deny me this opportunity by returning the entire
control of profits to the networks denies me the goal that I have
been working for my entire career." Producer Lillian Gallo8 put
it "I believe in the American dream. On my first two films I
worked `in-house' for the experience. But as you accumulate
knowledge and experience your efforts should let you grow and
develop and profit."
Most producers felt that the elimination of the Rules would
result in their either going out of business or else in their
becoming employees of the networks, producing network-owned
shows. They did not believe they would continue to operate as
independent producers because they felt the networks would take
100% of the profits. In their minds, the distinction between
being independent and being an employee has a qualitative Impact
on the resulting television programs. As Malone put it "If you
give birth to a project you must see it to adulthood. If
deregulation oocurs the network development employees will
produce all the shows and even in the best of circumstances a few
employees just can't be as committed or get quality when they are
overseeing several projects at once." Gallo said: "If you take
the initiative and take the creative gamble - working with a
passion - It makes a difference In the product. This involvement
PAGENO="0680"
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and commitment to television is in the public interest." Bolen
saw a direct impact on the public: "The FCC must look at the
impact on the community. If they care about what goes over the
air and about the people in this country who cannot afford to pay
for cable services arid only have the network supplied
programming, they cannot deregulate. We will see a reduced
interest on the part of the networks for supplying quality
programming. It will be a cost-control business at the expense
of quality." Gallo added,"The number of network executives will
increase but the ideas from which programming originates won't
come from as broad a base of people. The ideas will be
restricted to the point of view of the few executives at the
network. With the rules there are opportunities for larger
numbers of professionals to come to the networks and have their
ideas heard."
The positive effect that the profit incentive can have on
the qualify of programming was pointed out by one producer with
respect to the television series "Paper Chase". The series was
created for a television network as a spinoff from a theatrical
motion picture. The network series was a critical success but
fell upon low ratings and was cancelled. If it had been owned or
controlled by the network it probably would never have been
syndicated since too few episodes were produced by normal
PAGENO="0681"
679
syndication standards. Yet the profit motivation on the part of
the studio which produced it, led to the series being re-run on
the Public Broadcasting System, thereby reaching a different
audience than that nf the networks. Now the same series concept
has been sold to cable television as the basis for a series
produced directly for cable thereby reaching still another
audience. In view of the hundreds of series that have been
produced and cancelled never to rise again, the three lives of
the "Paper Chase" series can only be attributed to an astute and
persistent evaluation of the program concept on the part of its
producers, coupled with a profit incentive. If the series had
been created originally by a network in-house employee whose
major objective was to get ratings it never would have gotten
further than cancellation.
All of the producers responding to the survey felt they had
benefited both directly and indirectly from the Financial
Interest and Syndication ~ulez. Some had overall deals with
studios and, through the studios' increased syndication revenue,
were guaranteed by the studio an annual salary in return for
exclusivity on all of their projects. Others did not participate
directly in profits from shows they produced but participated
indirectly through employer profit sharing plans. Most however,
were truly independent, with numerous affiliations with a variety
PAGENO="0682"
680
of companies that have prospered from syndication revenue or have
only recently entered the syndication or production business,
enticed by the expectancy of future profits.9 Many pointed out
that in addition to greater opportunity for producers such as
themselves, the rules had created more jobs for other women - and
men, of course in such areas as story development, creative and
business affairs executives, and distribution executives, since
all of these new companies had to staff their operations. WIF
has, for example, over 50 members in the development/story editor
job category, the majority of which work for small, independent
companies. Abolition ofthe Rules would mean the loss of many
of these jobs, since many production companies would go out of
business. Most producers felt that the majority of programming
would then be produced "in~~house" by the three networks, on a
purely cost..criented basis.
Many producers noted that the networks were already
expressing a desire to produce projects "in-house". One producer
(who did not want to be identified) related "At a network's
insistance I was told they wanted a new project of mine `in-
house' and would give 25% of the revenue (this was for a movie of
the week and possible series). It was made very clear that they
did not want to work with a company. I understand that mine is
not an isolated case - that the networks are anticipating
PAGENO="0683"
681
deregulation and most orders going out Eire `in-house'."
Another producer, had the same experience. Having produced
two movies of the week, *the network wanted the next project to be
"in-house", saying "Two for you and one for us would be a nice
way to go." In her case the network offered her 25% of the
profits. (We assume that in both cases the arrangements proposed
by the networks were consistent with the Rules and applicable
oonsent decrees. The technicalities of how much profits or
revenues were to be computed and how syndication rights were to
be disposed of were not made available to WIF).
We believe it is important to note that in both cases the
network had determined that 75% of the profits was an appropriate
share. for the network to retain and indicated no willingness to
negotiate a greater share for the producer. In adopting the
Rules in 1970, the Commission based its action in part upon the
fact that the networks were participating in the profits from
syndication of series shown on their air in 65% of the programs
examined.10 The percentage of interest in profits in such cases
varied but the average domestic and foreign profit shares
obtained by the networks were less than 35% of the profits".
Today, the networks are retaining 75% of the profits. We cannot
understand how the Commission could believe that twelve years ago
PAGENO="0684"
682
an average of 35% of the profits was too large a share for a
network to retain yet can consider eliminating the Rules today
when networks are already demanding 75% of the profits on "in-
house" projects. If the Rules are eliminated there is no reason
why the networks will not continue to reduce the percentage of
profits offered to producers. Before acting upon the instant
rulemaking, we ask that the Commission examine more closely the
current business practices of the networks regarding "in-house"
programming as an indication of the manner in which networks will
conduct their business if the Rules are eliminated.
One thing that hasn't changed since the adoption of the
Rules appears to be the networks' preference for their own
programming over programming owned by third parties. In 1970,
the Commission noted a direct relationship between new programs
chosen for network schedules and network acquisition of profits
and syndication rights.12 Today the same relationship appears to
exist with "in-house" programming.
Dore relates "The networks listen to an idea for a MOW from
an independent, then say `Would you like to do it `in-house'?'
If you say `no' you get no pick up. If you say `yes' you
magically get picked up." Still another producer who declined to
be identified mentioned the increase in "in-house" development.
PAGENO="0685"
683
"It's terribly unfair" she said. "It means they stand to make
more profits from their own shows so they will choose their `in-
house' program over third parties' projects. You can't be a buyer
and a seller at the same time and remain truly competitive."
The producers' worry over "in-house" production of programs
was not merely financially based. All feared that the quality of
programming - the variety and diversity of programming - will
deteriorate if the networks are allowed to control the profits,
ownership and syndication of programs.
The general reasons for this fear were that so few people
had the ultimate power tø make decisions at a network. One
former network executive who is now a producer put it "There are
about six to seven people at each network making the final
determination .. . The networks will rule out entire areas or
topics which may be important issues. (If deregulation occurs)
you would have to pander to what these six to seven people want
to see." She felt that her ownership interest in her series made
her fight hard for issues or characters she believed in. If she
were forced to give up ownership to the networks and become their
employee she would have no incentive to fight; she would end up
in a position of self-censorship since there would be no reason
to fight against corporate policy - a team player plays by the
PAGENO="0686"
684
team's rules. For example, one producer related how, on a show
she was line producing, a dispute had arisen with the network
over changes the network required in one scene which the
executive producer/owner felt were necessary to the content of
the scene. The executive producer elected not to deliver the
program rather than make the change the network requested.
Ultimately the program aired without the change. Had the
producer been an employee of the network he would not have had a
choice in the matter, he would have had to follow instructions
from upper management.
The difficulty of selling a network on a new or
controversial project already exists, but most producers felt
that the situation will worsen if the Rules are abolished. "The
networks go for the bland, the non-controversial.. .to them, an
empty record is the best record. To say `no' is safe." Another
ex-network executive, now producing, felt that currently the
networks.are predominately interested in titillating subject
matter. "Only sexually related `hot topics' get picked up. Also
single people and marriages-in-trouble are `hot' but solid.
marriages are not. Good projects get cancelled if another
network does a project on the same topic (albeit poorly) and the
first project doesn't do well in the ratings.. .You can't do
projects featuring blacks or senior citizens, for example, unless
PAGENO="0687"
685
you have a major star attached to it." Another producer had a
project involving a Mexican as the main character which was
turned down: "Tacos don't get numbers" was what the network
executive had said.
If the Rules are eliminated and if as feared by the
producers we surveyed, many of the smaller independent producers
go out of business, in addition to the loss of jobs that will
result will be a consequent loss of diversity in programming. If
50 development personnel, story editors and producers lose their
jobs it is the loss of 50 different points of view as well. It
is the diversity in approach and outlook that allows for
creativity and quality in programming. This is most often
mentioned in the theatrical side of the business, in stories
relating to how many studios passed on projects that became
block..buster motion pictures such as "Star Wars" and "Jaws". But
the same principle applies in television. Today, network
television projects can be developed by any one of a number of
independent producers and studios in large part due to the
financial independence created by the Rules. There are simply
more places a writer or producer can take his project in the hope
of finding the best creative development approach. If many of
these independent producers and studios go o~t of, or diminish
their involvement in network television, the number and variety
32-540 O-84--44
PAGENO="0688"
686
of places where ideas may be taken will be much more limited,
resulting in a more limited variety of programming on he public
airwaves.
Coupled with the fear that controversial or creative
programming will be lost is the feeling that the networks already
exert excessive control in the creative process (in addition to
the control *exerted in financial areas). If the Rules are
eliminated one producer felt that the resulting decisions by
committee which are in effeot at the network will result in bland
programming. The current process is more healthy, she said,
since at least the more powerful independent producers and
studios can bargain more freely and "fight it out".
Many producers believed that the networks currently function
as executive producers on shows produced for their network. In
casting, directing and writing areas the networks already exert
substantial power. Mutual approval of casting by both the
network and producer is normal, often resulting in the loss of
bargaining power by the producer, as discussed above. Networks
can and do demand changes in the screenplay, the writers and the
director. If the Rules are eliminated and the incentive of the
independent producer thereby struck down, WIF believes there will
be a resultant impact on other categories of WI? membership,
PAGENO="0689"
687
including writer, director and performer members. The proclivity
of the networks to rely on statistics such as Nielsen ratings and
concept/personalitY testing in determining the selection of
artists and the existence of so-called "network-approved"
creative personnel is well-known. Without the independent
advocacy of the independent producer/owner, arguing with the
network for new faces, new directors and new writers, we fear
that access into network television will be diminished for such
newcomers. The networks will, of course, desire to develop new
talent as they have in the past, but without independent voices
spurring them on, we fear that the rate of change and growth in
the number of performers, writers and directors who are
"acceptable" to the network will diminish, with a resulting
impact on the quality of programming.
The inherent and beneficial conflict between independent
producer and network was summed up by one producer who left the
network because of differences of opinion with upper network
management: She thought the producer should control the
productiøri of a show and her management thought the network
should control it. She said: "Now the networks have total
creative control. If they were to own (programs) too they would
have even greater control. Even if the networks call themselves
partners with the producers it would not be a true partnership
PAGENO="0690"
688
because the precedent of total control already exists." We
believe this points up the fallacy in the Commission's approach
that elimination of the rules will better allow the parties to
allocate the risks and rewards of program production. An
individual producer is simply not powerful enough to negotiate on
an equal basis with a network. It is an unequal situation now.
The comments above illustrate that the networks have not shown
any interest in bearing any of the attendant risks of production,
and have in fact shown a tendency to allocate those risks to the
producer. Given that inequality, none of the producers surveyed
expressed any belief that the networks would step back from their
position of power in negotiating deals in the future. The
networks already command 75% of the profits on "in...house" deals,
and no one expects the networks will bargain for anything less
than all they can get. With an independent producer, all the
networks can get is everything.
WIF believes the existing Financial Ir~terest and Syndication
Rules serve the purpose for which they were intended. We believe
independent producers have become stronger and their numbers have
increased over the years that the Rules have been in force. As a
result the quality and variety of programming has also increased
both in terms of its creation for network telecast and its
subsequent availability for independent syndication. We believe
PAGENO="0691"
689
the Rules therefore, have benefitted the American public by
creating more and better quality programming and we urge the
Commission to act to retain the Rules in full force and effect.
Date: January 2Z, 1983
Respectfully submitted,
WOMEN IN FILM, LOS ANGELES
-~ L -
Phylis Geller, President
8~489 4. Third St. #149
Los Angeles, Ca. 900148
By~~~4 ~
Mary S.'~edding, 2nd VicPPresident
10202 W. Washington Blvd.
Culver City, Ca. 90230
PAGENO="0692"
690
FOOTNOTES
1 A list of Women in Film job categories and members who have
experience in such categories is attached hereto.
2 Susan Clark is an actress and producer who has been in the TV
business since 1967. With her husband, actor and producer Alex
Karras they have produced 3 movies of the week, "Jimmy B. and
Andre", "Word of Honor", "Maid in America". Clark has also
appeared as an actress in over 20 motion pictures.
3 Nancy Malone is a producer, director and actress. She has
produced numerous television movies including "Sherlock Holmes in
New York" and "Like Mother, Like Me". She has also produced such
television series as"The Nurses" and began her career as an
actress at the age of 11.
Lin Bolen has been an independent producer for 6 years.
During her career she has developed and produced TV series,
movies~of.the week and mini~.series for all day parts of the TV
day, i.e., daytime, primetime, late night. She was Vice
President of daytime programming with NBC from 1971 to 1975 and
has been in the business for 20 years. As an independent
producer she spent one year in association with Fred Silverman's
Intermedia Entertainment Co.
5 Fern Field - has been a writer and producer since 1975. Her
credits include after school specials, the syndicated series "The
Baxters", the CBS TV movie "Eleanor, First Lady of the World",
and the ABC Emmy Award program "The Wave". She has also worked
as a staff producer for Tandem/TAT since 1975.
6 Bonny Dore - is President of the Grief-Dore Company, an
independent TV and motion picture production company. She was an
executive with ABC from 1975 to 1977 and thereafter a VP of Kroft
Entertainment and Centerpoint Productions. She has developed and
produced network primetime series, MOW's and children's
programming, as well as syndication programming.
7 Cynthia Cherback is a writer and producer who has been
involved in the TV business since 1973, during which time she has
written MOWs, mini-series and pilots for NBC and CBS. She has
also served as supervising producer of the TV series "Harper
Valley PTA" and associate producer of "Switch". S
PAGENO="0693"
691
Lillian Gallo has produced numerous MOWs including "I Take
ir~ese tlen" (a humorous look at married relationships), "Fun and
Games" (an examination of sexual harrasement); "Hustling" (an
expose of prostitution), "A Stranger Who Looks Like Me" (which
chronicled adopted childrens' search for their biological
parents), as well as many others. She was also Director of
Movies of the Week for ABC and an executive at 20th Century Fox,
as well as a producer for MTM Enterprises.
9 A partial li5t of such companies is as followa:
EMI Television
Krof ft Entertainment Inc.
Viacom Enterprises
Tandem Productions Inc.
Group W
Tisch/Avnet Productions Inc.
PolyGram Television
Alan Landsburg Productions
Lorimar Productions
Metromedia Producers Corp.
Chuck Fries Productions
Playboy Productions
10 FCC Report and Order, FCC 70.-1466; 146636 paragraph 8.
~ See Table 143 of Television Program Production Procurement and
Syndication: "An Economic Analysis Relating to the FCC's Proposed
Rule in Docket No. 12782, Vol II. which was submitted by the
networks in connection with the FCC's 1965 notice of Proposed
Rulemaking considering implementation of the Rules (FCC 65.227,
30 F.R. `065).
12 FCC Report and Order, FCC 70-1466; 146636 paragraph 19.
PAGENO="0694"
692
WOMEN IN FILM
I~OB CATEGORIES
Acc~inting/FinanCe
Advertising/Market inp
Agent Literary
Agent Music
Agent Talent
Agent Other
Animation
Art (liiecticn
Assistant/AssoCiate flirector
Assistant/Associate Producer
Attorney
Business Affairs Network
Business Affairs StUdiO
Business Affairs OtP~r
Camera Film
Camera Tape
Casting
Chore~raDher
Coath
cow~oser/flrra'~gcr
Costt~ne Design/Wardrobe
~ve1oDment/Story £d~tor
Director
Editorial Film
Editorial Tape
Editorial - Music
Editorial So~'d
Educator/Lecturer/Librarian
Electrician/Gaffer
Event Coordinator
Executive Cab1e/~ay TV
Executive Network
Executive Studio
Executive Indep. Cev./~ruductiofl
Executive 0tf~r
Film Conm~issiOnerS
Graphic Oesigrs/ArtiSt
GriP
Guild/thirln/Org. RepresAntat !ves
Hairstylist
Journalist Film/Tare
Journalist Print
Lyricist/SOnGwriter
Makeup
sanagement/Persoflnel
Musician
Performer
Personal Manager
Pt~oto9:3Pher
Pioducer
Production Manager/SLVerViSot
~todct Inn Personnel/Coorc4./ASSt.
Project iuni St
Publicity/Pro.'~OtiOfl
Publishing
Radio
Research
SaJeA/DiStributiOn
Script Supervisor
Set Oecorat ion
Spund Recording
stage Man~ger/rlOOr P4gr.
Stuntwoman
Talent Coordinator
Theatre
Writer
Writers Services
PAGENO="0695"
AGCOUIrIM'/FINRPCE
Albert, 1'udrey
Childress, Joyce
OeThcseas, Anita
Dyson, Charlotte
Fields, Lilian
Golden, Paulyne
Gonzales, Martha
Crosso, Nikki Allyn
leveriaie, ~arv~tne
Kennedy, Beth
Lyle, Barbara
Mastro, Joyce
Robbins, Joni
Wakefield, Carol
ADVFRTISINC/MARI~ETIPG
Alexander, Stephanie
Bo~ert, Zepha
Buzzell, Linda
Carfart, Linda
Den Hartog, Pam
Ergeison, Dale
Fox, Kara
Joseph, Sandra
Klausner, Willette
Lane, Camille
Miller, Freyda
Mudge, Barbara
Peterson, Eileen
~~1man, Karen
Rose, Sharon:.
Rubin, Sharon
Sutton, Mel 1ssa~
Travil Lion, C~rinne
At~NT LIITERAPY
Berneechi, Shauna
BLitmen, Nsn
Brown, Juanita
Carol, Jo~Ann
Chandler, Rita
Chssman, Tanya
Cornell, Polly
Gary, Lorraine
Hirsch, Sylvia
Iser, Oeverly
Joseph, Flo
Karlan, Patricia
Lake, Candace
Lam~reeht, Marcy
Strick, Shirley
Wallerstein, Michele
AGENI. MUSIC
Faith, Carol
Joseph, Flo
Llr*e.E1li~, Maci
AGENT TALENT
Blanchard, Nina
$lit"Wn, Nan
Chandler, Rita
Davis, Diane
Mutchirson, Beverly
Joseph, rip
Joseph, Sandra
Uchtman, Terry
Penman, Laurie
Preston, Maggie
Rr,ber~s, Uancy
Ross, Eleanor
Schoen, Judy
Wltkln, Francine
AGENT OTtER
J"seph, .F1O
Ror,erts, Nancy
ANIMATION
Dennis, 3. .Ncél~
Dixon, Dianne..
K~rry, Margiret
*R1 DIRECTIO~1
Abbott, Cami~1e (thus.)
Runney, Sharon
Cotwin, Alexandra
Hadfleid, Perwy
Miller, Freyda
Roth, Dena
Sh~e1ds, lie
Blecter, rlorcnce
Dobrow, Joelle
Dowrey, Cheryl
Fox, Maredith Ellen
Gerber, D3Isy
Grigg, Ginger
Gzuber.Blackmafl, Karen
693
ASSISTANT/ASSOCIATE DIREITOR
PAGENO="0696"
~!~YA~T/ASSOCI~rE DIRECTOR (cont'd)
Kim, OkSL$~
Maffco, Cayle
Nelson, Janis
Rothenberg, Betty
SInv'~ons, Linda
Wal~iian, Leslie
Wigie, Shari Lynn
694
~S1S1AN!LAS$GCIMTE PREX$LtER (cont'd)
SL.mnels, Cathleen
Thornton, Corthita
Weintraub, Amy
NUde, Dorothy
Anderson, Adrienne Chia
Arc, Kathleen
Austin, Stephanie
Baharic, Carol
Ballard, Christine
Bennet, Barbara Allyne
Bigelow, Penny
~leehar, Florence
Brown, I. Bonnie
Carv~n, Hana
Carter, Beverly
Carter, Pamela
Charles, Sandy
Cha'~1n, Perrj
Chaulnaid, Carole
Crchran, Lisa
Demiery, Yvonne
Dillon, Rita
Elman, 8art~ra
cImiay, Dolores
Foiter, Su~ana
fez, Meredith El1~n
Gilbert, Irene
Galand, Marlene
r.ruber_alackman, (a zen
Hartley, Doris
~kin~, Anne
~tatch1n~~n, Canny Caruso
Jarian, Bonita Bonnie'
Karrin, Bonnie
Kl~*y, Carol
Kim, C~s~.r
l.enti, Susan
Llnke.Eli1s, P4ancI
LwNard, Pa'4a
HaUeo, Cayle
Horea, Darien
Nelson, Donje
Nick, Betty
O'Neill, Susan
*Ockett, Elaine
~tUy, Sara
~5S, £lear~
$~IJKifl, Jasaica
~ Marilyn
SlrC1*t~, Dorothy
Smith, ~
Aciand, Nor'na
Baldwin, June
Beredek, Melinda
Bfltman, Nan
Contes, Carol
Denkert, Darcie
Dornstein, Judith Cohen
Free~an, Fran
Gottesfeid, Sharon
Grode, Susan
Heath, Leanna Johnson
Munt, Jan
Kalins, Dayna
Keller, Micheline
Kennedy, Beth
Landau, Edie
Levin, Evanne Lynn
Lichter, Linda
Marshall, Meryl
Merians, Judith
Murphy, Midge
Noddirqs, Sarah
Richards, Leslie
Shaffer, Tobey
Snyder, Jacquelyn Gail
Surpin, Shelley
Warshaw, Christine
Weller, Elizabeth
Wilson, Heavenly Koh
Wilson, Margaret (Mnlly)
Zolt, Nina
Baldwin, June
Hood, Valerie Sage
Merians, Judith
Murphy, Micige
Razo, CamIUIa
Sny~1er, Jac~uelyn Call
Denkert, Darcie
(.arzilli, Jane
Mealy, Patrj'~1a
HLmt, Jart
Jurist, Lorrayne
ASSISTANT/ASSOCIATE PRCOL~%IR
~JSDESS AFFAIRS NETWORK
~JSDE!S AFFAIRS STICID
PAGENO="0697"
695
BUSINESS AFFAiRS - STWIO (cont'd)
ç~T!P4 (cont'd)
Ledding, `Wary
Lesser, Su
Levine, Jotvina
Pamkowski, Yikki
Sledlecki, Agnes
Wilson, Margaret (Molly)
JS1PfSS IFFAIRS
Albert, Audrey
Carrell, Martha
Chaobers, Arline
DeThornas, Anita
Golden, Paulyne
Kerry, Margaret
Klein, Barbara
Richards, Leslie
Warshaw, Christine
Bahoric, CArol
Midas, Lida
Mill, Leslie
Zheutlln, Cathy
CAtERA FILM
CNERA 1N~E
Le$4oven, Dinah
McCor~nick, Mary
Marsall, Jacqueline
Reidel, Jody
Zheutlin, Cathy
CASTING
Appingate, Phyllis
Bennet, Barbara Allyne
Bigelow,. Penny
Brown, Jeanne de Vi vier
Glucksman, Margie
Guest, Jell)
Holle, Merita
Hoistra, ~idith
Majston, Labame
Jotvson, Kathleen Kay
Kelsay, Carol
Long, Beverly
Mclean, Doreen (Dodic)
Newell, Claire
Remsen, Barbara Dodd
Robinson, Joyce
Ross, Eleanor
Ross, Marcia
Shelehov, Ursula
Soskin, Carol
Watson, Robyn
Korwin, Oevra
Indrews, Jennifer
Bennett, Fran
Bridges, Betty
Chauvin, Lilyan
Dietrich, Dena
0cm, Dolores
Edwards, Rona
Fury, Loretta
Gobetti, Maria
Kanter, Abbe
Kiechie, Suzanne
Kondazian, Karen.
Korwin, Devra
Mancini, Joyce
Pointer, Priscilla
Roberts, Tracy
Rose, Laura Lea
R~ln, Brady
Tobias, Marice
elide, Meta
C0,'#CSER/MRRNGER
Belle, Barbara
Connors, Carol
Donovan, Lisa Ann
Greene, Nancy
Lee, Beth
Morley, Angela
5~~~rof F, Andrea
Schock, Harriet
Schwartz, Nan
CDSTt~ DESI~4I'WARDR~
Doctor, Jane
Ewatt, Carolina
Jenssen, Elois
Marcher, Jane
Miller, Freyda
Phillips, Erica
Roy, Hazel
PAGENO="0698"
696
~y~LOP.~NT/5TORY EDITOR
~IRECTOR
Arandjelovich, Karen
Arc, Kathleen
Arnoldi, Natasha
Austin, Diane
Barrett, Karen
Bigelow, Penny
Brantlinger, Dolores
Breese, Eleanor
BrnccoU, Dana Wilson
Brnokt~, Hind!
Brown, Piona Parnselee
Brun.Ccttan, Francoise
Chasm, Perri
Ch.icerman~Saperstein, Irene
Cobb, ~nny
Craig, Susan
Daniels, Lani
Davis, Andrea
De4coven, Lindy
Dillon, Maria
Doratahoo, Terry
farnsworth, Teresa
Clibert, Irene
G~mf~1no, Lee Schafr
Horton, Winter
Howard, Cwendolyn
Wyman, Terry
Isenberg, Lynn
Johnson, Kathleen Kay
Jordan, Bonita "Bonnie"
Kanter, Abbe
Kerry, `~rgaret
Liowan, Carol Sue
MoCord, Gloria
Walone, Nancy
Merle, Sara
Meyer, Nancy
Ner',a, Darien
Nelson, Donje
Nelson, Janis
O'Neill, Susan
Peterson, Eileen
Rahtnowieh, Ellen
Roc1~ett, Elaine
SCIURan, Jessic*
Sger, Ur~ia
$etloee, Beverly
Slenker, Marilyn
Sl'lelde, ha
Sloan, Dolores
SQi~~, ldRy
SUMrs, Cathimen
~~Off, $Xsala
1.tson Rnbyn
1ilO,, Dorothy
`t'Chestar Nargot
Albrecht, Joie
Allen, Penny
Apick, Mary
Back, Karen
Ballard, Christine
Binder, Judith
Birch, Miriam
Brickell, Beth
Carr, Betty Ann
Carter, Lynne
Cason, Barbara
chaikin, Judy
ch~uvin, Lilyan
cho, Renee
Clearfield, Anita
Dallwitz, Ann
Dean, Margo
Deitch, Donna
DeKoven, Lindy
Dobrow, Joelle
Feinstein, Lisa
Field, Fern
Fury, Loretta
Gardner Don Jean
Gerber, Daisy
Gibbs, Ann
Gilbert, Sue
Gobetti, Maria
Greene, Nancy
Names, Randa
Harwood, Raven
Haymer, Susan
Miii, Leslie
Hoffs, Tanar Simon
House, Karen
Houske, Marta
Houston, Labame
Howard, Karin
Jassiin, Llndi
Kahn, Ilene
Kanter, Donna
King, Claudia
Korwin, Devra
Laird, Marlena
Lander, Diane
Lavin, Linda
Lee, Joanna
Littman, Lyrne
Litin, Natash3
Lucchesi, Jasmine
Luck, Thu
HoCormick, Mary
Malone, Nancy
Marlyn, Audrey
Martei, Tasha
Mock, Freida Lee
Morgan
Mossman, Merrily
Nervig, Sandra
Oliver, Susan
Perreau, Gigi
PAGENO="0699"
DI~CTOR (cont'd)
697
kPIT_CRIPL TAPE (cont'd)
Rar~x~, Timrm
Reldel, Judy
Roberts, Tracy
Rus~ll, Pat
ScPw,ltz, Barbara
Shoshana
Shar*lin, Una
Sha,*s, Ann ZarW
9~rwood, Celia
Shirwi, ~4ar~aret
Shi(~ey, Susan
Smitaan, Susan
Sol~n, J.T.
Stevis, Stella
Stratton, Susan Krauss
Tobias, Marice
Tyler, Gmmy
Wiser, christine Zurbach
Wolf, Rhnett
Zheutlin, Cathy
~iTCRIAL. FILM
Allan, Dede
Carollo, Sylvia
D'Antanio, Joanne
Oeitch, Donna
Dennis, Baa
Finkle, Claudia
Grand, Eleanor
Hanson, Ellen
Model, Terry
I~arato, Noelle
Jotnsai, Christie
London, Helyn Spears
Marcit*us, Susan
Marks, Barbara
Moore, Millie
Nervig, Sandra
Paul, Millie
Pettit, Suzanne
Pokras, Barbara
Reidel, Judy
Roland, Rita
Pettlt, Suzanne
Reldel, ).idy
81.1, Joan
Marks, Barbara
Nervig, Sandra
EDITORIAl. MUSIC
EDITORI*J. -
D'Antonio, Joanne
Finkie, Claudia
Model, Terry
Marks, Barbara
Bacal, Nancy
Barry, Patricia
Brown, Mona Parmelee
Carrell, Martha
Chambers, Arline
DU1T~hOO, Terry
Feinstein, Usa
Mause, Sharon Wilkinson
.~nssen, Elois
Kazadi, Camille
McCord, Gloria
Marks, Barbara
Marsall, Jacqueline
Miller, Pat
Myles, Betty
O'Brien, Sharon (Sam)
Peyser, Lois
Ross, Eleanor
Shepard, Wendy
Slain, Dolores
Soskin, Carol
Tyler, Robin
Williams, Rhoda
~p~TORt~., . TPFE
Carollo, Sylvia
O'Antonto, Joaive
Finkle, Claudia
Grand, Eleanor
Ia~~arato, Noelle
Karrin, Bonnie
Narcir~aJs, Susan
Paul, Millie
~ECTR!CIAN/CArFER
EVENT COORDI!$JDR
Davids, Mollace G.
Finlay, Dolores
EC*TOR/LECTLPER,tIBRARI~
Day, Jo Ann
PAGENO="0700"
EXECUTIVE CPBLE/PAY TV
698
EXECUTIVE - STWIO (cont'd)
Loreen
Benedek, Melinda
Boone, Gebrielie
Castiart, Unda
Deknatel, Jane
~qoi, Iris
Fitzpatrick, Cathy
~rar~(iin, RiCki
Gallagher, Sarah
Cray, Elizabeth
Kern, Ilene
Luger, Lois
Nerea, Darien
PurceU, Madalyn Ulil
5hv~ks, Ann Zane
Turtle, Cindy
EXECUTIVE P~TWORK
BoLen, Un
Brut~,, Joyce
Corday, Barbara
rester, M. christine
Celier, Phylis
Click, Phyllis
Coast, Jean
Marshall, Meryl
*~lcai~y, Joarne
Neww~an..Minson, Latasa
RaIn,an, Karen
SOChs, Barbara Turner
Slrqer, Carla
Wiriart, Cthel
EXECUTIVE STUDIO
~`arboth, Jane
~ Barbara
~ Barbara
I'Ilrman, Brooke
~`~oaci,, Sheila
Boran, Lindsay
rne, Cir~y
N~ker, Neler~
GIant, Willie
Kvr~,~k Deborah
IIImsdy, Beth
Lar~sirq, Sherry
L~rence, Candace
Mary
Anne
~tzbaeh, Susan
`~aat1r, Marcia
Un
d~ee~1 Dean
Tenser, Marilyn
warren, Madeline
Welles, Annette
Whittaker, Susan Mcoargh
E~CUTIVE - DCEP.. DEVELOPtNT/PROULCII(
Au, Deborah
Alexander, Barbara
Arthur (Bartolazzi), ~X*iith
Austin, Diane
Austin, Stephanie
Bernhardt, Sharon
Brown, I. Bonnie
Brown, None Parmalee
Cannon, Hans
Dailey, Diane
des Lauriers, Michelle
Dixon, Dianne
~jbrow, Donna
Gotand, Marlene
Haynes, Roberta
Hc~kins, Anne
Lenti, Susan
Leve, Harriet
Loring, Lynn
L~bard, Paula
Maffeo, Gayle
Merlis, Iris
Nelson, Donie
P&aell, Faye
Pettit, Carol Fisher
Price, Susan
Purcell, Nadalyn LUll
Rees, Marian
Romilly, Sara
Swiderson, Auriel
Shatel, Barbra
Siieaons, Linda
ken'ers, Cathleen
Trube, liene Lehrman
Ulene, Priscilla
Van HarUngen, Darlene
Winchester, Margot
Wittn, Ellen
EXECUTIVE OTHER
Annerterq, Wallis
Arandjelovich, Karen
Buzell, Lit~
chambers, Az-line
Den Harteg, Pam
Dyson, Charlotte
]elhaldt, Roth
Evans, Pat
Ferren, Peg
PAGENO="0701"
EXECUTIVE OT~R (cont'd)
Garen, Kayla
Greening, Judy Conway
Joseph, Alexis
Kelly, MeryCarol "t4arcy~
O'~rien, Sharon (Sam)
Pubin, Ronnie
Shepard, Wendy
Wilkerson, Tichi
FILM CDP44ISSlOP~ERS
De Lauer, P4ar~jel (Tt~son)
KItzrnlller, Laura (Florida)
GRA~1IC DE3ID~/ARTIST
Orti2, Loille
Wayne, June
Bernay, t4arjo
Golden, Paulyne
Jackson, Lyn
Strasser, Carole
699
JGJRNAL1ST PRINT
kinerterg, Wallis
Asselin, Diane
Birch, Miriam
Bogert, Zepha
Elman, Barbara
Garfield, Kim
Gelgur, Donna
Hoffs, Tamar Simon
Kael, Pauline
Lee, Shirley
Lipton, Sandy
Marshall, Jan
Peterson, Monica
Rose, Sharon
Rwth, Marianne
Schoenberger, Frances
Sutton, Melissa
Treloar, Dorothy
Williams, Gall
LYRIC1ST/SONCWRI ICR
Belle, Barbara
Carr, Betty Am
Claire, Judith
Connors, Carol
Donovan, Lisa Ann
Feldman, Na~yni
Frances, Helene
Cripoo, Joelyn
Leikin, Molly~Am
Ruchala, Leslie
Saparoff, Andrea
Sauceda, Lora Kayo
Schock, Harriet
Waxevterg, Jon
Wayne, Dorothy
Anson, ~jth
8rooks, Nellie
Foster, Susana
Haymer, Susan
Kanter, Donna
King, Jocqueline
MacRae, Meredith
Meyer, Carla
3choenberger, Frances
Smith, Sunde
Westersan, Chantal
Williams, Gail
Forrest, Susan
MANACEMENT/1'ERSONNEL
Biye, Marjorie
Gary, Adrienne
Iaçeniale, Je*nnine
Links-EllIs, Nanci
GRIP
Day, Jo Ann
GUILD/UNION/ORG. ~PRESENTATIVtS
JOLPNALIST rTLM/IPP
PAGENO="0702"
700
WJSIC1AN
~~OR~ER (corit'd)
Donovan, Lisa Ann
Jec1~son, Lyn
Kiechie, SUzanne
Macintosh, Jay
Dohoa, Beth
SaQaroff, Andrea
~RrCR~
~erson, Barbara
~rews, Jennifer
~nan, Ruth
Abkk, Mary
~olegate, Phyllis
Arc, Kathleen
Archer, Kate
Bacalla, Donna
Backes, Alice
Baker, Sally
Barry, Patricia
SeT~et, Barbara Allyne
Bennett, fran
Bev~ett, Meg
linUsy, Savannah
Bantam, fran
~ Zina
Batten,, Mary
Bisset, Jacqusline
Blake, ahitney
onllla..Clannini, Roxanna
S~idges, Betty
Brown, Jeanne de Vivier
BEOwn, Judy
~jrn.tt, Carol
Carr, Betty Ann
Carter, Lyrre
Cason, Barbara
a~iauvin, Lilyan
D%lnea.Varela, Migdia
COrvioUy, Noziaa
Connors, Carol
Dollwit~, P411%
Dovi~, ft4~fle~Marle
Oletricri, Dana
~van, Eriri
Barn, Dolores
Doyle, P~Qgy
£øward~, Rama
£stl,r, Ruth
1ll~n, Naowj Z.
~l*1ds, Lilian H.
`tan, Lisa
~ ~l~Tejla
~ ~
~d, Jean
Melon.
Polly
~TY, Laretta
Cam, Rita
Gelgur, Donna
Gibbs, Ann
Gilbert, Irene
Gish, Lillian
G~etti, Maria
Golaner, Molly
Graham, Lyla
Grant, SPerry
Greer, Ann
Griffin, Julann
Crippo, Joelyn
Hackett, Joan
Hansen, Danna
Marwood, Raven
Holle, Merita
$4jtchlnson, Beverly
Hutchinson, Canny Caruso
Hyde, Jacquelin
Janis, Norma
Jaress, 3111
3orden, Jan
Kanter, Abbe
Kasica, Meryanne
Keller, Susan
Kellogg, Kathie
King, Jact~ieline
Kim, Oksun
Kondazian, Karen
Ladd, Diane
Lander, Diane
Lavin, Linda
Leeds, Regina
Lewis, Marcia
Lightstafle, Marilyn
Lipton, Sandy
Lowell, Sondra
Lyle, Barbara
Macintosh, Jay
MacRae, Meredith
MacRae, Sheila
MoCord, Gloria
McCarmack, Patricia
MoKnight, Sandra Lee
Mackenzie, Patch
Malone, Marcy
Malooly, Maggie
Mneini, Joyce
Mannix, Julie Hawthorne
Marlow, Judy
Marlyn, Audrey
Marlyn, Jan
Marst*il, Jan
Meyer, Carla
Miles, Joanna
Meiahan, Kate
Myles, Betty'
Nolan, Kathleen
Oliver, Susan
PAGENO="0703"
(cont'd)
701
Parrish, Julie
Perrea~, Olgi
Peterson, Monica
Pfeiffer, Constance
Pflug, Jo Ann
Pointer, Priscilla
Potter, Carol
Price, Patrician
Raymond, Beverly
Redgrave, Lynn
Remsen, Barbara Dodd
Roberts, Tracy
Rose, Laura Lea
Rasher, Laurie Burton
Rubin, Brady
Ruchala, Leslie
Rye, Patricia
Schock, Harriet
Seguev, Shoshana
Shinn, Margaret
Silvern, Bea
Solanon, 3.1.
Stapleton, Jean
Stephens, Marcy
Stevens, Stella
Strawn, Linda
Thornton, Corchita
Tucker, Sandee
Turner, Janet
Tyler, Robin
Tyson, Cicely
Van Dam, Gwen
Van Harlingen, Darlene
Vanderbilt, Nanette
Wakeley, Marged
Waters, Lila
Wax, Ruby
Westerman, Chantai
Williams, Rhoda
Young, Dry
Zeiher, Barbara
PERSONAL MA
Belle, Barbara
Best, Barbara
Carol, Jo~kw~
Chasman, Tanya
Danto, Joan
Dayton, Arlene
Os Lauer, Marjel
Endler, Estelle
Hutson, Nancy Nester
McQueefley, Patricia
Mirell, Henrietta
Thowas, Judy
Adlen, Joan
A~e~son.Hervey, Vera
Qjterman, Steryl Levine
Hadas, Lida
Lowell, Sandra
Marsall, Jacqueline
Morrow.aergean, Linda
Stelehov, Ursula
Terry, Susan
PRODUCER
~Albrecht, Joie
Alexander, Barbara
Allen, Jay Presson
Allen, Penny
Anderson, Adrienne Ohio
Andre, Blue
Andreola, Silvia
Apick, Mary
Applegate, Phyllis
Arsndjelov1CP~, Karen
Archer, Kate
Assefln, Diane
Atlas, Barbara
Attlas, Elaine
Bacal, Nancy
Back, Karen
Baker, Sally
Bartlett, Juanita
Begelman, Gladyce
Bell, Mary
Belle, Baroara
Bettune, line
Blgelow, Penny
Binder, Judith
Birch, Miriam
Blake, Whitney
Biectar, F'lorence
Bolen, Lin
Boone, Cabrielle
Brown, JoAnn
Brown, Mona Parmelee
Brun~Cottan, Francoise
Buce, Barbara
Buzzell, Linda
Caddell, Jaclyn
Carrel, Wendy Jane
Carter, Lyrre
Carwin, Linda
Chek1cP~, Elaine
Clerbak, Cymthia
ho, Renee
ChIicerman~SaPerstei", Irene
Clearfield, Anita
Corday, Barbara
Corman, Julie
Corwin, Alexandra
Cattle, Anna
Curley, Joanne
32-540 O-84--45
PAGENO="0704"
702
CUCE~R (cor't'd)
O'~tonio, Joanne
Oavies, Patricia
Bean, Margo
des Lauriers, Michelle
Dillon, Maria
Dillon, Rita
Dobrow, Joelle
Bere, Bonny
~Jbrow, Donna
Oisme, Cindy
Endler, Estelle
Esqelson, Dale
(vans, Patricia
Fafet, Liv
field, Fern
Flanagan, Fi(~'Inula
Fleischer, Mary
Fonda, Jane
Frances, Helene
`tV~~ aarbara
Franklin, Ricki
Franklyn, MeQ
Cailo, Lillian
Car~er, Don Jean
Garen, Kayla
Geller, Phylis
Gather, Daisy
Giffond, Gail
Gilbert, Sue
GOianer, Molly
Gaidrich, Sybil Niden
Graha.n, Lyla
Ctant, Sherry
Gnene, Nancy
Greene, Varessa
Greening, Judy Conway
Creer, 94%fl
Gt1ffj~, biann
Gross, Marcy
~arEsino, Lee Schaf?
Gan.tte, Frances
Hell~r, P*jla Lee
Mavwc*,~j, Raven
Ma~~er, Susan
Maynes, ~berta
Komessy, Gay~A~~aj~
Kill, Leslie
Mat r5, Yamar ~1eon
Matt~~, Vthter
Mauske, Marta
~ars~, Gwer~~,~
Na,d, Cole D4vm
l$Ivteng Lynn
~5sl., Linda
~t!Cies, Georgia
~`t5On, Kathleen Kay
~ Sonita "Bonnie"
Ka~n, 1lere
PRLJDUCER (eont'd)
Kalish, Irma
Kanin, Fay
Kanter, Donna
Keller, Micheline
Keller, Susan
Kim, O~ungm1
King, Claudia
Kiausner, Willette
Klein, Barbara
La Brie, Alice Faye
Ladd, Diane
Landau, (die
Lander, Diane
Laura, ~a
Lee, Joanna
LeHoven, Dinah
Lava, Harriet
List, Shelley
Littean, Lynne
Loring, Lynn
LL~1n, Natasha
Lucchesi, Jeannine
Lukk, Thu
MacRae, Meredith
MacRae, Sheila
McCormick, Mary
MoKeand, Carol (van
Maffeo, Gayle
Malone, Nancy
Malooly, Maggie
Mancini, Joyce
Mannix, Julie Hawthorne
Mansfield, Barbara
Marlyn, Jan
Nartel, Tasha
Martyn, Elizabeth
Maynor, Asa
Merlis, Iris
Miles, Joanna
Miller, Pola
Mirell, Henrietta
Mock, Freida Lee
Korea, Darien
Marrow..8er~aan, Linda
Myles, Betty
Masitir, Marcia
Malson, Janis
New'mn.Minson, La.s~a
O'Naii, Justice
Ortiz, Lollie
Osborne, Lynre
Oshins, (.3.
Owens, Joan
Papp, Ten
Parsons, Yvonne
Perillo, Patricia
Paterson, Eileen
Petrie, Oorothea
Pfei?fer, Carolyn
Price, Sus~n
Pruss, Nancy Avis
PAGENO="0705"
PROOU~XR (cont'd)
703
f~U~UCfl(J4 MkNAG~R/SLP~RVISUR
Quinlart, Doris
Ranon, Tjnmo
Raymond, Beverly
Rees, Harlan
Roberts, Nancy
Roth, Lynn
Rothstein, rreyda
Rubin, Sharon
Russell, Pat
Sackett, Nancy
Salant, Lynn
Sanford, ~1idge
Sct~.a1tz, Barbara
Shanklin, LIna
Shanks, Ann Zare
Shapiro, Esther
Shields, ha
Shim, Margaret
Shippey, Susan
Shotel, Bart,ra
Shjler, Lauren
Slnvaons, Linda
Sloan, Dolores
Smith, Sunde
Smitman, Susan
Sneider, Caryn
Spielberg, Anne
Spiller, Jane
Stayden, Gail
Stephens, Nancy
Stern, Kardy
Stevens, Stella
Stratton, Susan Krauss
Su'uaers, Cathleefl
Tenser, Marilyn
Tivers, Cynthia
Turner, Janet
Tyler, Gmmy
Ulene, Priscilla
Van Harlingen, Darlene
Vanderbilt, Nanette
Verbit, Helen
Waldaan, Leslie
Warsham, Christine
Wayne, June
Weinstein, Hannah
Weintraub, Amy
Wells, Donna Cox
Weston, Ann
Wigle, Shari Lynn
Winchester, Margot
Wiser, christine Zurbach
Wittman, Ellen
Wolf, Annett
Zaoata, Carmen
Ticker, Laura
Caddell, Jaclyn (jackie)
Carrel, Wendy Jane
Carter, Pseela
Consigilo, Marie
Davies, Patricia
Day, Jo Ann
Gerber, Daisy
Goidrich, Sybil Niden
Kim, Oksun
Lent I, Susan
Luv~ard, Paula
Mimes, Kathleen
Nelson, Jan15
Smith, Donna
Thornton, Conchita
Wejntraub, Amy
Wigle, Shari Lynn
~O~JCTION PER L/COO,~D./ASST.
Anderson, Adrienne Chio
Applegate, Phyllis
Barrett, Karen Amira
Caddell, Jaclyn (Jackie)
Cannon, Hans
Carrel, Wendy Jane
Childress, Joyce
Clearflelvl, Anita
Oallwitz, Ann
Downey, Cheryl
Elman, Barbara
Grand, El,anor
Guber~Bla~kman, Karen
Hartley, Doris
Holle, Merita
Mood, Dana Greet
LinkevEilis, Mmci
Long, Kathleen
LylYi~ThOflsWS, Annie
Milnes, Kathleen
Nick, Betty
O'Neill, Susan
Rothenberg, Betty
Sanderson, Auriel
Schu'iwn, Jessica
Setiowe, Beverly
Smith, Donna
Watson, Robyn
PROJECT IONIS1
P4arlow, Judy
PAGENO="0706"
704
eLlCITv/~CI4OT1aI
RADIO
Alesandar, Stephanie
*lscr~jIer, Susan
~erson, Adrienne Q~1o
~dreola, Sllvia
*rmel, Paula
*ArtPsjr, Vicki
Barrle, Lee
&~qert, Zepha
Cof~n, Paulette
Cuvner, Jane
El~n, Barbara
E~itein, Jeckie Neiman
Flniay, Dolores
~oib, Phyllis
Pretzin, Julie
Carfield, Kim
Green, Jacgueflne
Phuse, Sharon Wilkinson
Isenberg, Lynn
kleiner, O~ickL
Llpstone, Jane
~ Gloria
Marcus, Barbara
Menahan, Kate
Mallen, Jane
Paterson, Eileen
POllock, Sandy
Baese, Mjcheje
Rockett, Elaine
Rose, Sharon
Masher, Laurie Burton
~ibtn, Sharon
Sherwood, Celia
Sinclair, Dorothy
Sutton, Melissa
Taylor, Jeyce Elaine
Thomas, Maxine
Anson, Ruth
Bacal, Marcy (Jeurnl.)
Grief in, Jul~v~ (Dener)
Model, Terry (Prod/Parf/Ed)
Marshall, Jan (Writer/Prod)
Paterson, Monica
Solowon, 3. 1. (Airier.)
Strawn, Linda (Journi.)
Ulius, Betty Deborah (Prod/Dir)
RESEARCH
Alexander, Stephanie
Brown, Mona Parmelee
Carollo, Sylvia
Casser, Lynn
Choulnard, Carole
Dillon, Maria
Gardner, Dan Jean
Gray, Elizabeth
Mouston, Laba'ne
Kazadi, Camille
MoCord, Gloria
Meehan, Diane
Meyer, Marcy
Milnes, Kathleen
Nick, Betty
O'Neill, Susan
Sager, Unda
Schuxan, Jessica
Sher*er, Marilyn
Spiller, Jane
Svitil, Torene
Thornton, Conchita
Watson, Robyn
~~LISHTI~
S*,ES/DISTRI~JTIO~
,etle, Barbara
Blys, Marjorie
Boric, Marcia
Dernis, 3. Noel
Endler, Fst*lle
Cow, ~
Coren, ICayta
Garlanci, Carol,
lreton, Asia
Ust, Shelley
~ Barbara
~in, ~
Terry, 3~
VSy~, Dorothy
Wilkerson, Tlchj
Zol., Marion
kiderson-Marvey, Vera
Arthjr (Bartolazzi), Jt~ith
Benedek, Melinda
Carroll, Mrtha
Cataiane, Marianne
Cha~n, Abble
DeLoach, Sheila
~erren, Peg
Grant, Sherry
Noelacher, Jean Leeper
1a~eriale, Jearrilne
~e, Barbara
Parsons, Yvonne
Sia,ons, Linda
Spiller, Jane
Si*ton, Melissa
PAGENO="0707"
!~RIP1 5LrERVISO~
Broccoli, Dana Wilson
Miller, Pat
Morgan
Shanklin, Uris
Wilde, Mets
Bonney, Sharon
Miller, Freyda
!E~ DECORA1~
SWND RECDRD1N~
Arandjelovich, Karen
Carollo, Sylvia
Joseph, Alexis
K~*, Oksun
Carter, Pamela
Dobrow, Joelle
rosdick..Stever5on, Virginia
Gr~ter..Blackman, Karen
Mizrahl, Lillian
Sinclair, Dorothy
Watson, Robyn
T~ATRE
Andreola, Silvia
Andre'ws, Jennifer
Apick, Mary (Prod/Dlr/Perf)
Applegate, Phyllis (Prod/Perf)
Bernet, Barbara Allyne (ProdlPerf)
Beth~s~, Zina (Artistic Dir/Dance)
Bridges, Betty (Pail/Coach)
Brooks, Mmdi (writer)
Carter, Lyrne
Chalkin, Xidy (Dir/Writer)
Chambers, Arlirie (meat. Mgt)
DsUwitz, Ann (Perf/Dir)
Oletz, Susan (Artistic Dir/Prod)
Fury, Loretta (Dir/Perf)
Girford, Call (Prod)
Gray, Elizabeth (writer)
1tEAj~ (cunt'd)
Hansen, Danna (Prod/Writer)
Houston, Labame (Dir)
Keilogq, Kathie (Parf)
Kiect~le, Suzanne (~`¼aSical Coord)
Kondazian, Karen (Prod/Perf)
Korwin, Devra (Dir/Choreo)
Ku.*iri, Sarah Sappington (?ounder)
Lenti, Susan (VideotapinQ)
Leve, Harriet (Prod)
Lewis, Marr~ia (Perf)
Marlyn, Audrey (Exec Prod/Dit/Perf)
Msrlyn, 3an (Perf/!ljsic*ls)
Martyr, Elizabeth (Prod/Dir/Perf)
Merlis, Iris (Prod)
Meyer, Carla (Prod)
Monahan, Kate
N'jell, Faye (Prod/Exec)
Perreau, Cigi (Dir/Perf)
Peterson, Monica
Pfeiffer, Constance (Perf')
Pflug, Jo Ann
Roberts, Tracy (Dir)
Seger, Linda
Seguev, Shoshana
Sinclair, Dorothy
Solomon, J.T. (Perf)
Strawri, Linda
Van Dam, Gwen (Parf)
Wittman, Ellen
Zeiber, Darbara (Prod)
Zucker, Laura (Prod/Dir)
W
Allen, Jay Presson
Allen, Penny
Ans~'n, Ruth
Arbus, Loreen
Arc, Kathleen
Arcrer, Kate
Attias, Elaine
Bacal, Nancy
Back, Karen
Baker, Sally
Barnes, Kathleen
Bartlett, Juanita
Barzman, Norma
Baskin, Susan
Begelman, Cladyce
Bennett, Meg
Benton, Fran
Birch, Miriam
Blake, Whitney
Blarchard, Nina
Boric, Marcia
Browse, Eleanor
Brickeil, Beth
Broo~'s, Mmdi
Brown, JO~wt
705
STAGE MANAGER/FLOOR M~
TALENT COORDINATOR
PAGENO="0708"
706
~ITER (c~t'd)
~astany, Judith
&azzell, Linda
Cannon, Nina
Carol, Jo~Arm
Carter, Beverly
Casser, Lyrr~
Ousikln, Judy
Omotin, Zamira
D~erbak, Cynthia
Oiinea.Vareta, MI gdia
cho, Renee
Düermsn.~Saperstein, Irene
Claire, Judith
Coho, Jenny
Corday, Barbara
~iley, Diane
Oa~iaru, April Anson
~vids, Hoilace
~KOv~n, Lindy
~La~er, MarJel
~nnls, 3. Noel
De~~res, brain,
~sv~ahoo, Terry
Oyrector, Joyce
Elfman, Blossom
(lain, Barbara
Elstad, Linda
E'qelson, Dale
Epstein, Jackie Neiman
Evans, Pat
Fader, Sonia (&iiny)
Feldemn, Naomi
Field, Fern
Flanagan, Fionrijla
F'leisctier, Nary
Ford, Jean
Forrest, Susan
`aster, Susana
Frarces, Helene
Frarcis, Polly
Frar~dyn, Meg
Fretzin, Julie
Ci~~er, Don Jean
Celgur, Donna
Clbbs, Ann
Gilbert, Sue
Golaner, Mojjy
CoWrica, Sybil Njt~n
Ceidmaith, Gloria
Gadd, Diana
Cray, Elizabutpi
Ciiane, Marcy
Gregory, Molije
Crlf fin, .Aalann
Ctigpo, Joelyn
Cutermin, Sheryl Levine
Mansom, Ellen
Marwood, Ri.~n
Mayn~, Roberta
NUI, Leslie
$ire, Lois
WRITER (cont'd)
HefTs, Tamsr Simon
Holle, Merita
Henigsberg, Gail
Hood, Dana Greer
Hauske, Marta
Howard, Gwendolyn
Howard, Karin
ttsnphreys, Martha (Marty)
ttjrd, Gale Ann
Hutchinson, Canny Caruso
Isehoerg, Lynn
Jaress, Jill
Jef fries, Georgia
Jordan, Bonita "Bonnle
Kael, Pauline
Kalish, Irma
Kanin, Fay
Kanter, Abbe
Kanter, Donna
Kanter, Doris
Kasica, Maryanne
Keller, Susan
Kim, ChIJrI9ITU
King, Claudia
King, 3ac~uelIne
La Brie, Alice Faye
Lander, Diane
Laura, An~
Lee, Joanna
Lee, Shirley
Leikin, Molly.Arn
bevin, Audrey Davis
Levis, Marcia
Lipton, Sandy
Liss, Stephanie
List, Shelley
Ltttman, Lynne
London, Helyn Spears
Lowell, Sandra
Lubin, Natasha
LixcPesi, Jeannine
Lukk, Thu
McCormick, Mary
HoKeand, Carol Evan
Plancinl, Joyce
Mannix, Julie Hawthorne
Mansfield, Barbara
Marks, Barbara
Nirlyn, Jan
Marshall, Jan
Martei, Tasha
Martyn, Elizabeth
Matson, Donna Marie
Meehan, Diana
Niric, Sara
Marl, Judy
Meyer, Marcy
Miles, Joanna
Miller, Melissa
PAGENO="0709"
Mock, Freith Lee
Monahan, Kate
Morrow~Ber911an, Unda
Myles, Betty
Newman-Mlnson, Launa
O'Brien, Sharon (Sam)
Oliver, Susan
Owens, Joan
Papp, Ten
Parrish, .Julie
Petnle, Dorothea
Peyser, Lois
Pfeiffer, Constance
Price, Susan
Rabinowich, Ellen
Ranon, Timna
Raymond, Beverly
Robinson, Sylvia
Roper, Carol
Ruse, Sharon
Rosenzweig, Carol
Roth, Lynn
Rubin, Brady
Ruchala, Leslie
Russell, Pet
Ruuth, Marianne
Sachs, Barbara Turner
Sackett, Nancy
Sauceda, Lora Kaye
Schafer, Darlene
Sctiock, Harriet
Schoerterger, Frances
Setlowe, Beverly
Seven, Marilyn
Shanklin, Line
Shapiro, Esther
Shea, Patt
Shepard, Ellen
Sherwood, Celia
Shippey, Susan
Shotel, $arbra
Siegel, Sandra Kay
Sloan, Dolores
Spielberg, Anne
Spies, Amy
Stern, Kandy
Sullivan, Beth
Taylor, Joyce Elaine
Tables, Manice
Tucker, Sandee
Tyler, Ginny
Tyler, Robin
Ulius, Betty Deborah
Van Narlingen, Darlene
Vanderbilt, Nanette
Wakeley, Marged
Warshaw, Christine
Wax, Ruby
Wayne, Dorothy
Wayne, June
Weiss, Harriet
Westermark, Victoria
Wigle, Shari Lynn
Nude, Meta
Wiser, Christine Zurbach
Wittman, Ellen
Wolf, Annett
Zala, Nancy
lola, Marion
Elman, Barbara
Peters, Joan
707
WRITER (cont'd)
WRITCR (cont'd)
WRITERS' SERVICES
PAGENO="0710"
708
CHAIRMAN FOWLER:
Next is Mary Ledding, representing Women in Film.
Mrs. Leddlng.
MRS. LEDDING: I am a member of the Board of Direc-
tors of Women in Film, Los Angeles, which is a non-profit,
professional women's organization which began about ten years
ag~ with 12 women and has grown to over 900.
Our membership includes women from the executive
and the creative areas as well as those in the technical and
craft side of the business. We also have members in -- from
all areas of racial minorities. Well over half of our members
work predominantly in the television industry.
In view of the rise in our membership, it's clear
to us over the last ten.years that the rules have been in
effect the increased number of strong, independent production
companies has, in turn, opened up employment opportunities
for women. If the rules `are repealed, we believe many of
these small in4ependent companies and producers will go out
of business or be submerged within the networks, creating
a loss of jobs for many of our members.
But more important than the loss of jobs will be
IN1W4A11CNAL 1~M$~IPflON SERV1c~. INC
PAGENO="0711"
709
the loss of diversity in program content which will result.
I believe that even the networks this morning acknowledged
that through the period of the rules diversity has been im-
proved.
In preparing my comments I spoke with many of our
producer members, particularly those who have been in the
business for a number of years. These are the women who
earn their living pitching ideas and story concepts to the
networks with the hope that a project will have that certain
something which a network executive will think worthy to be
aired.
Remember that at each network there are only a
handful of people, maybe six to seven, who have the power
to say yes. The rest can only say no or maybe. For example,
one experienced producer who created one of today's top 10
television shows told me about an idea that she had for a
movie of the week based on the life of a Mexican maid in
Beverly Hills. The concept she pitched to the network was
to examine the day-to-day dreams and problems of a woman who
as a woman and an ethnic minority employed in a menial and
thankless task nonetheless had goals and aspirations.
On hearing the idea the quick reply frnm the net-
work executive, and I quote, "Tacos don't get numbers." His
reply is all the more devastating when you know that this
network executive was himself a member of a minority group.
IN1~NA11ONA1. TMNS~R$PTION SER'vla3, IN~
PAGENO="0712"
710
The simple truth is that program selection at the
networks is a numbers game, the numbers of ratings and
audience share. The networks have always had the power to
select programming that reflects minority points of view.
They have that power right now, but they don'.t pick minority
oriented shows because they believe that mass audiences won't
be interested. It's not because minority ideas and contro-
versial subjects are not being presented to the networks.
For example, one former network executive who is
now a producer quoted to me the following two rules of net-
work program selection which she had been told by various
network executives. The first, TV audiences don't want to
see female leads in TV shows. The second, Blacks don't work
on TV. As an example of how the latter rule is applied, she
related the situation of a TV movie called "Crisis at Central
High" which starred Joanne Woodward and she was depicted as
a teacher in a predominantly black school.
The show got low ratings, so thereafter black
oriented projects were turned down. Another rule that she
mentioned to me was that topics with senior citizens don't
work unless they star Bette Davis. Things that are too con-
troversial or appeal to small audiences simply are not in
the networks' best interest.
If the rules are repealed, it will only get worse.
The current system provides an incentive for independent
IN1Pi4AT~ONAL TPANSOJPTION SE~1~& INC.
PAGENO="0713"
711
producers to create a product that is their own. Since most
of Woman in Films' producer members are small and independent,
they don't have any bargaining power when it comes to nego-
tiating with the networks. Many, in fact, do not even want
their names mentioned in this proceeding for fear of network
reprisal.
For example, one producer of children's programming
was surprised to see that when the network sent her her con-
tract they had arbitrarily increased the license term for
her new show by one additional year. When she questioned
this the network said it was their new policy to require four-
year terms instead of three-year terms, and they refused to
negotiate the issue.
With that kind of leverage, no one is kidded into
believing that if the rules are repealed and networks will
allow small producers -- that the networks will allow small
producers to retain anything but a very minor percentage in
ownership of their programs.
By the way, I have not heard today anywhere of any
network person or representative stating that they would
undertake, were they to receive syndication revenues, that
they would agree to invest those 100 percent into free TV.
I suspect that instead they will see their way into other
and new media.
But don't discount the impact of ownership and
1NTE~NA11ONM. 1~ANS~JPT1ON sERvicEs. INC
PAGENO="0714"
712
profits on creative content. There is a correlation between
the profit incentive and the creative process. Independent
producers feel the urge to fight for my show, my star, my
cast. Those I spoke with said they'd go to battle with the
networks in areas such as casting, script content, selection
of writers and directors because they felt the need to create
the best possible program which, in turn, would create the
most profitable product in syndication.
i see my time is up, and I will try to finish as
quickly as possible.
cHAIRMAN FOWLER: How much more do you have there?
MRS. LEDDING: Two sentences.
CHAIRMAN FOWLER: All right. That sounds good.
MRS. LEDDING: If the rules are repealed, such
producers see themselves because of their lack of leverage
as becoming merely emloyees of the network, team players
carrying out team policies. The network team policies are
numbers and ratings, and the independent producers are inde-
pendent voices which should not be silenced.
CHAIRMAN FOWLER: All right. Thank you very much,
Mrs. Ledding.
N1W~4AT1ONAL MJ.ISOJPTION 5ERV1~. INC.
PAGENO="0715"
713
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
)
Amendment of 47 C.F.R. )
S 73.658(j); the ) BC Docket No. 82-345
syndication and Financial )
Interest Rule
COMMENTS OF THE UNITED STATES
DEPARTI'~T OF JUSTICE IN RESPONSE TO
TENTATIVE DECISION AND PROPOSED RULE
I. INTRODUCTION AND STATENENT OF POSIflON
On August 4, 1983, the Commission adopted a `Tentative
Decision and Proposed Rulew, ~/ in its reevaluat~ofl of the
financial interest and syndication rules. The Tentative
Decision contained an extensive analysis of the legal and
policy justifications underlying the existing rules, their
effects on the program supply and syndication markets, their
possible costs, and changes in the industry since adoption of
the rules. The Tentative Decision concluded that the existing
rules promote neither competition, diversity, nor efficiency in
the program supply market. It also determined that the only
competitive issue implicated by the rules was the risk that the
networks might withhold off-network programming from the
1/ 48 Fed. Reg. 38020 (Aug. 22, 1983).
PAGENO="0716"
714
syndication market (so-called "warehousing") to the detriment
of independent television stations. The Commission's proposed
rule woulç! eliminate the financial interest rule, but retain a
narrow syndication rule designed to prevent "warehousing." The
Commission requested comments focused on the proposed. rule to
ensure that its "mechanical aspects" are workable and to
address any additional problems of application.
The Department generally agrees with the Commission's
analysis of the effects of the present rules and with the
fundamental approach of the proposed rules. The proposed rule
is a reasonable one, consistent with the goals of protecting
competition in the syndication market and of avoiding
regulations that may reduce economic efficiency~and
competition. By prohibiting the networks from engaging in any
domestic syndication of off-network prime time entertainment
series, the rule should eliminate any serious risk of
"warehousing." We believe, however, that the FCC should make
certain minor modifications to the proposed rule to give the
networks some measure of control over off-network syndicated
programming during the `network run of a series. In addition,
as a corollary to the proposed rule, we also suggested that
certain additional information should be supplied to the
Commission under its proposed reporting requirements. Such
modifications would help ensure that the proposed rule does not
reduce economic efficiency. Finally,' we also support the
Commission's decision to include `a "sunset" provision in the
proposed rule.
PAGENO="0717"
715
II. THE TENTATIVE DECISION A1~D PROPOSED RULE
The Tentative Decision found that the extent of network
monopsony power over program suppliers is "very much in doubt,"
and, in any event, that the rules are unlikely to reduce any
such power the networks might have. 2/ The Commission also
found "no credible evidence" presented in the proceeding that
the rules have fostered the production of first-run syndicated
progralTuting. ~/
The Tentative Decision concluded that the only possible
competitive issue implicated by the rules was the risk that the
networks would "warehouse" off-network programming, as a
strategy to increase program license fees and possibly
advertising rates. The Commission proposed eliminating the
financial interest rule but, to protect against the risk of
"warehousing," also proposed to retain a narrow rule that would
prohibit domestic syndication of prime time entertainment
series by the three major television networks. The proposed
rule would require the networks to transfer all syndication
rights to such series by the earlier of two dates: (1) no
~/ Tentative Decision at ¶11 12332, 195.
jg. at ¶11 195.
PAGENO="0718"
716
later than six months after a series completes its network
exhibition run; or (2) no later than the end of the fifth year
of a series' network run. The networks could control no term
or condition of syndication, nor impose any restrictions on
syndication decisions after selling a program. The rule would
reguire the networks to notify the Commission of all such
transfers of syndication rights and to provide certain data on
the terms of the transfers. Finally, the rule would contain a
"sunset" provision providing that the rule would terminate in
August 1990.
III. DISCUSSION
A. The Department Agrees With the Tentative Decision's Major
Conclusions on the Effects of the Existing Rules
The Tentative Decision makes clear that the Commission does
not intend in this round of comments to reconsider its
fundamental analysis of the effects of the present rules. The
Commission has already developed an exhaustive record on that
issue. Suffice it to say, that the Department generally agrees
with the Cornmission~s analysis of the effects of'the present
rules on the program supply and first-'run syndication
markets. ~/ We agree with the Commission that the original
~/ The Department's analysis of the rules differed from the
Commission's in several minor respects. The Department's
comments reached no conclusion on whether the networks possess
monopsony power. The comments were also much more skeptical
Footnote Continued
PAGENO="0719"
717
purpose of the rules to promote diversity and competition in
the program production and first-run syndication markets was
ill-founded. ~/ We also agree with the conclusion.that the
only credible competi-tive issue raised by the rules involves
"warehousing" of off-network syndicated programming. ~/
B. The Proposed Rule Will Eliminate All Serious Risk of
"Warehousing"
The Department's comments recognized the risk that complete
elimination of the rules could, at least in theory, enable the
networks to withhold off-network programs from syndication with
a resulting increase in license fees. They noted that if this
conduct were the result of tacit collusion, itmightbe
difficult to prosecute under the antitrust laws. The
Department's reply comments recommended that, to be cautious,
the Commission should keep in place a narrow prophylactic
measure designed to guard against the admittedly small risk
that the networks would "warehouse" off-network series.
~/ Continued
than the Tentative Decision on the effect of new video
distribution technologies on any market power held by the
networks. Moreover, the Department argued that the networks'
positions as "gatekeepers" over network television made it
possible for them to be monopolists in the sale of off-network
series without having inonopsony power. ~ Reply Comments of
the Department of Justice at 14.
~/ Tentative Decision at ¶11 191-97.
~/ ~ at ¶ 202.
32-540 O-84----46
PAGENO="0720"
718\
We believe that the Commission's proposed rule will
effectively prevent any credible risk of varehousing.N The
Tentative Decision recognized that the rule may be subject "to
various types of technical criticisms for their potential
inability to address every market practice or situation that
might 1be~ hypothesized." ~J However, the rule should handle
most, if not all, of the possible scenarios. Indeed, given the
minimal likelihood of "warehousing" even without the rule, the
proposal is intended "to provide only an additional measure of
protection (against warehousing.]" !/
The Department supports this approach. Antitrust law
enforcement and Commission monitoring should effectively
prevent any unanticipated anticompetitive network strategy
after the proposed rule takes effect. The Commission should
not expand the rule in an attempt to prevent every
anticompetitive possibility no matter how unlikely it is to
occur.
It has been argued, for example, that allowing the networks
to hold syndication rights for even a limited time poses the
risk that they would sell those rights to a few syndicators,
creating market power in the syndication market. !/ Although
~/ ~4. at ~ 205.
!/ See, ~ Reply Comments of the Committee for Prudent
Dere~iTation at 79-80.
PAGENO="0721"
719
there are reasons to believe the networks vould not adopt such
a strategy, ~ such a scenario cannot be ruled out
completely. At the same time, market power in the syndication
market would be highly visible and could be detected by the
Commission through the reporting mechanism it intends to
establish.
Similarly, it is possible that network acquisition of
financial interests could become a vehicle for "warehousing."
Of course, any attempt to use a financial interest to exercise
direct control over syndication decisions would violate the
rule and would be difficult to conceal. A conceivable indirect
"warehousing" strategy, however, could involve manipulation of
the fees paid to syndicators. By reducing syndicators' fees,
networks might diminish syndicators' incentives to distribute
programming. Programs that are marginally profitable for
syndicators to distribute under standard agreements today might
become unprofitable under the terms of such network syndication
contracts, In theory, such a strategy could be used as an
extremely crude instrument for "warehousing."
It is doubtful, however, that such a scheme could make
network collusion profitable. It could not be used to ensure
that programs were "warehoused" on a market by market basis in
such a way as to maximize network profits from any collusion.
~ Reply Comments of the Department of Justice at 34.
PAGENO="0722"
720
Moreover, it would be difficult to amend existing contracts
with independent syndicators to reflect changing circumstances
or new information about the optimal contract terms necessary
to effect successful Nwarehousing.h In addition, independent
syndicators of off-network programs would likely inform the FCC
or the Department if the networks attempted such a strategy.
Although the competitive risk is slight, to help ensure
that no such problem arises, the Commission should require each
network to include in its reports on sales of syndication
rights an additional, non-public filing that discloses the
terms negotiated by each network with the syndicator of each
off-network program. fl/. These data would verify that, programs
in which networks hold a large financial interest do not
feature systematically different and possibly anticompetitive
syndication terms.
finally, it may be argued that narrowing the scope of the
proposed rule to a restriction on domestic syndication of prime
time entertainment series by the three major networks will
create certain competitive risks. For example, syndicators may
argue against allowing the networks to do first-nm
syndication; :to syndicate all programs in foreign markets; and
11/ Of course, this would be sensitive proprietary
I~formation, the disclosure of which could reduce competition
in the syndication market. The Commission should'take
appropriate precautions to ensure that it does not become
public.
PAGENO="0723"
721
to syndicate any programs broadcast outside of prime time or
programs other than series broadcast in prime time. The
Department believes that an overwhelming record has been
developed that there is no justification for preventing the
networks from competing in these areas. Reducing the present
rules' overbreadth raises absolutely no credible competitive
risks and it could increase competition in some segments of the
syndication market.
C. The Department Supports the Proposal to Prohibit All
Domestic Syndication of Prime Time Entertainment Series by
the Networks
The Department's proposal was intended to narrow the
present rules to eliminate any serious risk of ~warehousing"
while imposing no substantial costs in economic efficiency. It
would have permitted the networks to acquire financial
interests and syndication rights in any network program and to.
syndicate any network program during its network run. This
provision would have required the three major networks to sell
domestic syndication rights to prime time entertainment series
within a fixed time after cancellation of the program's network
run. After the end of the network run, the networks could be
no more than passive profit participants in the syndicated
programs, unable to exercise any control over any term or
condition of syndication distribution. The FCC's proposed
rule, on the other hand, would prohibit any network syndication
of such programs. The Department has concluded that the FCC's
PAGENO="0724"
722
proposal with the modifications suggested below would be
preferable to our original proposal. because it would clearly
allow syndication contracti signed during the network run to
extend beyond the end of the run without competitive risk.
A 0forced sale' rule mandating termination of all.
syndication contracts at the end of the network run could have
the unintended effect of impeding syndication of programs by
the networks, irrespective of any anticompetitive purpose.
According to syndicators~ representatives of the networks, and
independent station managers, syndication rights are often sold
to local stations in multi-year contracts, several years before
they become available. Apparently, local stations often rely
on such early acquisitions to plan their programning
schedules. If all contracts signed by the networks during the
network run were required to terminate at the end of the run,
stations could never know the exact length of syndication
contracts with networks. This could reduce stations'
efficiency in promoting their schedules and could increase the
difficulty of planning program schedules, thereby reducing the
value to stations of programs sold on such terms. The result
could be that some programs might not be syndicated solely
because of this uncertainty.
One possible solution to this ~,problem would be to allow the
networks to comply with the forced sale rule simply by
assigning their contracts to non-network syndicators. Although
this would eliminate the problem of uncertain termination, it
PAGENO="0725"
723
would not eliminate the competitive risks. The networks could
still sign long~term syndication contracts with their
affiliates and owned-and-operated stations that would run far
beyond the end of the network run. Payments to affiliates or
owned-and-operated stations in the form of adjustments in
compensation would be difficult to detect and might induce
these stations to ~`warehouse" the programs. ~/
Another possible alternative would be a rule allowing the
networks to assign contracts signed with independent stations,
but regLliring termination at the end of the network run of any
syndication contract signed by a network with an affiliate or
owned-and-operated station. The problem with this solution is
that it could put affiliates and owned-and--operated stations at
a competitive disadvantage with respect to the independent
stations that would be able to buy syndication contracts with
fixed termination dates from networks. Given the difficulties
presented by the problem of assignment and termination of
syndication contracts at the end of the network run, the FCC's
proposal with minor modifications would be' preferable to the
solution we previously advanced.
Barring the networks from syndication of off-network prime
time entertainment series at this time should not impose
ij/ The problem would be particularly acute in the case of
each network's five owned-and-operated stations.
PAGENO="0726"
724
substantial costs. The networks' ability to acguire financial
interests in conjunction with the modifications to the proposed
rule discussed below will substantially reduce any costs of
inefficient risk-sharing, 13/ and possible costs of inefficient
program coordination. 14/ It will increase networks' `incentive
to bear risk by financing programs in return for financial
interests in syndication. It will also allow the nitvorks to
capture profits from successful syndicated programs, thereby
giving them the incentive to promote first-run programs to the
optimal levels. -
Moreover, prohibiting network syndication of off-network
prime time series is not' likely to have significant effects on
the competitiveness or efficiency of the business of
syndicating off-network progr~ams. Although the networks would
be three additional entrants jnto this market, there is no
evidence that they would be more efficient,than any other firms
in that market. Moreover, although the market is moderately
concentrated, j~/ it appears to be workably competitive.
~/ Tentative Decision at Iii 133-44.
14/ 14.~ at 1 134.
IV jj. at 1 110.
PAGENO="0727"
725
D. The Proposed Rule Should Not Prohibit the Networks From
Placing Certain Restrictions on Syndication During the
Network Run Nor Require Forced Sale Within Five Years
The Department has argued consistently that the networks
should be given control over syndication of programs that are
in their network run. This will ensure that the networks are
able to capture any efficiencies available from coordinating
first-run and syndicated episodes of the same series. ji/ Such
coordination would promote efficient use and promotion of the
programs. Therefore, the Commission should modify its rule in
two ways to give the networks some limited control over
syndication of programs during their network runs.
First, the requirement in the FCC's proposed rule that the
networks can exercise absolutely no control over syndication of
programs once they are sold to an independent syndicator should
be modified to allow.the networks to restrict the time of day
in which a program is broadcast, or the frequency with which it
may be broadcast, during the network run. This modification
would allow the networks to capture any efficiencies resulting
from coordination of new and syndicated episodes,~ thereby
giving the networks an incentive to put programs into
syndication most efficiently. Failure to allow such network
controls may lead to effects counter to the Commission's intent
~/ Comments of the Department of Justice at 20-21, Reply
Comments at 32.
PAGENO="0728"
726
by causing networks to refuse to syndicate programs that they
otherwise would have released had they been able to exercise
such control.
me most obvious restriction of this type is the right to
exclusive exhibition of a program's episodes in prime time. It
has long been standard industry practice for the networks to
obtain such rights to assure that syndicated episodes do not
"free ride" on the network's prime time first-run exhibitions.
Thus, at a minimum, the rule should be modified to enable the
networks to obtain exclusivity in prime time during the network
run.
Second, there is no need to reguire that the networks
relinguish. syndication rights five years after a~prograzs begins
its network run rather than at the end of the network run.
There is no basis in the record suggesting the existence of a
serious competitive risk of "warehousing" between a program's
fifth year on the network and cancellation. The credible
"warehousing" models predict that the networks would withhold
marginal programs in order to drive up the prices of the more
popular programs. The syndication values of programs are
highest while they are still in their network runs.
Withholding such programs would require the networks to forego
substantial revenues. At the seine time, it is possible that a
network could promote the efficient scheduling of its programs,
without any anticompetitive purpose or effect, by holding
syndication. rights to certain prograi'ns beyond their fifth
PAGENO="0729"
727
year. Thus, the five year "forced sale" provision in the
proposed rule should be deleted.
Modifying the proposed rule in these ways could help ensure
that the rule does not reduce economic efficiency. Moreover,
since any such restrictions imposed by the networks would have
to terminate at the end of the network run, they would raise no
risk of "warehousing." i!/
E. The Department Supports the "Sunset" Provision and Proposal
to Require the Networks to File Reports on Sales of
Syndication Rights
The proposed rule contains a "sunset" provision that would
eliminate the rule in 1990. The Tentative Decision argued that
"sunset" is appropriate since there are going to be
"significant changes" which may make the "warehousing"
17/ The Tentative Decision also requests comment on how to
~ifine the end of the network exhibition period for purposes of
the forced sale requirement. Th~ exhibition period should be
considered completed when a program is no longer exhibited by a
network in its weekly prime time schedule. Occasional
preemption of a series would not trigger "forced sale," as long
as the series continued to be exhibited regularly by a
network. Nor would a program be considered "completed" during
normal summer reruns of its episodes. This definition of
network run would be keyed to highly visible network practices
and would thus be easily enforceable. In addition, the
proposed rule correctly does not require "forced sale" of any
series with fewer than 22 episodes. A series with so few
episodes is not likely to have sufficient syndication value to
justify imposing the cost on the networks of having to dispose
of the program. Moreover, the 180 days allowed for sale after
the end of the network run should be adequate to allow the
networks to sell syndication rights efficiently.
PAGENO="0730"
728
scenarios "increasingly unrealistic." The Tentative Decision
noted that "the independent stations viii be much stronger, the
networks' audience share viii be much lover, and the expanding
communications marketplace viii make anticompetitive activities
in the syndication market significantly more difficult." j~/
Commissioner Rivera dissented on the proposed "sunset," arguing
that if the proposed rule is necessary to the continued
veil-being of independent stations today, it is illogical to
decide now, based on little more than a guess about future
competition, that the rule viii not be necessary at an
arbitrary future date. Commissioner Rivera cited a section of
the Department's reply comments in support of the proposition
that the best projections about the effects of new technologies
on the networks' ability to "warehouse" are only
speculative. i!/
The Department agrees with Commissioner Rivera's assessment
that predictions about the effects of change are speculative.
It is simply impossible to know whether changes caused by new
technologies will have any significant impact on the networks'
incentive or ability to "warehouse." For this reason, the
Department opposed an immediate complete repeal of the rules.
j~/ Tentative Decision at ¶ 209.
~/ 48 Ted. Req. 38053 (Aug. 22, 1983), citi~nq Comments of the
Department of Justice at 28.
PAGENO="0731"
729
We believe, however, that the Tentative Decision to adopt a
"sunset" is justified as a matter of regu2atory policy in this
instance because (1) the networks never "warehoused" programs
before adoption of the present rules; ~/ (2) the competitive
risk of "warehousing" today ii small; ~j/ and (3) development
of the new video distribution technologies will tend to reduce
the networks' control over the supply of syndicableseries,
even if it cannot guarantee that this risk will be eliminated
entirely. ~/ Given these factors, the Department would not
want the rule to be retained in perpetuity due merely to
institutional inertia. The "sunset" will force the Commission
to consider the efficacy of the rule and either act to continue
it as adopted, to modify it, or to allow it to expire by
inaction. Moreover, if the rule is terminated and a problem
were later to develop, the Commission could act to reinstate an
appropriate rule.
Any Commission proceeding to consider extending the rule
beyond 1990 would be facilitated by the proposed rule's
reguirement that the networks file reports with the Commission
containing the names of series with syndication rights covered
by the rule, and identifying the programs involved and the
~ Tentative Decision at I 172-73.
j~, at ¶ 200.
Jj~ at ¶ 122.
PAGENO="0732"
730
party to whom thi rights were transferred. 71/ These data
should give the Commission helpful information on the
competitive risks of network "warehousing." 2j/ As discussed
above, the reports filed by the networks should also include
data on the terms of payment to syndicators.
IV. CONCLUSION
For the reasons discussed above, the Department urges the
Commission to adopt its proposed rule with the modifications
suggested.
Respectfully submitted,
William P. Baxter
Assistant Attorney Douglas . insburg
General Deputy Assistant Attorney
Antitrust Division General
Antitrust Division
71/ The proposed rule recp.iires the networks to notify the
Commission within thirty days of the transfer of syndication
rights and to certify that the terms of the transfer comply
with the requirements of the rule.., Proposed Rule, 47 C.P.R.
S 73.658(j)(3).
24/ Of course, the conduct of the networks while the rule is
iii effect may not fully foreshadow network conduct after the
rule is removed, but it will give the FCC at least some
information on which to anticipate such conduct.
PAGENO="0733"
731
Gorinson, Chief
~ Regulated Industries
6~etion
~
arren
Attorney, Special Regulated
,Xr~dqstries Section
Timothy
Economist, Economic Policy Office
gG~çI4~ A~/
he don Kimrnel f~.1
Economist, Economic Policy Office
Department of Justice
Antitrust Division
Washington. D.C. 20530
202/724-6693
Dated: September 20. 1983
CERTIFICATE OF SERVICE
I, Phillip Warren, hereby certify that a copy of the
foregoing Comments of the United States Department of Justice
was served this 20th day of September. 1983. by United States
mail postage prepaid. on all parties of record.
Ph~4 ~ -
hip arren
Attorney, Antitrust Division
Department of Justice
202/724-'6774
PAGENO="0734"
732
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Amendment of 47 CFR S73.658(j); the ) BC Docket No. 82-345
Syndication and Financial Interest
Rule
COMMENTS OF THE
UNITED STATES DEPARTMENT OF COMMER~
The United States Department of Commerce, as the Executive
Branch department principally responsible for national
telecommunications policy, respectfully submits the following
Comments in response to the Commission's Notice of Pr'oposed
Rulemaij~q ("Notice") in this proceeding released July 21, 1982
(FCC 82-300)
INTRODUCTION. AND SUMMMX
The Commission's Notice requests comments on whether the
Syndication and Financial Interest Ruler is necessary and
appropriate given changes in the marketplace since its adoption and
whether the public's interest in a more diverse and competitive
programming marketplace would be furthered by the Rule's deletion.
The Rule, in essense, currently prohibits the three major
television networks (ABC, CBS, NBC) from engaging in television
program syndication and/or acquiring any financial interest in
1/ 47 CFR S73.658 (j).
PAGENO="0735"
733
television programming produced by another entity (i.e., they are
prohibited from producing television programming for broadcast in
which they are not the sole owner). The Commission has asked for
comments on a number of specific matters related to the Rule:
1. whether there is a continued need for Commission
restriction, based on a 1964 view of the networks as the
overwhelming force in the program marketplace (138);
2. whether the Network Inquiry Special Staff (Special Staff)a/
was correct in stating that the rule was misguided in the
first place (139)
3. whether program producers need to be protected from the
possibility or exercise of undue influence by the networks
(139)
4. whether the rule restricts the ability of the networks and
producers to spread financial risks and rewards (140);
5. whether the rule achieves any balancing of bargaining power
between the parties involved (140);
6. the impact of any bargaining imbalance on the ability of
the networks and competing non-network outlets to acquire
different types of programming (142);
7. the impact of rule deletion on independent television
stations where networks, acting as syndicators, would be in
the business of selling program rights to be used in
competition with their network schedule or the local
schedules of affiliates, or their owned and operated (0 &
0) stations (142);
8. whether protection of program producers from undue
influence is an appropriate subject of Commission concern
(142); and
2/ In 1977, the Commission issued a Notice of Inguir~y, Commercial
Television Network Practices, Docket No. 21049, 62 F.C.C. 2d 548
(1977) and appointed a Network Inquiry Special Staff ("Special
Staff") which issued a report, New Television Networks: Ent~y~
Jurisdiction, Ownership and Regulation ("New Television Networks")
in October 1980.
32-540 O-84--47
PAGENO="0736"
734
9. the nature of the relationship between the rule and the
network antitrust consent decrees3/ (1142).
Except for the last two matters which will be dealt with
separately, most of these questions can be grouped into four major
issues for purposes of discussion and analysis: (1) Risk/Reward
Sharing; (2) Producer versus Network Contol; (3) Network Ability to
Compete with New Technology; and (4) Program Warehousing.
Summary of the Department's Recommendations
The Department of Commerce believes strongly that the
Commission should not seek to regulate the contractual arrangements
between program suppliers and the networks. In our view, it is
inappropriate for the Commission to concern itself with allocating
revenues and profits among individual firms and industry segments,
particularly as no clear public interest purpose has been
demonstrated. There also is convincing evidence that the Rule was
uncalled for when it was promulgated and, in any case, has not
achieved the goals articulated by the Commission at that time.
We appreciate the competitive concerns some have raised. It
is the Department of Justice and not the Commission, however, that
3/ United States v. National Broadcasting Co., 449 F. Supp. 1127
(C.D. Cal. 1978), aff'd, No. 77-3381 (9th Cir. April 12, 1978),
cert. denied sub non; CBS v. U.S. District Court for Central
Division of Calif., 48 U.S.L.W. 3186 (1979); United States v. ~
Inc., Civ. No. 74-3599-RJK (C.D. Cal. July 31, 1980), reprinted at
45 Fed. Reg. 34,463, 34,466 (1980); United States v. ABC, Inc.,
Civ. No. 74-3600-RJK (C.D. Cal.) reprinted at 45 Fed. Reg. 58,441
(1980); (hereinafter referred to as "consent decrees").
PAGENO="0737"
735
is primarily responsible to monitor anticompetitive behavior and
enforce the antitrust laws against any abuses of market power.
Indeed, the Department of Justice and each of the networks
previously have entered into consent decrees restricting network
program acquisition, production, and distribution which are still
in effect. Although these consent decrees and the Financial
Interest and Syndication Rule have much in common, they are
separable. Further, it would be inappropriate to encroach upon the
court approved decrees by examining them in this proceeding.
Even if it were appropriate for the FCC to regulate these
activities in the past, we believe that there are signficant
reasons why the Commission now should repeal its Rule. First, the
Rule precludes efficient sharing of risk by the networks by
prohibiting their participation as partners in the production
process. Second, the notion that the Rule in some fashion protects
producers' creative control over their programs is significantly
flawed because the ultimate power to select programs for broadcast,
remains with the networks no matter who owns them. Third, because
of the restrictions on risk and reward sharing placed on the
networks, the networks may in the near future find themselves
unable to compete effectively with other program distributors and
exhibitors who enjoy the ability to participate as full partners in
program production. Finally, if the Rule is repealed, it is
unlikely the networks would in fact harm independent stations by
withholding off-network syndicated programming from the
syndication market. In any case, the Department of Justice, as the
PAGENO="0738"
736
appropriate government agency is well equipped to monitor such
activities and take any appropriate actions.
Fundamental to the efficient performance of our free
enterprise economy is maximum reliance on free and unregulated
competition Unless it can be clearly demonstrated that the public
interest would best be served by retaining the present outmoded
restrictions on network participation in program production and
distribution, therefore, the Department of Commerce believes that
the Commission should repeal its Financial Interest and Syndication
Rule
DISCUSS ION
Appropriateness of Commission Action
Before evaluating the efficacy of its Rule in redressing
alleged abuses by the television networks the Commission should
first address the issue of whether it is appropriate for it to
regulate the contractual relationships between program suppliers
and exhibitors (networks and/or stations)
There are several reasons why the Commission should question
the appropriateness of promulgating the Rule in the first place and
whether to retain it First, allocative issues such as the
redistribution of revenues and profits from the networks to program
PAGENO="0739"
737
suppliers should not be a concern of the Commission. Second, and
related to this first concern, it is simply inappropriate for the
Commission to be concerned with success or failure of individual
firms in a market as long as the market overall remains
co~npetitive. Finally, if, as has been alleged, the issue is not
allocative, but rather, protection against anticompetitive conduct
as a result of network market power, then antitrust enforcement by
the Department of Justice and not the Commission is the appropriate
remedy.
A primary intent, and result, of the Rule is re-distribution
of profits from the networks to the major Hollywood producer:3.~
This, however, is an inappropriate topic for Commission concern.
As the Network Inquiry Special Staff correctly points out:
Indeed, neither the statutory nor the constitutional
mandates under which the Commission operates can fairly be
construed to authorize intrusion into the program supply
business solely for the purposes of enhancing the profits
of suppliers. It is at the very least quite difficult to
comprehend how the interests of television viewers are
affected by the division of advertising revenues between
networks and program producers.5/
4/ Amendment of Part 73 of the Commission's Rules and Regulations
with Respect to Competitiveness and Responsibility in Network
Television Broadcasting, Report and Order 23 FCC 2d 382, 399 (1970)
(herinafter "Report and Order"); See also discussion in Federal
Communications Commission Network Inquiry Special Staff,
Background Report, "An Analysis of Television Program Production,
Acquisition and Distribution," (hereinafter Special Staff
Analysis) in New Television Networks, Vol. II, 293 at 725-31.
5/ Id. at 726.
PAGENO="0740"
738
It is widely agreedW that the Commission should not be
concerned with the division of revenues or profits in a healthy
competitive market Nor should the Commission be concerned with
the success or failure of any individual firm as long as the
overall market remains competitive In this regard the Network
Inquiry Special Staff analysis Nunambiguously demonstrates that the
program supply business is competitive and adaptable Moreover,
in reexamining pre-Rule market data the Special staff found that
the networks did not have market power in syndication prior to the
Rule
- Our analysis of the structure of the 1968 syndication
market indicates that none of the networks controlled a
sufficient portion of the syndication rights to programs
to exercise market power 8/
Further in its overall evaluation of the Rule the Network Inquiry
Special Staff concluded
The financial interest and syndication rules [sic) can
Only be characterized as misguided at best. At the cost
of disrupting an efficient risk-sharing arrangement
between networks and program suppliers and increasing
6/ In preparation of these comments dozens of persons were
interviewed including independent producers independent
distributors studio executives, network executives and managers
of both network affiliates and independent stations Virtually all
agreed that it was inappropriate for the Commission to concern
itself with purely allocative issues or individual firm financial
health Although there was expected disagreement over what
constituted a purely allocative issue, the fact remains t~at there
seems to be broad consensus that the Commission should not
ordinarily concern itself with firm or industry segment revenues or
profits.
jj Special Staff Analysis supra n 4 at 726
8/ Id at 733
PAGENO="0741"
739
concentration in network program supply, the rules [sic]
diverted business from the existing networks' syndicated
distribution arms.
The rules have done little to further the Commission's
goals of diversity or increased competition in the program
supply market. Diversity remains largely unaffected
because the number of available outlets and viewing
options remains unchanged. Competition in the syndication
market has not been fostered by the rules, for that market
was competitively structured prior to their imposition.~/
Even if the Special Staff was wrong and the networks could
distort the market by exercising market power, it is the Antitrust
Division of the Department of Justice and not the Commission that
is the primary enforcer of the nation's antitrust laws. Unless a
compelling case can be made to the contrary, the Department of
Justice, rather than the Federal Communications Commission, is the
appropriate body to oversee, to the extent necessary, the
relationship between television program suppliers and exhibitors,
whether networks or stations. ~Ih addition to the appropriateness
of the Commission's activity in this area, there are major
questions about the Commission's ability to enforce detailed
restrictions on business practices. Even the Commission's Network
Inquiry Special Staff concluded that "the Commission lacks the
resources and expertise necessary to" evaluate claims "that
networks collusively impose contract terms on program
suppliers."~'1 Instead, the Special Staff suggests that the
Commission rely upon "government antitrust authorities." There is
9/ New Television Networiç~s, supra n. 2 at 510.
10/ Special Staff Analysis, p~ n. 4 at 508.
PAGENO="0742"
740
no reason to believe that the Commission would be any better
equipped to detect evaluate, and pursue antitrust claims against
the networks with regard to any of the alleged practices under
discussion
Relationship to Consent Decrees
In 1972 the Department of Justice filed antitrust complaints
against the three television networks charging violations of
Sections 1 and 2 of the Sherman Act. The suits were dismissed
without prejudice on procedural grounds11' but ref iled in late 1974
charging that (1) ownership and control of prime time programming
was concentrated among the networks (2) the networks unreasonably
restrained competi$~ion in the production, distribution, and sale of
entertainment programming (3) program supply to the networks was
unreasonably restrained and (4) the public had been deprived of
the benefits of free and open competition in the broadcast of
television entertainment programming
In late 1976 NBC and the Department of Justice filed a
stipulation providing for the entry of a consent decree to settle
the litigation A little more than one year later a modified
11/ United States v National Broadcasting Co 65 F D R 415 (C D
Cal 1974)
12/ United States v National Broadcasting~~, Civ No 74-3601--
RJK (C D Cal , 1974) United States v CBS, Inc Civ No 74-
3599-RJK (C D Cal , 1974); and United Stat~e~ V American
Broadcasting Companies Inc , Civ No 74-3600-RJK (C U Cal
1974)
PAGENO="0743"
741
version of the proposed consent decree was entered by the District
Court.1~'1 Slightly more than two years after that, in mid-1980,
first CBS, then 1~BC followed by entering into similar consent
decrees with the Department of Justice.~"
The consent decrees incorporate the major provisions of the
Commission's Syndication and Financial Rule, and thus restrict
network program production and distribution. In addition, the
consent decrees provide for further limitations on network program
acquisition activity not addressed by the Commission's Rule. Thus,
with very detailed provisions, the decrees govern and limit the
timing and terms of network-program supplier agreements concerning
program production, distribution, options, and exclusivity. Fo\~
example, the ABC consent decree limits to four years the length of
time the network can initially,negotiate for exclusivity to keep a
program out of daily (stripped) syndication.1~" Thus, as the
CommissIon noted in its Notice, "in all significant respects, the
requirements of the consent decrees are more restrictive than or
equivalent to the restrictions of our syndication and financial
13/ United States v. National Broadcasting Co., 449 F. Supp. 1127
(C.D. Cal. 1978), aff'd mem., No. 77-3381 (9 Cir. April 12, 1978),
cert. denied sub nom; CBS v. U.S. District Court for Central
Division of Calif., 48 U.S.L.W. 3186 (1979).
14/ United States v. CBS, Inc., Civ. No. 74-3599-RJK (C.D. Cal.
July 31, 1980), ~printed in 45 Fed. Reg. 34,463, 34,466 (1980);
United States V. ABC, Inc., Civ. No. 74-3600-RJK (C.D. Ca]..)
reprinted in 45 ~ed. Reg. 58,441 (1980).
3.5/ United States v. American BroadcastinQ~CompaflieS, Inc., supra,
45 Fed.. Reg. at 58,443.
PAGENO="0744"
742
interest
Although the consent decrees incorporate the major provisions
of the Commission's Syndication and Financial Rule, they are
neither identical to the Rule nor should they be thought of as
such. The decrees build on the Rule, accepting its premises, and
provide for additional restrictions, especially by governing the
negotiations and relationship between a network and program
supplier and the length of time a network may control the use of a
television program. Any discussion of the consent decrees,
therefore, must include an analysis and discussion of these
additional provisions. This current proceeding is an examination
of the Commission's Rule and not the consent decrees, regardless of
their relationship or similarities. Although the two sets of
limitations on network activities have much in common, they are
separable and should be evaluated separately. This proceeding is
not the proper forum within which to debate the appropriateness of
the consent decree~. Rather, the Commission should focus on the
appropriateness of its own intrusion into the networks' business
practices and relationships with other entities. Only if it can be
demonstrated that these issues involve public interest concerns
related to communications policy beyond the normal jurisdictional
scope of the Justice Department's antitrust interests, should the
Commission continue to regulate the contractual relationships
between networks and program suppliers.
16/ Notice at 126.
PAGENO="0745"
743
Risk/Reward Shar~g
The Financial Interest and Syndication Rule was, in part,
"designed to eliminate the networks from distribution and profit
sharing in domestic syndication . . . and designed to
"prohibit networks from acquiring subsidiary program rights and
profit shares"1~1 in order to make "for fairer competition."~"
What the Commission did not foresee in its attempt at "fairer
competition" is that the Rule prohibits an efficient risk-sharing
arrangement between producers and the networks in the production of
new television programming. Contrary to its intent, the Rule
appears to have stabilized or increased concentration in the
program supply industry by making it more difficult for unknown
independent producers to find partners with which to share their
risks. As the Special Staff. study points out, these small
independents,
may either leave the industry, or merge with other
suppliers or participate in ventures jointly with large
suppliers [major Hollywood studios and producers] in order
to facilitate pooling of risks. The result will be for
the size of the average supplier to increase and for
measures of industry concentration to rise4Q/
The net result of the rule, therefore, has been to force small
independent producers into "umbrella" arrangements with major
Report and Order, sup~ m. 4 at 397.
Id. at 398.
Id.
Special Staff Analysis, su~p~ n. 4 at 621.
PAGENO="0746"
744
studios and producers in lieu of the networks. If the Rule is
repealed then these independent producers will be able, should they
so desire, to enter into a risk-sharing arrangement with a network
rather than a studio. To the extent that the Rule eliminates such
choice and this prevents efficient risk-sharing arrangements, it
serves to shift revenues and profits from the networks to the major
Hollywood producers.
Producers claim that the networks now are able to "share in
the profits" from a successful program, by virtue of the
significant advertising revenue generated from selling time during
and adjacent to prime time programs. In addition, producers claim
that the networks are even able to recoup their investment in pilot
programs not developed into series by airing them in the summer and
offsetting some of their inves~inent with advertising revenues such
programs generate. Because of this revenue, the studios claim that
the networks are not taking the bulk of the risk when financing a
new series but, rather, are merely end users of a product.
This is an oversimplified view, however, and it ignores the
significant investment that each network makes in new programming
annually as well as the enormous uncertainty of success in the
process. As an example, of the 113 prime time scripts and stories
commissioned by ABC for the 1981 season, only 32, were ever
produced as pilots (see Figure 1, page 14). The experience at CBS
is similar. For the 1981-82 season, CBS commissioned 158 scripts
of which only 31 became pilots. Of these, only nine were developed
PAGENO="0747"
745
FIGURE 1
1981-82 TV SEASON -- ABC
Percentage of Scripts
Number and Stories Commissioned
Number of Scripts and
Stories Commissioned
113
100.0%
Number of Pilots
32
28.3%
1981-82 TV SEASON -- LBS
Percentage of Scripts
Number and Stories Commissioned
Number of Scripts and
Stories Commissioned
158
*
100.0%
Number of Pilots
31
19.6%
Number of Series
9
5.7%
Number of Renewals
2
1.3%
1978-82 TV SEASONS (CUMULATIVE) - - CBS
Percentage of Scripts
Number and Stories Commissioned
Number of Scripts and
Stories Commissioned
805
100.0%
Number of Pilots
160
19.9%
Number of Series
51
6.3%
Number: of Renewals
12
1.5%
Source: ABC and CBS~
PAGENO="0748"
746
into series and only two were renewed For the four seasons from
1978-1982, CBS commissioned a total of 805 scripts of which 160
were made into pilots and only 51 became series Only 12 of these
less than 1 5 percent of the original scripts, were successful
enough to be renewed for at least one season. Contrary to the
producers' assertions, the networks make a significant investment
in programming and take a substantial risk in the program
development process It is also questionable to assert that the
networks can cover their investment in program development by
airing or "burning of f pilots and failed series during the summer
Shortly after Grant Tinker became president of NBC, that network
wrote off apporoximately $38 million in programming that could not
be used. Likewise, for 1981, ABC wrote off approximately $29
million in direct program development costs that could not be
recouped (~g through summer Jroadcast) It should be noted that
these costs reflect gross figures and do not include provisions for
overhead or lost opportunities resulting from preemption of other
(more popular) programs To say that the networks do not take
significant risks in the program development process is not
accurate. To prohibit them from sharing in the potential rewards
not only is unfair but also threatens their future ability to
compete effectively with unregulated competitors (~g, cable and
pay networks) for new programming
As it stands now the networks are limited to paying program
suppliers a -license fee for a program's initial network run. If,
PAGENO="0749"
747
on the other hand, the networks were permitted to have a financial
interest in programming or to acquire syndication rights, they
would be able to pay producers more than just a license fee at the
time of production.
Producer Versus Network Control
Program producers (both studio and independent) claim that if
the networks are permitted to obtain a financial interest in
programming and re-enter the syndication business, producers will
be at a critical disadvantage in bargaining and negotiating with
the networks. First, they claim they would be unable to resist
network demands for financial participation and syndication rights.
Second, and more important for some, producers fear losing creative
control of their programs if,, the networks regain a financial
interest.
Experience does not support these fears. Prior to adoption of
the Rule, the networks did not obtain a financial interest in all
programs. While they commonly obtained syndication rights from
producers who did not operate their own syndication business, this
was not typically the case with programs produced by the major
studios or other producers operating their own syndication
business. Further, any independent not desiring to negotiate
directly with the networks could always enter into an "umbrella"
agreement with a studio, much as they do today.
PAGENO="0750"
748
Regarding fears about creative control, with or without a
financial inthrest in a program, the networks already have ultimate
or final control over the nature of the programs they purchase for
broadcast Indeed as a licensee (each with five owned and
operated stations) with a responsibility to its affiliates each
network properly oversees the content of each program it
broadcasts It is in the mutual interest of networks and program
suppliers to have successful programs Disagreements about how to
achieve that commercial success exist today and inevitably are part
of the television program development and production process. It
would be unfair, however, to characterize the network-producer
relationship as an adversary one in which all producers are in
conflict with all three networks To the contrary, most producer-
network relationships are mutually beneficial Repeal of the
Financial Interest and Syndication Rule will not significantly
alter this process
The Commission has inquired about the imbalance in bargaining
power between producers and the networks Most producers as well
as network representatives agree that while there may be an
imbalance in favor of the network in initial negotiations once a
program qualifies as a hit (ie, the network wants to renew it),
the advantage shifts to the producer Indeed, the Network Inquiry
Special Staff found that among the network-producer contracts that
they examined, all had been amended for series appearing on the
PAGENO="0751"
749
network for more than three years.11~" They concluded:
Although it is true that the network entertainment
program development process is characterized by multi-
year agreements that usually specify prices and at least a
few other provisions to be effective several years hence,
these agreements are themselves a part of that
evolutionary, dynamic development process. . . . It
would be erroneous to conclude that any one agreement made
during this evolutionary process, no matter how long-term
or ironclad the contract may appear to be, is the sole or
the last deal that will be made. The parties are not only
legally free to amend their contracts; they do so with
regularity .22/
Therefore, to assert that the relationship between a network and a
producer is one-way and imbalanced is to ignore industry practice.
If the fear on the part of producers is that they will be forced
into unfavorable contracts with the networks, they do not
adequately recognize the shift in bargaining power that occurs when
a program is successful enough to be renewed. If a program does not
succeed and subsequently is cancelled, then nothing is lost; i.e.,
whatever the producer gave up turned out to have no value. On the
other hand, if a program is successful, the producer has the
opportunity to renegotiate the contract (and commonly does) and to
negotiate better terms for subsequent projects.
While the question of program control is an important one for
producers, it is not addressed by the Rule in question. The
networks today, with the Rule in place, appropriately control the
21/ Special Staff Analysis, supra n. 4 at 463.
22/ Id. at 465.
32-540 O-84--48
PAGENO="0752"
750
programs they license and broadcast. Repeal of the Rule will not
change the fundamental buyer-seller relationship between network
and producer in which the networks have the ultimate control of
choosin~ to broadcast or not to broadcast a particular program.
Network Ability to Compete with New Technology
It is widely recognized that we are in a period of dramatic
change in the communications and entertainment industries. For the
first time in their history, the networks are facing significant
competition for prime time audience attention. A multiplicity of
cable networks already are available to viewers and dozens more are
planned or scheduled for operation. Satellite communications have
enabled ad hoc broadcast networ)~s to compete with the networks for
audience. The combined television network prime time share fell
from 91 percent in 1977-78 to 80 percent in 1981-1982 and is
predicted to reach only 60 percent by the end of the decade.
Although it has been predicted that, because of growth in the
general population and number of households, the networks' audience
in terms of households and viewers will remain relatively constant
and not decline along with their shares, it also is predicted that
network costs for programming will increase significantly. Without
the increases in audiences they have enjoyed over the past thirty
years, the networks will find it increasingly difficult to compete
successfully for new programming.
PAGENO="0753"
751
The networks' inability to share in syndicat~on and other
subsidiary rights because of the Rule has therefore become more
than just an inconvenience In order to pay the high prices prime
time programming demands, the networks need to be able to share in
the non-network revenues generated through exploitation of
subsidiary rights The only alternatives are either to raise
advertising rates or purchase less expensive programming Given
the increasingly competitive nature of the advertising business it
is unlikely that the networks would be able to raise their rates
sufficiently to cover their increasing program costs An
undesirable alternative would be to increase the number of minutes
devoted to advertising each hour This would likely be counter-
productive since advertisers would resist increased "clutter" and
viewers would have additional incentive to desert the networks for
advertising-free subscription services Nor is purchasing less
expensive programs a viable solution It is difficult to envision
producers being able or willing to provide the kinds of network
prime time drama and comedy that comprise the bulk of the networks
schedules for very much less than they now charge It has been
suggested that, in order to cut costs the networks may have to
begin scheduling game shows and other low budget programs in prime
time One potential outcome of Rule retention therefore is that
the producers objecting to repeal might find themselves without
customers for the very programming they argue needs protection
Not only would the networks and producers suffer from such
cutbacks, but so too would the independent stations that depend on
PAGENO="0754"
752
expensive off-network programming for much of their schedule. The
ultimate loser, of course, would be the public.
Program Warehousing
The most difficult issue raised by the Commission's Notice is
whether independent television stations require special protection
from potential network "warehousing" of programming, if they are
permitted to re-enter the syndication business. While the three
preceding issues appear to be allocative and therefore outside
proper government action, this issue potentially involves important
competitive issues more appropriate for government concern.
However, as discussed below, there is little reason to believe that
the potential for warehousing is a real threat and, more
importantly, if it were to become a problem, the proper remedy lies
more appropriately with antitrust enforcement by the Department of
Justice rather than by Commission Rule.~V
Independent television stations fear that if the networks are
permitted to obtain syndication rights for network series and re-
enter the syndication business, there will be a "conflict of
interest" where the networks will control sale and use of programs
used to compete with their network affiliate and 0 & 0 schedules.
The independents claim that the networks would withhold popular
programs from syndication in order to limit this competition. This
23/ See supra pp. 9-11 for discussion of Department of Justice
~nsent decrees with each of the networks.
PAGENO="0755"
753
claim goes on to argue that the result would be a lessening of
competition in the program syndication business, weaker independent
stations, and, therefore, higher overall advertising costs. There
is no support, however, for these claims, all of which hinge on the
desire and ability of the networks to withhold programming.
This alleged potential for withholding is based upon three
rather questionable assumptions about network activity that, while
theoretically possible, do not reflect the reality of sound
business practice. First, the withholding argument is premised on
the networks' ability to control virtually all off-network
programming. In order to accomplish this, the networks would
either have to buy syndication rights for all programs they develop
or, since this would be prohibitively expensive, buy syndication
rights only for those series that become hits. The problem with
this assumption is that no one can predict which programs will be
successful. One only has to look at the extremely high failure
rate of program development to see the difficulty involved.~" The
notion that the networks could control even a majority of
syndicated programming is thus totally at odds with the state of
the industry. The program syndication market is competitively
structured and was so before the networks were restricted by the
Rule. Indeed, the Network Inquiry Special Staff found that the
combined network share of the syndicated program business was only
24/ See Figure 1, supra p. 14.
PAGENO="0756"
754
18.5 percent,~~' concluding, "there is no evidence that the
syndication market was concentrated in the hands of the networks as
a result of their ownership of distribution rights. Their share of
that market was relatively sinall."2-~' In addition, if the networks
re-enter the syndication business, they will begin with zero market
share.
The second questionable assumption underlying the alleged
withholding threat is that the three networks will collusively form
an undetected cartel to coordinate their syndication activities.
Given the highly competitive nature of the television programming
and syndication businesses, such coordinated action is highly
improbable. Not only would the networks have t9 avoid Justice
Department detection and enforcement, they would have to avoid
detection by potential private litigants. The latter problem would
be particularly acute since the television distribution industry is
extremely fluid with personnel moving among firms and industry
segments many times during a career. Finally, the most difficult
task for the cartel would be to enforce its agreements since the
incentives to violate the agreement would be extremely high, given
the assumed demand for scarce off-network programming. Those who
argue that the networks would not have to act collusively, but only
in parallel, fail to recognize the significant incentives to enter
the syndication business, especially if there is a shortage of
product.
25/ Special Staff Analysis, p~ n. 4 at 578.
26/ Id. at 532.
PAGENO="0757"
755
The third questionable assumption is that the networks will
engage in irrational business practices. That is, they would
purchase, at considerable expense, program syndication rights and
then choose not to exercise those rights. A primary reason the
networks desire to re-enter the syndication business, however, is
to be able to share in the rewards associated with a successful
television series by participating in syndication revenues. For
the networks to "sit" on these rights, failing to exploit them,
would be acting against their own and their stockholders' own best
interests. Further, since the networks would rarely be the sole
owner of a program, they would open themselves up to lawsuits from
partners if they were to act contrary to their partners' (and their
own) interests. To argue that the networks would pay for rights
they would not use is to ignore the fiscal necessities of the
highly competitive television entertainment business.
Because of the highly unlikely event that the networks would
have the desire or the ability to withhold programming, it is not
even necessary to address claims that independent station viability
would be harmed and therefore advertising rates would increase if
the networks were permitted to engage in program syndication. It
should be noted, however, that even if a convincing showing can be
made that independent station strength is related to local market
spot advertising rates, linking station health and advertising
rates to any particular program or program type is a separate
issue.
PAGENO="0758"
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CONCLUSION
Although producer fears about repeal of the Commission's
Financial Interest and Syndication Rule are genuine, they do not
appear to be justified. Although some independent producers may
find it difficult to remain "independent" ~ outside an
"umbrella" arrangement with either a major studio or a network), it
is unlikely that the business of producing television programs,
especially prime time series, will become any more concentrated.
Although it is likely, as was the case before the Rule, that the
networks will be able to obtain syndication rights from independent
producers, there is no evidence such arrangements will do anything
but shift a portion of the syndication business from the studios to
the networks. However, if producers would rather work with the
studios, there would be nothing preventing them from doing so
through an "umbrella" arrangement giving the studios syndication
rights.
Producer concerns about "creative control" are understandable
but again unsupported. The networks already have significant
control over program content and if producers fear network
intrusion they will always be able to seek "insulation" by working
through the studios as they do now.
Likewise, if individual program distributors fail because of
the entry of more efficient competitors, this will not result in
significant increases in concentration and, in any event,
PAGENO="0759"
757
should not be the concern of an independent regulatory agency If,
on the other hand business failure is the result of
anticompetitive behavior and undue market power then there are
sufficient existing antitrust remedies available to the Department
of Justice and private litigants
Based upon available evidence the only issue raised that may
be more than allocative is the impact of eliminating or modifying
the Rule on the availability of programming to independent
television stations If eliminating the Rule resulted in
withholding popular off-network syndicated programs from
syndication, then questions would have to be raisea about network
behavior However, such an outcome is unlikely And if the
networks were able to create an effective cartel they certainly
would find themselves subject to Department of Justice and private
antitrust litigant scrutiny and action
The ability of the networks to withhold programming from the
syndication market is based on three seemingly implausible
assumptions (1) networks would be able to control the vast
majority of "important~ programs in syndication (2) networks would
be able to maintain the cartel and avoid detection and
(3) networks would act irrationally and not exploit a valuable
property
Summarizing, the Commission $ Financial Interest and
Syndication Rule never had the intended effect of increasing both
PAGENO="0760"
758
the number of producers and the amount of programming available for
both network broadcast and syndication. Both program supply and
program syndication markets are competitively structured today and
were so before the rule was promulgated. Overall, therefore, the
rule appears to have had little impact on the program market other
than skewing market shares in the direction of producers, and
permitting entry by some new firms. Repeal, however, would have
the positive effect of promoting competition in program supply by
permitting independent producers to work directly with the networks
if they so desire. Repeal also would permit increased competition
in program distribution by permitting three additional entities
~ the networks) to compete for business.
Perhaps most importantly, to the extent that the Rule is
concerned with allocating revenues and profits among firms and
industry segments, it is an inappropriate activity of a government
agency. In addition, to the extent that protection against
anticompetitive behavior and undue market power is required,
sufficient remedies re~t with the Department of Justice and private
antitrust litigants exercising their rights under existing law.
PAGENO="0761"
759
Therefore the Department of Commerce urges the Commission to
act on its Notice and repeal the Financial Interest and Syndication
Rule
Respectfully submitted,
ernard under, Jr
Assista Secretary for
Communications and Information
U.S. Department of Commerce
Washington, D C 20230
January 26 1983
Pro3ect manager for this filing was Robert Pepper, NTIA, Office of
Policy Analysis and Development, Suite 4725, U S Department of
Commerce, Washington, D C 20230, (202) 377-1880
PAGENO="0762"
760
* RECEIVED
SEP20 1983
I~LC
Before the Office of the Secretary
FEDERAL COMMUNICATIONS COMMISSION
Washington, D. C. 20554
In the Matter of
Amendment of 47 CFR Sec. 73.658(j) ) BC Docket No. 83-345
(1) (i) and (ii), the Syndication
and Financial Interest Rules.
COMMENTS OF TEE NATIONAL TELECOMMUNICATIONS
AND INFORMATION ADMINISTRATION
The National Telecommunications and Information
Administration (NTIA), as the Executive agency principally
responsible for the development and presentation of
telecommunications policy, respectfully submits the following
brief comments to the Commission in general support of the
"Tentative Decision" released August 12, 1983 (FCC 83-377, 48
Fed. Reg. 38020). We previously submitted extensive comments and
reply comments in this important proceeding, and also.
participated in the Commission's March 14 oral arguments.
NTIA's Views on the principal Issues
NTIA consistently has recommended comprehensive rescission
of the Commission's Syndication and Financial Interest Rules in
its earlier submissions to the Commission, and we continue to
believe this would be the soundest, most procompetitive approach.
We have adopted this position, essentially, because we believe
the proponents of the rules have not yet adequately demonstrated
that the kind of *Government intrusion into the programming
marketplace these rules represent is needed to further any
clearly defined public interest, or that the obvious economic
costs the rules impose outweigh any likely future gains.
PAGENO="0763"
761
All parties to this proceeding agree that virtually all
sectors of the "video marketplace" today are workably
competitive, or clearly have the potential to become so,
especially given the rapid technological and commercial changes
that are occurring. Once dominant, the three national television
networks, for example, have seen their commercial leadership
increasingly challenged, indeed, eroded by the rapid development
of both independent broadcast stations and cable television in
particular. Although there is some diversity of views regarding
how quickly any residual "network power" will dissipate, there
is little disagreement that a very substantial reduction has
taken place and will continue to take place in the future. The
programming busjness, moreover, has also experienced major recent
changes, by virtue of new technology (e.g., videotape and
satellite distribution), shifting and growing demand, and new
competitive entry as well.
Competitive Imperatives
We generally start from the fundamental premise that
Government intervention into competitive markets is not
desirable, and ordinarily is likely to generate more economic
costs than societal gains, particularly when those markets are
being reshaped by technological forces. Competition, as the
Supreme Court has repeatedly noted, constitutes our "fundamental
national economic policy"; reliance upon competition, not
intrusive Government regulation, should thus be our "Magna Carta
of free enterprise," "comprehensive charter of economic liberty,"
and the "polestar" by which all agencies including the Commission
should be guided. */ Absent clear and persuasive evidence that
regulatory intrusion is warranted to further a clearly defined
~/ See United States v. Philadelphia Nat'l Bank, 374 U.S. 321,
~63 (1963); United States v. Topco Associates,T05 U.S. 596, 610
(1972); Northern pacific R. Co. v. United States, 356 U.S. 1, 4
(1958); City of Lafayette v. Louisiana Power & Light Co., 435
U.S. 389, 406 (1978)
PAGENO="0764"
762
public purpose, we believe both our traditional national policy
biases in favor of competition and historical experience would
dictate that the public's interests are most likely to be
efficiently furthered by relying upon unfettered marketplace
forces.
Given our traditional, strong commitment to competition,
those urging detailed and intrusive regulations and constraints
on competition bear an especially heavy burden of proof. Cf.
Connell Construction Co. v. Plumbers & Steamfitters Local, 421
U.S. 616, 623 (1975); National Assoc. of Professional Engineers
V. United States, 435 U.S. 679, 692 (1978). We appreciate some
of. the theoretical concerns the proponents of retaining the
Financial Interest and Syndication Rules have advanced. Even
assuming any validity to these theoretical concerns, however, in
our view the proponents have simply failed sufficiently to
buttress their arguments with adequate or credible facts. That
being the case, we believe rescinding the rules and relying on an
unregulated marketplace is both desirable and fully warranted as
a inktter of law. For as the courts have stated, "A regulation
perfectly reasonable and appropriate in the face of a given
problem may be highly capricious if that problem does not exist."
C.ity of Chicago v. FPC, 458 F.2d 731, 742 (D.C. Cir. 1972).
Financial Interest Rule Repeal
We fully support the Commission's proposed rescission of the
Financial Interest Rule. As indicated both in our earlier
pleadings and in our oral presentation in this proceeding, we see
no good reason for continuing, among other things, to deny
particularly smaller, independent program producers a broader
range of financing and risk-sharing alternatives than they enjoy
today.
One practical consequence of this rule, which prohibited
network investment in entertainment programming, was that it
PAGENO="0765"
763
tended to limit those alternatives and thus, as a consequence, to
discourage new, competitive entry into the program production
business by precisely that group of smaller, possibly more
innovative and creative, programmers who might otherwise make a
substantial contribution to greater diversity. Eliminating the
Financial Interest Rule should foster new entry and greater
competition in program production, and thus work ultimately to
the benefit of the viewing public.
We believe, in sum, that the Commission would best serve the
interests of the public in a more diverse, competitive, and
efficient program production business by rescinding the Financial
Interest Rule, as we have previously urged. This is the soundest
approach, in our view, and given the Commission's careful review
and analysis, is a timely action likely to be sustained easily on
appeal. See, e.g., NAACP v. FCC, 682 F.2d 993, 998 (D.C. Cir.
1982).
Modifying the Syndication Rule
While we support the changes in the Syndication Rule the
Commission has proposed, we believe the FCC should have gone
further and proposed rescinding this rule altogether. We
appreciate the legitimate concerns that some have raised
regarding possible adverse effects on some independent stations
at some indefinite future time. We do not believe, however, that
the proponents of this rule have adequately demonstrated the
reasonable probability of such hypothetical harms, nor the
ineffectiveness of alternative, less costly, and less
anticompetitive remedies should such hypothetical harms
materialize. Given that a firm, fact-based basis for such a rule
is lacking, we believe the wiser course for the Commission would
have been to decline completely to intervene in the workings of
the syndication marketplace.
PAGENO="0766"
764
The easy assumptions upon which this rule is based do not
bear close analysis, as we have noted. The notion that the
networks might hypothetically "warehouse" syndicated
programming, for example, rests on the assumption that any "deep
pocket" these ~companies currently enjoy will persist
indefinitely; a~nd that the kind of collusive, consciously
parallel, anticompetitive conduct which might run afoul of the
antitrust laws, and thus the Communications Act, will be
undertaken, and succeed, undetected. This, as we pointed out, is
an invalid assumption: any abuses, to begin with, are most
likely to materialize only in the far future -~ and at precisely
that time when competition from new media (and hence the
pressures on any network monopoly rents) is likely to be most
intense.
Similarly, any competitive abuses will arise, if at all,
only over time, and not all at once. Were the Commission to
rescind the Syndication Rule altogether, it would retain full
authority under the Communications Act to take ad hoc, remedial
actions. The Commission, in addition to its general authorities
under. the Act (see, e.g., 47 U.S.C. Sec. l54(i),303(g)) retains
authority over station licensing, for example; for more than 30.
years established FCC policy has been to hold licensees
accountable for anticompetitive conduct even when such conduct
does not rise to the level of a fu.llfledged antitrust violation.
See, e.g., NCC~ V. FCC, 436 U.S. 775, 814 (1978); "Report on
Uniform Policy as to Violations by Applicants of the Laws of the
United States," P.& F. Radio Reg. (part 3) at p. 91:495 (1951).
We believe the realistic likelihood of any anticompetitive
conduct on the part of the national networks in this instance is
remote and that, in any event, safeguards and remedies other than
special Commission regu'ations are more than sufficient.
PAGENO="0767"
765
"Warehousing" and "Preferential Licensing" Forestalled
We recognize that some independent television entrepreneurs
are less confident of the adequacy of antitrust and other ad hoc
safeguards. Indeed, even the Department of Justice has expressed
reservations in this proceeding concerning its ability to deal
with potential anticompetitive developments. We do not share
these concerns, but even conceding for argument's sake their
validity, it seems to us that the Commission's revised
Syndication Rule goes far to negate any legitinate basis for
concerns.
The revised syndication~ Rule will impose uncertain and, to a
considerable degree, unquantifiable costs. Although
"sunsetted," for example, the revised rule will nevertheless run
through 1990. Given the pace at which changes are occurring in
this field, we are chary of regulations premised on already shaky
marketstructure and performance assumptions that by the end of
this decade may have even less empirical support and validity
than they enjoy today.
If the genuine concern of the independent television
stations and the Antitrust Division is the possibility of
"warehousing" or its variant, "preferential licensing" to
affiliates, the revised Syndication Rule should be ample to deal
with those concerns.
Conclusion
We start from the basic policy assumption that Government
intervention into the workings of effectively competitive markets
should not be undertaken except for very sound reasons. Among
such reasons would be the high probability of adverse
developments taking place too rapidly for other remedies to be
effective, or the high probability of such developments, coupled
with the absence of adequate ad hoc remedies aThogether.
82-540 O-84--49
PAGENO="0768"
766
In this proceeding, we believe that even if there ever were
a legitimate risk of undue "network power" adversely affecting
the diversity and abundance of programming choices available to
the public, this risk has been ameliorated, if not eliminated
altogether, by tbe major changes that are affecting the "video
services" marketplace. Not only is the risk of harm to the
public thus remote, but any such harm could materialize, if at
all, only over time. During such time, moreover, any number of
remedies would be available to correct the situation, remedies
including vigorous private enforcement of the antitrust laws.
In conclusion, we continue to believe the Commission should
promptly repeal the Financial Interest Rule. Although there is
not clear evidence of a need for a prophylactic restriction on
network syndication, we recognize the Commission's concerns and
thus do not oppose the proposed rule change.
Respectfully submitted,
David. J. Markey
Assistant Secretary for
Communications & Information __________________________
Kenneth Ro5inson
policy Adviser to the
Richard H. Shay Assistant Secretary
Chief Counsel
National Telecommunications
and Information Administration
September 22, 1983
Project manager for this filing was Dr. Robert Pepper, Office of
Policy Analysis and Development, NTIA, Room 4725, U.S. Department
of Commerce, Washington, D. C. 20230 ((202) 377-1880).
PAGENO="0769"
767
Mr. WIRTH. Thank you very much, Ms. Asselin. We appreciate
your being here.
Mr. Ochoa.
STATEMENT OF DAVID OCHOA
Mr. OCHOA. Mr. Chairman, first of all, I want to thank you very
much for this opportunity and the invitation to testify and I want
to give credit, especially to our own Congressman, Congressman
Waxman, for his leadership in encouraging having this hearing
here in Los Angeles. It is of great benefit to all of us in the indus-
try. My compliments to you, sir.
My name is David Ochoa and I am the president of Buenavision
Cable Co. I got my start in television as the founder of "Via Alle-
gra," a children's television show on PBS and with NBC, which I
left several years ago to form my own production operation, which
is a very small firm here in southern California. I now have an
ownership interest in four cable companies and as a businessman I
have to meet a 72-person payroll every 2 weeks. I am very proud of
the nine Emmy nominations I have received and the two Emmy's I
have won.
As an independent film and television producer, I am pleased to
inform you that my second feature film, "The Ballad of Gregorio
Cortez," will soon be released for national theatrical distribution. In
short, on the basis of merit, I wear the title of television and film
producer. In addition, I am proud of my Hispanic heritage but
ashamed at the failure of America's major television and film stu-
dios to produce prime time and syndicated programs, which reflect
Hispanic life, themes, and experience.
Earlier this year I testified before the FCC urging the repeal of
the financial interest and syndication rules. Today, I am here
before you because passage of H.R. 2250, in my opinion, which, if
enacted, will provide a 5-year moratorium. In short, a 5-year delay
to persons like myself who are convinced that dealing directly with
the networks can result in having minority-produced and Hispanic-
themed programing on network prime-time television.
My colleague, Topper Carew, a black, and president of Rainbow
Television Workshop, has conducted a 15-year study of prime-time
television. The study, which is included in the appendix of my testi-
mony, reveals that black producers have supplied 188 hours of
prime-time programing in the past 15 years. In many cases these
black suppliers were in partnership with nonminority companies.
This paltry 188 hours compares with a total of 21,780 first-run,
prime-time hours. The total volume of minority business represents
0.0086 percent of the overall total for the last 15 years. The 1982-
83 television season is a clear case in point. Of the 1,452 prime-time
hours available, Motown is producing one 2-hour 25th anniversary
special and one movie-of-the-week. This translates to 0.0026 percent
of the 1982-83 network schedule.
If the situation for blacks on prime time, as we heard earlier in
the previous panel, is inadequate, for Hispanics on prime time, it is
a disaster and 5 more years of the same won't help.
In short the rules discourage the television networks from invest-
ing in projects with new and small independent producers, leaving
PAGENO="0770"
768
us only one option: Trying to convince major studios to provide
funding for us. For Hispanic producers the reply has been, as Mr.
Leland has learned on his visits to the west coast-their reply has
been "No," "No thanks, can you call me back?" "Send me a treat-
ment, will you, please, or a script," which of course is neither read
nor returned.
Hispanic independent producers have not fared well under these
rules. We are nonparticipants in 1983 and for the past 15 years. In
fact, for outstanding producers, such as Jose Luis Ruiz, Jesus Tre-
vino, Moctesuma Esparza and others, success has been limited to
public television and, on occasion, network O&O's.
Until Hispanics become 20 percent stockholders in Warner Bros.,
Universal, Paramount, Columbia, Syndicast, Lorimar and others,
we have no reason to believe that things will change and no way to
change them. We simply lack the leverage with Hollywood. And by
the way, the record of the networks is about as bad, but there we
have a little bit of leverage. The leverage? Each network owns sta-
tions in major metropolitan areas. In Los Angeles there are 2.1 mil-
lion Hispanics, constituting 22 percent of the area's population. In
New York there are 1½ million Hispanics making up almost 15
percent of that city's population and growing. No one can dispute
their television audience share. Eighty-eight percent of the Na-
tion's Hispanics are concentrated in metropolitan areas where in
many of which networks have owned stations.
Hispanic viewing trends, whether or not we watch CBS, NBC, or
ABC is a good market lever to assure the networks are responsive
and if they are not, we will turn them off. And, as always, the
matter is money. Repeal of the rules will provide the networks a
second good business reason to consider our programing tastes.
In summary, I want to support the comments that were made by
the preceding panel, because if there is a Hispanic viewpoint on
this issue, they stated it much better than I.
Protecting the public interest of 20-million American Hispanics
is in the public's interest. The Pentagon tells us that Hispanic
Americans serving in World War II, Korea and in Vietnam far out-
numbered any other group of Americans in terms of casualties and
heroism.
No other group, Mr. Chairman, has won more Medals of Honor
than Hispanic Americans.
Somos Americanos Y Tenemos Patritismo Para Nuestro Pals.
We are proud to be Americans and we are proud of America. We
have served our country and made the ultimate sacrifice. We have
the same determination and skill to make our rightful contribution
to the American experience via the medium of film and television
if the FCC and the Congress gives us that opportunity.
I join Mr. Poitier in asking for fairness. Please allow the FCC to
remove the largest single obstacle, in my view, that prevents us
from achieving this success and repeal the financial interest and
syndication rules now.
Thank you very much.
[Mr. Ochoa's prepared statement follows:]
PAGENO="0771"
769
STATEMENT OF DAVID OCHOA
PRESIDENT
BUENAVISION CABLE COMPANY
My name is David Ochoa and I am President of
BUENAVISION Cable Company. I got my start in television
with NBC, which I left several years ago to form my own
production operation, a very small firm in Southern California.
I now have an ownership interest in four cable companies. As
a businessman, I have to meet a 72-person payroll every two
weeks. I am proud of the nine Emmy nominations I have re-
ceived and of the two Emmy's I have won.
As a small independent film and television producer, I
am pleased to inform you that my second feature film, "THE
BALLAD OF GREGORIO CORTEZ", will soon be released for national
theatrical distribution. In short, on basis of merit, I wear
the title of television and film producer. In addition, I am
proud of my Hispanic heritage but ashamed at the failure of
America's major television and film studios to produce prime
time and syndicated programs which reflect Hispanic life,
themes and experience.
Earlier this year I testified before the Federal Communi-
cations Commission urging repeal of the Financial Interest
and Syndications Rules. Today, I am here before you because
passage of H.R. 2250, which if enacted, will provide a five
year moratorium. In short, a five year delay to persons like
PAGENO="0772"
770
myself who are convinced that dealing directly with the net-
works can result in having minority produced and Hispanic-
themed programming on network prime time television.
My colleague Topper Carew, President of Rainbow
Television Workshop, has conducted a 15 year study of
prime time television. The study, which is included in the
appendix of my testimony, reveals that Black producers have
supplied 188 hours of prime time programming in the past
15 years. In many cases black suppliers were in partnership
with non-minority companies.
This paltry 188 hours compares with a total of 21,780
first-run, prime-time hours. The total volume of minority
business represents .0086% of the overall total. Added to
this is the fact that of the 188 hours, 72% are comedy!
musical or variety shows . . . represented by 88 hours of
"FLIP WILSON," 18 hours of "REDD FOXX," 22 hours of "BILL
COSBY'S VARIETY SHOW," 5 hours of Motown music specials
and one hour from Diana Ross Enterprises.
Of the remaining 28% in the dramatic or comedy category,
22 hours are from Bill Cosby's 1969-70 series and 24 are
from Alex Haley's partnership with Norman Lear which resulted
in "PALMERSTOWN." The balance, eight hours, consists of
two-hour movies-of-the-week . . . two from Bill Cosby's
Jemmin Productions, one from Motown and one from a Motown!
Universal partnership.
PAGENO="0773"
771
The 1982-83 television season is a clear case in point.
Of the 1,452 prime time hours available, Motown is producing
one two-hour 25th Anniversary special and one movie-of-the-
week. This translates to .0026% of the 1982-83 network
schedule.
Fifteen years of prime time television represents
18,480,000,000 - 21,780,000,000 dollars of activity. The
dollar volume of activity for Black suppliers is approximately
$159,800,000 - 188,000,000 . . . or .0086%.
It should be noted that this report has not even addressed
the issue of daytime and Saturday morning television .
an area of programming where minority suppliers have ex-
perienced total non-participation.
If the situation for Blacks on prime-time is inadequate,
for Hispanics on prime time, it is a disaster.
Five more years of the same won't help.
The rules were initially aimed at increasing competi-
tion in the program supply business, but they haven't
worked that way. According to industry sources, in 1969 --
before the rules were adopted -- there were 60 suppliers of
prime time entertainment programming. In the 1981-82
season there were only 41 -- none of whom were Hispanic and
all of whom failed to support Hispanic-themed programming
with any degree of consistency.
PAGENO="0774"
772
We can see in the experience of one network where the
top eight program suppliers provided only half that network's
prime time entertainment series in 1970 but eight program
suppliers provided almost all 97% by 1980!
In short, the rules discourage the television networks
from investing in projects with new and small independent
producers, leaving us only one option: trying to convince
major studios to provide funding for us. For Hispanic
producers, the reply has been "no." "No thanks, can you call
back?" "Send me a treatment or script" which, of
course, is not read or returned.
How, then, does repeal of the rules assure, as Commissioner
Rivera points out, that recision does "NOT AFFECT ADVERSELY
THE PUBLIC INTEREST BY LIMITING PROGRAM CHOICES AND
DIVERSITY OF VIEW POINTS ON THE AIR"?
Hispanic independent producers have not fared well
under these rules. We are non-participants. In fact, for
outstanding producers such as Jose Luis Ruiz, Jesus
Trevino, Moctesuma Esparza and others, success has been limited
to public television and network-owned stations.
Until Hispanics become 20 percent plus stockholders in
Warner Brothers, Universal, Paramount, Columbia, Syndicast,
Lorimar, and others, we have no reason to believe that things
will change and no way to change them. We simply lack the
leverage with Hollywood.
PAGENO="0775"
773
Under the present rules, the major production companies
have no reason to consider us as anything other than a
nuisance. Repeal of these rules, however, brings us and
other independent producers, including women, native Americans,
Blacks, and Asians increased opportunity to deal directly
with the networks who are also public licensees of television
stations. Then and only then, will we have the necessary
leverage to make sure that some prime time and syndicated
programming includes Hispanic themes and can be produced by
Hispanic companies.
The leverage? Each network owns stations in major
metropolitan areas. In Los Angeles, there are 2.1 million
Hispanics constituting 22 percent of the area's population.
In New York there are one and one-half million Hispanics
making up 15 percent of that city's population and growing.
No one can dispute their television audience share! Eighty-
eight percent of the nation's Hispanics are concentrated
in metropolitan areas where, in many of which, networks
have owned stations.
For Hispanics, repeal of the rules and the open
competition which would follow, provides new opportunities.
Few among us dreamed for this enlightened policy during the
Reagan Administration. But credit must be given where it
is due. It was President Reagan who appointed the nation's
first Hispanic to the FCC, making it clear that the Hispanic
PAGENO="0776"
774
Agenda on telecommunications matters must be represented
and have a voice!
Experience makes us confident that a new relationship
can be worked out with the networks and that the networks
will respond to our programming tastes and needs for good
business reasons. First, they must keep and expand on viewer
shares.
Hispanics watch and enjoy lots of television.
Hispanic viewing trends whether or not we watch CBS,
NBC or ABC is a good market lever to assure the networks
are responsive. And, as always, the matter is money. Repeal
of the rules will provide the networks a second good business
reason to consider our programming ideas.
Program development is costly, and having the
opportunity to share in syndication profits will add incentive
to networks to give added consideration to Hispanic produced
programming. The National Black Media Coalition put it this
way:
"REMOVING OBSTACLES POSED BY THE SYNDICATION AND
FINANCIAL PROHIBITIONS WILL PERMIT THE NETWORKS TO
POOL RISK EFFICIENTLY FOR THE PURPOSE OF
BROADENING THEIR PROGRAMMING CHOICE. THE RESULTING
INNOVATION AND DIVERSTIY WILL BENEFIT NOT ONLY THE
BLACK COMMUNITY, BUT THE AMERICAN PUBLIC GENERALLY."
PAGENO="0777"
775
I could not have put it better.
Mr. Chairman:
Protecting the interest of 20 million American Hispanics
is in the public's interest. The Pentagon tells us that
Hispanic American serving in World War II, Korea, and in
Vietnam far outnumbered any other group of Americans in terms
of casualties and heroism.
No other group has won more Medals of Honor than
Hispanic Americans.
`SOMOS AMERICANOS Y TENEMOS PATRITISMO PARA NUESTRO
PAlS."
We are proud to be Americans and proud of America. We
have served our country and made the ultimate sacrifice.
We have the same determination and skill to make our
rightful contribution to the American experience via the
medium of film and television if the Commission gives us
the chance.
Please allow the F.C.C. to remove the largest single
obstacle that prevents us from achieving this success, and
repeal the financial interest and syndication rules now!
Thank you very much.
PAGENO="0778"
776
4 March 1983
~R: Topper Carew~j~i/ttAA(~
Rg: Prime-Tine Television Suppliers
This research is designed to establish one pertinent fact . . . minorities
have been excluded from participation in the business of television. We
suggest that minority actors, writers, directors and producers are denied
some emtloyment opportunities. We also suggest that minority companies
have historically been denied an opportunity to supply programs directly
to the three co~ercial networks.
Why even bother with this question? First, because Black leadership has
consistently pushed for employment rather than entrepreneurship. Secondly,
to be an entrepreneur in the television business is to be a television sup-
plier . . . to be a supplier can be worth millions of dollars.
For example, if a Black company was contra~ted by a network to p~oduce a
weekly one-hour dramatic program for the network's prime-tine schedule, the
minority company would have a contract worth $22 million (22 hours x a li-
cense f cc of 1 million per hour). This $22 million does not include any
additional income that might be derived from syndication or other forms of
ancillary income. But, as you can see, one series by itself would put a
Black company on BLACK ENTERPRISES' list of the Top 100 Black Corporations.
Thirdly, each network presents 22 hours of prime-time fare each week. There
are three co~nercial networks. This represents a total of 66 hours of prime-
time prograning available to the viewing public. Since the types of pro-
gra~ning vary, I will use an average per-hour cost of $850,000-l,000,000.
$850,000-l,000,000 x 66 hours - $56-66 million of business per week.
If you multiply the per-weekly volume tines a season of 22 weeks, you get
$l,232,000,000-l,452,000,000 per annum. This, in fact, is a conservative
estimate since it does not take year-round prograimning into consideration.
Now what percentage of this business activity goes to minority companies or
suppliers (as they are customarily called)? The research included herein
looks at the last 15 years of prime-time television. In all of that time,
the volume of activity represented by Black suppliers is lS8 hours. In
many cases, the Black suppliers were in partnership wIth non-minority com-
panics.
PAGENO="0779"
777
This paltry 188 hours compares with a total of 21,780 first-run, prime-time
hours. The total volume of minority business represents .0086% of the overall
total. Added to this is the fact that of the 188 hours, 72% are comedy/musi-
cal or variety shows . . . represented by 88 hours of "TLIP WILSON," 18 hours
of "REDD POXX," 22 hours of "BILL COSBY' S VARIETY SHOW," 5 hours of Motown
music specials and one hour from Diana Ross ~nterprises.
Of the remaining 28% in the dramatic or comedy category, 22 hours are from
Bill Cosby's 1969-70 series and 24 are from Alex Haley's partnership with
Norman Lear which resulted in "PALMERSTOWN." The balance, eight hours, con-
sists of two-hour movies-of-the-week . . . two from Bill Cosby's Jeimnin
Productions, one from Motown and otis from a Motowc/Universal partnership.
The 1982-83 television season is a clear case in point. Of the 1,452 prime-
time hours available, Motown is producing one two-hour 25th Anniversary spe-
cial and one movie-of-the-week. This translates to .0026% of the 1982-83
network schedule,
Pifteen years of prime-time television represents 18,480,000,000 - 21,780,
000,000 dollars of activity. The dollar volume of activity for Black sup-
pliers is approximately $159,800,000 - 188,000,000 . . . or .0086%.
It should be noted that this report has not even addressed the issue of
daytime and Saturday morning television . . . an area of programming where
minority suppliers have experienced total non-participation.
In our view, we are due equitable participation in the television business.
Hopefully, this docuxqent will further enlighten our community of concern, and
encourage Black leadership to broaden their issue base.
PAGENO="0780"
778
Mr. WIRTH. Thank you, Mr. Ochoa.
Ms. Sanchez.
STATEMENT OF DOLORES SANCHEZ
Ms. SANCHEZ. Good morning. I think it is still morning, Mr.
Chairman, Congressman Waxman and Congressman Leland. I
want to thank you for the opportunity to address you this morning.
I would like to offer my testimony for the record, but with your
permission, I would like to digress a few moments from it.
Mr. WIRTH. We will include your testimony in full in the record.
Ms. SANCHEZ. Thank you.
Some observations that I have seen this morning. One of the
things is that if you will turn and look at the audience, you will see
the depth of the interest that this industry holds not only for
blacks, minorities, but especially for Hispanics. I am afraid the lim-
ousines are gone and so are the heads of the studios, perhaps. I be-
lieve some of the network representatives may still be here. They
were at the time that I sat down.
We have been ignored. We are a people who really settled this
country, first on the scene and, yet, we remain an absent kind of
population as far as the electronic media in this Nation is con-
cerned.
I can't see where network television, the networks, have any
right to stand up and say that we are worried about minorities and
Hispanics-I have never felt so wanted, considering the fact that
there are few, if any, Hispanics on television today both by the net-
works and by the independent producers, since they are notorious
for ignoring our needs, our wants and even our presence. But I feel
that of all the communities, because we have so little media, so
little involvement in media, we need the opportunity that Con-
gressman Waxman's bill H.R. 2250 allows us and that is an oppor-
tunity-we look at this bill as an opportunity, as a moratorium, in
which to catch up with the issues, to really see how the intentions
of the studios and the networks will be carried out in the next 5
years.
We are a growing population. We are not taking a boat any-
where or a train. We intend to stay here. Our population is young.
They will, therefore, be in the next 10 years many of the decision-
makers in public policy, hopefully, in the Congress and in the
Senate and, again, in other avenues of life, in daily life.
We do belong in the mainstream. We are part of the main-
stream, whether people like to admit it or not and, therefore, I
would like to urge you to continue with H.R. 2250 at the risk of
perpetuating a stereotype and that is that Hispanics are, No. 1, ill
prepared, disorganized, and not always together.
I believe that David and I share the same concerns, but we look
at it from two different areas. I have spent now, as the publisher of
the only all-Hispanic-owned chain of community newspapers in the
Nation, which has a circulation of 44,000-have spent years trying
to influence how the media, how the people who advertise in the
media and who support it and give it the resources it needs to pro-
vide programing, newspapers, magazines, how they interpret the
wants or the needs of Hispanics, and that is that Hispanics view
PAGENO="0781"
779
only Spanish television; therefore, a commercial thrown on a Span-
ish language TV will suffice. It will reach and service that commu-
nity. That is not true.
The majority of us are English speaking. We have been here for
500 years. We are not recent arrivals on the scene nor are we com-
posed of all gangs in a subculture of recently arrived aliens. We are
American to the core, starting from our Indian blood to our His-
panic blood and we share two cultures very proudly and hope to be
able to share this with a nation, which has really been kept igno-
rant of our existence
Mr. WIRTH. Thank you very much, Ms. Sanchez. We thank you
all.
Again, it is the procedure of the subcommittee to first ask if any
of the panelists have comments that they might like to make on
the comments made by other members of the panel.
Mr. Waz.
Mr. WAZ. I concur again completely on behalf of the members of
the Committee Against Network Monopoly with the viewpoints ex-
pressed by Mr. Ochoa and Ms. Sanchez concerning the need to
inform the broader public of the Hispanic contribution to Ameri-
can culture and to improve opportunities for Hispanics in media.
One thing that perplexes me in Mr. Ochoa's presentation is his
suggestion that somehow the minority community would have in-
creased leverage with the networks as compared with that they
hold with the independent production community currently.
In an article that Mr. Ochoa had in the Los Angles Times just a
couple of months ago, he used a phrase "equal programing opportu-
nity" to which the networks could be held. It is not a phrase that I
have encountered previously. I know the networks are held to a
level of public trusteeship as licensees. Their O&O's are held at
such a level of trusteeship. The networks, as such, of course, are
not regulated.
The particular concern I have is that there is some hope here
that the elimination of these rules by the FCC, given their current
attitude toward the public interest, is somehow going to be followed
with an aggressive assurance that licensees are going to provide
programing for the Hispanic community and create minority pro-
duction opportunities. I think there is a gross inconsistency there. I
don't see, in the proposed repeal of the financial interest rules and
in certain other deregulatory efforts by the Commission, anything
that is going to tend to enhance opportunities and portrayals of mi-
norities in broadcasting.
I think, if anything, it is the independent production community,
broadly defined-not just the MPAA members, not just the MTM's
and Embassy's of the world, but also the smaller production enti-
ties producing for local broadcast, for syndication, for new media-
those are going to be the places where I think the pressure points
are going to exist.
Again, it is the point Mr. Waxman raised earlier, decentraliza-
tion of power or decentralization of decisionmaking.
Mr. WIRTH. Mr. Thomopoulos.
Mr. THoMopouLos. Gentlemen, if I could just take a couple of
minutes because I found this morning's hearing to be informative,
to be illuminating and the different points of view are worthy of
PAGENO="0782"
780
discussion. I only take exception with one remark this morning on
the second panel that the gentlemen and ladies that were testify-
ing this morning may have been lying or not honest people. I be-
lieve the people up here who were testifying do portray honest
points of view and sincere points of view.
But with regard to the overall picture we are discussing here, it
would be foolhardy for me to sit here and say that there is not
room for improvement and I am talking specifically in the area of
minorities and in the area of programing for the minorities.
However, it would be foolhardy as well for me not to say here
and point out examples of positive steps that have been taken by
the networks, and I will only deal with ABC, over the years.
I believe that you gentlemen had a presentation recently by my
vice president in charge of children's programing, Mr. Squire Rush-
nell, who from 1972 to the current showed you what was being
done in children's programing in dealing with the minority issues,
in dealing not only with the black minority issues, but the Hispan-
ic issues, et cetera.
In the area of prime time, we were the network and that is the
past, but we should mention, that did "Roots," and "Roots, the
Next Generation."
Looking to the future, we are doing a 5-hour miniseries which
will be on next year, called "Mystic Warrior," that will deal with
the American Indian. It is the American Indian "Roots." As far as
performers on our network and the portrayal of performers in mi-
nority situations, staples of our network have been Ricardo Montal-
ban, Rita Moreno, Robert Guillaume.
Next year, we will have a medical show on "Trauma Center,"
Dorian Harewood will portray a surgeon. We had a medical show
on this year called "Ryan's Four," in which Albert Hall portrayed
an intern who was a very outstanding medical man.
In a show we had on this year called "High Performance," one of
the key members of that group was a black scientist, who was re-
sponsible for devising all the scientific paraphernalia used.
We had a show on this year called "Condo." "Condo" was-we
worked very closely with Nasotros. They were very pleased with
the show because it portrayed the Hispanic family as they felt it
should be.
Tonight starts a programing service that we are offering, Span-
ish language radio simulcast of two ABC programs on an experi-
mental basis in five markets. We are starting with that on a 3-
week period. If it is successful, we will extend that throughout the
country.
We are starting it in the markets that have heavy Hispanic pop-
ulations, New York, Los Angeles, Chicago, Miami, San Antonio.
There are many, many other examples that I can illustrate. I do
believe there is room for improvement; however, I think it is very
important that we do discuss what has been accomplished and
what is continuing to be accomplished.
Just bear with me a couple of more minutes.
One of our people in our programing department in dramatic de-
velopment is a gentlemen who is on the California Commission for
the Handicapped. Last year, we put on a show called "Gold
Monkey," and in that program we had a gentleman who was phys-
PAGENO="0783"
781
ically handicapped. He was in a wheelchair, but we did not play
him as a handicap. We played him as an able-bodied person. That
is the first time in network television that was done.
Next year, we are putting on Lou Ferrigno, who has a speech im-
pediment due to a hearing failure that he received as a child. We
are playing that as a hearing-impaired person so that we are not
making excuses that he isn't in everyday life.
There are numerous examples. Thank you for listening.
Mr. WIRTH. Thank you, sir. All of us commend you for those ef-
forts. I think it is important to have that on the record.
Mr. Ochoa.
Mr. OCHOA. Just a brief response to the comments made by Mr.
Waz. First of all, I am not here to defend the networks. They are
going to need someone much more adequate than I to explain away
Mr. T and Condo, which is an insult to Hispanics, as far as I am
concerned, but that is a matter of my opinion.
The more important thing is that the primary rationale for
having the ability to talk about leverage in terms of repeal of these
rules is that we simply don't have any kind of leverage with the
studios. But in the major marketplaces each of the networks has
made a commitment to urban programing and we are urban.
Blacks and browns are urban in this country and if we don't get
what we want, then we will go elsewhere to get it. It could be
cable. It could be an independent TV station, but the reason that
the NAACP and Ben Hooks has been able to sign agreements with
some of the studios in terms of employment. That is a strategy that
makes commonsense to us. It is based on good faith and the net-
works know it.
Mr. WIRTH. Ms. Sanchez.
Ms. SANCHEZ. I don't know if-do you think that is why they put
us at the end of the table, David, because of argument?
Well, I must say I am very pleased to hear all these fantastic
plans that are now on the planning boards for Hispanics and other
minorities. You can imagine how I feel about a woman and a mi-
nority, Hispanic, even worse-if you give me a microphone, I won't
ever let go of it.
I am sensing what is really true and that is the fact that the net-
works and the producers have finally come to the realization that
they must address the needs of different segments of the popula-
tion. Now, they seem to be doing quite well with the rules in place
as they are. I can't really see, David, and honorable panel, where
they intend to change their plans unless there is a change in the
way things are done.
That is to say, if the regulations on syndication and financial in-
terest are changed, it may bode ill for these marvelous plans that
all these lovely people have in store for the television audience. I
don't see where it would hurt to wait 5 years. It can be a useful
time to judge these organizations by their actions. We will then
have a historical track record. The last one is abysmal and I don't
think they want to be held to it. So, we will give them an opportu-
nity now to show that they have come to a point of enlightened
self-interest by really retaining the FCC's rules.
Thank you.
32-540 O-84----50
PAGENO="0784"
782
Mr. WIRTH. In the few minutes remaining, let me see if I can get
one issue that was raised at the first panel more clearly on the
record.
Addressing myself to Mr. Price and Mr. Thomopoulos, I have
read the data on how shows get on the networks and how programs
are financed. It seems to me that the data clearly indicated that
the networks make a good deal of money on its shows. Over a suc-
cessful 5-year run, a network could typically make $300 million in
network advertising revenues.
If over this 5-year period, 110 programs were produced at an av-
erage cost of $500,000 an episode, that would bring total network
production expenses to $55 million. That is against then $300 mil-
lion in revenue.
Perhaps, Mr. Price, given the experience of MTM, you could ex-
plain to us and for the record the financial arrangements for a hit
show, say, such as "Hill Street Blues."
Mr. PRICE. I am not quite sure what you mean by financial ar-
rangements. If you want to know the structure of how a deal is put
together starting from a concept, I can answer that.
A production company, such as MTM, comes into a network, pre-
sents them with an idea. Let's assume for the purposes of this con-
versation that the network likes the idea and they say, OK, let's go
develop it and write a script. At that point the network puts up the
money for the script.
One aside: MTM, and I think this is true of almost all the compa-
nies in town-MTM usually works with writers or producers that
they have under contract. We have writers and producers under
contract to whom we pay yearly guarantees.
Sometimes we get very lucky and they get a show on the air.
Sometimes we don't get lucky and that person has cost us x dollars
and then they go away at the end of whatever the term is. So, that
is a total loss to us.
Anyway, let's go back. Let's assume the network likes the idea.
They pay for the writing of the script. If the script is not done to
their satisfaction at that point, yes, the network is exposed to what-
ever the price of that script is. But if they like the script and we go
forward and make a pilot, they pay for the financing of the pilot.
In MTM's history, we have never brought a pilot in for the li-
cense fee. We have always deficited pilots. I think we deficit every-
thing.
If the show fails,. if the pilot fails, the network has the right to
play it twice on its air. We have been compensated, so they keep
the advertising revenue.
In most cases the network is able to put that pilot on the air,
that broken pilot on the air and make most, if not all, of its invest-
ment in that pilot back. MTM is at loss whatever its deficit was on
that pilot, plus probably the remainder of the salary for that indi-
vidual who created the idea for the rest of the year because the
making of a pilot is a rather long term process and it is very un-
usual for a creative artist to get more than one pilot off the ground
in a season.
Mr. WIRTH. What does it cost you to produce each weekly seg-
ment of "Hill Street Blues"? Do you know?
PAGENO="0785"
783
Mr. PRICE. In this season, the 1982-83 season, it cost us $865,000
to produce the segments.
Mr. WIRTH. What is the license fee?
Mr. PRICE. The license fee is $800,000. So, we lost $65,000 a show.
The rerun pattern that we have on "Hill Street" with NBC--
Mr. WIRTH. How many segments will there be in a year?
Mr. PRICE. There were 22 originals and there will be 26 repeats.
Mr. WIRTH. So what you will have lost in the first year of "Hill
Street Blues" is a little over a million dollars. Is that right?
Mr. PRICE. We anticipate at the end of the run of "Hill Street,"
at the end of a hundred episodes, that MTM will have deficited
about $6 million.
Mr. WIRTH. About $6 million. OK. Then on the other side, how
much do the networks sell that for?
Mr. PRICE. Our information from talking to advertising agencies
in town a couple of weeks ago was that the average price, between
the high and the low, the rate for a 30 second spot varies during
the time of the year, but the average spot for "Hill Street Blues" is
around $125,000 a spot, between the high and the low. Now, re-
member something, in the reruns, we sell the reruns to NBC for
the actual out-of-pocket to MTM. We don't make a profit on the
rerun. The network makes a great deal of profit.
Mr. WIRTH. Let me stay with the first run. How much then, do
they make on each episode?
Mr. PRICE. There are 12 30-second spots in a 1-hour program.
They gross up to $1½ million.
Mr. WIRTH. The license fee for that--
Mr. PRICE. You deduct the license fee--
Mr. WIRTH. So, they are making on the first run of the pro-
gram--
Mr. PRICE, After their expenses, their program profit is about
$250,000 an episode on "Hill Street."
Mr. WIRTH. Then, when you get to the reruns, what happens?
Mr. PRICE. I can't remember. I think the actual out-of-pocket on
"Hill Street" was around $90,000, if I remember correctly, per epi-
sode and it worked out when we did the math for the FCC hear-
ings, it worked out that the networks made $550,000 profit, pro-
gram profit, per rerun of each "Hill Street Blues" show.
According to our figures, they wind up with a profit at the end of
the 1982-83 season of about $20 million.
Mr. WIRTH. On "Hill Street"?
Mr. PRICE. On "Hill Street."
Mr. WIRTH. And during that time, what will MTM's----
Mr. PRICE. Slightly in excess of a million.
Mr. WIRTH. You will have made that?
Mr. PRICE. I have lost that.
Mr. WIRTR. You will have lost that? You will have lost the $1.4
we talked about earlier. The networks will have made $20 million.
Is that correct?
Mr. PRICE. That is correct. That is why I say they do share in the
profits-they do get the profit of a hit show.
Mr. WIRTH. Earlier, the suggestion was--
Mr. PRICE. Let me say one thing. In one sense, "Hill Street" is a
loaded example because it is a hit show. There is also the other
PAGENO="0786"
784
side. The industry, during one of the strikes, did some homework
on the number of shows that get into syndication. About 10 percent
of the shows that get onto the network get into syndication and not
every show that gets onto the network makes that "Laverne and
Shirley" kind of profit. Those are the aberrations.
We did the "Lou Grant" show, where at the end of the produc-
tion of the "Lou Grant" show, when CBS cancelled the show, we
were in deficit about $6 million. Right now, we can't sell it and if
we do sell it, we are going to be very lucky if we get the residual
back out of it.
Mr. WIRTH. We are discussing the aberration because "Hill
Street Blues" is a hit. There is an enormous amount of money that
is being made on that. But there are also failures. They have the
right to run them twice and I assume they sell advertising revenue
for those, right?
Mr. PRICE. Of course they do.
Mr. WIRTH. So, do they break even on shows that never make it
into syndication?
Mr. PRICE. I couldn't answer that, but my hunch is that if they
don't break even, they come so close to it as to be meaningless.
Mr. WIRTH. Let's turn the successful shows. The networks appear
to be very anxious to share the profits of MTM-the producer-on
the syndication of "Hill Street Blues." Correct?
Mr. PRICE. Correct.
Mr. WIRTH. They want to share those profits. Why shouldn't you
then, going back to an issue that was raised this morning, be al-
lowed in a reciprocal sense to obtain a share of the network's reve-
nue?
Mr. PRICE. I would make that deal with NBC anytime they want
to sit down and make that deal. I would be more than happy to
create a proportionate sharing of their advertising revenue. I have
a feeling Mr. Thomopoulos would get very upset at that suggestion.
Mr. WIRTH. That was going to be my next question to Mr. Tho-
mopoulos. What is wrong with the logic of that option that we just
outlined? What happens with a hit show, the cost of that, what the
revenues are, and the sharing of the producer's revenues versus
the sharing of the network's revenues?
Mr. THoMopouLos. I would like to put it in a little sense of per-
spective with the example "Hill Street," which is an aberration be-
cause it is a hit show and we know what the failure rate on all
three networks has been over the last couple of years. The cost of
doing business is extraordinary.
We had a show on the air called "Soap," which was a commer-
cial success. It was on for 4 years and it lost $3 ½ to $4 million a
year for the network. That show is an enormous success in syndica-
tion and has made an enormous amount of money for the syndica-
tor.
Mr. WIRTH. Let me go back and understand this. "Soap" is a suc-
cess. "Hill Street Blues" is also a success. There was a great deal of
money that was made by NBC on one hit. How with "Soap" can
you lose? How does that work?
Mr. THoMoPouLos. Because the advertisers were afraid of the
program.
Mr. WIRTH. They didn't advertise?
PAGENO="0787"
785
Mr. THOMOP0ULOS. They didn't advertise. We kept it on the ~ir
because we thought it was a quality program, a diverse program
with very good comedy, one of the best comedy writers in television
in Susan Harris and we were dedicated to keep it on the air. But at
the same point in time, I would like to just put some sense of per-
spective into this in the sense that MGM, UA, in its 10-K in 1982.
It said in general that properties are developed at the request of
the network and the network license fees cover substantially all
the cost of development and production of the pilots and resulting
series.
In their annual report in 1981, they said television has the poten-
tial of being a very rewarding and profitable business. The cost of
production is essentially assumed by the networks. Television can
produce a high return on investment with a modest amount of
funds at risk.
Lorimar in its prospectus in 1981 says that the license fee is a
flat sum payment by which Lorimar generally attempts to cover its
production costs and overhead.
Mr. WIRTH. Let me go back to the question, if I might. I under-
stand that there are risks involved for you all and there is risk in-
volved for MTM or the independents. That continually gets harped
on.
I think that there is noting wrong with the networks showing
their profits on the successes with the producers.
Mr. THOMOPOULOS. Can I just interject there for a moment, if I
may? The risks that are portended by the studios and I am not
doubting Mr. Price. We haven't done business. We have one pilot
and we are trying very hard to do business together over the last
ten years, but the risk-I question the risk. I think there are situa-
tions where studios do deficit to a certain amount and I think there
are situations, many situations, where studios do not deficit. They
are not taking risks and I believe that there are situations wherein
their deficit figures are overhead, administration, which cover the
operation of their entire studio, not that one specific series only.
Mr. WIRTH. But that is part of their risk. Let me go back again
to the up side. That when you do have a hit, doesn't it make sense
that the producers gets a piece of the profits? Isn't that consistent
since they share in the losses?
Mr. THoMoPouLos. Well, then you must look at the other side of
the question. Is there a request on the part of the producers to
share in the negative side of our business as well? What is their
position where shows fail and where we lose money on shows? Do
they want to share in the risk and give us money back?
Mr. WIRTH. Let me ask Mr. Price to respond to that question.
Mr. THOMOPOULOS. There are two sides to that question.
Mr. WIRTH. How would you respond to that, Mr. Price?
Mr. PRICE. Someone once told me, and I don't know if it is true
or not, but I have a feeling it is, that in radio I admit that the dol-
lars we are talking about are slightly different, that in radio shows
were sold to advertisers or networks, depending on the case at min-
imum amounts of money and that the packager of the radio show
was then rewarded to an extra degree based on the success of that
show.
PAGENO="0788"
786
If the networks wanted to work out a formula where there was
some kind of equalizing of the jeopardy involved, I personally, on
behalf of MTM, would take that deal.
I want to go back to something that Mr. Thomopoulos said when
he read the prospectuses--
Mr. WIRTH. From my perspective, I think it is a lousy deal. I am
concerned that we should be doing everything we can to encourag-
ing more MTM's and more Diane Asselins to produce innovative
shows.
Mr. PRICE. I understand, Congressman, but you could work out a
situation-you are not starting from zero. You are starting from a
point where there is an equity in the deal, the equity being that
the supplier of programing is being brought home. There is no
doubt that some suppliers in town, and have from time-to-time, and
do make money on the first run of a network show. That is a fact.
Talking of Mr. Thomopoulos' reading of the prospectuses, MTM
is private,, so we don't have to tell anybody how well we are doing
or how well we are not doing. Companies that are public, especial-
ly, for example, Lorimar, who just went public, have to present the
best case possible in their prospectuses as to their economic viabili-
ty. Networks do the same thing. On the one hand, all three net-
works are crying about how they are being hurt by the onslaught
of pay television, and by the increase of effectiveness of the inde-
pendent television stations, and the high cost of production, and
then they turn around and tell you in their prospectuses or in their
statements to the Security Analysts Commission how well they are
doing and how wonderful the broadcast business is.
I think that is a trait of all public companies, both production
companies and networks.
Mr. WIRTH. Let me just close this by saying this involves another
part of our jurisdiction-the Securities and Exchange Commission.
We are looking at great length at book, as it is called in the trade.
However, let me just ask you if you have any other comments on
this. I am just trying to search through the logic of this, Mr. Tho-
mopoulos. We are running out of time, and I have taken much
more than my share.
Let me ask Mr. Waxman and Mr. Leland if they have further
questions of the panel.
Mr. WAXMAN. Just a few very quick questions.
Mr. Thomopoulos, I assume that "Soap" is an unusual case. It
isn't often you run a commercially successful program and lose
money.
Mr. THOMOPOULOS. No, as I stated, sir, yes, it is unusual.
Mr. WAXMAN. How about the programs that do not succeed com-
mercially? You put up the money to underwrite a program and it
doesn't do well. Does the network lose money on that or does the
network still come out even?
Mr. THoMopouLos. In certain instances we do lose money.
Mr. WAXMAN. Under all circumstances do you lose. money if a
program is not successful?
Mr. THoMopouLos. I would not say in all circumstances, no, but
in most instances we do.
Mr. WAXMAN. In most instances you lose money. I was interested
to note that NBC is bringing a show that failed back on to the air.
PAGENO="0789"
787
They did it a couple of years ago. It was a police show, 1979, "Eis-
chied" or something like that. It wasn't a success. They purchased
the program and now they can bring it back on. People can think
it is a fresh new show and they can sell commercial advertising for
all the time that would be available for that purpose and then they
can recoup more money out of a program that otherwise did not
succeed.
Mr. THOMOPOULOS. I don't know the workings of that deal, but I
would assume that if it were on in 1975, they would have had to
renegotiate for the rights, because I would assume that their li-
cense period was concluded.
Mr. WAXMAN. 1979.
Mr. THOMOPOULOS. That is 4 years ago. I assume their rights to
that-they must have gone back to the producer and renegotiated
a new deal and paid a license fee for it. So, I don't know what the
financial arrangements are.
Mr. WAXMAN. We hear from some of the proponents of keeping
the rules that the networks don't lose all that much money. They
are not taking that great a risk because they still sell advertising
to recoup the investment that they made, even if a show is not suc-
cesssful. The independent producers tell us that their biggest incen-
tive is to hope they have a success because then they can make-
not only become whole, but realize the potential profit that drives
them to continue in this business. Do you disagree with that?
Mr. THoMopouLos. Well, I think that there is a problem from the
networks' standpoint, and I believe these figures have been made
available to you-that in a recent 5-year period net return on reve-
nues of the three networks went from 16 percent down to 8 per-
cent.
With regard to the syndication market, I think it is an accepted
fact in the business and we can argue the merits of both sides with
regard to profitability on the network run or deficit on the network
run, that a successful showing in syndication is a bonanza for the
producers and I think you can look at the various shows, whether
they be "Happy Days," "Laverne and Shirley," "Three's Compa-
ny"-I am referring to ABC shows-"Hart to Hart," et cetera,
"Love Boat," and go through the schedule are enormous financial
bonanzas to the producers.
But there is one point that I think we did not mention this morn-
ing that is worth mentioning and that is the question of relief. Pro-
ducers and studios fail to mention that after they negotiate a li-
cense fee with the networks at the end of each year, they come into
the networks and say we couldn't make enough money. We had too
many additional costs. Would you please cover those costs for us?
Handle those additional costs for us? Cover our deficits? And I
would say in most instances-and I can only speak for ABC-we
have always been equitable and fair with the producers in paying
them moneys that they have said they have lost or portions of
those moneys which they claim they have lost.
Even this year, ironically enough, we set two shows on our sched-
ule. We set a license fee. We announced the schedule and before
the shows had gone into production, the producers had come back
to us and said we can't produce those shows for the money just
PAGENO="0790"
788
agreed to. We haven't started producing them yet, but we can't
produce them for the money. So, give us more money.
So, I think the question of relief is a very important question for
the subcommittee to look into. I think it is an area that would be
illuminating and put some further information into the financial
picture.
Mr. WAXMAN. One of the concerns is over the independent televi-
sion stations ability to get reruns and you mentioned ABC supports
a Justice Department intervention in some way, a regulation in
some way that would prevent a disadvantage to the independent
television stations. Are you aware of the fact that CBS would not
support that position?
Mr. THOMOPOULOS. Well, I have heard that, but I am only here
speaking for ABC. In addition to which I will say that the prime-
time access rule, which no one is asking to be changed, effectively
prevents the network from selling those programs in the Top 50
markets to any network affiliates. So, in effect, with the Justice
Department's--
Mr. WAXMAN. The fear is not that the networks will sell it to
their affiliates or not sell it to their affiliates. The question is
whether they will prevent the sale to the independent stations that
are competing.
Mr. THoMoPouLos. In the top 50 markets the only logical custom-
er is the independents. If you are prevented from selling to your
affiliates, then where-as I said in my opening remarks-but that
is one of the time periods that is most profitable.
Mr. WAXMAN. Evidently, the independent television stations are
not assured about their fears when they have come before us to ex-
press their doubts that they are going to be in the same position
they are in now.
Mr. THOMOPOULOS. We said in our statement a narrow based rule
governing that would be more than acceptable to us.
Mr. WAXMAN. I appreciate ABC's position. I just point out that
that is not CBS's. I don't know where NBC stands on it.
Mr. Ochoa, just one last point with you. You talk about your dis-
appointment with what television production people have done in
terms of Hispanic community. Are you proud of what the networks
have done? After all, I don't think you can tell us a single program
they produced prior to the rules when they had complete control
over TV programing, which you would now want them to return to
have, and I don't know what you can tell us in terms of what they
have done today, even with these rules, whether they are still able
to go out and produce TV programing on their own.
Mr. OCHOA. You are right, Mr. Waxman. There is nothing that I
can recount in my experience at NBC or as an independent produc-
er that I could point with pride vis-a-vis Hispanic minority pro-
graming, let alone Hispanic programing, either from the idea stage
to the despicable employment pattern.
As a public licensee, however, I feel I have an opportunity with
some leverage and some equity. With the existing system I have
now, I have less leverage. That is all.
Mr. WAXMAN. You still have leverage. They still license each TV
station and you can challenge the license if you as a citizen feel
that they are not living up to their responsibilities. You still have
PAGENO="0791"
789
the leverage that you say would exist with the 20 percent of the
market being Hispanic and, therefore, having an influence. That
leverage is there whether we change the rules or not and, yet, we
see with the networks' ability, without any change in the rules to
respond to that leverage, that they are not responding to that le-
verage. Yet, your statement to us is that the single-and I almost
want to quote it-"largest single obstacle to the Hispanic communi-
ty on television are these rules." I can't understand how you make
that statement.
Mr. OCHOA. Let me respond this way. The status quo of the past
15 years has given us a dismal record in production as minority
proc~ucers. That is No. 1.
The existing rules do not provide the climate, the opportunity,
that we feel we should have in terms of getting our ideas read, let
alone produced. Our experience of independent producers, and
mine in particular, has been very difficult with the Big 8 independ-
ent companies of this country.
Mr. WAXMAN. Have you had more success directly with the net-
works?
Mr. OCHOA. Yes, we have. Substantially more. As a matter of
fact, of the minority producers, of the Hispanic minority producers
in this country who have won Emmy's, 90 percent of them have
won them for the O&O stations or PBS.
Mr. WAXMAN. So, you are saying that you have had more suc-
cess--
Mr. OCHOA. In some areas.
Mr. WAXMAN. Then why do you think it makes any difference?
You are in a position of an independent producer and if you are
successful now with the networks, you will continue to be success-
ful. Why do you want to change the rules? Why do you see that as
a--
Mr. OCHOA. The reason for the change is very clear. We are not
able, as my black colleague producers indicated today in an earlier
panel-we are not able to get our ideas read, considered or funded
by the existing structure that exists now in the industry. We
think-it is only a hunch-it is a calculated risk admittedly-we
think we are going to have a better opportunity if we can go direct-
ly to the networks--
Mr. WAXMAN. You can go directly to them now.
Mr. OCHOA. Well, they only have 2 hours a week of programing
now.
Mr. WAXMAN. Well, I don't see them filling those 2 hours of pro-
graming right now with the kinds of programs you think ought to
be on TV.
Mr. OCHOA. That is true, but at the moment they only have--
Mr. LELAND. Mr. Ochoa, you are not saying, though, that after
you roll the dice that, in fact, if we repeal the rules or the FCC
repeals the rules, that that is the save-all for minorities.
Mr. OCHOA. No way. Not at all. Especially if you look at, as Mr.
Waxman pointed out, on the basis of experience. There is very
little that I can show--
Mr. LELAND. That is the point I raised earlier.
Mr. WAXMAN. Do you stand by your statement that these rules
are the single largest obstacle for minorities on television?
PAGENO="0792"
790
Mr. OCHOA. I reaffirm it, Mr. Waxman, at this point, that that is
the single largest obstacle to me and my colleagues for getting our
ideas read and considered and on prime-time television and syndi-
cation.
Mr. PRICE. The ones that makes the decisions on those rules are
the guys you are bringing your ideas to, the networks. You bring
your ideas to a network executive for approval. That approval auto-
matically translates itself into a pilot and if it is good, it gets on
the air. I have a feeling, Mr. Ochoa, without being insulting to you
that maybe the networks don't like your idea, which happens to an
MTM also. We bring ideas that do not go--
Mr. OCHOA. It has happened to all of us.
Mr. LELAND. Mr. Chairman, if I might have a little bit of time.
Mr. WIRTH. I have to leave, so I would like to leave this in the
hands of Mr. Waxman.
Mr. WAXMAN. If you will yield to me, Mr. Thomopoulos, will
ABC go along with at least that part of our legislation and then we
will prime-time access rule?
Mr. THOMOPOULOS. I believe that we have stated that we have
had no real desire to change the prime time access rule.
Mr. WAXMAN. You would support legislation?
Mr. THoMopouLos. I would support the fact that we are not
wanting to change the prime time access rule.
Mr. WIRTH. You might like to clarify that statement in huddling
with these other individuals on what is happening with the prime
time access rule. We will leave the record open so that the question
of the history of where various networks were on the prime time
access rule can be clearly on the record and not misunderstood by
anybody.
Mr. WAXMAN. Mr. Leland.
Mr. LELAND. Thank you, Mr. Chairman.
Mr. Thomopoulos, you have heard Mr. Ochoa and I can appreci-
ate where he is coming from because he has benefited from the re-
lationship that he has developed with the networks, but I would
suggest that he is probably speaking of isolated incidents of circum-
stance in the industry and that, indeed, there are not that many
people like him who have benefited from that kind of relationship.
I am really concerned, if I can whip a dying horse to death-I am
really concerned about this issue that minorities have expressed
today and that I expressed as a minority, in dealing with not only
ownership and how that ownership benefits, but also the imagery
and the participation of minorities in your programing, ABC, NBC,
CBS, and ultimately those programs that are bought by independ-
ent television and networks, et cetera and also cable and all the
rest of it.
You have programs like "Dynasty," "Happy Days," or had, "Fall
Guy," "Matt Houston," all those programs. No minorities featured
in the series. No minorities participating. Yet, they are very much
hit programs and I would suggest probably watched by many,
many minorities. Why is it that you have not put blacks and His-
panics and other minorities in a program like "Dynasty," for in-
stance? It is an incredible hit.
My best friend is a guy who owns night clubs, in Houston, Tex.
He owns about 17 of them, a very successful business person. He
PAGENO="0793"
791
watches religiously "Dynasty." He came to me and he said, man,
why the hell are there not any black people in "Dynasty," because
they do exist wherever it is that "Dynasty" is played. Why don't
you have black people in shows like that?
Mr. THOMOPOULOS. First of all, Mr. Leland, I don't think you are
whipping a dead horse, because I think it is a very important issue
and I think your question is--
Mr. LELAND. I said "dying horse."
Mr. THoMopouLos. Dying ~iorse, OK. Each program has to be
looked at as a separate entity and to sa7 to you why there is not a
black person or minority on "Dynasty,' I cannot give you a legiti-
mate answer. I can only tell you that--
Mr. LELAND. Is "Dynasty" still yours?
Mr. THoMoPouLos. Yes, it is.
Mr. LELAND. Can you go back and tell those folks to put some
black people in?
Mr. THoMopouLos. We can certainly look at it.
Mr. LELAND. Put a Hispanic in "Dynasty."
Mr. THOMOPOULOS. We can certainly look at it.
Mr. LELAND. One or two or three or five or six.
Mr. THoMopouLos. We can certainly look at that and at the same
point of time we could look at other shows that have been success-
ful that I mentioned and that you mentioned that have minorities
and some that don't. But the most important point is that I believe,
and I can speak for the people at ABC, who are sensitive and
aware of this, and as I stated earlier, there is room for improve-
ment. But I think the important thing is that we are on that road.
There is legitimate movement for that arena of representing the
minorities. It is not a perfect world and it is not a perfect system.
Mr. LELAND. I know, Mr. Thomopoulos. But we as minorities are
very frustrated in this country. We are at the bottom rung of the
ladder. Everybody is stepping on us. Nobody is giving us a shot and
you are telling us, once again, just wait, just continue to wait. I
mean, we are making progress, step by step.
Mr. THOMOPOULOS. What I am saying to you is look at what is
happening and the facts speak for themselves.
Mr. LELAND. But we are.
Mr. THoMoPouLos. But there is improvement.
Mr. LELAND. Wait a minute. A lot of white actors got jobs in
"Roots" on ABC. Right?
Mr. THOMOPOULOS. Yes.
Mr. LELAND. A lot of white actors. A black show, sure. A lot of
white actors watched "Roots" and learned a lot.
Mr. THOMOPOULOS. That is correct.
Mr. LELAND. Then you come back and put-I don't how much-
$40 million-into "Winds of War." How many black people were in
"Winds of War"?
Mr. THoMorouLos. With due respect, sir, we--
Mr. LELAND. How many blacks?
Mr. THoMoPouLos. None, but we did not write "Winds of War."
Mr. LELAND. I understand that, but--
Mr. THoMopouLos. That was written by Mr. Wouk.
Mr. LELAND. But wait now, wait, wait, wait, wait, wait. Did you
have any rights whatsoever?
PAGENO="0794"
792
Mr. THoMopouLos. To change a character?
Mr. LELAND. Yes.
Mr. THOMOPOULOS. No, not to change his characters. He wrote
the book and he wrote the scripts.
Mr. LELAND. Could you not have placed black people in some of
those roles that they were playing in that--
Mr. THOMOPOULOS. I would doubt it, sir.
Mr. LELAND. You would doubt it or are you saying--
Mr. THOMOPOULOS. I would say I would doubt it. I did not-- -
Mr. LELAND. You had no right to review and no right to say that
a black person ought to be here and a Hispanic ought to be here?
Mr. THOMOPOULOS. Yes, we do.
Mr. LELAND. You can't say to put a streetsweeper somewhere
when the movie took place in America or put what is his name-
what is the guy's name-a black guy who was the gunner at Pearl
Harbor, who was the hero. I can't think of his name right now. I
am sorry. My history is failing me.
Mr. THOMOPOULOS. When we did the presentation of "Pearl," we
had black performers in "Pearl" as well as Asian performers.
With regard to minority performances, we do make a conscious
effort and I think the facts do speak-they are not where they
should be, but they are beginning--
Mr. LELAND. But a lot of your statistics are in comedic roles. I
mean, you know, that is-I understand that you are making an
effort. My point is--
Mr. THOMOPOULOS. There is nothing wrong with the comedic role
of Robert Guillaume in "Benson" who became a terrific role model
for the black minority community because what he did is he start-
ed off as a butler. He moved to the Governor's mansion and he
then became the budget director and one of the most influential
men in the Governor's committee.
Mr. LELAND. Thank God for him.
Mr. THOMOPOULOS. That is a direct result of being conscious and
aware of how to portray minorities on television.
Mr. LELAND. I understand that, but what is the strain to do a lot
more of that as opposed to evolving this in a very slow, developing
process? I hear Mrs. Sanchez over here and she was almost brought
to tears and she almost brought me to tears. I heard David Ochoa.
I heard that panel of black people. I am really concerned that noth-
ing is really happening fast enough to satisfy our future for that
matter in terms of imagery of black people.
In ABC are there blacks and Hispanics making decisions in
terms of programing and that kind of thing to say, to rule on poli-
cies that you develop as to whether or not there would be a black
or a Hispanic or other ethnic minority person to fill a role?
Mr. THoMopouLos. We have a very active EEO and affirmative
action plan at ABC. There are minorities. There are strong women
and minorities in our programing department and I think what we
are discussing here, Congressman, is the fact of the speed in which
you are requesting this to be accomplished. I just, after 5 years, got
a Greek on one of our shows, so I am very pleased with that.
Mr. LELAND. Well, that is fantastic, but I-and I would just like
to say, Mr. Chairman, that I can appreciate your statements, all of
them. I am just really concerned that if you don't move fast
PAGENO="0795"
793
enough, something chaotic is going to happen, not in the industry,
but in America, because, you know, you have the responsibility of
challenging the future where blacks and Hispanics and other
people are concerned If we continue on this road, financial inter
est, by the way, or not, if the rules are appealed or not, we are
going to still be living here Mr Ochoa, Ms Sanchez and I are all
going to be here suffering the same kinds of atrocities that racism
has imposed on us
So, all we are asking and begging, I guess, of both the independ
ent producers and the networks is give us a break Do some real
affirmative action and let there be more Hispanics and blacks and
other people on television doing dramatic and romantic roles, in
place of, if you will, some of these white shows and I think that
given a chance, let them run 22 weeks or however long a season is,
just giving them a chance to show their wares
Mr WAXMAN Will the gentleman yield?
Mr. LELAND. Be glad to yield.
Mr WAXMAN One final comment A network executive who can
decide to put more black characters in a program can also decide
not to put them in I would think the past history was more likely
the latter than the former Whether a network executive is going
to require more violence on TV programs or more sexually explicit
roles will depend on what the networks see their role to be and
their role is to attract a mass audience and by nature, even if that
network programing executive is a minority person who is sensi
tive, I think that just the fact that there are only three outlets, the
creativity on television is going to decrease because the networks
are not interested in the quality of programing and appealing to
different audiences They are trying to appeal to the sameness in
all audiences
For that reason, Mr Chairman, I would just conclude that I
don't want three people, whoever they may be, deciding all the pro-
graming on television
Mr WIETH We will have our host have the last word
Congressman Waxman, thank you very much for hosting us in
Los Angeles Congressman Leland, thank you very much for being
with us and for your help with the panel Thank you very much
The committee will stand adjourned
[Whereupon, at 1230 p m, the subcommittee was adjourned]
[The following letter was received for the record]
PAGENO="0796"
794
ABC Entertainment 2040 Avenue of the Stars Century City, CA 90067 Telephone 213 557-6549
Anthony D. Thomopoulos
President
June 23, 1983
Honorable Timothy E. Wirth
Chairman, Subcommittee on
Telecommunications, Consumer
Protection, and Finance
Committee on Energy and Commerce
House of Representatives
Washington, D.C., 20515
Dear Mr. Chairman:
At the June 1, 1983 hearing of the Subcommittee
on Telecommunications, Consumer Protection, and Finance
in Los Angeles, you requested that I provide additional
information on two points.
At Transcript pp. 187-90 you raised the question
of program suppliers sharing in revenues from hit programs.
Of course, suppliers already share in these revenues
through the license fees which networks pay. And such
fees do tend to rise for hit programs. Apparently, however,
you have in mind some form of percentage participation.
I believe the answer to your question is that the Government
should not attempt to dictate the financial terms of any
contractual relationships between networks and program suppliers.
The terms of network program supply arrangements should be
decided ma free negotiation between the parties, as they
are in program supply arrangements involving network competitors.
In supporting repeal of the FCC's Financial Interest
Rule, ABC seeks removal of a current barrier to such free
negotiation.
At Transcript p. 199 you asked for a further statement
regarding ABC's position on the FCC's Prime Time Access Rule.
As I indicated in my testimony, ABC does not seek repeal of
this Rule. In fact, ABC has advised its affiliates that it
will not seek repeal unless both ABC and the affiliates agree
upon some different utilization of the access time period.
Further, the FCC has no proceeding pending which looks toward
repeal, and, so far as we are aware, none is contemplated.
Under these circumstances, ABC does not support H.R. 2250 as
it pertains to the Prime Time Access Rule.
Please associate this letter with my testimony,
for the record.
Very truly yours,
U
ANTHONY D. THOMOPOULOS
PAGENO="0797"
FINANCIAL INTEREST AND SYNDICATION
RULES
MONDAY, AUGUST 1, 1983
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON TELECOMMUNICATIONS,
CONSUMER PROTECTION, AND FINANCE,
Washington, D.C.
The subcommittee met, pursuant to call, at 2:07 p.m., in room
2322, Rayburn House Office Building, Hon. Timothy E. Wirth
(chairman) presiding.
Mr. WIRTH. Good afternoon. Today the Subcommittee on Tele-
communications, Consumer Protection, and Finance holds further
hearings on H.R. 2250, and the immediate issue of the FCC's pro-
posal to repeal the financial interest and syndication rules.
The financial interest and syndication rules were adopted in the
early 1970's to address the problems posed by the dominance of the
three commercial television networks-ABC, CBS, and NBC.
At that time, the FCC outlined its reasons for implementing the
financial interest rules by declaring:
We propose to encourage and increase competitive forces-both creative and eco-
nomic-in television program production and procurement through limitations on
the capacity of network corporations to confine network schedules to programs in
which they have financial and proprietary interests.
I happen to believe that retention of these rules is still necessary
for three fundamental reasons: to protect the incentives of inde-
pendent producers to come forward and produce programming; to
assure greater diversity with respect to creative and editorial con-
trol of program content; and, to preserve the competitive vitality of
the Nation's independent television stations.
Congressman Henry Waxman, along with Congressman Moor-
head and I, introduced H.R. 2250 in order to strip the FCC of au-
thority for a 5-year period from repealing the financial interest,
syndication, and prime time access rules.
I note, with great displeasure, I may add, that the FCC will be
meeting this Thursday to take further action toward repeal of the
financial interest and syndication rules. I would also like to note,
and I do so with great pleasure, that there are over 120 cosponsors
of H.R. 2250 to date, and I applaud the efforts of Mr. Waxman in
bringing this issue so clearly and carefully to the attention of so
many of our colleagues in the House.
I have consistently stated that there are two fundamental -com-
munications policy objectives which must be addressed above all
(795)
PAGENO="0798"
796
others. The first. is to promote and encourage competition in the
marketplace.
The second is to provide the American public with the widest
possible diversity of programing sources. The financial interest and
syndications rules have accomplished these goals, and should be al-
lowed to continue to accomplish both goals.
We are all very aware of the contributions the networks have
made to American television. Network news and much network en-
tertainment have added significantly to the richness of our culture
and our lives overall.
But the dominance of the networks goes to the very heart of the
issue of diversity of information sources in a democratic society to
a fundamental first amendment value.
Encouraging a diversity of program suppliers; furthering diversi-
ty and competition among broadcast stations; and, promoting diver-
sity in the creative process are the goals underlying H.R. 2250 and
first amendment rights, as described initially in the Federalist
Papers. Assuring the public such diversity should be the focus of
these hearings this morning.
I ask unanimous consent to have a letter from Grant Tinker in-
cluded in the record at this point, the president of NBC.
[The letter referred to follows:]
PAGENO="0799"
797
NBC National Broadcasting Company, Inc Thirty Rockefeller Plaza
NewYork,NY 10020 2126644555
Grant A Tinker
Chairman of the Board
and Chief Executive Officer
July 26, 1983
The Honorable
Timothy E. Wirth
Chairman
Subcommittee on
Telecommunications, Consumer
Protection and Finance
U. S. House of Representatives
Washington, D. C. 20515
Dear Tim:
I have been informed that you have announced hearings
in Washington on }LR. 2250, a bill which would prohibit
the Federal Communications Commission for five years
from considering changing in any way several of its
network rules especially the Financial Interest and
Syndication Rules. Although the hearings were called on
about one week's notice, NBC does wish to appear and ~
we will be represented by our Vice Chairman, Irwin ~egelstein.
I do want to share with you and your colleagues some
thoughts of my own on one aspect of the subject; hopefully
they will be helpful. As you know, I have spent some
fifteen years in Hollywood as a producer and the last
two years as Chairman of NBC and have had the opportunity
to experience the networks' relationships with the
production community from both sides.
The reality is that the networks' share of the total
audience pool is inexorably shrinking. This will inevitably
impair our ability to pay for the steadily rising costs
of programs we buy from program producers. A significant
solution to this problem would be the ability to partici-
pate on a negotiated, risk-bearing basis in the after-
market profits from later syndication of programs shown
32-540 0-84--Si
PAGENO="0800"
798
r~c
The Honorable
Timothy E. Wirth
July 26, 1983
Page 2
on the network. The problem is inflamed by the fact
that the pay media, which are bidding against us for
creative talent, are not limited by government rule.
We believe that without repeal of the Financial Interest
and Syndication Rules, the networks, and the program
services they present, are at serious risk -- and that
is not just a network problem. It is a problem for the
audiences who wish to continue their free access to the
programs we present. And it is a problem for the con-
tinued success of those who supply the programs, who
do not want to lose the vigorous network marketplace
for programs which now exist.
I know that claims have been made that the repeal of
these rules will somehow increase the ability of the
networks to exercise "creative control" over those who
produce programs. As a person who has seen both sides
of the process, I can assure you that would not be the
case. The networks have every reason to want producers
to be creative - it is exactly for that creativity that
the networks pay such great sums of money. It would be
folly for networks to attempt to stifle the very creativity
for which they pay and on which their own success depends.
The fact is that elimination of these rules would enable
the networks to make direct investments in the creativity
of talented producers, writers and performers. By being
permitbed to share in their success, networks would
have a greater ability to finance their creativity. This
would be particularly helpful to the newer creative
talent for whom it would provide an additional source
of financing.
I sincerely believe that the intervention of the Coi~gress
into the exhaustive investigation of these matters
being conducted by the Commission would be unwise
and contrary to the public interest.
Sincerely,
Grant A. Tinker
PAGENO="0801"
799
Mr. WIRTH. The Chair recognizes the gentleman from California,
Mr. Waxman, for an opening statement.
Mr. WAXMAN. Thank you very much, Mr. Chairman, for holding
this hearing and for recognizing me to speak on the financial inter-
est and syndication rules. Today marks the fourth time our sub-
committee has focused all or part of a hearing on the rules.
For my part, I find it extraordinary that despite our extensive
deliberations, FCC Chairman Mark Fowler and others favoring
repeal have not answered the most fundamental question in this
debate. That is, what public interest considerations compel the FCC
to repeal the rules?
No answer has been given because none exists. The rulemaking
is inspired not by the public's interest, but by the networks' inter-
est.
Today's witnesses will focus on the implications of repeal not
only for the television industry, but for the vast American viewing
public. They will tell us that if we fail to preserve the rules, televi-
sion will get blander, more monotonous, and less inspired than
ever.
Their warnings about this threat to creativity is even more sig-
nificant in that even now the greatest single complaint against tel-
evision programming is "it is all the same.'
Since Chairman Fowler continues to give every indication he will
vote on the rules as soon as he finds a third commissioner support-
ing repeal, we have no choice but to act decisively to save competi-
tion and diversity in television.
A consensus has emerged that the FCC must be stopped. The bill
I introduced last year, H.R. 7347, did not have a single cosponsor.
But this year's bill, H.R. 2250, already boasts over 120 cosponsors,
including 10 of the 16 members of this subcommittee.
My bill enjoys overwhelming support because it strikes a middle
ground. It neither allows for immediate repeal, nor permanently
prohibits the FCC from taking action.
Instead, it sets a 5-year moratorium. This respite will provide
ample time to assess the needs of the television industry and give
the network's fledgling competitors an opportunity to survive.
Moreover, the bill's support reflects a growing awareness of the
significant diversity and competition the rules have brought to tele-
vision viewers. The dramatic rise in the number of independent tel-
evision stations across the Nation has brought alternative program-
ing choices to millions of Americans.
That rapid growth, from 73 stations in 1970 to over 190 today,
has increased the independents' viewing audience share from 10
percent to 17 percent.
Similarly, the number of truly independent program producers,
the people who actually supply prime time programing, has in-
creased by 26 percent.
The number of autonomous companies distributing programs to
local independent stations has increased by 51 percent.
Even the networks have impressive numbers, with their profits
increasing by 550 percent; and their percentage of industrywide
profits nearly doubling.
Indeed, the only declining statistics are in advertising costs. Ad-
vertising rates in television markets with strong independent tele-
PAGENO="0802"
800
vision stations are much lower than in those markets with weak or
no independents.
So why, with all those positive trends, should the FCC look to
repeal the rules?
Perhaps there are~two answers. First, the FCC is in the midst of
an irrational frenzy of deregulation.
Just as sharks at a feeding don't pause to look at their meal, the
FCC is not pausing to consider what it is deregulating.
Everything is fair game. I am just grateful the first amendment
is outside the Commission's power. Otherwise, I fear that Chair-
man Fowler would be telling us it too could be repealed because
the marketplace would provide the public with ample safeguards.
Second, the networks, who have profited handsomely with the
rules in place, believe they can do even better with fewer restric-
tions. They are probably right-by tightening the stranglehold they
already have on the industry, their profits will go even higher, and
their power and influence will reach new heights.
This is one reason public interest groups are virtually unanimous
in opposing repeal.
In reviewing this issue, I have found it especially instructive to
heed the warning given by Supreme Court Justice William 0.
Douglas. Shortly before he died, Douglas sadly noted that "looking
ahead, the days seem dark to me. Great wealth controls most of
our news outlets. * * * A Society of the dialog, as espoused by the
first amendment, will be increasingly difficult to stimulate."
Douglas' instincts and intellect told him that no matter how hon-
orable corporate conduct, we should not be lulled into thinking our
communications giants are benevolent despots.
Here, the networks are asking for the power to determine their
competitor's survival, on the premise that they can be trusted not
to harm those competitors. By repealing the rules, we are handing
the networks a loaded rifle, and we will be left hoping they don't
pull the trigger.
Instead of following that course, we should opt for the more sen-
sible guidelines Douglas set. Very simply, Douglas wrote that in
our search for truth, a "medley of voices is essential. That is why
the first amendment is our most precious inheritance. It gives
equal time to my opponents, as it gives to me."
Douglas' medley of voices is really a diversity of sources, and
that diversity is as fundamental to the freedoms of speech and
press as is government restraint. The key question becomes: How
diverse will our sources of information be?
Will it be sufficiently diverse to allow alternative programing
that may not cater to the lowest common denominator?
Will it be diverse enough to feature minorities in dramatic as
well as comedic roles?
Will it allow for something other than stereotypical portrayals of
women?
If just three network programers continue to be responsible for
these decisions, then we will have little diversity. Their yardstick
for success is imitation, not innovation.
The industry's tight concentration of power has bred sameness.
Just consider how many Tom Selleck carbons graced our television,.
sets this past season.
PAGENO="0803"
801
Safe, successful, and boring program formulas come back year
after year. Why? They bring in the ratings numbers and keep the
networks very profitable.
But network profits should not be the standard for our public
policy decisions. The rules have decentralized the industry and
changed its landscape.
Now local independent television stations can feature special pro-
gramming, as a Boston station did for "Black History Month," to
meet the needs of its community. Minority producers don't have to
settle for being network employees-they can start their own com-
panies and tailor their programs to their own themes, not those of
an advertising formula.
The networks don't need tailor-made rule changes to prosper.
Their profit record is the envy of most businesses.
Yet the independent and small television producers and stations
need the rules to survive and flourish.
Thank you very much, Mr. Chairman.
Mr. WIRTH. Are there further opening statements?
Mr. Markey.
Mr. MARKEY. Thank you, Mr. Chairman.
Mr. Chairman, this subcommittee has many bills under its juris-
diction. Today we consider our only bill which gets full page cover-
age in the style section of the Washington Post, brings Alex Haley
and Alan Alda to town, and has the wholehearted endorsement of
J. R. Ewing: H.R. 2250, the bill to preserve the financial interest
and syndication rules, as well as the prime time access rule.
The rules, in place since 1970, have had a significant impact on
the television industry. Since their imposition we have seen an im-
pressive increase in the number of independent television stations
and the audience they reach, as well as the development of a made-
for-syndication programming market.
As a result, the diversity of programming available to the public
on free TV has been expanded, while innovation and creativity in
the production community have been encouraged.
Yet this market, the industry, remains only nascently competi-
tive. The networks still control the gateway to 85 percent of the
Nation's television viewing audience.
By lifting these rules now, we would move regulation at a pace
faster than the growth of competition. Someday it may be time to
lift the rules-that day has not yet arrived.
I am distressed by some of the arguments which the opponents of
H.R. 2250 are raising. They contend that the future of free TV
rests with repeal of the rules. They warn that if we do not repeal
these rules, the networks will fall rapidly behind the new pay tech-
nologies. If this were the case, my position would be a very, very
different one.
Indeed, I would argue that the question which divides the two
sides in this debate is not: "Are you for or against free TV?" but
instead should be posed, "Where does the future of free TV lie?"
I believe that the future of free TV lies with the retention of the
rules. By encouraging a healthy and independent production com-
munity, we provide needed support to those who will be creating
the programs for the medium.
PAGENO="0804"
802
By encouraging the development of independent television sta-
tions and syndication networks, we secure the future of an impor-
tant outlet which brings these programs to millions of homes on
free TV.
The future of free TV lies with those who would bring such pro-
graming to our home sets, not with network executive who-in one
official's words-are made "uneasy" by this distribution.
The financial interest and syndication rules, and the prime time
access rule, have worked to serve the public and free TV over the
past decade. That is why I am a cosponsor of H.R. 2250, and why I
urge its passage.
Mr. WIRTH. Mr. Tauke.
Mr. TAUKE. Thank you, Mr. Chairman.
Mr. Chairman, members of the committee, I did not prepare an
opening statement, and I hesitate to sound a discordant note in
this happy harmony that I have heard since coming to the meeting
this afternoon, and I am not particularly anxious to get into a
debate at the moment about the substance of the measure before
us or the substance of the rules that the FCC has promulgated in
the past.
What bothers me, however, is the fact that I received a notice
today that we are going to have a markup on this legislation on
Wednesday morning.
If there is a rush to judgment, it seems to me it is a rush to judg-
ment not on the part of the Federal Communications Commission,
but a rush to judgment on the part of this subcommittee.
The FCC, we are told by the gentleman from California, is pro-
posing to repeal the financial interest and syndication rules. I
hadn't known that.
To the best of my knowledge, the FCC isn't scheduled to make a
decision until, ironically, Thursday of this week, and the best
rumor mills suggests that repeal is not going to be the order of the
day.
In any event, at that time the FCC will be merely making a pro-
posal. It is not going to be terminating or officially changing the
rules, simply putting something out there for those in the industry
and in the public to take a look at and to offer comments on.
The FCC, unlike this subcommittee, has held extensive hearings
on the issue. We asked the agency to make decisions about critical
issues in the broadcasting and communications field and yet it
seems when there is a major issue, one that is extremely complex,
that we want to jump into the fray and act before they have even
had a chance to make their recommendations.
We have not heard in this subcommittee, nor-the chairman
may correct me if I am wrong-I don't believe we are scheduled to
hear from the Justice Department, which has a major interest be-
cause of the antitrust implications; from the Commerce Depart-
ment, which has a major interest because of the communications
policies involved; from the FTC, which has spent a lot of time look-
ing at this issue; and from the FCC, itself.
We have not spent any time to date, and we have very little time
to do so before we had spent any time looking at the implications
of not just repeal or nonrepeal, but various other possibilities on
independent stations.
PAGENO="0805"
803
We haven't had any time to look at what the impact will be on
independent producers. We haven't had much ability to look at the
claims or counterclaims about the impact of changes in these rules
on diversity of programing.
It seems ironic to me that those who are condemning programing
on TV are those who want to maintain the status quo. We haven't
had any ability or time to look into the issue of pay TV versus free
TV.
I may well come down on the same side as the gentleman from
California on these issues. In fact, I would have to say to him right
now that certainly I have heard a lot more on his side of the ques-
tion than I have heard on the other side of the question, but it
seems to me that it is unfortunate that the subcommittee makes its
decision on the basis of a lot of visits from a lot of well-known lob-
byists, instead of making the decision on the basis of a carefully
compiled record.
So I hope that we take some time to study this issue carefully,
see what the FCC has to say about the question, before we rush in
and try to undo the work that they have begun without even knowS.
ing what kinds of conclusions or suggestions they might have to
offer.
In any event, Mr. .Chairman, I am glad you have called this hear-
ing today to give us a chance to begin to sink our teeth into the
issue. I hope that this won't be the last hearing we have on this
question because I think we have a lot to learn on an issue that is
one that is going to have very substantial impact on the future of
television and the future of broadcasting in this country.
Mr. Swirr. Will the gentleman yield?
Mr. TAUKE. I would be happy to yield.
Mr. Swivr. I think the gentleman makes a superb point in terms
of the process. This is a subcommittee that has developed over the
years, I think, a justifiable reputation for being a stickler for proc-
ess, for not wanting to function until it has full information on
which to base actions that it would take legislatively.
The surprise to me of having the markup scheduled for Wednes-
day seems to cut across both of those principles which this subcom-
mittee has fought very hard over a considerable amount of time to
establish as basic policy.
The gentleman mentioned in particular the depth of Commerce,
the Federal Trade Commission, arid the Department of Justice-
three agencies who have researched, studied, and reported on this
particular proposal.
They are not on today's hearing schedule and apparently we
have scheduled a markup before we will get to them. It just seems
to me that this is totally inconsistent with policies that have been
established soundly by this committee, policies I have defended,
and will continue to defend as a proper way to handle important
legislation.
I thank the gentleman for yielding.
Mr. WAXMAN. Would the gentleman yield to me?
Mr. TAUKE. Yes.
Mr. WAXMAN. I hope when the gentleman looks into this issue,
he will end up on our side. Our subcommittee has held two over-
PAGENO="0806"
804
sight hearings with the FCC and each time we raised with them
why they were pursuing changing the rules.
We have gotten no response that I consider adequate. This is the
kind of issue that we shouldn't let a regulatory agency decide for
the people of this country.
It seems to me we want to say to them, before you act precipi-
tously, let's stop and evaluate whether we need to change the
rules. This subcommittee is a deliberative body.
I think we have a reputation for acting as carefully as we should,
and it seems to me we have heard a great deal of testimony,
today's hearing will add more to the record.
If we move this legislation, we will be saying that, as elected
Representatives, this kind of decision ought to be made by Congress
after we hear from everyone involved as to why the rules ought to
be changed. But if we allow the FCC to move without explaining a
public interest purpose that would be served by repealing the rules,
then we will have put aside our responsibilities and let the Com-
mission act as if they were the Congress of the United States.
Mr. TAUKE. Reclaiming my time for just a moment, I think there
are two separate issues. The first question is, Does the FCC have
reason for acting?
I might just say, I really don't know. I know the gentleman has
raised this issue. I can't say that the answers from the FCC were
particularly forthcoming either.
However, I do know that this huge volume, there are two vol-
umes of a report that were an inquiry of the special staff of the
Federal Communications Commission put together a couple of
years ago, a group headed by Charles Ferris, a distinguished group
that spent a lot of time looking at the issue.
They recommended that the FCC should repeal the rules. I don't
know whether the arguments that they offered for repeal are meri-
torious or not, but it seems to me that gave the FCC adequate
reason to look into the issue.
We don't even know now whether or not the FCC is going to
repeal the rules or what they are suggesting, and I think it is a
little premature to jump the gun and say simply because they are
looking at the question we are going to pass legislation in the area.
Second, we don't know anything about the issue yet as a subcom-
mittee. We have virtually nothing on the record and all we have on
the record is what the FCC has put there through its hearing.
We don't have anything that we have put together on the basis
of testimony from witnesses and so on, and I guess it just seems to
me we ought to look at all the facts as hopefully the FCC is doing
before we take action.
The gentleman has done a terrific job of pushing the issue and of
orchestrating efforts on his side. I am not sure, however, that I
want to jump to his side without hearing from those who might
represent a different viewpoint.
Mr. WAXMAN. If the gentleman would yield further briefly, it
seems to me that this is not an issue that is so very difficult and
complicated that it is hard for us to make up our minds about.
It is not hard to see what the FCC is about to do. Chairman
Fowler has made his position clear. He has scheduled oral hearings
before he got written comments.
PAGENO="0807"
805
The FCC is rushing to judgment in my opinion to adopt a par-
ticular point of view and when the Congress has asked what he is
doing and why he is doing it, he has refused to comment because
the matter is pending before him.
Mr. TAUKE. He doesn't have the votes either.
Mr. WAXMAN. We have had hearings on the issue. The members
of the subcommittee for the most part have had a chance to evalu-
ate the comments made.
I am glad to say that most members of the subcommittee are
joining in sponsoring the bill. I hope the gentleman will also,
maybe after this hearing when he hears the paucity of comments
on behalf of changing these rules.
I hope we move forward with the bill. Otherwise, Congress won't
be making the decision, it will be a FCC that has its mind made up
that will be deciding the question.
Mr. WIRTH. The gentleman's time has expired.
Mr. Rinaldo has an opening statement that he would like to
make.
Mr. RINAu0. Thank you, Mr. Chairman.
I want to say at the outset that I have the greatest amount of
respect for the chief sponsor of this legislation, but I have to dis-
agree with him when he says that this is not a complicated issue. It
may not be complicated for him, but I think it is for everybody
else. It is probably one of the most complicated issues to come
before our subcommittee this year.
If it is not complicated, I can't understand why the Federal Com-
munications Commission has been investigating, it almost continu-
ously for the past 6 years. In 1980, a team of FCC investigators
published an 813-page analysis of the rule after more than 2 years
of work. Early this year, members of the public submitted literally
thousands of pages of written testimony to the FCC on the intrica-
cies of the rule and on what, if any, changes should be made to it.
Now we are holding our first hearing on the legislation, and I am
not saying-and I don't want the gentleman or anyone else to con-
strue this as a speech on my part in opposition to the legislation. I
haven't taken a position yet. But the legislation, of course, would
statutorily codify the FCC's financial interest and syndication rule,
and I favor hearings on the issue.
I just received a written notice a few hours ago stating that we
are going to mark up the bill on Wednesday morning. So I think
that means that this is going to be our first and our last hearing on
the legislation. I think in all' due respect that it appears that this is
somewhat of a rush to get the bill through the committee.
Now the issue is too complicated, I think, for most of us to fully
absorb and understand after only half a day of hearings, especially
with a markup, supposedly based on these hearings, now scheduled
to occur in less than 48 hours. It is difficult for me to believe that
our committee can make every Member an informed decision, and
that is what I want to make, an informed decision. I want to study
the issue carefully. We simply cannot make an informed decision
on a complicated issue after only a couple of hours of hearings,
when the FCC has spent over a period of 6 years studying the
issue.
PAGENO="0808"
806
It is my understanding that several important groups are not
being permitted to testify even at this hearing. I am particularly
interested in the views of the administration, for example. At least
three U.S. Government agencies have been intimately involved in
the FCC's investigations-the Justice Department, the Commerce
Department, and the Federal Trade Commission. All three of these
Federal agencies have submitted major studies to the FCC, yet
none of them is here to testify before our subcommittee this after.
noon.
Moreover, I was told just a few minutes ago that Senator Pete
Wilson of California requested permission to testify this afternoon,
and I always thought it was customary for Members of Congress
and members of this committee to honor requests of other Mem-
bers of Congress to testify. However, Senator Wilson was denied an
opportunity to appear.
Third-and this is probably the most troubling and baffling
aspect on the expedited procedure that is being followed in this
committee-we are being asked to vote on the Waxinan bill only 24
hours before the FCC is scheduled to propose a compromise solu-
tion. I haven't read that, solution. I haven't seen it. Other people
claim they know about it. Well, God bless them; they are in better
shape than I and have better connections than I have.
I am asking the gentleman from California to take a look at the
FCC proposal after it is made on Thursday. If he thinks for 1
minute that by marking up this bill on Wednesday he is going to
influence what they come out with the next day, he is wrong. Let's
take a look at their decision. I may very well, after I look at it, say
I agree with you 100 percent. I might sign on as a cosponsor and I
might be the most vocal proponent. But let's not rush through the
thing. It seems like some sort of a shotgun marriage here, and I
have always been afraid of those things.
In view of the FCC's long involvement, its expertise in these mat-
ters, and its attempt to come out with a compromise, I can't under-
stand why we have to vote on the bill this week. And I think it
would stand the gentleman who is very much in favor of thjs-and
I have attended his meetings and I have worked with him on other
legislation in the past, and he knows I have been very supportive of
many of his efforts in many different areas. I think he would be in
better shape if he would have the markup at a later date. I think it
would influence the members of the full committee more and
would give him an edge, because then they would feel he was
fairer. I think he would stand out in better shape on the floor.
I know he doesn't want to hear me say this in front of the full
committee and on the floor. I would hope that he would say to me
in a spirit of good faith, in a spirit to resolve this issue that is so
critically important to the American people-and not one constitu-
ent has written to me about it-that we would then take care of
this matter at a later date, maybe after the recess, when we can
come back well-rested, listen to both sides, and then come out with
a decision that is going to make the American people rally to our
cause and say Congress is finally doing a great job on the most
pressing issue of the day.
Thank you, Mr. Chairman.
Mr. WIRTH. Is there further discussion?
PAGENO="0809"
807
The gentleman from Washington, Mr. Swift.
Mr. Swi~"r. Thank you, Mr. Chairman.
I want to compliment the gentleman from California for his dry
humor when he suggests this iSn't complicated. I also want to sug-
gest that we have only had a hearing and a half on this, plus a
little discussion at the oversight hearing.
It is a horrendously complicated piece of legislation that has
caused me a great deal of difficulty in trying to decide on the
merits. But what perhaps is more disturbing than anything else-I
would add that when the gentleman suggests that the FCC has a
lot of temerity to consider changing this rule and the Congress
must thrust its body between it and the public interest, I would
point out that the FCC created the rule in the first place without
help from Congress.
It seems to me that it has some proprietary interest. It was
action the FCC had taken rather than action that they may per-
haps take a day or two after we act. But most importantly, it seems
to me that it goes to the integrity of this subcommittee.
I understand what the gentleman is trying to do. It is very clear,
very obvious, and it is simple. But the fact is, this subcommittee
has for many, many months now, since new leadership. took the
Chair, has insisted that this committee go through a rigOrous proc-
ess of information gathering. The subcommittee has been subject to
considerable criticism for taking that policy. It did so on telephones
in the past Congress in which there were many who said it was
simply a ruse to try and prevent there from being legislation.
That was wrong then and it is still wrong. It was demonstrably
wrong because we did move, but we did so on the basis of a thor-
ough understanding of the information. We are currently undergo-
ing requests for a great deal of information with regard to broad-
casting deregulation before we can move with legislation there.
There is a long questionnaire that has gone out to television and
radio stations all over this country, and I have supported that, the
purpose being that we need the information with which to legislate
properly. I don't believe that anybody can seriously argue that we
have had sufficient hearings or collected sufficient information to
make an expert and proper judgment on this issue today or tomor-
row or Wednesday.
Now, we are probably going to. Not only would I not bet the
ranch that we are not going to pass this on Wednesday, I wouldn't
bet a cigar. I wouldn't bet a cheap cigar that we are not going to
pass this on Wednesday. But I think it is totally inappropriate and
it is totally inconsistent with what is sound policy on the part of
this committee. And this committee, when this issue is long gone,
will rue the day that it broke its own policy in this regard.
I thank the Chairman.
Mr. WIRTH. Is there further discussion on the legislation?
Mr~ Bates.
Mr. BATES. I would just add that the gentleman from Washing-
ton, Mr. Swift, his comments about the FCC's involvement with the
AT&T issue, the telephone issue, is precisely the reason that I
don't think we can wait for their decision; that they have, I think,
in that instance shown a philosophy really that goes against the
American consumer and disturbs me very much. And I have just
PAGENO="0810"
808
recently signed on as a cosponsor on this legislation after a great
many months studying it, and I would have to agree that it is not a
simple issue. It is very complicated.
But I think that the proposal is simply not to make a decision.
The 5-year moratorium is warranted. And I would hope that we
could pass this legislation as soon as possible.
Thank you, Mr. Chairman.
Mr. WAXMAN. Would the gentleman yield?
Mr. BATES. Yes.
Mr. WAXMAN. I thank my colleague for yielding.
I just want to point out to those of our colleagues who have ex-
pressed some concern about our rushing to judgment, this subcom-
mittee has generally worked on trying to develop a consensus
before we do report a bill to the full committee. I don't think we
have seen much of a stronger consensus than we have behind this
legislation. We have 10 out of the 14 regular members of the sub-
committee backing this legislation. If we just do nothing and let
the FCC act, I point out, then when we come back here after this
August recess, we may find that it will be too late for Congress to
assert itself.
Maybe that is what some would have us do. But I don't think
that is the responsible position for the committee of Congress that
has jurisdiction over telecommunications.
I think it is important for us to have this hearing today. I point
out it is not the first time we have discussed this issue. Since last
December, we were asking the FCC representatives why they were
looking into this issue and what they hoped to accomplish, and we
couldn't get a reply from them then, and we really can't now. I
don't think they are going to be any more forthcoming here what-
ever rule they come up with, whether it is a so-called compromise
or the original proposal floated around to repeal the rules.
In 1970, the FCC adopted rules that provided for competition and
diversity. We have seen the success of those rules. It is in the
public interest that we not let those rules be swept aside.
For those who agree with that position, we ought to assert our-
selves as lawmakers; for those who don't agree with that position,
they should oppose it. For those who haven't made up their minds,
I hope the hearing today will give us more information to sort
through what may seem complicated to some and not so complicat-
ed to others.
But I think the debate ought to go forward and the subcommit-
tee, after this hearing, be prepared to send a bill forward so when
we come back we can move forward with it.
Mr. WIRTH. The Chair recognizes himself for a reading of the
H.R. 2250: A bill to provide a moratorium until June 30, 1988, on changes to the
Federal Communications Commission rules regarding network television syndica.
tion, network television financial interests, and prime time access.
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, that, in order to maximize competition in the tele-
vision broadcasting marketplace and to promote diversity of programming sources
for the public, the Federal Communications Commission shall not have authority to
take any action before July 1, 1988, to repeal, amend, or otherwise modify the provi-
sions or applicability of any of the following:
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(1) section 73.658(j)(i) of title 47, Code of Federal Regulations (commonly known as
the "Syndication Rule"; 23 F.C.C. 2d 382);
(2) section 73.658(j)(ii) of title 47, Code of Federal Regulations (commonly known as
the "Financial Interest Rule"; 23 F.C.C. 2d 382); and
(3) section 73.658(k) of title 47, Code of Federal Regulations (commonly known as
the "Prime Time Access Rule"; 23 F.C.C. 2d 382).
This enormously complicated bill I just read in 90 seconds. It is
here available for perusal of all the members of the subcommittee,
and has been for some time perused carefully by 120 of our col-
leagues who had thought it was appropriate to cosponsor this enor-
mously complicated 90 seconds long bill.
It is not a complicated piece of legislation. It is an enormously
simple piece of legislation designed to do one thing: To make sure
that it is the Congress of the United States, not the FCC, not Mark
Fowler, not the NAB and not the broadcasters of this country, who
are going to make telecommunications policy. It is imperative that
we not abdicate our responsibility.
Now, there are those who believe that we should abdicate respon-
sibility, and that is fine. I mean, they have a vote in this Congress,
they have votes on the subcommittee, they have votes on the full
committee, and that is just fine. But as long as I am chairman of
this subcommittee, we will not abdicate our responsibility. We will
collect the necessary information as we have done or amended to
do in two oversight hearings on this issue when we got little re-
sponse from the FCC. We asked the FCC not to rush charging
ahead with this, but they insisted on doing it anyway, despite their
alleged accountability to this subcommittee and to the Congress,
We collected information at great length in the competition report
which was published by this subcommittee in the fall of 1981, prob-
ably the most rigorous analysis of competition in the whole arena,
as we did in hearings that were held in California in early June, of
which a record has been made available to the members of the
committee since that time.
It is the opinion of the Chair that it is the obligation of this com-
mittee to make important telecommunications policy, and it should
not be delegated to others. And that is what this vote and this
issue is going to be all about.
I just wanted to make it very clear. And I will not rue the day in
any way, shape or form that this subcommittee attempted to exer-
cise its jurisdiction and not abdicate that to somebody else.
With that, the Chair is delighted to have as witness our panel
today, and we welcome Mr. Roger Colloff, the vice president for
policy and planning of the CBS Broadcasting Group in New York;
Mr. Irwin Segelstein, vice chairman of the board of the National
Broadcasting Co. in New York; Mr. Norman Lear of Embassy Pro-
ductions and Tandem Communications in L.A.; and Mel Blu-
menthal, the executive vice president of MTM Productions in
Studio City, Calif.
Gentlemen, I think you are familiar with the rules of the sub-
committee which have been so carefully reflected so far this after-
noon in which we ask everybody to summarize their statements
and testimony in 5 minutes, and the rest will be included in full in
the record. We would like you to be able to do that perhaps in the
PAGENO="0812"
810
order in which I introduced you, starting with you, Roger, and
moving from your right to your left.
If you would summarize your statements, we will include them
in full in the record. We would then like you to respond to what
others may have said as a way of exchange among members of the
panel before we get into questions from the subcommittee.
Thank you for being here.
STATEMENTS OF ROGER COLLOFF, VICE PRESIDENT, POLICY
AND PLANNING, CBS/BROADCAST GROUP; IRWIN SEGELSTEIN,
VICE CHAIRMAN OF THE BOARD, NATIONAL BROADCASTING
CO., INC.; NORMAN LEAR, EMBASSY PRODUCTIONS AND
TANDEM PRODUCTIONS, INC.; AND MEL D. BLUMENTHAL, EX-
ECUTIVE VICE PRESIDENT, MTM ENTERPRISES, INC.
Mr. COLLOFF. Thank you, Mr. Chairman.
This is probably going to come as a terrible anticlimax after the
vigorous debate the last hour. I appreciate the opportunit~t given
me by the subcommittee to present CBS's views on the financial in-
terest and syndication rules.
As the subcommittee is well aware, the FCC's review of the rules
has been long and thorough. The FCC's pending rule-making repre-
sents a culmination of a 5-year effort designed to determine the
best means of encouraging competition and diversity in television.
That effort began with a $2 million, 2-year study by an independ-
ent special staff. This study was mandated and appropriated by
Congress. It recommended a regulatory policy with two major ele-
ments: first, changing the structure of the television industry by
encouraging new methods of program distribution; and second, re-
pealing a wide variety of anachronistic rules, including the finan-
cial interest and syndication rules.
The FCC, under both Democratic and Republican administra-
tions, has begun to implement this policy of encouraging new forms
of competition, while removing regulations which have hampered
diversity and choice. As part of this effort, over a year ago the FCC
began its rule-making proceeding concerning the financial interest
and syndication rules. In this proceeding, a massive record has
been compiled, including over 225 initial and 35 reply comments.
Forty parties have expressed their views in oral presentations.
Other economists who are expert on regulatory issues support
repeal. These include those who serve at both the American Enter-
prise Institute and the Brookings Institution.
Further, the major Federal departments and agencies-the De-
partment of Commerce, the Federal Trade Commission and the De-
partment of Justice-have all advised the FCC to repeal the rules.
All of these parties found that the rules have failed to achieve
their objectives, and that the rules have had the unintended, anti-
competitive effect of making it more difficult for new firms to enter
the television production business.
I would like to comment briefly on the interesting course of the
arguments against repeal. Opponents of repeal originally argued
that the rules continued to be* needed to check the monopsony-or
unfair buying-power that CBS, ABC, and NBC were believed to
have over their suppliers. Indeed, this was the fundamental reason
used by the FCC to promulgate the rules in 1970.
PAGENO="0813"
811
But in recent years, a wide range of students of the issue have
concluded that the networks do not possess such power. Yet, with-
out network monopsony power, the rationale for prohibiting net-
work financial interests in programing, for prohibiting network
syndication of first-run programing or made-for-television movies,
or for barring the foreign distribution of off-network programing
all fall of their own weight.
Therefore, opponents of repeal abandoned this structural under-
pinning to the rules as the focus of their arguments against repeal,
and began to tell us that the real rationale of the rules was to
insure a steady flow of reruns to independent stations. In fact, wit-
nesses for the six major Hollywood studios, television program syn-
dicators, and independent television stations stated at the FCC
hearings in March that the only real issue left in this whole debate
was the effect of repeal on independent stations. So, the argument
shifted-and narrowed substantially-away from the broad prohibi-
tions of the rules to the very specific issue of the role of networks
as syndicators of off-network prime-time entertainment series.
And yet, in reply comments to the FCC, numerous commentators
reviewed the new presumed rationale for the rules, and concluded
that theories of potential anticompetitive network behavior in the
syndication business were not sound and did not justify retaining
the rules.
Given the history of these changing arguments against repeal, I
suggest that opponents of repeal would continue indefinitely to
shift their defense of the rules. The pattern of opposition to repeal
is clear. When one rationale can no longer withstand serious public
policy scrutiny, another is invented. When that one is discredited,
yet another rationale becomes the focus of the antirepeal efforts.
I appreciate the opportunity to reiterate the reasons why CBS
supports repeal-and these are the reasons that CBS has put for-
ward consistently since the beginning of the FCC's proëeeding. CBS
believes that repeal will increase competition and diversity in the
television program supply and syndication business. If the rules are
repealed, the networks would be able to invest in television produc-
tion, thereby increasing the financing available for independent
program- development and production. This, in turn, would stimu-
late new, additional sources of programing to the networks.
The record is clear that the rules have led to a significant reduc-
tion in the number of sources of prime-time entertainment series
programing. If the rules were repealed, an increasing number of in-
dependent production companies would gain access to three impor-
tant sources of financing for new series development: the three net-
works. This would increase diversity in the sources of prime-time
entertainment series programing.
CBS believes that an exclusionary approach to the television pro-
duction and syndication business-one that eliminates additional
potential participants-is unsound public policy.
We believe that an inclusive approach-one that includes as
many participants as possible-is sound because it maximizes com-
petition and diversity. That is the fundamental reason why we
favor repeal of the financial interest and syndication rules.
Thank you very much, Mr. Chairman.
[Mr. Colloffs prepared statement follows:]
PAGENO="0814"
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CBSTe)evusonNetwork.CBSEnlellaulment.CBSSp0IIs CBSNews.CBSTe)eveonSlat,onsCBS Ratho
CBS)nc 51 Wesl52Slreel.N,wYork. NewVo~k 10019(212)9754321
Statement of Roger Colloff
Vice President, Policy and Planning
CBS/Broadcast Group
Before the Subcommittee on
Telecommunications, Consumer Protection and Finance
U. S. House of Representatives
Washington, D. C.
August 1, 1983
I would like to thank the Subcommittee for this opportunity to
present CBS's views on the the financial interest and syndication rules.
As the Subcommittee is well aware, the FCC's review of the rules has
been long and thorough. The FCC's pending rule-making represents a
culmination of a five-year effort designed to determine the best means of
encouraging competition and diversity in television. That effort began
with a $2 million, two-year study by an Independent Special Staff. This
study was mandated and appropriated by Congress. It recommended a
regulatory policy with two major elements: first, changing the structure
of the television industry by encouraging new methods of program
distribution; and second, repealing a wide variety of anachronistic rules,
including the financial interest and syndication rules.
The FCC, under both Democratic and Republican administrations, has
begun to implement this policy of encouraging new forms of competition,
while removing regulations which have hampered diversity and choice. As
part of this effort, over a year ago, the FCC began its rule-making
proceeding concerning the financial interest and syndication rules.
PAGENO="0815"
813
In this proceeding, a massive record has been compiled, including
over 225 initial and 35 reply comments. Forty parties have expressed
their views in oral presentations. For its part, CBS has submitted the
analyses of a number of eminent economists, including Alfred Kahn, former
Chairman of the CAB, and Bruce Owen, former Chief Economist of the
Antitrust Division of the Department of Justice, who both served during
the Carter Administration.
Other economists who are expert on regulatory issues support
repeal. These include those who serve at both the American Enterprise
Institute and The Brookings Institution.
Further, the major Federal Departments and agencies -- the
Department of Commerce, the Federal Trade Commission and the Department of
Justice -- have all advised the FCC to repeal the rules.
All of these parties found that the rules have failed to achieve
their objectives, and that the rules have had the unintended,
anti-competitive effect of making it more difficult for new firms to enter
the television production business.
In short, the rules have been debated and studied for over five
years. They have been thoroughly reviewed by leading public policy
experts of opposing ideological and political backgrounds. Support for
repeal of the rules is clearly a non-partisan issue. And, as is
frequently the case in deregulatory proceedings, those who wish to
preserve the status quo are those who benefit from limiting competition
and the entry of new companies in the television supply business.
:J2-540 O-84---52
PAGENO="0816"
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-3-
I would like to comment briefly on the interesting course of the
arguments against repeal. Opponents of repeal originally argued that the
rules continued to be needed to check the monopsony -- or unfair buying --
power that CBS, ABC and NBC were believed to have over their suppliers.
Indeed, this was the fundamental reason used by the FCC to promulgate the
rules in 1970. But in recent years, a wide range of students of the issue
have concluded that the networks do not possess such power. Yet without
network monopsony power, the rationale for prohibiting network financial
interests in programming, for prohibiting network syndication of first-run
programming or made-for-television movies, or for barring the foreign
distribution of off-network programming all fall of their own weight.
Therefore, opponents of repeal abanonded this structural
underpinning to the rules as the focus of their arguments against repeal,
and began to tell us that the real rationale of the rules was to ensure a
steady flow of reruns to independent stations. In fact, witnesses for the
six major Hollywood studios, television program syndicators and
independent television stations stated at the FCC hearings in March that
the only real issue left in this whole debate was the effect of repeal on
independent stations. So, the argument shifted -- and narrowed
substantially -- away from the broad prohibitions of the rules to the very
specific issue of the role of networks as syndicators of off-network prime
time entertainment series.
And yet, in reply comments to the FCC, numerous commentators
reviewed the new presumed rationale for the rules, and concluded that
theories of potential anti-competitive network behavior in the syndication
business were not sound and did not justify retaining the rules.
PAGENO="0817"
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-4-
Given the history of these changing arguments against repeal, I
suggest that opponents of repeal would continue indefinitely to shift
their defense of the rules. The pattern of opposition to repeal is
clear. When one rationale can no longer withstand serious public policy
scrutiny, another is invented. When that one is discredited, yet another
rationale becomes the focus of the anti-repeal efforts.
I appreciate the opportunity to reiterate the reasons why CBS
supports repeal -- and these are the reasons that CBS has put forward
consistent~y~ since the beginning of the FCC's proceeding. CBS believes
that repeal will increase competition and diversity in the television
program supply and syndication business. If the rules are repealed, the
networks would be able to invest in television production, thereby
increasing the financing available for independent program development and
production. This in turn would stimulate new, additional sources of
programming to the networks.
The record is clear that the rules have led to a significant
reduction in the number of sources of prime time entertainment series
programming -- from 65 before the rules to 47 today -- and to a reduction
from 66 percent to 48 percent in the percentage of series supplied by
independent production companies to the networks. If the rules were
repealed, an increasing number of independent production companies would
gain access to three important sources of financing for new series
development -- the three networks. This would aid considerably in -
increasing the opportunities for fledgling firms to get established in the
production business and for talented individuals to break into the
production business. This would increase diversity in the sources of
prime time entertainment series programming.
Because of these reasons, CBS believes that an exclusionary approach
to the television production and syndication business -- one that
eliminates additional potential participants -- is unsound public policy.
We believe that an inclusive approach -- one that includes as many
participants as possible -- is sound because it maximizes competition and
diversity. That is the fundamental reason why we favor repeal of the
financial interest and syndication rules.
PAGENO="0818"
816
Mr. WIRTH. Thank you very much.
Mr. Segelstein.
STATEMENT OF IRWIN SEGELSTEIN
Mr. SEGELSTEIN. Thank you, Mr. Chairman.
My name is Irwin Segelstein, and I am vice chairman of the
board of the National Broadcasting Co.
I was sorely tempted when I listened to the debate within the
committee to pass my 5 minutes. However, I suppose I must resist
that temptation.
I am here today to present NBC's strong view that H.R. 2250 is
an unsound bill. This bill would prohibit the Commission, despite
its expertise and despite the voluminous evidence that has accumu-
lated, from repealing and modifying rules which it adopted over 12
years ago and which have resulted in inhibiting competition and
diversity of program sources.
We are not here today to present the detailed reasons why the
rules should be repealed and modified. NBC and others have done
that extensively in comments and economic presentations to the
Commission. I would be glad to leave copies of ours with this sub-
committee.
Rather, we wish to emphasize NBC's view that it would be inap-
propriate for Congress at this point to prevent the FCC from ex-
pressing its judgment on this issue. I note that the item is on the
FCC agenda this week.
The FCC proceeding has been neither hasty nor ill-considered.
Nor has it been a partisan effort. It started over 6 years ago and
continued through the administrations of Democratic and Republi-
can chairmen. The FCC has compiled a voluminous record. There is
absolutely no reason now to reject all that evidence and yet that is
what H.R. 2250 would do.
During the 2-year study specifically funded by Congress, the FCC
formed a special network inquiry staff, interviewed representatives
of virtually every possible view, and obtained and analyzed volumi-
nous facts and documents about every segment of the industry.
Based on this extensive evidence, the special staff concluded that
the financial interest and syndication rules should be repealed
since they interject the Government into risk sharing arrange-
ments between private parties without any public interest benefit.
A year ago, the FCC issued a notice of proposed rulemaking. Re-
sponding to that notice, thousands of pages of additional comments
and reply comments were filed by every segment of the industry.
With the Chairman's permission, I should like to submit for the
record a list of the more than 150 parties that have participated in
this comment procedure.
Mr. WIRTH. Without objection, that will be included in the
record.
Mr. SEGELSTEIN. Additionally, the FCC heard oral presentations.
The result was widespread support for the repeal of the current
rules. Significantly, Government agencies with special expertise on
the issues of competition-the Department of Justice, the Federal
Trade Commission-found that the rules were anticompetitive. The
PAGENO="0819"
817
same conclusion was reached by the Department of Commerce's
National Telecommunications and Information Agency.
Numerous public interest groups representing diverse minorities,
the elderly, religious organizations, retired people, labor organiza-
tions and many lower income Americans have also supported
repeal of the rules because of their adverse effects on free televi-
sion's ability to purchase quality programming.
Mr. Chairman, we should be glad to make available to each
member of the committee a list of the organizations I refer to.
The rules simply do not accomplish any public interest purpose
and, in fact, affirmatively harm the public interest.
Put briefly, the reasons are as follows: First of all, the rules have
the practical effect of putting a cap on the ability of broadcast net-
works to invest in program development and production for the
free television system.
Second, the evidence demonstrates that the rules decrease com-
petition in the program supply marketplace, disadvantaging the
viewing public and advantaging only the major studios and produc-
tion companies.
Third, they inject the Government into the business negotiations
between buyers and sellers without any public interest benefit.
And, fourth, the rules provide an unfair advantage to pay media
in the acquisition of programing and talent to the detriment of
viewers who depend on free television.
These and other public interest reasons for repeal have been es-
tablished over and over in the FCC's proceedings. For Congress
now to stop the FCC from making use of the extensive evidence
that has been accumulated at great effort and expense would be
wasteful, I believe, and unwise.
Mr. Chairman, this is a time when there are dynamic changes
overtaking the telecommunications industry almost on a daily
basis. If the bill forces the Commission to a freeze, the Commission
will be unable to respond to these changes. Indeed, the effect of the
bill will be to block Commission action and establish a regulatory
vacuum in this area for many years, probably to the 1990's, at a
time when the Commission is charged with regulating, is undergo-
ing radical transformation. For these reasons, we oppose the bill
and urge that it not be adopted.
I read in the trade papers this morning and I read in the con-
sumer press that this week the Commission will offer a new pro-
posal for comments and responses, perhaps a compromise. None of
us, of course, has seen it. But I would urge this committee to allow
the process to continue until you have a chance to look at the pro~
posal and the comments of all the interested parties.
I would like to thank you, Mr. Chairman, and members of the
committee, for allowing me this opportunity to speak.
[Testimony resumes on p. 833.]
[The statement of Mr. Segelstein and attachment follow:]
PAGENO="0820"
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STATEMENT OF IRWIN SEGELSTEIN
My name is Irwin Segeistein, and I am Vice
Chairman of the Board of the National Broadcasting
Company. I am here today to present NBC's strong view
that H.R. 2250 is an unsound bill.
H.R. 2250 would prohibit the FCC from taking any
action to repeal or modify the Commission's own Financial
Interest or Syndication Rules for five years. This Bill
would prohibit the Commission -- despite its expertise and
despite the voluminous evidence that it has accumulated --
from repealing or modifying Rules which it adopted ovet 12
years ago, and which have resulted in inhibiting competition
and diversity of program sources.
We are not here today to present detailed reasons why
the Rules should be repealed or modified. NBC and others
have done that extensively in Comments and in economic
presentations to the Commission and I shall be glad to leave
copies of ours with this Subcommittee. Rather, we wish
to emphasize NBC's view that it would be inappropriate for
Congress at this point to prevent the FCC's expert considera-
tion of the question of repeal or modification of the Rules.
PAGENO="0821"
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-2-
The FCC's proceeding has been neither hasty nor
ill considered. Nor has it been a partisan effort. The
FCC began itS consideration over 6 1/2 years ago. Since
then, it has accumulated an enormous public record consistin.g
of some 30 volumes of evidenc? and analyses, plus all the
materials of its own Staff Inquiry. Its examination is now
virtually complete. There is absolutely no reason now to
reject all of that evidence and to disregard the substantial
time and effort that have been devoted to comprehensive
analyses of the industry, of the changes in the marketplace,
and of the public interest. Yet that is what H.R. 2250
would do.
Mr. Chairman and members of the Subcommittee, let
me briefly highlight how thoroughly and objectively the
Commission has considered these Rules. It is important to
emphasize that the FCC study has been a bipartisan one --
involving three different Commission Chairmen. In January
of 1977, when the Commission initiated its Network Inquiry,
Rich~trd Wiley, a Republican, was Chairman. Then, when the
Further Notice of Inquiry was issued in the fall of 1978,
Charles Ferris, a Democrat, was Chairman. A two-year
special study costing about $2 million and specifically
authorized by a Democratically-led Congress, was conducted
by appointees of Chairman Ferris, headed by Thomas Krattenmaker
and Stanley Besen, two highly regarded experts in law and
economics.
PAGENO="0822"
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-3-
The Special Staff that they put together was
unquestionably impartial and apolitical. It consisted
of expert industry analysts, economists, and attorneys
chosen especially to study the television industry. During
its two years of study, the Special Staff interviewed
representatives of virtually every possible view and
obtained and analyzed voluminous facts and documents about
every segment of the industry. Based on this extensive
evidence, the Special Staff concluded that the Financial
Interest and Syndication Rules should be repealed since they
interject the Government into risk-sharing arrangements between
private parties without any public interest benefit.
A year ago, the FCC issued a Notice of Proposed
Rulemaking looking toward possible repeal or modification of
the Rules. Responding to that Notice, thousands of pages
of additional comments and reply comments were filed by
representatives of every segment ~of the industry. With the
Chairman's permission, I should like to submit for the
record a list of more than 150 parties that have participated
in the comment procedure. Additionally, the FCC heard oral
presentations on this matter from individuals representing
many diverse viewpoints.
The result was widespread support for repeal of
the current Rules.
PAGENO="0823"
821
-4-
Significantly, all of the expert government agencies
that have studied the Rules agreed with the Network Inqt&iry
Staff's conclusion.that repeal was in order. The Department
of Justice and the Federal Trade Commission, the governmental
bodies with special expertise on issues of competition, found
that the Rules are anticompetitive and do not serve the
public interest. The same conclusion was reached by
the principal spokesman for the President on national
telecommunications policy -- the Department of Commerce's
National Telecommunications and Information Agency.
Furthermore, numerous public interest groups
representing diverse minorities, religious organizations, the
elderly, retired people, labor organizations and many lower
income Americans also have supported repeal of the Rules
because of their adverse effects on free television's ability
to purchase quality programming. Mr. Chairman, we shall be
glad to make available to each member of the Subcommittee
a list of such organizations.
NBC strongly agrees with these citizen representatives
and with the government bodies and impartial commentators
that have studied the Rules who have called for their repeal.
The Rules simply do not accomplish any public interest
purpose, and in fact affirmatively harm the public interest.
Put briefly, the reasons why the Rules disserve the public
are as follows:
PAGENO="0824"
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-5-
First, the Rules have the practical effect of
putting a cap on the ability of broadcast networks
to invest in program development and production
for the free television system;
Second, the evidence demonstrates that the Rules
decrease competition in the program supply market-
place, disadvantaging the viewing public and
advantaging only the major studios;
Third, they inject the Government into the business
negotiations between private buyers and sellers
in the program marketplace without any .public interest
benefit; and
Fourth, the Rules provide an unfair advantage to pay
media in the acquisition of programming and talent
to the detriment of viewers who depend on free
television.
These and other public interest reasons for repeal
have been e~tablished over and over in the FCC's proceedings
during the past 6 1/2 years. The FCC's information about
these Rules is as comprehensive and as current as it can
be. For Congress now to stop the FCC from making use of the
extensive evidence that has been accumulated and the
analyses that have been made, at great effort and expense
after specific Congressional authorization, would be
PAGENO="0825"
823
incredibly wasteful. In our view it would be an unwise and
inappropriate interference with an expert administrative
agency for Congress now to order the FCC to halt its normal
processes.
The consequences of enacting H.R. 2250 are clear: it
would require the Commission to ignore the facts it has
developed; it would waste the money and effort already
expended pursuant to specific Congressional authorization;
it would prohibit the expert agency from determining the public
interest; and it would protect the economic interests of
one group -- the major producers.
Mr. Chairman, this is a time when dynamic changes are
overtaking the telecommunications industry on almost a
daily basj~s. If H.R. 2250 forces the Commission to a freeze,
the Commission will be unable to respond to these changes. In
fact, the Commission will be unable to recommence the
administrative process until after the five-year period
of the Bill ends. It will be the 1990's before any Commission
decision on this matter can be rendered. And even after
repeal, there will still be a number of years before the
effects of the Rules are undone.
Indeed, the effect of the Bill will be to block
Commission action and establish a regulatory vacuum in
this area for many years. The FCC would be put in a strait
jacket and forced to maintain Rules that have been proven
to be counterproductive and anticompetitive - - at a time
when the industry that the Commission is charged with
regulating is undergoing radical transformation.
For these reasons, we oppose this bill and urge
that it not be adopted.
PAGENO="0826"
824
COMMENTS FILED IN
FCC DOCKET BC 82-345
ABC Television Affiliates Association
Action for Children's Television
American Association of Advertising Agencies
American Broadcasting Companies, Inc.
American Family Corp.
American Federation of Grain Millers
American Legal Foundation
American Television Syndication, Inc.
Andrews & Associates
Association of Independent Television Stations, Inc.
Association of National Advertisers, Inc.
Association of Program Distributors (Victory Television and
Wolfertz Associates)
Association of Talent Agents
Bane, Tom, Asst. Speaker pro Tempore, California Assembly
Barry & Enright Productions and Colbert Television Sales
Bolter & Nilsson
Buford Television Inc.
Busby, Finch, Lathan & Widman
Carlini, Ulysses A.
Carrera, ~arbara
Caucus for Producers, Writers, and Directors
PAGENO="0827"
825
CBS, Inc.
Cedar Rapids Television Co.
Channel Two Television Co.
Chicago Coalition
Chronicle Broadcasting Co.
Coalition of Labor Union Women
Columbia Pictures Industries, Inc.
Comma/OCC Media Dept.
Committee for Prudent Deregulation
Connecticut Broadcasters Association
Cowles Communications, Inc.
Cox Communications, Inc.
Robert W. Crandall & Glen Robinson
Department of Commerce
Department of Justice
Walt Disney Productions
Duhamel Broadcasting Enterprises
Embassy Communications & Tandem Productions, mc,
Family Focus
Federal Trade Commission
Fetzer Television Corp.
Fort Meyers, Florida Broadcasting Co.
Forward Communications Corp.
Charles Fries Productions, Inc.
-2-
PAGENO="0828"
826
Gay-Bell Stations & WLEX
Gilson International
Glasser, Richard D., Member of IATSE
Golden West Television, Inc.
Gray Communications Systems, Inc.
Guaranty Broadcasting Corp.
Harron Communications Corp.
Haupt, Laurence, Member of IATSE
Hearst Corporation
Hispanic Republicans of Michigan, Inc.
IATSE Local 1
IATSE Local 193
ICF, Inc.
Illinois
Institute for Applied Economics, N.Y.
Inter-Guild Council of the Talent Guilds of the Motion Picture
& Television Industry
James, Kevin, Member of IATSE
Alfred E. Kahn, Special Consultant to National Economic
Research Associates, Inc.
KAKE-TV
KARK-TV
KAUZ-TV (Wichita Falls Telecasters, Inc.)
KBIM-TV
KFNB-TV, WCIA, WMBD, & WSPA-TV
-3-
PAGENO="0829"
827
KGMC
KID Broadcasting Corp.
KMPH & WHNS (Pappas Telecasting Inc.)
KOAT-TV
KPLC-TV
KPLR & KRBK (Koplar Communications, Inc.)
KQTV
KRBC-TV & KACB-TV
KTRV
KVOA-TV
KWWL-TV (American Family Corp.)
KZTV
La Prensa of Miami
Lexington Broadcast Services, Inc.
Lorimar Productions, Inc.
Loyola University (WWL-TV)
Mandelu Enterprises, Inc.
MCA, Inc.
McCullough, Brian & Jim
Meredith Corporation
Metromedia, Inc.
Mexican-American Opportunity Foundation
MGM/UA Entertainment Co.
Midcontinent Broadcasting Co.
-4-
PAGENO="0830"
828
Motion Picture Association of America, Inc.
Mt. Mansfield Television, Inc.
MTM Enterprises, Inc.
National Association of Black Owned Broadcasters, Inc.
National Association of Independent Television Producers
and Distributors
National Association of Television Program Executives
National Black Media Coalition
National Broadcasting Company, Inc.
National Coalition of Hispanic Mental Health and
Human Services Organization
National Coalition on Television Violence
National Council of La Raza
National Council of Negro Women, mc,
National Institute of Economics and Law
National Institute of Low Power Television
Nationwide Communications, Inc.
National Council of the Churches of Christ
NBC Television Affiliates
New York State Department of Commerce
Northern Television, Inc.
Paramount Pictures Corp.
Park Broadcasting, Inc.
People for the American Way
Polygram Television Corporation
Presbyterian Church in the United States
PAGENO="0831"
829
RCA Corp.
Roberti, David, President Pro Tempore, California Senate
Roadrunner Television and Galaxy-Southwest Television
Rohrs Television, Inc.
Shamrock Broadcasting Company, Inc.
Shooshan & Jackson, Inc.
Springfield Television Corporation
Summit Radio Corp.
D. L. Taffner/Limited
Taft Broadcasting Co.
Teleco Indiana, Inc.
Telecommunications Research and Action Center
Telefilm Sales II
Telepictures Corp.
Teleworld, Inc.
Thirty-Three, Inc.
Tribune Company Broadcasting, Inc.
Turner Broadcasting System, Inc.
United Rubber, Cork, Linoleum & Plastic Workers
Viacom International, Inc.
Warner Communications, Inc.
-6-
32-540 O-84---58
PAGENO="0832"
830
WBBH-TV.
WCYB-TV 5
WDRB-TV
WEEK-TV 25
WHNS
WICU-TV
Williman, Earl C., Sr., Member of IATSE
Winnebago Television Corp. & Plains Television
Partnership
WI S-TV
WKRG-TV
WLEX-TV
WMKW
WNNE-TV
World Hunger Year
Women in Film of Los Angeles
WOWL-TV (Television Muscle Shoals Inc.)
WPTY-TV
WPTZ-TV
WRBL-TV Center
WEST-TV
Writers Guild of America, West, Inc.
WSLS-TV 10
WTVZ, WRLH, WJTM, & WMKW-TV
WXXA
Ziff-Davis Broadcasting Co.
-7-
PAGENO="0833"
831
REPLY COMMENTS FILED IN
FCC DOCKET BL 82-345
ABC Television Affiliates Association
Advertising Club of Fort Worth
American Broadcasting Companies, Inc.
Association of General Merchandise Chains, Inc.
Association of Independent Television Stations, Inc.
Association of National Advertisers, Inc.
Association of Program Distributors
Capital Cities Communications, Inc.
Caucus for Producers, Writers, and Directors
CBS, Inc.
Chicago Convention & Tourism Bureau, Inc.
Citizens Communications Center
Committee for Prudent Deregulation
Cox Communications, Inc.
Department of Commerce
Department of Justice
Fast, William M., Representative of MEBA
Federal Trade Commission
PAGENO="0834"
832
General Mills Inc
Henry Geller & Donna Lampert
ICF Inc
Idaho Advertising Federation
IATSE District 2
Metromedia Inc
Motion Picture Association of America Inc
National Association of Independent Television Producers
and Distributors
National Institute of Low Power Television
NATPE International
National Broadcasting Company Inc
Paramount Pictures Corp
Penthouse Presentations Inc
Presbytery of Newark
Public Broadcasting Service
Senior Citizens Club of New Milford N J
Shooshan & Jackson Inc
SIN Inc
Station Representatives Association Inc
Storer Communications Inc
Taft Broadcasting Co
Union Theological Seminary
Viacom International Inc
Westinghouse Broadcasting and Cable Inc (Group W)
WGHP-TV 8
PAGENO="0835"
833
Mr. WIRTH. Thank you, Mr. Segelstein.
Mr. Lear.
STATEMENT OF NORMAN LEAR
Mr. LEAR. Mr. Chairman, members of the subcommittee, I am
here in strong support of H.R. 2250, which would place a 5-year
moratorium on repeal of the financial interest syndication and
prime-time access rules. Chairman Fowler and the FCC seem
intent on repealing or substantially modifying the rules regardless
of the fact that the networks have not demonstrated that the rules
should be changed.
I am interested, as I hear Mr. Segelstein now talk about that the
networks have accumulated all the voluminous, as he called them,
volumes of research, graphs, statistics, and so forth, to make their
point.
But they have had through these years 2~/2 hours of programing
per week that they could program, and I have not heard among
those voluminous statistics, the graphs, the proud allusion to one
single show which they have fielded as networks--any of the three
of them-that would help religious groups, women, elderly, and all*
the other groups that Mr. Segelstein just took pains to mention.
* We in the production, creative advertising, and independent sta-
tion communities are at serious risk if the rules are repealed.
Accordingly, it is critical that Congress, in view of Chairman
Fowler's apparent prejudgment, make the public policy involved in
this area very clear. The rules are working for the benefit of the
public and should not be changed at this time. If the rules are re-
pealed, I would like you to understand that I believe and the cre-
ative community in California and elsewhere in the country firmly
believes it would diminish and destroy the strength and vitality of
independent companies.
Those independent companies are made up of writers, directors,
actors, producers, they are comprised largely of the creators who
happen to have created sufficient programing to then run their
own companies.
There is a basic difference between networks and the creative
community of writers, directors, and producers. The networks are
not in the business of nurturing innovation. They can't. They can't
because the name of the game-I don't think one has to have all
that much information to understand just to participate in Ameri-
can life, to understand that the name of the game for three net-
works is how do I win Tuesday night at 8 p.m.? That is what it is
about.
There are no villains, no villains sitting at this table; there are
no villains in network programing. They are men and women with
contracts to deliver important ratings in the very short term.
I would submit to you that that is antithetical to the spirit of in-
novation and to creativity. I would ask you to place yourselves for
just a moment in the mind, the spirit and the heart of a network
programing executive who, since the New York Times and newspa-
pers across the country some 6 or 8 years ago began to print each
week the standings of the three networks, his half-hour by half.
hour across the board.
PAGENO="0836"
834
This executive in New York, say, wakes up one morning and his
New York Times is at his door and he reads it over coffee, and he
doesn't have one show in the to~ 10. I would submit that he has a
little difficulty catching his wife s conversation or taking too much
more of the grapefruit. He goes downstairs and picks up a copy of
the Wall Street Journal which has taken to projecting earnings
based on ratings, and he finds that the projected earnings for his
network are down.
And when he walks into his desk, a little palpitating in the
heart, there is a warm Xerox on his desk that has last night's rat-
ings, and he doesn't have a show that won. It was a complete
defeat that night. Let's say that at 10 o'clock in the morning this
executive has a meeting with tomorrow's Rod Serling or Paddy
Chayefsky, some 26-year-old young man, young woman, with a terrif-
ic new piece of television entertainment, an idea.
Also sitting on his desk with the notation of the 10 o'clock ap-
pointment is a note there will be a meeting at 11 o'clock upstairs to
discuss the New York Times, the Wall Street Journal, and the
warm xerox.
I mean no joke in this. Just some understanding of humanity, of
what that man or that women might be going through would sug-
gest that he, she, is in no mood to listen to a new idea because
when the name of the game for you is to win Tuesday night at 8
o'clock, that is antithetical to risk-taking and risk-taking is innova-
tion, and I would suggest that if something is working on the other
network that has two young women on motorcycles who practice
law, that if you have to win that quickly in 6 weeks, perhaps, you
are going to come up or see to it that somebody else comes up with
or passes on something that someone else suggests that has two
women on motorcycles who practice law, but do it in braless sweat-
ers and jump rope at the same time.
That is the way it goes. It is the need to win, the need to trans~
late those wins to ratings and ratings to profits and quarterly earn-
ings which is the system, and no one is to be faulted. We must face
the fact that risks are not taken in such a climate and, therefore,
we see more clones, more carbons, more white bread, and more
pabulum.
Now, yes, writers and producers and directors wish to succeed,
too, but their motivation doesn't come the same way. They are re-
porters on the scene of life. They are in the business of listening to
and observing their children, their wives, reading their newspa-
pers, watching the society about them, finding out of the fabric of
American life those things they wish to dramatize or satirize or, de-
pending on what part of the business they occupy.
They are not seeking, though they wish to succeed, of course,
they are not-the name of the game for them is not how do I get
an idea that wins Tuesday night at 8 o'clock; it is how do I express
what is in me because that is what I know I can do best.
So, as the competition accelerates, so does the competitive net-
work practices.
Though the networks, for example, are and have been for some
time, into warehousing talent. By warehousing talent, I mean they
sign up the actor, they sign up the writer; one can have a hit show
and find that 3 weeks into a successful series, network people are
PAGENO="0837"
835
in the halls of one's own company seeking to sign up the writers
who were responsible.
There is a very severe competitive disadvantage to being an inde-
pendent producer when a network can come to that writer or actor
and say, "We would like to sign you exclusively, and we will give
you an on-the-air commitment;" or "We will give you a guaranteed
pilot;" or "We will guarantee you three episodes on the air."
An independent company can make no such guarantees. We
have to compete in the marketplace without that very unfair ad-
vantage of being able to offer the theater with the play.
There are any number of stories that would indicate all this. Red
Foxx was on a show called "Sanford & Son" a good many years
ago, and that was on NBC. The gentleman running ABC at that
time wanted Redd Foxx. This was one of the early beginnings of
warehousing. He approached Redd Foxx and made him an offer.
Because it was a network he could not refuse. He guaranteed him
on the air, I forget how many episodes, 1-hour weekly, a variety
series.
Now, that successfully defeated our opportunity to keep Sanford
& Son on the air for a public on NBC that wished it perhaps for 2
or 3 more years. We could not do it because Mr. Foxx had an offer
he could not, in all conscience, refuse because there was so much
money involved, and on the air for 1 hour was involved.
Speaking of "Sanford & Son," that was one of the early, I think
the first all-black, comedies on television.
The networks had been there for a great long while. I would
submit to you that if a network wishes to put a Latino show on the
air next fall, it has only to decide it will do so. It will then, if it
wishes to-with its 2½ hours of programing-to do it itself it may
do so. It never has. But it may go to an independent producer and
say "Will you do this for us?" To my knowledge it never has.
In the fall, Embassy will be fielding a situation comedy with a
Latino family. It will be the first time, in this case a Mexican-
American family will be on the air. But we will be doing it. The
networks I repeat have had the opportunity and do have the oppor-
tunity any day they decide to say "We will do this," because they
have the stage, they have the theater, they have the access to 85
percent of American homes.
I am very well aware of my time. There is so much one could
say, but suffice it to say that the American people I believe sincere-
ly are better served by a strong independent community of writers
and actors and directors, people whose life's work is to observe life
and reflect it as really authentically as they can.
I would suggest, ask you not to diminish the strength of those
people and pass that strength on to the networks who are all but
omnipotent already in my opinion and whose only business is-and
I repeat, there are no villains here, that is the system-it is their
business to win only and win quickly, not to innovate and not to
serve the American people by vi±tue of that innovation.
I thank you.
[The statement of Norman Lear follows:]
PAGENO="0838"
836
Oral Presentation Norman Lear, of Embassy Communications
i~Tandem Productions, ic.~~n Su~prt'of H.R. 2250 Before
~ ~~~b~mittee ~n Pelecommuni~ations, Consumer Prote~tion
and Finance of' the Committee nn Energy and Commer~e, U .*S.
House ~pres~a*tives, Wasi~ngton, D.C., August i,T~3.
Mr. Chairman, members of the Subcommittee, my name is
Norman Lear. I am with Embassy Communications and Tandem
Productions, Inc. Embassy is a diversified entertainment
company involved in the production and distribution of
television program series. Tandem is an independent pro-
duction company devoting itself exclusively to the televis-
ion market. Both companies support H.R. 2250.
I am primarily a writer, but I have always had an entre-
preneurial instinct. The Financial Interest and Syndication
rule has enabled a company like Tandem to grow over the last
decade because with the syndication and ownership rights to
own our own programs we can control our destiny and plan for
the future.
Embassy and Tandem are experienced producers of tele-
vision series, having licensed more than 20 series to the
networks for exhibition during prime time over the past 12
years. Several series are now on the networks' prime time
schedules, including "Archie Bunker's Place," "One Day at a
Time," "The Jeffersons" and "Diff'rent Strokes." Embassy
and Tandem are experienced in syndicating off-network pro-
grams, including "All in the Family," "Maude" and "Good
Times," and we have produced and distributed several first-
run syndicated programs, including "Nary Hartman, Mary
Hartman."
PAGENO="0839"
837
-2-
My experience, then, which began with the inception of
television in 1950, includes writing, producing and syndi-
cating network series and first-run syndicated programs, and
spans the time period before the Rule took effect through
the period when the Rule has been in force.
I believe that the Rule offers producers of prime time
television series more financial stability and creative
freedom, and therefore benefits television viewers. Spec-
ifically, broadcast television networks are extremely
reticent to take new approaches to programming, whether that
means different program ideas, new characters or innovations
in production techniques.
For example, I had tremendous difficulty bringing "All
in the Family" to network television. It was too different
from the "Petticoat Junction," "Green Acres" and "Beverly
Hillbillies" type of situation comedy that was popular at
that time. After pouring much creative energy into the
development of "All in the Family," it took me three years
to get the show on the air. We made pilots and went to all
three networks until, finally, CBS, under a new network
president, elected to put it on the air. Because these
negotiations took place before the Rule became effective,
CBS was able to condition its agreement to broadcast "All
in the Family" on a grant to the network of all distribu-
tion and syndication rights in the program. When the Rule
came into effect those rights were spun off to Viacom.
PAGENO="0840"
838
-3-
Similarly, the networks displayed considerable resist-
ance to scheduling series featuring minorities as the lead
characters. "Sanford & Son" had a British antecedent with
white actors playing the two lead roles. We believed that
Redd Fox and Demain Wilson were best for the parts. Per-
suading the networks, however, took. a considerable amount of
time. We finally had to do a half-hour live show for net-
work executives using Fox and Wilson to demonstrate to the
networks that it would work and that those two actors were
appropriate for the roles.
Since the Rule came into effect, and producers have
found financial strength through being able to retain syn-
dication rights, we have been better able to negotiate with
the networks over the creative questions. The networks
remain insistent that series appeal to a certain basic level
among viewers and are very hesitant to allow deviance from
this norm. Retention of off-network rights allows producers
to withstand some of these pressures.
However, producers remain at the mercy of the networks
for broad distribution of their products. The networks are
the bottlenecks. Without network distribution, a producer's
series will have a limited--if any--audience. Thus, pro-
ducers have limited negotiating leverage at the program
development stage.
If networks were permitted to purchase syndication
rights from producers, they would be in a very strong
PAGENO="0841"
839
-4-.
bargaining position to do so. And they could purchase those
rights at a relatively low cost because of their trump
card - if the rights are not sold to them, they will not put
the program on their prime time schedule. Without network
exposure, the syndication value of a program drops enormously.
Would the networks play that trump card? They did
before the Rule took effect. I had no opportunity to retain
the syndication rights to "All in the Family."
The networks argue they should be able to purchase
syndication rights. Since they cover the costs of develop-
ing potential series -- through the story idea, script and
pilot stages -- they should be able to share the risks and
rewards with the producer. This is a specious argument.
First, the risk was not "shared" before the Rule and
would not be shared if the Rule were repealed. The networks
assumed all the risk, making the producer no more than a
salaried employee. But the network's risk was a protected
one. Because of the highly unequal bargaining positions of
the network and the producer at the program development
stage, networks were able to obtain syndication rights for a
relatively low amount. The networks then reaped the re-
wards, but incurred little actual risk.
Second, producers take the risk, and want to do so.
While networks may cover some of the production costs once
they accept an idea, there is a considerable amount of
PAGENO="0842"
840
-5-
creative time and energy that goes into development of the
program before the network even sees it, and producers'
profits if any will only come from successful syndication
If the program is a hit the network is able to charge
higher advertising rates and make a considerable profit
during the network run If the prograr~ fails, the network
quickly recoups its investment and earns profits from the
advertising revenues available even from a low-rated pro-
gram, while the producer is left with nothing
Third producers do not see an advantage to sharing
risk with the networks There are other sources of financ-
ing for producers -- including small and new producers --
all of which do not impose the creative constraints that the
networks do New producers can come to Tandem, to MTM, to a
major studio or to smaller production entities such as D L
Taffner We are not in the network business of selling
advertising time rather we too strive to create the best
possible product The Producers Guild of america, with its
thousands of members, support the Rule because they would rather
work independently or in conjunction with another producer
than become a captive employee of a network
The viewing public also is better served by allowing
producers to retain syndication and ownership rights and
prohibiting networks from owning them The producer is
better able than the network to make a straightforward
PAGENO="0843"
841
-6-
business decision as to when the program should be syndica-
ted. A network has many considerations, most having nothing
to do with the particular program or viewers' best inter-
ests. For example, networks must consider whether syndica-
ting a program while it is still on the network's schedule
will have an adverse impact on other of the network's pro-
grams, or whether the program will be aired during prime
time by independent stations which purchase exhibition
rights. The producer is more likely to put the program into
syndication at the optimal time for gaining revenues, almost
certainly an earlier date than a network would. Thus,
viewers will have access to the program in syndication at an
earlier time.
I would like to speak to two other important points.
First, having dealt with all three networks and sold pro-
grams to two of them, it is clear to me that the conduct of
all three networks is very similar. The manner in which
they determine scheduling, contract terms, number of series
ordered and creative constraints, are remarkably parallel.
Finally, I would like to state unequivocally that the
new media -- cable, MDS, DBS, LPTV, cassettes -- are not
substitutes for network television. The new media do not
often seek the types of television series seen. on commercial
broadcast networks, and when they do, their offers are not
comparable to those of the networks.
PAGENO="0844"
842
-7-
The new media may challenge the broadcast networks for
certain unique products -- theatrical movie releases, cer-
tain major sports events and the like. But this Rule does
not relate to that question. This Rule is concerned prin-
cipally with prime time television entertainment series.
Currently, the new media are not seriously competing with
the networks for these.
I am deeply troubled by the FCC's potential action to
structure a so-called "compromise" doing away with the
Financial Interest Rule. Allowing the networks to have
ownership rights to our programs will severely impact the
creative integrity of American television. Producers need
the incentive to create the best possible product -- that
incentive only comes when the producer owns the fruits of
his labor.
I would like to conclude on a personal note that I hope
you will understand. I am the father of three daughters.
One out of three is coming into this industry. Her name is
Kate Lear. She started with Readers' Digest Productions in
New York very recently. I would wish for her the oppor-
tunity her father had which was not simply to write and
produce a television show as an employee of a network, but
with a little entrepreneurial instinct, to build her shows
into a viable company which hires other creative people who
wish to operate in a climate that allows for innovation and
PAGENO="0845"
843
-8-
creativity. I hope such a company could become economically
viable and eventually strong enough to withstand network
pressure when the network executives say, "This will not
play in Peoria," or "They will not salute this in Des Moines."
I have learned the hard way that very often we are right and
they are wrong, and it is constructive to be strong enough
to make it a real competitive battle.
So I would urge you to pass H.R. 2250.. The interesting
thing about the Financial Interest and Syndication Rule is
that it frees the marketplace rather than restricting it.
To remove the Rule is to restrict the marketplace and prevent
the future Tandems, the future Lorimars and MTM's, the Whit
Thomases, and others .from growing in a free enterprise system.
To conclude, I want to stress that program producers
have developed greater financial strength and creative
autonomy under the Rule. This has benefitted everyone, I
believe, but particularly the television viewer.
Thank you for allowing me this time.
Mr. WIRTH. Thank you, Mr. Lear.
Mr. Blumenthal.
STATEMENT OF MEL D. BLUMENTHAL
Mr. BLUMENTHAL. Mr. Chairman, members of the subcommittee,
I am Mel Blumenthal, executive vice president and one of the
three principal shareholders of MTM Productions, Inc. MTM urges
your support of H.R. 2250, a bill which in our view will encourage
continued creativity and diversity in television programing.
In the period of the existence of the syndication, this enabled us
to bring to television the "Mary Tyler Moore Show"; the "White
Shadow"; "WKRP in Cincinnati"; and "Hill Street Blues". Because
of this fact, MTM may be considered an important example of how
a wide variety of high-quality, television programing does result
from the combination of the efforts of one, unique creative talents;
two, sound business management which functions synergistically
with the creative talent; three, profit motivation through owner-
ship and a degree of control over the creative process and the re-
sulting product; and four, a regulatory atmosphere which has given
MTM a "fighting chance" in dealing with the networks.
Some of the MTM's programs have been successful and profitable
and some have been unsuccessful and have cost MTM enormous
sums of money which have never been recouped. MTM's successful
programs have varied widely from the "Mary Tyler `Moore Show"~
PAGENO="0846"
844
and the "Bob Newhart Show" to "Rhoda",. a half-hour comed~r
which evolved out of the original "Mary Tyler Moore Show',
"WKRP in Cincinnati", a half-hour comedy placed in a radio sta-
tion and generally regarded as out of the same mold as the "Mary
Tyler Moore Show", providing comedy with a social message; the
White Shadow, a 1-hour drama about an inner-city high school and
its white basketball coach who must deal with the problems of mi-
nority teenagers, their parents, teachers and others in the commu-
nity; "Hill Street Blues', a totally unique undertaking which came
on the air to an initially passive response from the mass audience
while at the same time earning 14 Emmys, the George Foster Pea-
body Award, and numerous other awards; and this season, "St.
Elsewhere", another unique 1-hour drama set in an inner-city hos-
pital in Boston, which is meeting resistance from the mass audi-
ence, but which has received general praise from critics.
Our most recent show, "Bay City Blues" was picked up for net-
work broadcast next season. This series about a minor league base-
ball team was created, developed, and produced by the same cre-
ative team that created and produced `Hill Street Blues". To the
best of my knowledge, this new series will be the most expensive
series produced for television. Although NBC did in fact agree to
pay a very fair license fee when compared to license fees generally,
their license fee does not come anywhere near covering the cost of
production.
MTM will deficit finance in excess of $100,000 for each episode of
this series. MTM has undertaken this substantial risk in order to
stretch the quality of television programing to new heights and to
give the television audience a show which is innovative and enter-
taining. If our judgment is correct and the audience responds favor-
ably to this new series for at least 5 years, hopefully MTM will be
able to recoup its investment and profit from the sale and syndica-
tion.
The recent "St. Elsewhere" and "Bay City Blues" experience
demonstrates MTM's philosophy and belief that the American au-
dience deserves quality programing and MTM is willing to invest
its capital to bring such programing to the networks. Without the
ability to recover its investment and make a reasonable profit,
there would be no motivation for MTM or any other production
company to create and produce unique, expensive, and hi~h-quality
series such as "Hill Street Blues", "St. Elsewhere", and `Bay City
Blues".
The long-term upside potential now available in television is due
to the rules and has afforded MTM the ability to attract, support
and retain the high quality creative personnel needed to produce
its shows and to have the resources available to develop and sup-
port new writers, producers, directors, and new innovative pro-
graming.
It has come to our attention that the FCC may be issuing an
order later this week proposing retention of some version of the
syndication rule and outright repeal of the financial interest rule. I
would like to make it absolutely clear from a creative standpoint
such a compromise would be untenable. First, it is pure fallacy to
allege that the networks will negotiate for a financial interest. Be-
cause such terms are finalized before a show is aired, networks will
PAGENO="0847"
845
simply extract the maximum permissible rights as the price of get-
ting your program aired.
If anyone believes otherwise, he is living in an Alice in Wonder-
land fantasy world.
Second, repeal of the financial interest rule will rob production
companies and their creative staffs of their incentive to invest the
time, effort, and money required to produce expensive high-quality
programing.
The viewing public benefits when MTM is willing to reshoot "St.
Elsewhere" in order to improve the quality of the series. Three,
based on MTM's experience, to allow networks any financial inter-
est or syndication rights into our program will encourage intoler-
able network interference in creative development.
Finally, reversion to pre-1970 days where three entities totally
dominated all phases of the television industry is anticompetitive.
In conclusion, MTM is convinced that the degree of independence
that exists between the networks and producers under the rules is
vital to the quality of American programing. Eroding the interest
of the creative community can only discourage retention of experi-
enced and established creative talent as well as entry of new pro-
duction companies and new creative talent and homogenize the re-
sulting programing and reduce the quality of product that reaches
the viewers. MTM urges your support of H.R. 2250.
Thank you very much for your time.
[Testimony resumes on p. 856.]
[The statement of Mr. Blumenthal follows:]
32-540 O-84----54
PAGENO="0848"
846
Oral Presentation by Mel Blumenthal, Executive Vice Presi
~ MTM Enterprises, Inc., in support of H.R. 2250 before
~~Subconimittee on Telecommu~ications, Consumer Protection
~ Finance of the C~mmittee on Energy and Commerce, U.S.
House of Rep~es~i~atives. Was1~Tngton, D.C., ~9ust 1, ~
Mr. Chairman, members of the Subcommittee, I am the
Executive Vice President and one of three principal share-
holders of MTM Enterprises, Inc.
The period of the existence of the Syndication and
Financial Interest Rules directly coincides with the period
of growth and prosperity of MTM as an independent production
entity supplying prime time television programs to the
networks. Because of this fact, MTM may be considered an
important example of how a wide variety of high quality
television programming does result from the combination of
the efforts of (1) unique creative talents; (2) sound busi-
ness management which functions synergistically with the
creative talent; (3) profit motivation through ownership and
a degree of control over the creative process and the re-
sulting product; (4) and a regulatory atmosphere which has
given MTM a "fighting chance" in dealing with the networks.
Some of the MTM's programs have been successful and
profitable and some have been unsuccessful and have cost MTM
enormous sums of money which have never been recouped.
MTM's successful programs have varied widely from "The Mary
Tyler Moore Show" and "The Bob Newhart Show,," to "Rhoda", a
half-hour comedy which evolved out of the original "Mary
PAGENO="0849"
847
-2-
Tyler Moore Show;" "WKRP In Cincinnati," a half-hour comedy
placed in a radio station and generally regarded as out of
the same mold as "The Mary Tyler Moore Show," providing
comedy with a social message; "The White Shadow," a one-hour
drama about an inner-city high school and its white basket-
ball coach, who must deal with the problems of minority
teenagers, their parents, teachers and others in the com-
munity; "Hill Street Blues," a totally unique undertaking
which came on the air to an initially passive response from
the mass audience while at the same time earning fourteen
Emmys, the George Foster Peabody Award and numerous other
awards; and this season, "St. Elsewhere," another unique
one-hour drama set in an inner-city hospital in Boston,
which is meeting resistance from the mass audience, but
which has received general praise from critics. Our most
recent show, "Bay City Blues," was picked up for network
broadcast next season.
It is vital for members of this subcommittee to real-
ize that, at present and for the foreseeable future, there
has been and will continue to be only three viable theatres
(ABC, CBS and NBC) for the type of entertainment programming
produced by MTM. With their enormous mass audience, these
three networks generate billions of dollars of advertising
revenue each year which support a large portion of the
PAGENO="0850"
848
-3-
enormous production costs of this type of programming and
which still provides very healthy profits for the networks.
Because there are so many program suppliers all competing to
get into the same three theatres (ABC, CBS and NBC), these
networks have acquired enormous power and control over the
production community. The networks have historically exer-
cised this power and control to the fullest extent allowed
under the applicable rules in effect at any particular point
in time. Since the founding of MTM, the Syndication and
Financial Interest Rules and the recent Network Consent
Decrees have operated to create a delicate balance to the
unrestricted power and control of the networks in the nego-
tiation process between the networks and program suppliers.
If the Financial Interest and Syndication Rules are
altered in any manner, the notion that the networks will
"bargain" for syndication or ownership rights ignores the
realities of the broadcasting marketplace. At the point
that MTM and other program suppliers are negotiating their
license fees with the network, the program supplier is at
its most vulnerable point in the creative process to the
network's exercise of power. If MTM wants to be on a
network, it will have to accept the network terms which the
network will exact to the maximum benefit of the network.
For the producer, there is no alternative. For a show to
acquire ~ value, it must be accepted by a network. They
hold all the cards.
PAGENO="0851"
849
-4-
Since the inception of the Financial Interest and
Syndication Rules, MTM has produced several series which it
has put into syndication such as "The Bob Newhart Show,"
"Rhoda," "The White Shadow" and "WKRP in Cincinnatti" and
several movies for television. MTM has, had the freedom with
respect to these programs to choose its own distributor and
to maintain a voice and decision making authority over all
aspects of the selling and distribution process. The rev-
enues derived from the syndication of these shows have been
used to help offset the deficits incurred in production of
these shows and others which have not been successful enough
to reach the syndication market. The profits which remain
are used to carry the substantial current deficits of series
such as "Hill Street Blues," "St. Elsewhere," "Remington
Steele," and "Newhart," and to fund the hiring of estab-
lished writers and producers under long term contracts to
develop new programming and to employ and support relatively
new and unknown writers so that they may learn and develop
their craft in order that they may ultimately develop and
produce new programming.
MTM believes that the Financial Interest and Syndication
Rules play a vital role in encouraging the creative integrity
of our programs. Our recent program, "St. Elsewhere" has
been the most expensive program in NTM's history in terms of
PAGENO="0852"
850
-5-
initial startup costs. A license fee was negotiated with
NBC, and MTM received an order for 13 episodes. Because of
the complex creative structure of the series it was essen-
tial that the first episode clearly set out the format of
the series and introduce a very large number of continuing
characters while at the same time telling an entertaining
story, all in one hour. After filming of the first episode
was completed, MTM realized that the initial episode did not
successfully meet MTM's expectations. MTM informed NBC that
MTM wished to revise the script and re-shoot substantial
portions of the first episode. NBC agreed with MTM's cre-
ative evaluation of the first episode and NBC indicated they
would like the changes made but they were unwilling to pay
for these changes. Because MTM firmly believed that these
changes were essential to the success of the series, MTM
undertook these improvements at its own expense. Thus after
producing one episode of "St. Elsewhere," MTM had incurred
additional costs in excess of $1,000,000 and has since
incurred further substantial episodic.deficits with the only
hope of recoupment being that the series would become suc-
cessful and remain on the air for at least four years,
thereby allowing MTM the opportunity to sell the show in
syndication.
The "St. Elsewhere" experience demonstrates MTM's
philosophy and belief that the American audience deserves
quality programming, and MTM is willing to invest its capital
PAGENO="0853"
851
-6-
to bring such programming to the networks. Without the
ability to recover its investment and make a reasonable
profit, there would be no motivation for MTM or any other
production company to create and produce unique and expen-
sive series such as "Hill Street Blues", and "St. Elsewhere."
The loss of such profit potential would result in more
programs which are of low quality -- the type of programming
which far too often appears on the networks today.
MTM is aware that the networks contend that they will
be able to provide the program suppliers with larger initial
license fees if the networks are given a financial interest
or syndication rights in the programs. It is MTM's opinion
that it may indeed receive, for some short period of time, a
modest increase in license fees. However, with the networks
in absolute control of the three theatres, they will un-
doubtedly revert to their pre-1970 position of extracting,
as a condition of putting a series on the air, a signficant
financial interest and/or syndication rights.
Repeal of the Rules would deprive MTM and the creative
personnel who develop, write, direct, produce and perform,
of the long-term upside potential now available in tele-
vision. This upside potential has afforded MTM the ability
to attract and retain the high quality creative personnel
needed to produce its shows and to have the resources
PAGENO="0854"
852
-7-
available to develop new writers, producers, directors and
new programs.
MTM makes it a point to hire several promising young
writers each year, and to encourage their professional
development and allow them the greatest creative freedom
possible. We hope that one or two of them will become the
Norman Lear's of their day. Established writers are willing
to stay with MTM in the television production industry
because innovation and c~eativity are encouraged and f in-
ancial rewards are significant. Without the Rules, much of
the top creative talent in the industry will have no incent-
ive to work in television -- they will write feature films,
dramatic plays, or strictly literary works.
Historical evidence shows that neither the networks nor
the program suppliers can predict with any certainty the
reaction of the 2\merican public to a new television series.
It is also important to note that only between 5% to 10% of
the programming produced for the networks ever gets into
syndication. However, it is MTM's belief and corporate
philosophy that quality programming will ultimately survive
and prosper and MTM is willing to invest its capital in
support of this theory. Without the potential profits from
syndication, companies like MTM are not likely to evolve in
the future to support this belief in quality programming.
PAGENO="0855"
853
-8-
The networks already have multiple exclusive options
on our series, exclusivity clauses, control of spin-of fs,
and other controls. The networks do not lose money on even
their unsuccessful shows, while the independent production
companies such as MTM bear substantial deficits on the same
shows. Because of the pricing structure of network adver-
tising time and the fact that the networks do not share
advertising revenues with the program suppliers, the burden
of a failed series is placed on the suppliers such as MTM.
MTM is willing to assume that risk because the incentive for
potential future profits encourages it and the creative
personnel working with it to create new and diverse pro-
gramming to obtain such profits. Please allow that incent-
ive to remain.
I understand that the Federal Communications Commission
may be considering a "compromise" position which would leave
the syndication rule intact but allow the networks to attain
any amount of financial interest in independently produced
programs. While in theory, permitting network profit par-
ticipation in the shows they air may appear acceptable, to
those of us in the creative community such a shift would be
untenable.
First, permitting networks to "negotiate" for a finan-
cial interest is simply not fair. Because such negotiations
take place before a show is on the air, producers are power-
less. Networks will simply extract the maximum permissible
PAGENO="0856"
854
-9-
rights as the price of getting your show on the air. Anyone
who believes otherwise is living in an Alice in Wonderland
world.
Second, permitting the networks to have ownership
rights in our programs will significantly reduce producer
incentive to create the program we believe best. Under the
rules, MTM is willing to invest considerable time, effort
and money into shows because they are ours. Without the
incentive that outright ownership creates, the quality of
American programming will suffer.
Third, the practical effect of any degree of network
ownership in independent programs will be a reduction of the
creative integrity of the ultimate product reaching viewers.
Quite simply, networks and program producers are in two very
different businesses, each with its own set of goals. The
networks strive to fill their air time with programming most
attractive to advertisers. The networks focus particular
attention on capturing the most viewers, in order to maxi-
mize advertising revenues. By contrast, the producers,
writers, directors and actors involved in developing a
program from idea to ultimate broadcast, are concerned with
creating the best program possible.
The production industry spends inordinate amounts of
time and energy producing shows because we believe in them.
As creators, we are convinced that the degree of independ-
ence that exists between the networks and producers is vital
PAGENO="0857"
855
-10-
to the quality of American programming. Based on our own
experiences, to allow networks any involvement in the finan-
cial interest in a program will encourage intolerable net-
work interference in creative development.
It is important to remember that the networks already
interfere in the creative production process. Permitting
them to own even a small share of a program, however, will
make them our financial "partners" with license to control
decisions both financial and creative. Eroding the measure
of independence the creative community has to do its job can
only homogenize the resulting programming and reduce the
quality of the product that reaches viewers.
And finally, a return to the days before the rules
will be downright anticompetitive. As you are aware, the
rules were promulgated to help ameliorate the networks'
unfair bargaining advantage over producers. The three
networks had the leverage to demand significant rights from
producers, because without access to the network stage, a
program could never attain value. The network potential to
extract the maximum rights permissible still exists in a
negotiation that no one would consider to be "arms length."
Merely limiting the equity share for which the networks may
"negotiate," does nothing to vitiate the fundamental imbal-
ance of power that led to implementation of the rules in
1970. Networks still, in 1983, have the power of financial
coercion over producers. The potential FCC compromise
ignores that fact.
PAGENO="0858"
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-11-
In conclusion, I feel very strongly that network fin-
ancial interest in programming, regardless of the size of
their participation, will stifle creativity in the televis-
ion industry. Allowing network equity participation in our
shows will not only exacerbate the current dominance of the
three networks, but it will also facilitate greater network
involvement in and control over the content of our tele-
vision programming. If the Financial Interest and Syndi-
cation Rules are modified, then the networks will not only
control the pipelines for free television programming into
American homes, they will also have the unfettered ability
to unilaterally shape the content of programming reaching
the American public.
If diversity of mass media outlets and ideas reaching
those outlets is important to this Subcommittee, MTM urges
you to pass H.R. 2250 in order to assure that the Rules
remain intact.
Mr. WIRTH. Thank you very much, Mr. Blumenthal.
I would ask any members of the panel if they have comments on
other people's testimony.
Mr. Colloff.
Mr. COLLOFF. I would like to respond to a couple points made by
Mr. Lear and Mr. Blumenthal.
No. 1, I thought Mr. Lear's somewhat humorous examples were
interesting. The only problem--
Mr. WIRTH. You will have to share the mike. I guess that one
doesn't work.
Mr. COLLOFF. The problem with the example given is that the
Rod Serling of tomorrow would not be in the office of the network
executive because the networks are not in a position to be able to
offer anything to that Rod Serling of tomorrow. We can not fi-
nance development of a show like that. Therefore, the options of
that Rod Serling of tomorrow are reduced by three and what we
are saying is if you repeal these rules, if the rules are repealed, it
will allow those independent creative talents to have more poten-
tial options, more potential people to whom to attempt to sell their
ideas.
PAGENO="0859"
857
No. 2, Mr. Blumenthal mentioned that it is a fallacy that net-
works won't negotiate for financial interest, they will simply
demand it.
First of all, that does not comport with the historical record. In
the 1960's, before the financial interest and syndication rules went
into effect, the networks acquired syndication rights in only a
s~nall percentage of programs that aired on their networks, in only
about 20 percent of the programs did they acquire syndication
rights. This was not and would not be a question of the large mono-
lithic networks somehow extorting rights from the poor, independ-
ent producers.
We are dealing with people who are perfectly capable of protect-
ing their own interests. This is a negotiation. It would be a negotia-
tion. We are now prevented from entering into that negotiation.
All we are asking for is the opportunity to be allowed to enter into
that negotiation. Thank you.
Mr. WIRTH. Mr. Lear.
Mr. LEAR. Just to respond to Mr. Colloff.
I don't know quite where he works in network television. He cer-
tainly doesn't work where we do. Not only would that Mr. Serling
be in the office of the network vice president for programing, but if
Mr. Serling, the young Mr. Serling, happened to be in my compa-
ny, I might have to be there, Allen Horn might have to be there
with him, too, all of us on our knees to knock on and get through
one of only three doors that are access to 85 percent of everything.
Mr. COLLOFF. But you pose a different situation. You are posing a
Rod Serling that comes in under the formidable umbrella of
Tandem. That is different. Tandem is not a fledging corporation
today. Tandem is a well-established-and for very good reasons-
well-established producer.
Mr. LEAR. We are the result of the efforts of the syndication and
financial interest rule without which we never could have been in
being.
Mr. COLLOFF. If the Rod Serling of tomorrow didn't want to go to
Tandem and instead wanted to go to the networks, he could not.
Mr. LEAR. He might have made an exclusive arrangement just
yesterday with ABC, NBC, or CBS, because that is what is happen-
ing. If he doesn't come with us, you have him by exclusive right
because you have offered him the world.
Mr. COLLOFF. The Redd Foxxes and the Tom Sellecks are not the
hypothetical Rod Serling of tomorrow that you posited, if I may say
so.
Mr. WIRTH. Mr. Segelstein.
Mr. SEGELSTEIN. Yes. I guess I am addressing some of the things
Norman said, maybe Mel, as well.
We have taken advantage of the opportunity to produce shows-
not necessarily to the limit in every year-at NBC but the shows
that we have produced, within our opportunities, like "Little
House," are shows that we are not embarrassed about; indeed, we
are quite proud of them. Father Murphy was a very well-made
show. It was not as successful as we would have liked.
As for innovation, another show did innovate, changed the com-
plexion of the time period; indeed, caused discussion and perhaps
even controversy, and some heat, and that is "Saturday Night
PAGENO="0860"
858
Live," which was something that did take place entirely within
NBC. I did have a feeling that although, it is very hot out today,
that we are dealing with some Christmas Carol notion that, but for
these rules, all these wonderful shows simply wouldn't get on the
air. I am not sure how that accounts for the presence on the air of
"All in the Family" and "Hill Street Blues." These are shows that
did go through the process of network program executives being of-
fered the shows and being willing to schedule them though they
were risks.
Some of them, incidentally, predated these regulations. Norman
worked early on in the heat, as did I, with "All in the Family,"
because ABC rejected it and I, as a programer at CBS, was one of
the two people who did see the show early and took it.
"St. Elsewhere," for the investment made, has been renewed,
though it was not, by any definition, a very successful program
that commanded renewal. An opportunity will be given to the show
to have another year of finding an audience and, perhaps, the pay-
back on "St. Elsewhere" will be as lucrative for MTM as the `Hill
Street" payout is.
There are some shows that are not deficit financed. A number of
our friends don't lose money on every show. So, I think there is a
sort of investment-a commitment-on the part of networks to
worthwhile programs. The renewal of "Taxi"-as it departed
ABC-by NBC can hardly be considered one of the wisest moves of
all time. Yet, it was bold enough because we believed in the pro-
gram.
I could go on but perhaps Mel and Norman or Roger have some-
thing else to say.
Mr. BLUMENTHAL. Mr. Chairman, I think there are a couple of
misconceptions that I have just heard from Mr. Segeistein and Mr.
Colloff. Mr. Se~elstein, I think-I wasn't quite sure I heard the
word "lucrative' when he mentioned "Hill Street Blues." The word
"lucrative" is what I think he said. At this present point, I have
finished producing three seasons of "Hill Street Blues," and about
entering into the fourth season. We are well in excess of $8 million
in deficit for the first three seasons, and will generate somewhere
between $75,000 to $80,000 per show negative in deficit this coming
season.
Mr. Colloff, I think, is not familiar with the fact that his business
affairs department at CBS might indicate to him when MTM got
started, it was with "The Mary Tyler Moore Show." We were given
absolutely no opportunity after a great struggle on our part to
retain any portion of the syndication rights to our show. It was
made very clear by management of CBS that if we wanted, and if
Mary wanted to be on the air, she would have to give 100 percent
of the syndication rights, plus merchandising rights and various as-
sorted other rights, to the network. And after a long, long hard
struggle, they made it real clear we were not getting on the air,
those rights were given to them and assigned, when FCC rules
came into effect, to a distribution company.
Mr. SEGELSTEIN. As the gentleman there said, will the gentleman
yield?
I was at CBS when "The Mary Tyler Moore Show" started. It
was a series commitment to a performer without any scripts and
PAGENO="0861"
859
any writers and that was its origin. Now, I was a programer so I
am not privy to the nuances of the deal, but I do think you may be
giving the wrong impression in saying that CBS retained 100 per-
cent of the syndication rights. What you mean is that MTM owned
the show and that CBS distributed it for a fee.
Mr. BLUMENTHAL. For a nonnegotiable fee, Mr. Segelstein.
Mr. SEGELSTEIN. That is not 100 percent of the syndication rights.
There is some confusion in that.
Mr. BLUMENTHAL. They owned, controlled and effectively
through the assignment still do today through Viacom control the
syndication rights to that. We have absolutely nothing to say, no
consultation rights, no advice as to how, when and where that
show is sold.
Mr. Cou~o~. I would note, Mr. Blumenthal, that in the second
show which MTM sold, that is the "Newhart Show," CBS did not
acquire any syndication rights nor any financial interest.
Mr. LEAR. Because the rule is there.
Mr. COLLOFF. This is prerule.
Mr. BLUMENTHAL. Mr. Colloff, I will correct that. The rule was
about to be passed.
Mr. CoILo1~. The rule had not yet gone into effect.
Mr. LEAR. It was about to be passed, Mr. Colloff.
Mr. COLLOFF. There was a prerule negotiation that went on.
Mr. BLUMENTHAL. I negotiated the deal, Mr. Colloff.
Mr. WIRTH. This is better than a discussion among the Members.
Perhaps we could-we greatly appreciate the back and forth there,
but maybe I could just briefly start the questioning if I might.
Mr. Colloff, in your first point you were making to which Mr.
Lear responded, you suggested the networks cannot do any of their
own programing for prime time?
Mr. COLLOFF. No. I suggested that most of the best talents in the
creative community do not want to be network employees. They
want to have production companies of their own or coproduction
deals.
Mr. WIRTH. Are you free to do programing now in prime time?
Mr. Cou~op~. Yes, we are.
Mr. Wmm. How much can you do now?
Mr. Cou~opp. We can do 21/2 hours a week..
Mr. WIRTH. Of prime time. How many hours of prime time is
there?
Mr. Cou~oni'. Excuse me?
Mr. WrnTH. How many hours of prime time a week are there?
Mr. Cou4oi~. Twenty-two hours of prime time.
Mr. Wntni. Under the rule, you can do 2½ hours, which is your
own production and you control it?
Mr. COLLOFF. That is permissible. Yes.
Mr. WIRTH. Out of the 2½ hours, how much do you do?
Mr. COLLOFF. We produce a number of made-for-television movies
each year. We do not exercise our quota of 2½ hours, but I don't
think that is the issue, with all due respect.
Mr. WIRTH. Mr. Segeistein, do you all use your 2½ hours?
Mr. SEGELSTEIN. We are not currently using it. We have recently,
when "Little House on the Prairie" and "Father Murphy" and
PAGENO="0862"
860
some original movie production was on, yes. We thought that we
were using it. We thought we were using it well.
Mr. WIRTH. Neither CBS nor NBC are using the total prime time
programing you are allowed to do now. Do you know what ABC
does?
Mr. SEGELSTEIN. No, I don't. There is an upside rule for us. I am
suggesting we are and have tried, and I am not sure that it relates
precisely to the other issues here, but, yes, we are not using our
full quota at the moment.
Mr. WIRTH. Mr. Waxman.
Mr. SEGELSTEIN. Maybe we will get lucky.
Mr. WAXMAN. Thank you, Mr. Chairman.
One network argument that I have heard is that to continue to
offer and to create programing on free television, the networks
need to have the rules repealed. As I understand it, cable and other
new technologies pose new competition. But isn't it true that cable
is not your competition, rather it is the independent television sta-
tion which is offering vigorous competition in many markets?
By CBS' own admission, cable will not be a factor until the 1990s.
My question is, what is the fact in this area? Is free television at
stake and if the rules are not repealed, will you be unable to com-
pete for quality programing?
Mr. COLLOFF. Well, a number of points I think should be made.
First of all, the bulk of the audience loss which the networks have
incurred over the past several years has gone to cable, not to inde-
pendent stations. There are studies that we have that will docu-
ment that fact, that well over half the audience loss has gone to
cable as cable penetration has increased over the past several
years.
Mr. WAXMAN. How do you account for the increase in independ-
ent television stations?
Mr. COLLOFF. The increase in independent television station
viewing is indeed partly the result of that very same increase of
cable penetration. What happens is as follows, before a cable
system is built in a given area, you have VHF and UHF stations,
and, the UHF are usually at a severe receiver handicap because
their signals are not as strong. When cable comes in, the FCC
"must carry" rules say that that independent station must be car-
ried on the local cable system.
That provides access to that independent station to all those
cable subscribers and indeed that and not the financial interest
and syndication rules is one of the primary reasons for the growth
of independent television stations over the past decade.
Mr. WAXMAN. In 1970, the cable audience was 10 percent; in
1981, it is 17 percent. Do you believe that is solely because of cable?
Mr. Cou~orF. No, not solely cable penetration. It is the result of a
number of factors. It is a result of the increased market for televi-
sion advertising which has encouraged development of a number of
new UHF independent stations. It is the result of increased and im-
proved technologies so UHF receivers are built more comparable to
the VHF portion of the receiver and the viewer can receive that
UHF station more easily.
PAGENO="0863"
861
It is a result of the cable penetration, which I mentioned, which
has increased since 1970 from 5 million households to approximate-
ly 30 million.
Mr. WAXMAN. That is 3 percent, isn't it? The cable share is 3 per-
cent.
Mr. COLLOFF. That is not the issue though, Congressman. I
thought we were talking about the independent stations' increase
in viewership and what I argue is that indepen~ent station viewer-
ship has increased because of these factors, one of the most impor-
tant being the strength of cable and increased reception' capability
that the spread of cable has granted.
Mr. WAXMAN. If I might stop you to challenge, to understand
you, what you are saying is we have seen an increase in the view-
ing audience of the independent television stations. I understand
your testimony to be that that is not a shift over to the independ-
ent stations; it is a shift over because of cable bringing in the inde-
pendent stations. If cable is only 3 percent of the viewing audience
how can you maintain that the success of the independent stations
is because of cable?
Mr. Cou4o~. They are separate numbers, Congressman. The per-
centage of cable and percentage of independents viewing is sepa-
rate.
Mr. WAXMAN. Do you think your competition is from independ-
ent television stations and isn't that your fear and why you want
the rule changed?
Mr. COLLOFF. Competition for the networks is coming from all
sorts of sources. It is increasing at a ever increasing rate. Indeed
that is one of the reasons that we believe that these rules are
anachronistic, because there is an increase in competition, there is
an increase in competition from cable, from independent stations,
from pay cable, from a variety of sources. And I might note that
the comparisons have sometimes been made to the issue of adver-
tising rates and continued network share of prime time viewing as
a way of saying that cable really isn't an issue. That is not the
question, though.
Mr. WAXMAN. I have only a limited period of time. It is your con-
clusion that because of competition from an array of sources that
you therefore need repeal of these rules so that you can accumu-
late more money in order for the networks to compete for quality
programming.
Mr. COLLOFF. I wouldn't put it quite that way, Mr. Congressman.
Mr. WAXMAN. Isn't that what you are saying?
Mr. COLLOFF. No, we are not saying that. Let me respond.
Mr. WAXMAN. Be brief because I only have a short time.
Mr. COLLOFF. We are saying the competition from increasing
sources means that in order for networks to be able to compete in
the quality of programming, we need to have the benefit of the
same downstream revenues that the motion picture production
companies and everyone else in this business has.
Mr. WAXMAN. That translated, to everyone who might not follow
it carefully, is downstream revenues meaning more money to the
networks because you would have the syndication rights and have
a financial interest in the program and the network will accumu-
late more money.
32-540 O-84--55
PAGENO="0864"
862
Mr. COLLOFF. It means the ability to put better quality program-
ming on the air.
Mr. WAXMAN. That may or may not be true. All you say is the
networks need the rules to accumulate the money and then you
say we should trust you because you will put it into quality pro-
gramming. That is the issue we need to test.
I would like to hear Mr. Blumenthal's response to that and I
would like you to particularly address that factor in terms of the
impact the programming people can expect.
Mr. BLUMENTHAL. Something Mr. Colloff was saying was confus-
ing and it sounded like a slightly different network position. Their
position has been that they are a competitive disadvantage in
buying programs vis-a-vis the various pay systems. That is what
the line has been up to this point. I see here something different
being said today, that cable is now a competitive threat because it
is allowing in some fashion the independent stations to reach the
marketplace.
Mr. COLLOFF. No.
Mr. BLUMENTHAL. Let me finish; that is very healthy for the
competitive marketplace. I will also vehemently disagree that pay
cable now or for the foreseeable future in terms of acquisition of
original programing is anywhere near competitive with the net-
work levels of buying and what they can afford. I would also like to
say that I sit in on many creative meetings and meetings that
relate to economics of networks and there is constant pressure at
the networks for us to revise shows such as "Hill Street Blues" to
meet the economics that the networks can afford now, to simplify,
to remove cast, to make it more the same as other shows.
We are investing a lot of money in that show that is not covered
by the network because we believe in doing something that is dif-
ferent and we will continue to do that as long as we have an eco-
nomic incentive to control our own destiny with this product.
Mr. WIRTH. The time of the gentleman has expired.
Mr. Markey.
The Chair will be recognizing members in the order in which
they appeared, and the record is that it is Messers Waxman,
Markey, Oxley, Tauke, Bryant, Rinaldo, Swift, Bates, Broyhill, and
Collins, in that order. I just thought I would let the members know
what the order would be.
Mr. Oxley.
Mr. OXLEY. Thank you, Mr. Chairman.
Tom Shields wrote an interesting column in the Washington Post
last week, I think, in which he made the point that despite the now
famous comment by former chairman Minow that television was a
vast wasteland, in retrospect the late 1950's and through the
1960's-at least comparing that television quality to today's qual-
ity-Shields came down on the side of the fact that it was perhaps
the golden age of television back in the 1950's and 1960's and
things have gone downhill since then.
He didn't specifically mention the rule that we are discussing
today. I wonder if you gentlemen would care to comment on that
particular column. And second has the rule itself had any effect on
the quality of television programing in the last several years?
PAGENO="0865"
863
Mr. COLLOFF. I did not see the column. Are you indicating Mr.
Shales advocated the view that indeed the golden age of television
was in the fifties and sixties?
Mr. Oxi~y. I believe that was the gist of his comments.
Mr. COLLOFF. That is very interesting because Mr. Shales has in
other columns said the rules should be retained. It strikes me as a
bit of a paradox if one believes that the golden age of television
was in the era before the rules were in effect to then say that "We
want the rules retained."
Mr. OxLEY. Just to clear that up, he never made a reference in
the column to the rule whatsoever. It was simply a comparison of
what he considered quality versus quality in the different decades.
Mr. COLLOFF. Without dealing with Mr. Shales because he has
written prior to that in strong advocacy of retention of the
rules--
Mr. OxI~Ex. I am aware of that.
Mr. COLLOFF. But without dealing with him in particular, I think
this irony is there, that there are many who say the golden age of
television was 10, 15, 20 years ago and they are the same people
who say, "We have to retain the rules." If the rules have had all
these wonderful effects which supposedly they have had, why was
the golden age of television in the fifties and sixties?
Mr. LEAR. Because, Mr. Colloff, the networks didn't control the
golden age of television. It was in the hands of the advertising
agencies who were more or less in control of the creative process
and there was no important syndication. In the fifties-I was in tel-
evision in the fifties-what we did was live, there was absolutely
no syndicatable product from it, there was no syndication and my
destiny was controlled by the J. Walter Thompson agency.
Mr. COLLOFF. When the networks could acquire the rules-be-
cause there were no rights-but the networks by and large did not
acquire the rights. They acquired syndication rights in only a small
minority of programing. Contrary to some of the scare stories that
have been thrown about during this debate, the networks will not
acquire syndication rights in all programing if the rules are re-
pealed.
These are, as I said before, these are big healthy companies, per-
fectly capable of taking care of their own interests.
Mr. LEAR. CBS was not interested, as you say, in acquiring syndi-
cation in their benign fashion because as the rules were coming
into place, "All in the Family" was just about going on the air and
as a matter of fact, we were in court for 3 years over this, and
before we could have control of our destiny in terms of syndication,
they spun it off to Viacom and "All in the Family" is still, for 35
percent fee off the top, off the gross for the handful of telephone
calls it takes to sell "All in the Family," Viacom retains all of that
income.
Mr. Oxu~y. Mr. Segelstein.
Mr. SEGELSTEIN. I think the fifties were a lot more golden be-
cause we were 30 years younger and I was in television, too.
They were different and to a very large extent, except for the
few dramatic shows we remember, "Playhouse 90," which was
not-incidentally, I was in an advertising a~ency so I mi~ht accept
Norman's comment as a positive one, but `Playhouse 90' was not
PAGENO="0866"
864
an agency-supplied show and neither was "Studio 1," if I recall, but
there were some others.
Except for those few dramas and live drama at that, within the
limitations of what one could do in a TV studio most of the other
stuff was not as good as the kind of stuff that MTM and Norman
Lear's company produces today, nor was it adventurous, although
they were golden because a great many young people came into the
industry out of theater and out ofschool and became the drama-
tists and producers of today.
Mr. OxiFY. The talent was better then, you mean?
Mr. SEGELSTEIN. No. I think we are getting good new people. But
some of those who came from that period are the kingpins of today.
Day in and day out, prime time television is better today than it
was in the so-called golden days. Maybe we ought to look at sched-
ules to compare them.
Mr. Oxi~y. Thank you very much, Mr. Chairman.
Mr. WIRTH. Mr. Tauke.
Mr. TAUKE. Thank you, Mr. Chairman. You cannot serve on this
subcommittee very long under the leadership of the chairman with-
out having a lot of discussion about diversity. His comments about
diversity earlier struck me and then I noticed in the testimony
from CBS, "The record is clear," they say on page 4:
That the rules have led to significant reduction in the number of sources of prime
time entertainment series programming-from 65 before the rules to 47 today-and
to a reduction from 66 percent to 48 percent in the percentage of series supplied by
independent production companies to the networks.
First of all, if I understand correctly, if only 48 percent of the
series are supplied by independent production companies, that
would seem to suggest the rest are from the networks. Obviously
that is not the case. What is the problem?
Mr. C0LL0FF. What I meant to imply was the rest are from the
major motion picture producers, MPAA members either alone or in
combination with independents. I was trying to draw the distinc-
tion of those coming from truly independent production companies
as opposed to those funneled through the major studios.
Mr. TAUKE. How do you define independent versus a major
studio?
Mr. COLLOFF. The six major studios are members of MPAA.
Mr. TAUKE. What are those six?
Mr. COLLOFF. Columbia, Fox, Warner, Universal, Paramount,
20th Century, I guess.
Mr. TAUKE. Mr. Lear or Mr. Blumenthal, how do you react to
those statistics?
Mr. BLUMENTHAL. Well, I don't know where the statistics came
from, over what period of time they came. My understanding is
that they were a snapshot of a week of programing, an isolated
week of programing.
Mr. TAUKE. Let's ask.
Mr. COLLOFF. I can tell you, the figures came from ICF, the con-
sulting firm hired by the Committtee for Prudent Deregulation,
which supports continuation of these rules. They were not a snap-
shot. As I understand it, they were comparing the situation during
the period from 1964 to 1971, which was before the rules came into
effect, and from 1972 to 1982. So they were a broad period.
PAGENO="0867"
865
I would say that we did not generate this information. This infor-
mation came from the other side on this debate.
Mr. TAUKE. Thank you.
Let me get back to Mr. Blumenthal.
Mr. BLUMENTHAL. I have two points. One, my understanding is
they are a snapshot of 1 week. Two, Mr. Colloff is also not report-
ing that over the period of time that he is showing us that inde-
pendent production supply has gone down, so have the prime time
network hours available to outside program suppliers gone down.
Now, I don't have at hand the percentages, but it has gone down
substantially over that period of time.
Mr. COLLOFF. These are percentage figures; which would be re
flected----
Mr. TAUKE. Mr. Colloff, he is talking about percentage of series
supplied. It seems to me the strongest case that you have made
today and in other discussions is that you are getting creativity
from independent people. You get diversity. This seems to fly in
the face of that.
Mr. BLUMENTHAL. Well, again, I am not a numbers man. I can
tell you in terms of the number of people and individuals going
into independent production companies. I can rattle a number off
on my hand to you that were not around 2 or 3 years ago.
Mr. TAUKE. You are saying this conflicts with your assertion?
Mr. BLUMENTHAL. In terms of practice out in California where I
am based, I can tell you that it conflicts with the operational prac-
tice out there. There are people that I assume their names would
mean things to you by their programing, people like Gary Gold-
berg, Steve Kennell.
Mr. TAUKE. Let me interrupt and go to another thing that trou-
bles me and this is this whole financial interest business. I under-
stand you are concerned about the syndication, but I don't under-
stand how the financial interest rules, the change in 1~hose rules
fundamentally affects your bargaining position as a producer with
the network.
As I understand it today, you have to go in and get the network
to run your program. If the network is going to run, say, "Hill
Street Blues,' you are going to have to meet all their requirements
about appealing to various groups and so on or I take it they won't
run your program. How does their desire to have a financial inter-
est or their ability to have a financial interest affect them?
First, why in the world would they want a financial interest in a
program losing $100,000 per series? Maybe I should be asking possi-
bly that naive question.
Mr. BLUMENTHAL. I think it is a very good question. Because they
have no intention of sharing in that deficit. I will continue, and
they will make sure I will continue to pick up the full deficit. Down
the road 5 or 6 years from now, if there is a marketplace that will
buy "Hill Street Blues" in syndication and that deficit is recouped,
and they may not even let me recoup the deficit before they start
taking their piece of the action--
Mr. TAUKE. Let me--
Mr. BLUMENTHAL [continuing].-I venture to say they will be in a
very enviable position of not sharing the deficit and reaping the
benefits probably before I do.
PAGENO="0868"
866
Mr. TAUKE. How do you get a financial interest without sharing
the deficit as well as the profits? I have been looking for that kind
of deal myself.
Mr. BLUMENTHAL. I think you ought to look at some of the prac-
tices that existed prior to the rules. That is exactly how it turns
out. They did not share, they do not offer to share advertising reve-
nue with the supplier. We might be talking a whole different ball-
fame here if they would ever take us up on any requests to say,
`Let's throw ad revenue in the pot and you guys throw back in
syndication revenue and let's split it up."
I venture to say if you ask Mr. Segelstein or Mr. Colloff whether
they would ever think of sharing ad revenue, they would probably
look at you like you were crazy, as they look at us. Why don't you
ask them that question-or I will ask them that question.
Mr. TAUKE. I am still a little confused but let me back up a
moment to the original part of the question. That was a tangent,
and I know I am going over time, but just explain to me why, how
the financial interest rule, repeal of that rule changes the bargain-
ing position that you have vis-a-vis the networks.
Mr. BLUMENTHAL. I would tell you what it does on a day-to-day
basis. If you or the FCC lift the financial interest rules, they will
acquire it. I am telling you it is a given. With that given, they will
now be in greater control of our programing than they now are.
We will basically be their ploys. Right now, Norman, us, other in-
dependent producers have a fighting shot at independence because
we have some clout. When we are their ploy, we will not have it.
Mr. TAUKE. Where will they get the program if they don't get it
from you?
Mr. BLUMENTHAL. They will get it from us, from Norman or from
whoever will supply it but it will not be as diver~e as it is now and
as we are trying to make it in the future and believe me, all of the
economics will turn out to be that every half hour show will be pro-
duced for the same cost because they are not goi~g to spend any
more money, all half hour programs will be the saii~ie cost and they
will all look the same.
Mr. LEAR. Another reason, Congressman, why it is analemma to
me that a network would seek financial interest, "All. in the
Family," I might say and I believe that "All in the Family" took
me 40 some years living with that father to know who Archie
Bunker was. I prepared all of my life as a writer to write that show
and anything else I may come up with. Why should the network
which makes its money, which is in the business of conducting the
operation of the theater and selling the advertising revenue and
doing its business that way and has profits escalating year after
year after year, at public knowledge, why should that company
come to me and ask me-not ask, insist upon because I have only
one of three places to go, insist on a piece of my show?
Mr. TAUKE. Is your bargaining power so weak that you would
have to give them a piece of your show? I guess that is what I have
trouble understanding. Why is your bargaining power changed so
substantially?
Mr. LEAR. Because the chances are very good that when you go
to one network, two others have already turned it down. "All in
the Family"-the gentleman on my right neglected to say that Mr.
PAGENO="0869"
867
Segeistein, when he was one of the two or three people that picked
up "All in the Family," that same network had turned it down 3
years before. They picked it up 3 years after I had been pounding
the pavement with only three doors to go to.
Mr. TAUKE. There is more programing than there are slots?
Mr. LEAR. You bet there are, and there are people willing to give
100 percent of anything to get it on the air. If the network can
have 100 percent of something, my guess, and based on experience,
is that they will look for it.
Mr. COLLOFF. Based on experience, that will not happen. Based
on experience, the networks acquired virtually no syndication
rights from the major studios, and I would assume that at this
point Tandem and MTM have similar bargaining power to the
major studios. The networks acquired virtually no syndication
rights from the major studios before these rules came into effect.
When we acquired financial interest, we acquired a financial in-
terest which averaged about 25 percent. Again we are being given
stories that if the rules are repealed we will acquire everything; we
will own everything which presumes that we are going to have an
unequal bargaining posture with our program suppliers.
Everybody who looked at this issue, including economists hired
by the studios to defend their position, have conceded the networks
don't have that type of buying power. If we are going to be in open
and fair negotiations with these folks, repeal of the rules will not
mean we will suddenly control everything.
Mr. WIRTH. The time of the gentleman has expired.
Mr. Rinaldo.
Mr. RINAUO. Thank you, Mr. Chairman.
I would like everyone to respond to the following question, the
program producers have argued that the network will suppress cre-
ativity if the rules are repealed and that the quality of network
programing will decline as a result.
Don't the rules really help producers fight off network demands?
Mr. Coloff?
Mr. COLLOFF. I would argue that the issue of creative control is
not really related to the financial interest and syndication rules, al-
though those on the other side of the debate have wanted to create
that connection. The fact of the matter is that there is and always
has been and always will be a certain amount of tension between
program producers who have a specific objective and networks
which have to worry about an entire schedule and satisfying tastes
of a broad audience.
Now there is going to be that tension, that tension was there
before the financial interest rules were in place, that tension has
been there during the financial interest rules and that tension
would be there if the financial interest rules were withdrawn.
The fact of the matter is that we, the networks, have and will
continue and frankly, in my view, should continue to have a role in
creative development of network television series. We put up the
money for it. We may hear a lot of talk about deficit financing on
the part of MTM, but if you look at what the major film studios
say when they talk to the SEC in their 10-K reports or reports to
shareholders, that is not the story.
PAGENO="0870"
868
What they are saying is the networks basically put up all the
money that is needed to develop the series. Columbia Pictures' 1981
report says, "In general, properties are developed at the request of
the network and the network's license fees cover substantially all
of the cost of development and production of the pilot and resulting
series."
Lorimar: "The networks generally finance the development and
production of concepts and programing accepted by them. The com-
pany has been able to secure network financing for the develop-
ment and production of many of its properties."
We have a large financial stake in these programs. Therefore, we
have to have some creative involvement.
Mr. RINAu~o. I would like to go down the line because I only
have 5 minutes.
Mr. SEGELSTEIN. I will be brief. I think the concept that the net-
work inhibits creativity just doesn't apply. If anything, the network
would insist on the best creative people and on the most creative
shows, and I think it has been that way, and I think the people
sitting at this table are creative people who profited by that net-
work approach.
Mr. LEAR. If I understand your question, you are interested to
know why the rules help our bargaining power.
One walks into the network with all kinds of things contributing
to one's strength. The fact that Tandem, now Embassy, is a very
successful independent company, the fact that it has control for
some years since of "All in the Family," its future in terms of syn-
dication, it walks in with the strength of a corporate power. There
are so many things that go into that, though.
One of them is that particular fact. It also has the strength as a
result of that to make its own financial decisions.
I was in a situation, Congressman Leland and Congressman Col-
lins were part of a situation some years ago with CBS, as it hap-
pens in a show that we made that we thought CBS ill-advised to
air. We didn't think it was at all proper and worthwhile and would
do harm, as a matter of fact, to black people, certainly to black
people serving in the Congress, because it was about Congressmen.
We came in and decided to swallow that show and pay the costs
of that, and have the network not run that show. We were able to
do that by virtue of the fact that we were a little bit more of a Go-
liath to their Goliaths and this happens time and again. We have
swallowed other episodes that we didn't think were right to put on
because we didn't think they should go on.
Mr. RINALDO. The more I hear the testimony, the more I am
coming to the conclusion that what Congress is doing here is legis-
lating a business deal and, frankly, it isn't within my power, but I
wish I could take the four of you or four of somebody else and lock
you in a little room and say "Come out with something that is
fair."
Nobody here really-we are talking about the American public. I
think the chief sponsor of the legislation would agree, I don't hear
much about what benefits the American public from either side,
quite frankly.
Mr. LEAR. Mr. Rinaldo, that is all I consider I am here talking
about. We are talking about the diversity in television--
PAGENO="0871"
869
Mr. RINAIADO. Excuse me, I am reclaiming my time here. It comes
down to the bottom line which is-and I don't think we should
mince words about it-which way does which side maximize their
profits. And you know, I would have hoped that it could have been
worked out instead of going from one point to what we are doing
with the legislation, going 3600 right around to the other point.
I would have hoped-I always thought before this bill came out
that all you guys were friendly, nice people who got along with one
another. But I am finding out it is something like the Mideast situ-
ation almost.
Mr. COLLOFF. If I might reply on the public interest issue because
I think it is important, and we have addressed it in our statements,
but if you look at it from our point of view, I can cite you example
after example of programming, not necessarily at the network
level. I will cite the example of a children's program which our sta-
tion in Philadelphia, a quality innovative children's program that
our station in Philadelphia wanted to put on the air.
They tried it, they found they couldn't continue it because they
were not allowed to syndicate that in a regional network to enable
them to get the financial base that they needed to produce a pro-
gram of that quality.
Now, that is an example to me of a specific public interest bene-
fit where the public is not now being served by the existence of
these rules and where the public would be served by the repeal of
these rules. I can recite numerous examples of this type of pro-
gramming which we cannot do because it is not economically viable
given the existence of these rules.
Mr. RINAU0. Yes.
Mr. SEGELSTEIN. We have had some time constraints, and you
may think that we are using the same words-and indeed we are-
differently from the gentleman here and the gentleman here. I
think maybe we are losing sight of where we started out, as I
would like to remind you.
I don't know that we will find answers today as to whether diver-
sity in programming is different from diversity in product and
talent pools, whether warehousing for independents which emerged
earlier is going to be resolved in this session today, whether crea-
tivity lies in joint ventures or in separate companies, whether the
siphoning of audience for cable is different from siphoning of the
talent pool et cetera, and that is why I was trying to suggest it is
complicated, and there has to be a great deal of work and evidence
accumulated, and it might be that if some of the things we say are
at odds with one another, it might better be left to a kind of analy-
sis and judgment and looking at the proposal and getting some
time to study some of the things and some of the seeming contra-
dictions here today.
Mr. WIRTH. The time of the gentleman has expired.
Mr. Swift.
Mr. SwIFT. Thank you, Mr. Chairman. I think the independent
producers really put their best feet forward. Take you two ~entle-
men and your outfits and people that produce ~~M*A*S*H.~ You
have delighted me for hours and years.
Who produces all the junk that is on television? Is that all pro-
duced by the networks?
PAGENO="0872"
870
Any of you who know?
Mr. LEAR. Can I speak to that, Congressman?
Mr. SWIFT.. Yes, please.
Mr. LEAR. A lot of the junk is produced by the same people who
produce the things you care about and a lot of the junk is produced
by people who don't have the talent to produce anything better,
and some of the junk-and it is important junk-evolves as a
result of the way the networks conduct their business.
I will hypothecate one example. This is not a matter of charts
and graphs. You will find no figures in any book for this, but I will
tell you how the system works.
Somebody has been hired to write a very good episode of a series
or a movie of the week. The network programing executive is sit-
ting with the writer or producer and suggests that in this scene, we
are going for 8 minutes here, and there just is no action.
The writer may say, here are two people sitting in an automobile
having an intense conversation, everything we know about the
characters comes to a head here and the plot is going to take a fast
turn at the conclusion.
The programing producer says, but they are sitting there for 3½
minutes.
Mr. SWIFT. I think you are describing the situation I am in. You
are using up my time, and I am willing to let you complete this
8-minute scene with no action--
Mr. LEAR. The writer, in order to supply the action, will have the
driver of the car go off the side of the road for a moment, cause an
oncoming car to spill over the side of ~the precipice, bodies flying
into the air and a car in flames.
This kind of thing happens for the need to provide action all the
time in dramatic fare and that is the way things evolve.
More violence than you care to see, more sex or smarm than you
care to see often comes as a result of the network's need to have
something sensational on the air.
Mr. SWIFT. You are saying there are independent producers who
do that, but you are blaming the network?
Mr. LEAR. If I were running a theater, I would put in that thea-
ter what I wish to run.
Mr. Swin~. But you are describing the influence that is there
now, are you not?
Mr. LEAR. Yes. I am saying they are responsible for the things
put on the air.
Mr. Swirr. If we have good programs and bad programs under
the present system, and we go back to the golden age of live drama
and we found some were produced by networks-who was it sug-
gested the great arbiter of our taste was J. Walter Thompson?
The golden age of variety, and there were rotten programs, what
we get down to it seems to me is it certainly benefits your particu-
lar side of this argument to couch it in the network's profit need
versus your intense interest in creativity.
That is the way I would try to postulate the argument, but what
this is about is money. Nothing comes before this committee that
doesn't have to do with somebody who wants a lot of money and
somebody else who has got it.
PAGENO="0873"
871
Mr. LE4R. I have no shame in saying that in this free enterprise
~ystem, I have gone as far as I can to build a company called
Tandem. I couldn't be more proud of it.
Of course, I am talking in addition to quality and taste and judg-
ment.
Mr. Swivr. There is nothing wrong with that. The point I am
trying to make is what we see before us are four honorable men
who are not objective presenters of information, but are advocates
for positions on which a lot of money rides.
That is perfectly appropriate. We have that kind of testimony all
the time.
We usually add to that testimony independent testimony that
can provide us with information about what those economics are,
what the form of the industry is going to be changed to, when we
have that information and when we fully understand it.
My point, again, is we are having none of that testimony present-
ed to us. Your testimony is helpful, it is a part of the story. I really
hesitate to disagree with my chairman when he says this is simple.
Certainly the bill is simple, but what it is going to do, the imple-
mentation of that bill may or may not do to the industry is not
simple to understand at all and I, for one, really am in a very diffi-
cult position to call it.
I don't know how those economics break down. I don't know
what the effect is going to be on the industry and I don't have the
information on which to base a judgment as to how the public in-
terest is best served in that regard.
Mr. WIRTH. The time of the gentleman has expired.
Mrs. Collins.
Mrs. COLLINS. I have sat and listened to the testimony, but before
doing that I happened to have done a little traveling and investi-
gating this matter myself before I decided which way I wanted to
go on this piece of legislation.
As a result, I talked to independents and networks and tried to
get some kind of feeling for the importance of the legislation.
As I talked to both those groups, one thing stood out in my mind,
the systematic visibility of ethnic minorities among both of them.
It seems that is something that ought to be worked on. I see very
few programers who are ethnic, minority ethnic; anyway, very few
programers, very few suppliers, very few writers. It goes on and on.
So my first comment, rather than a question, is going to be, I
hope that this will change in the future, and that is one reason I
think I decided to cosponsor this.
I think in another 5 years, we will see what is going to happen, if
anything, so a 5-year moratorium, I think, is a good idea at this
time. I have heard reports that the repeal of the rule is going to be
an impact on the growth of a number of independents.
Is that accurate, Mr. Segeistein?
Mr. SEGELSTEIN. I believe there will be-that these rules have re-
stricted the number of independents, by putting them under the
major producers, and I believe that repeal of these rules will allow
some new producers with network risk sharing to come into the
marketplace-yes.
Repeal of these rules will help in increasing new, young, inde-
pendent producers.
PAGENO="0874"
872
Mrs. COLLINS. Mr. Lear, is that your view-either of you?
Mr. BLUMENTHAL I am absolutely on the opposite side of Mr. Se-
geistein. Right now, the networks are financing under our very
noses the talent that we developed.
They are right behind us every time we developed a new writer
in making exclusive deals with networks. As has been said before,
they have the right to program right now 2½ hours of time that
they can produce themselves.
They are in the posture of beginning to do that. They have all
made recent deals with talent, putting them under exclusive net-
work holds.
I would ask how many people of ethnic minority they have put
under contract to the networks to support that they can do right
now. I would ask you what goes on in casting sessions when you
are in the pilot development stage.
The guild several years ago instituted collective bargaining
agreements to prevent us from delegating approval series actors
and directors to the networks. The networks disavowed that and
paid no attention to it which creates problems in the area that you
are interested in at the moment.
We all have great difficulty and we are all working on the in-
crease of minority employment and programs to develop and train
creative people in that marketplace because they haven't been
given that opportunity.
Mrs. COLLINS. Mr. Lear, do you think that there is a fear among
independents that if there is this repeal that the networks will
withhold programs from independents and engage in conspiracy or
antitrust action?
Mr. LEAR. I don't know that I would care to be that harsh. I
think three people making the decisions for what will appear with-
out equally-weighted or heavily-weighted independent writers, pro-
ducers, directors, who have their own ideas, their own thinking,
their own diverse views is a situation that does not bode well for
the American viewer.
Mrs. COLLINS. Why was the rule made in the first place in 1970?
Had this kind of action happened prior to that time?
Mr. BLUMENTHAL I am sorry. I didn't understand the question.
Mrs. COLLINS. Before 1970, there was no syndication rule; is that
correct?
Mr. BLUMENTHAL Correct.
Mrs. COLLINS. Was it the antitrust suit brought by the Justice
Department in the early 1970's that brought about the need for the
kind of' rule that we are talking about?
Mr. BLUMENTHAL I think the fact that the marketplace was not
working in a competitive fashion vis-a-vis the network and the sup-
pliers to the network caused the FCC and then the Justice Depart-
ment later to get into this.
You must remember that the ad agencies, when they were the
buyers of the programing, and the networks were a common carri-
er sellin~ time, it was a competitive marketplace.
I won t comment on what we might have thought of the pro-
graming, whether it was the golden age or not, but it was a com-
petitive marketplace. When the networks pushed the ad agencies
PAGENO="0875"
873
out as buyers and there became only three buyers is when the com-
petitive marketplace ceased.
These rules became an island of competition in a vast sea of reg-
ulations vis-a-vis regulations.
Mrs. COLLINS. I think you have hit on an important rationale for
the Commission action in 1970. It was not a retrospective action. It
was a prospective action.
They feared that network dominance over their suppliers would
lead to some distortions in the program buying marketplace.
Whether or not it existed at the time, in 1983 virtually everyone
who has looked at these rules, as I mentioned before, including the
economists hired by the motion picture studios, and independent
television stations, virtually everyone agrees that network buying
no longer exists if it ever existed.
So whether or not that rationale was a correct one in 1970, virtu-
ally everyone agrees it is no longer a correct rationale in 1983, and
that undercuts the need to retain these rules.
Mr. LEAR. Mrs. Collins, we are talking about independent produc-
ers and companies, and you may have some interest in independent
stations and on the next panel Lucy Salhany will give you some
great expertise in that area.
Mr. SEGELSTEIN. May I add, because I sensed that you were
asking about independent stations, and it touches on warehousing,
NBC is clear that it has no intention of warehousing and we will
not be warehousing.
Personally, I have always thought that the issue of warehousing
is a phantom threat and fear, and there is no evidence that there
was any warehousing or lack of sale to independents.
Mr. WIRTH. Mr. Leland.
Mr. LELAND. Thank you, Mr. Chairman.
I wish that I could be as kind as some of my colleagues have
been on the issues that have come before us. I am particularly in-
terested because of the lack of diversity in programing. We are
talking about children of ethnic minorities, and I am very con-
cerned, as I have expressed to you individually, and in another
forum like this, I am concerned that nothing is really being done.
The people who I have been working with out in Hollywood are
black writers, producers, directors. They are owners of independent
production companies themselves.
They have not the opportunity that Mr. Lear and Mr. Blu-
menthal have. They are concerned that nobody really cares about
them, and they are putting pox on both houses.
I am on the side of the independent producers because I think, as
I have stated before, that the independent producers are the lesser
of the evils.
I hear you pointing your fingers at each other. The independent
producers are saying that the networks don't want to show any
dramatic series with black actors and actresses in leading roles,
Hispanic actors and actresses in leading roles, because-well, I
don't know why.
For whatever reason. The networks are saying, well, the inde-
pendent producers don't produce or don't create these roles for
these folks and then we get word that the networks are hiring
these people who are saying-these independent consultants who
PAGENO="0876"
874
are saying that the audiences won't watch a dramatic series where
there is a black actor or a black actress or Hispanic actor or actress
in a leading role.
Who is to blame? What is going on?
There is a lot of garbage on television.
I get upset with what I see on those three stations. The independ-
ent stations are just showing what has been produced for the net-
works and has failed for one reason or another because of Mr. Neil-
son, whoever he is.
I am concerned about what is going on in television, because in
the future generations are going to be affected by the most power-
ful medium in the society. Young black and Hispanic children are
going to grow up thinking that their only role models are serious
white people or performers like Mr. Jefferson.
Where is the balance? Engage your colloquy on that. What is
going on in television?
Young white kids are going to grow up believing that all black
people can do is shuffle and scratch their heads and make. jokes
like Mr. Coleman on "Different Strokes."
It really bothers me. I got on this subcommittee to address this
very issue, as a matter of fact.
Mr. Segelstein.
Mr. WIRTH. Would the gentleman yield?
Mr. LELAND. Be glad to yield.
Mr. Wia~m. I found myself so sympathetic with the position of
the gentleman from Texas and the gentlewoman from Illinois.
What we have forgotten about in too much of this debate is the
impact of television and the possible positive impact that television
can play.
An enormous amount of research has been done on the impact of
television on kids, and the television people come back and say it
really doesn't have a negative impact.
Why aren't they talking about what kind of a positive impact TV
has? If kids are spending more time in front of a television set than
in school, wouldn't you think there would be a feeling of pride for
the television people to say we are having a positive impact, not a
negative impact?
Mr. LELAND. I have a young kid sitting in my office now who-I
belong to the Big Brothers program, and he is sitting in my office
and making bad grades in school. The reason that he doesn't study
is because his mother is handicapped and she doesn't have a lot to
say about what he does when he gets home. He says he doesn't do
his homework because he likes to watch television all the time.
In light of what the gentleman said, I am concerned about what
was happening to the youth of our country and what is going to
happen to the youth of the future.
Mr. WIRTH. Would the gentleman yield?
Here we are in a situation where we . have one report after an-
other coming out condemning American education for what is
going on.
They focus on the quality of the teachers or the teacher/pupil re-
lationship. How many of those reports are also looking at what
other influences are so predominant in these kids' lives and the po-
PAGENO="0877"
875
tential enormous impact of this particular medium has not been
addressed.
I thank the gentleman for yielding.
Mr. Lear is getting very itchy and scratchy.
Mr. LEAR. I have a 5:30 plane to catch.
Mr. LELAND. Mr. Lear, if Mr. Segelstein doesn't mind--
Mr. LEAR. My wife is waiting downstairs. There are no heros in
this area. Everybody should be ashamed, independent producers,
networks, we should all be ashamed.
Nobody has done enough. I can only say, too, that I know where
the trying has occurred. Our company is one that has tried.
You can quarrel, if you will, with the Jeffersons, but it is there.
Nobody quarrelled with it very much the first few years.
Nine years, everything becomes cliche, stereotype. In 9 years
when an actor is exercising his vital abilities the same week after
week, because he has only so many and it gets to be stereotypical.
I love George Jefferson. Good Times was another attempt. We
are with NBC doing a movie of the week starring Howard Rollins.
It is a back door, as they say, pilot for a series. He plays a geriat-
ric specialist dealing with the problems of the elderly, so there are
two problems we had hoped to cope with, one, a strong black male
lead, serious, and the whole question of geriatrics, and the prob-
lems of the elderly.
We tried for several years to get a black soap opera on the air,
did not even-went past the business of causing a script to be writ-
ten, caused a script to be written and the bible for an entire season
and then staged it and invited ABC, CBS, NBC to look at it, totally
cast, totally staged. Couldn't sell it~
That decision is a network decision. I know other areas in the
creative community where people have tried to do things and per-
haps the networks have, too, but they will have to say so.
I can tell you where I know the trying has occurred. They will
have to tell you that they have tried and failed, too, as I perceive it
and as I have experienced it these years, I haven't seen them try.
Mr. LELAND. Mr. Segelstein?
Mr. SEGELSTEIN. Obviously, some of the trying Mr. Lear talks
about did take place on the networks so there is evidence of the
networks cooperating.
Fundamentally, without the ad hominem attack at the end, it is
hard to say that anybody is a hero in this matter. I think I see, as I
suggested to you in a conversation we had not long ago, that there
are changes, and I suggested that Fame was different and Hill
Street was different--
Mr. LELAND. Fame has been cancelled.
Mr. SEGELSTEIN. It was on for 2 years and I hear it will be on
again. Its auspices are not so important if it is on the air. It is now
recorded and if it works, it will be available to play, but I do think
it represented a major step in our willingness or ability to use a
bunch of attractive young kids.
I don't want to make that an illustration of the wonderful things
we are doing every day--
Mr. LELAND. That is the point. Years ago there was a program
hosted by Bill Cosby and it showed all the stereotypes. It was spon-
sored by Xerox.
PAGENO="0878"
876
This is when black people were burning down communities be-
cause they were upset because they didn't have the same civil
rights that everybody else did.
The response of a network was to give an uninterrupted series
sponsored by Xerox, hosted by Bill Cosby, and they showed the
stereotypes of black people, absence of black people in advertising
and programing on television. All of a sudden that network had
made a statement-this was in the sixties-had made a statement
that, well, maybe things are going to be better.
Sure, black people have gotten token jobs on television, in series,
token jobs in advertising, bit parts and that kind of thing, and
there have been substantial changes in the area of advertising be-
cause the advertisers realize that 20 percent of the viewing audi-
ence is black and the buying audience is black and black people are
spending $145 billion a year in this country.
The question is why is it such a big deal to have one show like
Fame, and that is a giant step in the 1980s?
Mr. SEGELSTEIN. I don't know that I want to add much to what
Norman said. In fact, more can be done, and yet I mentioned
Fame. There is a morning show hosted-I don't want to seem de-
fensive about it; it is beginning to sound like I am-Bryant
Gumbel is the chief host of the Today Show and that is another
example.
Mr. LELAND. Fantastic, but Jesus Christ, how long do we have to
wait to be on an even keel? We have a survey that shows that 94
percent of NBC's 1,145 roles with white actors and white actresses,
94 percent were white actresses and white actors, 6 percent were
black. God knows what happened to the Hispanic. Are you really
reflecting what life in American society is all about?
I picked up some kid who had just gotten back from Israel from
my district in New York. They told me that people over there are
still rather befuddled that black people would show up in Israel.
The issue is that they were asking when they said that they were
from Texas, are you from Dallas, and how can you be from Dallas
if you are black, because they have watched "Dallas" on television
and there has never been a black actor on "Dallas" or "Dynasty."
The only thing that people can remember where black people
played significant roles was "Roots."
"Roots" made millions of dollars for ABC, and all of a sudden
ABC tried to outdo it with another white show and failed miser-
ably with "Winds of War." Not one black actor, not one black face
in the whole series of "Winds of War." So what is the big deal?
Why is it that you guys are not really doing what is necessary to
reflect American life, and I do not mean a shuffling, scratching
black person on television or a guy you have to knock out who
needs to fly in an airplane every time like Mr. T?
Mr. SEGELSTEIN. I think that you are asking two questions here,
and I was responding to the incidence of reality based minority
characters on television, and I believe that in some of the things
that all of us here at the table, there are some things we agree on.
As Norman said, perhaps we are all guilty. I then added that there
have been some very notable changes in the MTM productions, and
I do not know, Mr. Leland, to what extent you get a chance to
watch the entire 22 hours on all three schedules of prime time. But
PAGENO="0879"
877.
I think the use of characters in a reality situation in "Fame" and
in "Hill Street" and hopefully in "Bay City" and in "St. Else-
where" does augur a change in the use of minority characters in
drama. As I once said to you, it is a lot harder in comedy, where
there are certain other kinds of dramatic variables at work. So I
think there is change. As in the world, we have not really come to
a wonderful solution.
The second part as to the availability of access for young produc-
ers, I think that is a lot tougher, and there I think we have done a
worse job than with performers and with shows. It is tough to
break in. It is tough to break into the big leagues anywhere. I
think perhaps in some cases we are as culpable as the major stu-
dios. In other areas I think we have done a better job. There are
black programers at NBC and they are in important decisionmak-
ing roles and I think that will help.
Mr. LELAND. My time is up, and I hate to have had the emotional
response that I gave you, but let me say that I have been meeting
with Sidney Poitier and Brock Peters and those guys who are
struggling not for themselves but for all Americans, Sidney Poitier
said 15 years ago when he was hot if he had been as aware as he is
now maybe he could have made a difference. He is going to spend
the rest of his life working to make it different for writers, direc-
tors, people behind the cameras even.
Are you guys willing to sit down and talk? You guys are power-
ful people. You program America. Are you ready to reprogram
America, is my question.
Mr. SEGELSTEIN. I think we should give it a shot.
Mr. LELAND. Let us give it a shot. Let us go for it.
Mr. WIRTE. I thank the gentleman from Texas.
The Chair now recognizes one of the prime sponsors of the legis-
lation, the gentleman from California, Mr. Moorhead.
Mr. MOORHEAD. Mr. Segelstein, you made a comment a while ago
that interested me. You said that you believed that if these finan-
cial-interest rules were done away with, more producers would
come into the business. I cannot understand how taking part of the
money out of the producers' share and also taking control of the
programing to a greater extent would encourage more people to
come into the business.
Mr. SEGELSTEIN. Well, I do not know that I would characterize it
quite the same way. What I was saying is that if there were more
players to help new producers in addition to the major studios and
the major production companies as auspices for new young produc-
ers to seek risk-sharing arrangements, three or whatever, more
players should make it better than fewer players in the business of
helping. Now, I think that when an independent goes to a major
motion picture studio it is hard to say that he retains syndication,
because I think that is the first thing that he gives up to the major
motion picture studio. But he does have some participation, and I
do not think there will be much of a difference in the way a young,
independent producer, wherever and however he is housed will
make a deal. He will just have more choices to make those deals.
Mr. MOORHEAD. I wonder just exactly how much choice he will
have. Right now the networks already have a tremendous voice in
what goes on television. You make your choice among the pro-
32-540 O-84--56
PAGENO="0880"
878
grams that the various producers come to you and try to sell to
you. If you actually had a financial interest and you were perhaps
making more of the shows yourself and had greater control, would
that not restrict the number of people that were willing to venture
out and try to come up with new concepts and new ideas and a
greater variety of shows? The decisions would all be made by a
very tight group.
Mr. SEGEISTEIN. Well, it is not the way I saw it operate preregu-
lation, for example, and indeed I was a programer in the years
prior to regulation, and none of these-none of these were the proc-
esses. A group of us stood in front of a board and selected the best
among the shows we had, with our limited ability to make that
judgment; and the implications of who owned what, who brought
the shows, what were the profit shares on a deal basis, never en-
tered into the picture at all. The schedule was constructed entirely
in creative scheduling terms.
Mr. MOORHEAD. You mean you do not think that where there is a
financial interest that there is greater control than there would be
if there was not?
Mr. SEGELSTEIN. I think the nature of the network business is
that the best hit schedule, if you will, is the best thing in spite of
partial ownership or a piece of the syndication rights or of joint
shared-risk interest.
Mr. BLUMENTHAL. Mr. Moorhead, if I may, we are still talking
about, as somebody indicated before, an economic marketplace. I
find it very difficult to believe that network programing people,
who sit very, very close with their business affairs department
when schedules are getting set every year, and the figures are run,
that a show in which the network has a financial interest will not
be given greater credence than a show in which they do not. I
think you can bring in the business people of various types from
each network and find out how closely the heads of those depart-
ments sit in the programing decisions. They watch the pilot films,
they are involved in the programing decision, and they are sitting
there costing out an evening of programing and what it means to
the network when program selections are made. I think you can
find that out very directly from them. Also, I do not understand
how removal of the rules will allow the networks any greater free-
dom than they now have to bring in more independent writers and
producers to the business. If they want to do it now, they can, with
the rules in place.
Mr. MOORHEAD. Mr. Colloff, do you not think there is a lot of
what has just been said, that if there was a financial interest in
one particular show the networks held and there was another
show, perhaps of a little better quality, but not much, would the
networks not want to put on their own show or that that they had
a financial interest in?
Mr. COLLOFF. As Mr. Segelstein said, that was not what hap-
pened in the sixties before the rules took effect. The simple fact is
that the decisions being made by the networks as to which shows
they will put on their schedule are being made on the basis of their
expectation of getting an audience. The stakes are high, everyone
admits that, but the possibility of holding a small financial interest
in a given show is not going to tip that decision. What is going to
PAGENO="0881"
879
make that decision is what the networks believe will be an attrac-
tive show to the general audience which we are programing to.
That is what we are attempting to do, that is the basis upon which
the decision will be made, not whether a financial interest is or is
not held in a particular show.
Mr. SEGELSTEIN. Mr. Moorhead, may I-when Mel says he finds
it hard to believe, that is a kind of argument, I suppose. I am
saying something stronger, that in my years as a programer, some-
thing I no longer do, we never did make a decision that was based
on whether the network had a financial interest or did not, or had
syndication rights or did not, and frequently, almost entirely, we
never knew. The question as to whether we would make that kind
of decision-"Father Murphy" was a wholly owned NBC program,
and, when it failed to achieve minimum acceptable audiences it
was canceled in spite of the total ownership. So there is some evi-
dence that not every decision is based entirely on the financial in-
terest, but on the larger potential.
Mr. TAUKE. Would the gentleman yield?
Mr. MOORHEAD. Yes.
Mr. TAUKE. When we are talking about a financial interest of an
effort, how would the financial interest in a program stack up
against the amount of money you get from ratings? Would it be
worth your while to go with a less successful program even if you
had 100-percent financial interest in it?
Mr. SEGELSTEIN. I think obviously not. Our primary business, and
we are dealing with subtleties of aftermarket usage, the primary
business we are in is the business of the basic network schedule,
and decisions are usually made for that basic network schedule
that override all the other considerations.
Mr. TAUKE. How much money are we talking about-let us say
you have a successful series. It runs 6, 7 years. How much money
are we talking about if you have a financial interest, say 50 per-
cent in that series?
Mr. SEGELSTEIN. Mr. Blumenthal might be better able to tell you
than I.
Mr. BLUMENTHAL. Mr. Segelstein ought to be able to tell you
more accurately than I do, because he has shows like "Little House
on the Prairie" where he has 100 percent. They will dictate the def-
inition of profits. They will tell me how to define profits. So if he
tells me the ground rules for how that profit definition will read, I
can tell you.
Mr. TAUKE. You tell me how we ought to define the ground
rules-how much money are we talking about in a successful series
with a financial interest?
Mr. COLLOFF. I cannot give you a specific estimate, but the point
Mr. Segelstein made before is the key point, that whatever the ab-
solute numbers, the relative numbers are clear. The relative cost of
failure of a show on a network schedule is significantly higher, by
many times, as compared to whatever gain would be arrived at
from having a financial interest in that show, so that the program-
ing decisions are going to be made based on the success or lack
thereof of a particular show on a network schedule, not on whether
a network has or does not have a financial interest in that show.
PAGENO="0882"
880
Mr. BLUMENTHAL. That is just not the fact as it works now in
programing.
Mr. MOORHEAD. Then why are you so anxious to get that finan-
cial interest?
Mr. Cou~oFF. Because as I indicated before we believe that the
Government is imposing a restriction for which there is no existing
rationale, that there is no longer network buying power to coerce
the suppliers into doing things that the suppliers did not want to
do. I mentioned the example of the children's programing in Phila-
delphia, where the rules prevent us from doing things that are in
the public interest. The rules do not promote the public interest.
There is no economic basis in fact for those rules and therefore, in
fact, they should be repealed.
Mr. MOORHEAD. Can you tell me when there are dozens of these
companies all of which would give anything they could to sell a
show to you that you cannot control basically what the format and
a great deal of the content will be?
Mr. COLLOFF. I am not sure I understand your question.
Mr. MOORHEAD. There are lots of people that want to sell you
shows that are producing shows that no one ever buys. They are
anxious to sell them. Are you going to tell me that you cannot con-
trol to a great extent the content or the format of those shows?
Mr. COLLOFF. The control of the content of those shows is a col-
laborative process. Sometimes it is a smooth process, sometimes it
is not, but the goal is that it be a collaborative process.
Mr. MOORHEAD. You said a few minutes ago that you no longer
had the influence over the shows you would like to have.
Mr. COLLOFF. I do not believe I indicated that. I said that the
issue of creative control was not related to the existence or absence
of the financial interest rules, that there are other issues involved
in the question of creative control apart from the fact of whether
these rules are on the books or repealed.
Mr. WIRTH. The time of the gentleman has expired.
Gentlemen, we appreciate your being with us for a long and in-
teresting panel. We will keep the record open for any comments
you might like to make.
Our second panel this afternoon includes Mr. Paul Bortz, a con-
sultant to the American Broadcasting Co. He is now with Browne,
Bortz, and Coddington. Mr. Wade Hargrove, counsel, ABC Televi-
sion and Affiliates Association, Raleigh, N.C. Ms. Lucille S. Sal-
hany, vice-president, TV and Cable Programming, with Taft Broad-
casting. And Mr. Joseph Waz, Jr., Committee Against Network Mo-
nopoly, Washington, D.C.
Thank you for being here. We ask you to summarize your testi-
mony. We will include it in full in the record. We would hope that
you will take no more than 5 minutes. If we could begin with you,
Mr. Bortz.
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STATEMENTS OF PAUL BORTZ, CONSULTANT TO AMERICAN
BROADCASTING CO.'S, INC.; WARD HARGROVE, COUNSEL, ABC
TELEVISION AFFILIATES ASSOCIATION; LUCILLE S. SALHANY,
VICE PRESIDENT, TV AND CABLE PROGRAMMING, TAFT
BROADCASTING CO.; AND JOSEPH W. WAZ, JR., SPECIAL COUN-
SEL, COMMITTEE AGAINST NETWORK MONOPOLY
Mr. BORTZ. My name is Paul Bortz, managing partner of Brown,
Bortz, and Coddington, financial and economic consultants active
in the telecommunications industry. I appreciate the opportunity to
testify on H.R. 2250 and the financial interest and syndication
rules.
Our firm prepared an analysis of these rules for ABC as part of
the FCC proceeding. My testimony today is on behalf of ABC and
based on that analysis.
We have heard a lot in the first panel about the quality and di-
versity of programing, and that certainly is a public goal to be en-
couraged. The question before this subcommittee, though, is wheth-
er freezing into immobility some rules passed more than a decade
ago would assist in meeting that goal. So far today I have heard
nothing that suggests that it would.
Let me address three major areas where the financial interest
and syndication rules might impact the quality and the diversity of
programing: first in the production and distribution of broadcast
network programing; second in syndication of that programing; and
third, quality and diversity as might be achieved through new pro-
gram distribution channels provided by cable and related technol-
ogies.
With respect to the first, network programing, this topic has
been studied repeatedly by many different groups, not at interest
to the deal that we are talking about here between producer and
distributor. They include the FCC network inquiry staff, the De-
partment of Commerce, and the Department of Justice and they
have all concluded that the rules did not foster diversity and qual-
ity of programing, but simply intervened in what should be a pri-
vate marketplace, shifting revenue to producers from the networks
and their affiliates. Even the production community's own analysis
in this area is vague and inconclusive, and most of their data sup-
ports the contention that the rule does nothing to foster diversity
and quality.
What the rules have done is to further increase the leverage that
naturally accrues to production and talent. For example, from 1973
to 1983 prime time programing expense for the American Broad-
casting Co. increased from 63 to 73 percent of net prime time reve-
nues; hardly is the production community without leverage under
such a situation. The seller of product has increased prices faster
than the distributor can recover revenues. Another example: for
successful ABC series the price increases that producers were able
to extract average 18 percent a year compounded. When we look at
the success of the series and look at a better measure, price per
new episode per rating point, this has increased for a successful
series at 24 percent a year, and for a series running 4 or more
years, the best syndicated product, almost 30 percent per year. Yet
the revenue increase to the network is 14 percent a year.
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I would say the production community is in a good situation
there. Financial interest and syndication rules have only intensi-
fied what is naturally a seller's market. It has denied the real pro-
viders of risk capital their fair reward, and it can only stifle the
growth in quality and diversity of network programing and contin-
ue to concentrate the power in the hands of a few producers.
With respect to syndication, the second area I want to explore, it
is clear that by breaking the production community's total control
of syndication, by providing rewards to the real providers of risk
capital, syndicated product will improve and expand. They have
protected markets. With protected markets now secured by these
rules where the risk capital is provided by others, the producers
have shown that they seldom seek to reach out to provide viewers
anything more than off-network syndication. When the fields are
so rich to be mined in terms of the network programing and then
going into off network, why risk capital? If you want diversity, let
us try and channel those producers into first-run syndication prod-
ucts. A modification of the financial interest and syndication rules,
not a freeze on a failed set of rules, is the appropriate approach in
this situation.
Finally, consider the effects of new video distribution modes on
quality and diversity of product. Two-thirds of all households are
now passed by cable. Thirty million households subscribe. Network
prime time shares have dropped below 80 percent, and we project
as submitted to the FTC 1990 shares as low as 60 percent. This is
not a new-technology situation. Diversity via new video distribution
is here and here now. It is not something to halt and wait 5 years
to happen. Well before 1988 all households in the United States
will have access to multichannel premium television. The produc-
tion community is already reaping its rewards. This year, 1983,
their revenues in the aggregate, program revenues, producer reve-
nues will approach a billion dollars. By 1985 it will double or triple,
and by 1990, it will be on the order of $10 billion, more than the
three networks combined at that point.
Here in these new areas is the opportunity to seek quality and
diversity improvements, yet H.R. 2250 would retard this growth by
maintaining artificial barriers in the programing marketplace, al-
lowing producers to play it safe using other companies' risk capital
and by limiting the networks in participating in the development
of these markets.
I can only conclude that H.R. 2250 is protectionist legislation. It
would have no impact on quality and diversity of programing, and
it would freeze into place special-interest rules to benefit a narrow
constituency under a public interest guise of encouraging diversity
that has no basis in fact.
[Mr. Bortz' prepared statement follows:]
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American Broadcasting Companies, inc. 1330 Avenue of the Americas New York, New York 10019 Telephone 212 887-7200
Everett H. Erlick
Executive Vice President and General Counsel
Dear Mr. Chairman:
Thank you for your letter of July 27, 1983, inviting ABC to
testify at the hearing of the Subcommittee on Telecommunications,
Consumer Protection and Finance on the FCC's Syndication and
Financial Interest Rules and H.R. 2250 scheduled for August
1. Mr. Paul I. Bortz, of the Denver-based consulting firm Browne,
Bortz and Coddington, will be ABC's witness. Mr. Bortz has
been a consultant to ABC in connection with the FCC's Syndication
and Financial Interest Rules proceeding (BC Docket No.~ 82-345),
and his January 1983 report, "An Analysis of the Television
Program Market," filed with ABC'S Comments in this proceeding,
is part of the public record. We believe the Subcommittee will
find Mr. Bortz' views of significant interest.
As you will recall, Mr. Anthony D. Thomopolous, then President
of ABC Entertainment and now President of the ABC Broadcast
Group, was a witness before the Subcommittee at its hearing
on these Rules in Los Angeles on June, 1. Mr. Thomopolous ex-
pressed ABC's strong view that the Rules should be repealed
or significantly modified. It follows, of course, that ABC
is opposed to H.R. 2250, which would perpetuate them for at
least another five years. In the interest of conserving the
Subcommittee's valuable time, I am taking the opportunity of
this letter to expand upon ABC's opposition to both the Rules
and H.R. 2250.
The Syndication and Financial Interest Rules are gradually eroding
the quality and diversity of entertainment programming which
the ABC Television Network and, we believe, the other two national
networks can offer to the American public. This is because
the Rules deny to ABC, CBS and NBC, but not to any of our compet-
itors in offering national program services such as the emerging
direct pay networks, the opportunity to bargain for syndication
rights and interests in the programs whose production we largely,
if not entirely, finance. Not only does this make for unfair
competition in the program acquisition market to the detri-
ment of ABC, CBS and NBC and their more than 600 local affiliates
(the great majority of whom support repeal of the Rules), it
denies to these companies revenue opportunities which are needed
to keep pace with sharply rising program costs. As we have
documented before the FCC, for a number of years three-network
costs -- particularly program costs -- have been rising much
more rapidly than three-network revenues,. The effect has been
a significant profit squeeze; three-network income as a percentage
of revenues fell from 16% in 1977 to 8% in 1981 (the last year
for which FCC-compiled data are available).
Obviously, no network company can continue indefinitely to have
its costs increase at a significantly greater rate than its
revenues. Yet that is the difficult prospect which the three
traditional networks face. As the competition for the best
programming intensifies, costs of that programming will almost
certainly continue to rise in substantial measure. At the same
time, ABC, CBS and NBC are experiencing steadily declining aud-
ience shares, as more and more programming alternatives are
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884
available to viewers from sources such as cable television.
Our need is to offer better programming, and more original episode
programming, to meet this competition.
ABC seeks only a free and unfettered market for programming.
At present, the Syndication and Financial Interest Rules are
artificial barriers to such a fz~ee market. Government has no
rightful place at the bargaining table where program rights
are negotiated. It has no proper business tilting the bar-
gaining process in favor of the Hollywood producers, as these
Rules do. Not only do the Hollywood producers have no legit-
imate need for such assistance, the effect is' to deny the public,
at least those members of the public who rely upon' advertiser-
supported television, the best quality and the most diverse
programming which only a free and unfettered market can supply.
Five agencies of government have commented in the FCC's current
proceeding to consider repeal or changes in the Syndication
and Financial Interest Rules -- the U.S. Departments of Justice
and Commerce, the Federal Trade Commission, and the States of
New York and Illinois. All have reached essentially the same
conclusion as the FCC's Special Study Staff, which was appointed
and reported during the chairmanship of former Chairman Ferris:
the rules in their present form are anti-competitive and work
to the disadvantage of the television public.
A great deal of the comment in the current FCC proceeding has
been directed to one narrow concern. That is the continuing
availability of certain programming to independent (not net-
work-affiliated) television stations in the event the Rules
are repealed. ABC believes this concern is misplaced because
marketplace forces will dictate the continuing availability
of programming to these stations. We have also made a public
commitment that we will not withhold programs or discriminate
against independent television stations. Moreover, we have
indicated that we would have no objection to some form of narrowly
focused regulation to insure that independent stations continue
to have the same kinds of opportunity to acquire programming
as at present.
There is another, and perhaps more fundamental, reason why H.R.
2250 is an unsound approach. This proposed legislation amounts
to a judgment on possible FCC action without knowledge of what
the action will be. The filings before the FCC make clear that
the agency's options are not limited to outright repeal or total
retention of the Rules, as some co-sponsors may have once be-
lieved; for example, the Department of Justice Reply Comments,
at pp. 30-31, propose a specific substitute rule. It seems
to us that the Congress would want to know what the FCC decides
before it makes a judgment to exercise its prerogative to override
that decision.
Please associate this letter with the record of the Subcommittee
proceeding, and thank you for considering ABC's views.
Very truly yours,
~f. ~LL
Everett H. Erlick
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Mr. WIRTH. Mr. Hargrove.
Mr. TAUKE. Do we have a copy of Mr. Bortz' testimony?
Mr. BORTZ. This is the extent of it, handwritten notes.
Mr. TAUKE. Thank you, Mr. Chairman.
Mr. WIRTH. Mr. Hargrove.
STATEMENT OF WADE HARGROVE
Mr. HARGROVE. Thank you, Mr. Chairman.
The ABC Television Affiliates Association consists of over 200
local commercial television stations that are affiliated with the
ABC Television Network. The association favors repeal of the
FCC's network syndication and financial interest rules. I might
point out that while I am here on behalf of the ABC-TV affiliates,
the affiliates associations of the CBS and NBC Television Networks
also support repeal of these rules. In short, close to 600 local televi-
sion stations across the Nation believe these rules are harmful to
the interest of local stations and to the interests of consumers and
viewers these stations are licensed to serve.
The affiliate associations favor repeal of these rules for one
reason: they are convinced that the rules adversely affect the qual-
ity of over-the-air television programing. To the extent the rules
impair the ability of the networks to achieve the natural profits de-
rived from their programing, the rules discourage networks from
producing innovative, expensive, and high-risk programing for net-
work broadcasts. That in turn has the effect of undermining the
quality of over-the-air television programing both for network-affili-
ated stations and nonnetwork independent stations.
The Federal Trade Commission has observed that an unfortunate
result of the rules has been "reduced purchases by the networks of
relatively high-cost programing and increased purchases of lower-
cost programing." Economist Alfred Kahn describes the adverse
effect the rules have on television viewers as follows:
Anything that limits the ability of the networks to compete in the development
and acquisition of desirable programing must weaken the ability of the large majori-
ty of the viewing public to receive the kind of entertainment on which it continues
principally to rely. This it seems to me is the most important dimension of the
social cost of continuing these rules.
As you know, the syndication and financial interest rules do not
prevent the networks from acquiring financial interests in and syn-
dicating programs that are not produced for network broadcast.
Therefore, if Congress and the FCC continue to impose regulatory
constraints that make it less attractive financially for networks to
direct their resources to the production of programing for over-the-
air television, the networks will be tempted to divert more and
more of their resources to the production of programing for less
regulated and in turn financially more attractive delivery systems
such as pay cable, DBS, MDS, and video cassettes.
All three of the major television networks are involved in the
new technologies, and obviously intend to employ them to distrib-
ute programing. The CBS Network, for example, recently disclosed
plans to join with HBO and several major studios to produce pro-
graming for pay television. That is not surprising, because CBS can
share in the residual rights in programing it produces for pay TV.
It cannot, of course, share in the downstream profits of programs
PAGENO="0888"
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produced for the over-the-air television system. Thus the syndica-
tion and financial interest rules are unwittingly encouraging a mi-
gration of more expensive and high-quality network programing to
pay TV delivery systems.
Concern has been expressed by independent stations that if the
networks are permitted to reenter the syndication market the net-
works will somehow extend preferential treatment to their affili-
ates. Ms. Salhany I see from her prepared remarks is going to ad-
dress that, and I would like to respond to her comments at the con-
clusion of the panels' presentation.
The ABC Television Network has made it very clear to its affili-
ates that they can expect no favoritism in the acquisition of off-net-
work programing if these rules are repealed. The affiliates had no
such advantage prior to adoption of these rules in 1970, and they
really ~have no reason to feel they would now. The simple truth is
that the networks will maximize their profits in their programs,
and to do so they will sell their programs as they did before the
rules were enacted to those stations willing to pay the highest price
for them.
Independent stations have also expressed concern that if the
rules are repealed the networks will warehouse programing. If af-
filiates believed that would occur, they too would oppose repeal of
these rules. While the prime time access rule precludes stations in
the top 50 markets from running off-network programing during
the access period, the prime time access rule does not preclude the
below top 50 market stations from doing so. Affiliates derive con-
siderably more income from their access period programing than
from compensation paid to them by the networks for network pro-
graming.
So if the below-top-SO market stations-and that is the bulk of
the television stations-who are now allowed to carry off network
programing in the lucrative access period, felt for a moment that
repeal of the rules would cause the networks to warehouse pro-
graming, they would favor retention, rather than repeal of these
rules.
If the rules are repealed and the Justice Department's consent
lifted, the networks' syndication practices would be subject to un-
precedented scrutiny by the Congress, by the FCC, by the FederaL
Trade Commission, the Justice Department and the private sector,
including independent program producers and independent and
network-affiliated television stations.
Therefore, if the networks should in the future attempt to ware-
house programing, appropriate regulatory measures could be adopt-
ed.
To the extent competition and diversity presently exist in the tel-
evision programing marketplace, the prime time access rule, not
the syndication and financial interest rules, is responsible.
PTAR, not the syndication and financial interest rules, provides
the crucial window in prime time for independent .produced and
syndicated programs. PTAR, not the syndication and financial in-
terest rules, has spawned so much of the highly acclaimed and in-
depedently produced television programing now available in prime
time.
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The FCC network inquiry special staff reinforced this conclusion
by noting, "The growth in syndicated programing has occurred as a
result of the prime time access rule," not as a result of the syndica-
tion and financial interest rules.
Network-affiliated stations favor repeal of the syndication and fi-
nancial interest rules in the belief that so long as the prime time
access rule continues to be in effect, Congress overall public policy
objective of assuring competition in the production, distribution,
and exhibition of television programing will be achieved.
Thank you.
Mr. WIRTH. Ms. Saihany.
STATEMENT OF LUCILLE S. SALHANY
Ms. SALHANY. I am Lucie Salhany, speaking as vice president,
TV and cable programing, for Taft Broadcasting. I oversee program-
ing for four Taft Network affiliates, three affiliated with ABC, and
one with NBC.
I also oversee programing for three major market independent
stations and a cable venture. I have been on the board of the Na-
tional Association of Television Program Executives for over 7
years and in 1980, I served as its president.
The three television networks are now pressing for elimination of
the syndication and financial interest rules. It is important that
these rules continue in force at least until 1988 in order to see if
sufficient competition develops in the marketplace so that the net-
works will no longer have monopolistic power over television pro-
gram producers.
The first point I would like to address is network dominance over
affiliates. While we talk about the partnership that presently exists
between the networks and their local stations, it is only so because
each has equal power.
If an affiliate preempts the network, it can now choose from a
myriad of programing: Programing with no time period restric-
tions, programing which by contract can be run anywhere, pro-
graming not controlled by the network.
On the surface, that sounds perfect. But the story behind the
scenes is really quite different. The networks are continually fight-
ing for control. Each preemption goes against the station's record
and has a bearing on our compensation as affiliates.
If you doubt this, let me give you an example. Last February, one
of our affiliates had cleared two local sporting events which con-
flicted with a highly promoted two-part miniseries on their net-
work.
The station notified the network and asked for a 7-day delayed
broadcast. The station said it would run the miniseries late night
on the weekend or over 4 hours on Sunday afternoon. The network
turned the station down with, "It is not our policy to allow delays
on movies."
The network then suggested the station try and move the local
sporting events.
When the station was unable to do so, it was forced to preempt
and thereby deprive the viewers in that market of the right to see
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the miniseries. All the network could say was, "We are making a
note of this on your record."
The station knows that this preemption and every similar occur-
rence is noted and will be brought up during our network compen-
sation review meeting.
Thus, the choice to preempt, despite its price, exists today for
network affiliates.
However, if the networks gain control of the flow of product to
the stations, this choice will be destroyed because stations will have
to cease to have popular network programs such as
"Barney Miller," or "The Jeffersons" to run instead of network
programs. Or, programs such as these may be available, but with
time period restrictions.
If you don't believe that the networks will put time period re-
strictions on their programs, let me give you a very recent exam-
ple. Mr. Segelstein talked about "Saturday Night Live."
"Saturday Night Live" was held back from syndication because
NBC would not let it run late night. When they finally put it into
syndication, our contracts guaranteed them simulcast protection.
That means the station cannot run "Saturday Night Live" on Sat-
urday night.
So, we have to run it Monday through Friday.
Another example is the syndicated half-hour "Johnny Carson
Show." It was offered with the condition that it not run late night.
Not only could it not run at 11:30 against the network "Johnny
Carson Show," but even worse, it couldn't run at 11 on independ-
ent stations.
I would now like to talk about the impact of repeal on the role of
an independent station. Independent stations provide a viewing al-
ternative to the public; they are an alternative to the networks.
Independent stations exist because they can buy off network pro-
graming. Independents have become so successful that they are
now a threat to the networks, so the networks want to control the
independents' main source of supply, the foundation of their pro-
graming, off-network product.
If this happens, the networks can and will prevent the independ-
ents from maximizing rating and revenue potential. Networks will
be the thwarting the independents' growth and limiting competi-
tion.
I would like to carry this one step further. Suppose an independ~
ent developed an off-network show into a hit in syndication? Also,
suppose the indy runs the show against the network news? When it
is time to renew that contract, if a network owns the syndication
rights, does anybody honestly think they will renew the indy's con-
tract? If I were the network, I sure wouldn't.
I would make sure my affiliate got the program and thereby pro-
tect my network news. Then, I would put the squeeze on that same
affiliate to stop preempting me in prime time where I make my
money.
Would the independents have anyone else to buy from? Not if
the networks controlled the syndication marketplace, because there
would be no D. L. Taffner, no Embassy, no Jim Victory, no Lorimar
Telepictures.
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Independent stations like WDCA and WTTG in Washington are
thriving because the viewers want a choice. The same networks
who have cried that their audiences are being eroded because of
cable are really being hurt more by independent stations, not only
here in Washington, but all over the country.
If real, viable, significant competition to the networks ever comes
about, then the rules should be repealed, because the marketplace
would be available to protect the public values this rule was writ-
ten to provide: competition in terms and pricing of product; creativ-
ity and diversity in programing; and local responsiveness to each
market. The rule has allowed our industry to move towards these
goals. H.R. 2250 will give us enough time to hope to achieve them.
Thank you.
[The statement of Ms. Saihany follows:]
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TESTIMONY OF TAFT BROADCASTING COMPANY
BEFORE THE
SUBCOMMITTEE ON TELECOMMUNICATIONS,
CONSUMER PROTECTION AND FINANCE
ENERGY AND COMMERCE COMMITTEE
UNITED STATES HOUSE OF REPRESENTATIVES
August 1, 1983
My name is Lucie Salhany. I an speaking today as
Vice President, TV and Cable Programming, of Taft Broadcasting
Company. I oversee programming for four Taft network affiliated
stations; affiliates, by the way, which did not agree with
their affiliate boards. Three of them are affiliated with
ABC; one with NBC. I also oversee programming for three
major market UHF independents and a cable venture. Additionally
I have been on the Board of the National Association of
Television Program Executives for over seven years and in
1980 served as its President.
I am here to express Taft's support for H.R. 2250,
a bill which would place a five-year moratorium on repeal or
modification of the Federal Communications Commission's
existing regulations known as the Syndication and Financial
Interest Rule and the Prime Time Access Rule. These rules
were adopted by the FCC in 1970 to promote competition and
diversity in the television programming marketplace. The
Financial Interest part of the Rule prohibits the networks
from acquiring any interest in the syndication or distribution
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Of programs produced by anyone other than the network itself.
The Syndication part of the Rule prohibits the networks from
selling or `syndicating" re-runs of programs initially aired
on a network for later non-network exhibition. The Prime
Time Access Rule effectively prohibits the networks from
selecting the programming to fill a specific half hour
during the prime time schedule on their affiliates in the
top 50 markets.
The Syndication and Financial Interest Rule was
also included in Department of Justice antitrust consent
decrees against each of the three networks as recently as
1978 and 1980. Action to modify or eliminate those decrees
is expected shortly.
The three television networks are now pressing for
elimination of the Syndication and Financial Interest Rule.
Under the banner of "deregulation," the FCC initiated a
rulemaking procedure last year which threatens repeal of the
Syndication and Financial Interest Rule. The Commission
appears likely to move toward repeal or substantial modi-
fication of the Rule and soon may issue an order to that
effect.
It is important that these Rules continue in force
at least until 1988 in order to see if sufficient competition
develops in the marketplace so that the networks will no
longer have oligopolistic power over television program
producers. "Deregulation" when adequate competition does
not exist would: cripple independent stations by restricting
-2-
PAGENO="0894"
892
the flow of programming available to them; discourage
creativity, diversity, and localism by increasing network
control over program content and production; and increase
network dominance over affiliated stations.
The first point I would like to address is network
dominance over affiliates. While we talk about the partner-
ship that presently exists between the networks and their
local stations, it is only so because each has power. If an
affiliate preempts network programming, it can now choose
from a myriad of programming: programming with no time
period restrictions, programming which by contract can be
run anywhere, programming not controlled by the network.
Right now affiliates preempt day tine and prime
time network programs to air off-network programs for local
news and public affairs specials. On the surface that
sounds perfect, but the story behind the scenes is really
quite different. The networks are continually fighting for
control. Each preemption goes against a station's record,
and if the station preempts too frequently, we know we will
get a visit or a phone call reprimanding us. And, while no
one admits it, this preemption record has a direct bearing
on our compensation as affiliates.
If you doubt this, let me give you an example.
Last February one of our affiliates had cleared two sporting
events which conflicted with a highly promoted two-part
mini-series on the network with which it is affiliated. The
station notified the network and asked for a seven-day
delayed broadcast. The station said it would run the mini-
-3-
PAGENO="0895"
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series late night, on the weekend, or over four hours on a
Sunday afternoon. The network turned the station down with
"It's not our policy to allow delays on movies."
The network then suggested that the station try to
move the sporting events. When the station was unable to do
so, it was forced to preempt and thereby deprive the viewers
in that market of the right to see the mini-series. All the
network could say is, "W&re making a mote of this on your
record." The station knows that this preemption and every
similar occurrence is noted and will be brought up during
the network compensation review meeting.
Thus, the choice to preempt, despite its inevitable
price, exists today for network affiliates. However, if the
networks gain control of the flow of product to the station,
this choice will be destroyed, because stations will cease
to have popular off-network programs such as "M*A*S*H,"
~sBarney Miller," or "The Jeffersons" to program instead of
network programs. Or, programs such as these may be available
to affiliates, but with time period rOstrictions. If this
happens, the affiliates lose control of their future program-
xning and simply become conduits for the networks. They are
going to be forced to buckle under to the network blackmail,
and control over program decisions will move from the stations
to the networks.
If you do not believe that the networks will put
time period restrictions on their programs, let me give you
some very recent examples. "Saturday Night Live" was held
back from syndication because NBC would not let it run late
32-540 O-84---57
PAGENO="0896"
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night. When they finally put it into syndication, in our
contracts we have given them simulcast protection. This
means that we cannot run "Saturday Night Live" on Saturday
night, so we run it Monday through Friday.
Then there is the case of "Family Feud." The
network runs their show in the morning; but there is a
syndicated show of a version which some stations run in
access, and according to our contracts, stations cannot run
the show before 5:30 p.m. Why this restriction? Because
the network demanded that the producer give them daytime
protection. This restriction is even worse when you consider
that these syndicated shows are different from the network
shows. Once again, the networks have shown that they want
to control the marketplace. They are simply afraid of
competition.
If they are not afraid, why was the syndicated
half-hour "Johnny Carson Show" offered with the condition
that it could not run late night? Not only could it not run
at 11:30 against the network "Johnny Carson Show," but, even
worse, it could not be shown by independents at 11:00 o'clock.
In 1974, "Match Game" was held back from syndi-
cation for two years because CBS did not want syndication
competition. When it was finally offered on the marketplace,
there was a provision that it could not run before 6:00 p.m.
We contend that the networks have and are still
using their control to prevent programs from being offered
with unrestricted licenses. As you can see, the networks
really have not left syndication.
-5-
PAGENO="0897"
895
I would now like to talk about the impact that
repeal of the Syndication and Financial Interest Rule will
have on the independent station. Independent stations
provide a viewing alternative to the networks. Independent
stations exist because they can buy of f-netw9rk programming.
As you have heard, the success of shows like "M*A*S*H,"
"Barney Miller," and "The Jeffersons" has given independents
the financial base to acquire rights to local sports franchises,
to co-produce first-run programs like "Solid Gold" and "Star
Search," and to participate in the operation of prime tine
projects.
Independents have become so successful that they
are now a threat to the networks, so the networks want to
control independents' main source of supply, the foundation
of their programming: off-network product. If there is any
doubt in your mind, just remember "Saturday Night Live,"
"Match Game," "Family Feud," and the "Johnny Carson Show."
If the Syndication and Financial Interest Rule were not in
effect today, that list would be much longer and would
include "M*A*S*H," "The jeffersons," and "Happy Days."
After all, if a network will not allow "Match Game" to
compete, why would it allow a program like "M*A*S*H" to run
against its daytime, its news, its prime time, or even its
late night programming?
If this Rule is repealed, anticompetitive restric-
tions will follow. A network could conceivably offer a
program in syndication with the following stipulations: (1)
it cannot run before 4:00 p.m.; (.2). it cannot run between
-6-
PAGENO="0898"
896
6:00 and 7:00 p.m. on an independent because that would
compete with network news; (3) it cannot run in prime time
until after the last network run;' and (.4) it cannot rurx late
night.
Even with these conditions, there nay be buyers
for product. And maybe independents will have to buy the
product with those restrictions. The result remains that
the networks will be preventing the independents from maxi-
mizing rating and revenue potential. Networks will be
thwarting the Indies' growth and limiting competition.
I would like to carry this one step further. When
a show is a hit, the renewals are more important than the
original contract. Let me use `M*A*S*H" as an example
again. If a network affiliate had ~`M*A*S*H" leading into
the network news, the ratings for the news would be stronger
and a lot more valuable. So, if I were the network, I would
make sure my affiliate got that program, and then I would
put the squeeze on them to stop preempting me in prime time.
In markets where network owned and operated ètatioms are
located, there would be no doubt that the hits got on net-
work stations and less popular shoes would be offered to the
Indies--if they were made available at all.
Would the independents have anyone else to buy
from? Not if the networks controlled the syndication market-
place, because there would be no D.L. Taffner, no Embassy,
no Jim Victory, no Lorimar Telepictures; and without the
profits from syndication of "Happy Days," "Laverne and
Shirley," "M*A*S*H," "Barney Miller," etc. we might not have
-7-
PAGENO="0899"
897
risked investments in programs like "Entertainment Tonight,"
which my company co-produces, "Solid Gold," "Allen Fix,"
"Salute," "Blood and Honor," "Golda," or "Blood Feud." If
first run programming and local co-productions like those I
have mentioned are important, then so is the retention of
this Rule.
The networks claim that they would not be able to
control the market without illegal "collusion." This simply
is not true. Collusion would not be necessary to cause
serious harm to the television market. Networks would
merely have to act in their own best interest. The following
scenarios provide just a few examples of potential network
manipulation of off-network pro~raniming if the Rule is
repealed:
1. Networks could require full syndication rights or
a controlling financial interest in the programs they air as
the quid pro quo for getting on the network.
2. Networks could give their affiliates a "right of
first refusal" option on syndicated programs.
3. Networks could offer price "discounts" to their
affiliates.
4. Networks could refrain from putting a show into
syndication until it has completed its network run.
5. Networks could place time restrictions on the use
of programs.
6. Networks, by becoming active participants in the
syndication market, will have advance knowledge of which
-8-
PAGENO="0900"
898
programs might be available to any given independent station
for the next several years. If independents are forced to
buy off-network programming from the networks, they are
effectively notifying their competition of their future
programming plans and needs. This gives network owned and
affiliated stations a tremendous edge in planning their
schedules. They know what the competition is planning and
can schedule programs accordingly.
7. Independent stations could be used as the "test
bed" for what is successful in the syndication market.
none of these scenarios would require collusion with the
other two networks.
If a 10:00 o'clock news service in Miami or in
Philadelphia is important, if local coverage of sporting
events is important, and if a public service special like
"Job Fair" in Washington is important, then so is this Rule.
Repeal of the Rule would tip the balance of power in favor
of the networks and slow down the growth of the independents,
thereby stifling independent profit potential and preventing
investment in projects, as I have mentioned.
Independent stations like WDCA and WTTG here in
Washington are thriving because the viewers want a choice.
They want the opportunity to watch "The Jeffersons" at 6:00,
"Alice" at 6:30, or "Sanford and Son" at 7:30; and if the
opportunity to watch these programs in those time periods
disappears, then everyone suffers, everyone except the
-9-
PAGENO="0901"
899
networks. The sane networks who have cried that their
audiences are being eroded because of cable are really being
hurt a great deal more by independent stations, not only
here in Washington, but all over the country.
While Taft agrees with the overall concept of
deregulation, in this instance the regulation has created
the present free competitive marketplace. What we cannot
understand is, if the system is working, if the checks and
balances are in place, and if we are all thriving, why
repeal this Rule and allow a shift in power that lets the
networks regain their control?
If real, viable, significant competition to the
networks ever comes about, then the Rule should be repealed
because the marketplace would be available to protect the
public values this Rule was written to provide: competition
in terms and pricing of product; creativity and diversity in
programming; and local responsiveness to each market. The
Rule has allowed our industry to move towards these goals.
E.R. 2250 will give us enough time to hope to achieve them.
Thank you for giving me the opportunity to appear
before you today. I would be happy to try to answer any
questions you may have.
Mr. WIRTH. Thank you very much, Ms. Saihany.
Mr. Waz.
STATEMENT OF JOSEPH W. WAZ, JR.
Mr. WAZ. Thank you, Mr. Chairman, and to the heartier mem-
bers of the subcommittee, good afternoon.
I had the pleasure of addressing this subcommittee in support of
H.R. 2250 at its June 1 hearings in Los Angeles. At that time, I
noted that the FCC rules affected by this legislation have helped
make more and diverse viewing options available to the public by
allowing greater financial and creative independence to the cre-
ative community and by reducing the three major networks' con-
trol over what Americans may view.
I further suggested the rules retain their validity and impor-
tance. The dominance of the three major networks-an historical
accident aided by the FCC's misguided channel allocation policies-
persists to this day.
PAGENO="0902"
900
These rules, in conjunction with technological advances and
other forces, are just now bringing real competition to the video
marketplace, but repeal of the rule at this critical time would be
detrimental to the hopes of American consumers for more diverse
and competitive video services.
Mr. Chairman, the public support for H.R. 2250 continues to
grow rapidly. I would like to submit for the record, if I may, a
roster of the 40 organizations now affiliated with the Committee
Against Network Monopoly.
Mr. WIRTH. Without objection, it will be included in the record.
Mr. WAZ. And a separate list of organizations inside and outside
the television industry who also support retention.
Mr. WIRTH. It will be made a part of the record as well.
Mr. WAZ. In my presentation in Los Angeles I discussed the com-
petition in the video marketplace from the consumers' perspective,
and found it wanting.
I also noted that while a reasoned view of the marketplace mili-
tates in favor of retaining the rules, the three networks were ag-
gressively pursuing a campaign of public misinformation to sway
your constituents to their point of view.
The networks are rather like a strolling orchestra in a restau-
rant. They have a different song for every table. However, they
tend to play all their songs at once, all in a different key, depend-
ing on what their audience wants to hear. Members of this subcom-
mittee have expressed a desire for a full factual record on this
issue, but in the cacophony of the networks' songs, it is impossible
to know what is fact and what is fiction.
Let me give a few examples if I may. At the Los Angeles hear-
ings, Mr. Colloff of CBS sang a song of sorrow. He lamented the
networks' alleged inability to compete with the new media. But
CBS TV Network President Tony Malara chirped a different tune a
few weeks ago, telling the New England Broadcasting Association
that the three networks' ratings are up four-tenths of a point this
year, while HBO's ratings are declining, and that the 35 basic cable
services' collective audience represents only a 1.4 rating of the total
viewing audience.
The networks are also singing a plaintive aria intended to scare
the public into believing that failure to repeal these rules could
mean "the end of free TV." Even the members of the FCC, who are
usually a friendly audience for the networks, threw tomatoes at
that performance.
Several commissioners joined Mimi Dawson in criticizing "some
very wrong information going around." But these bad reviews have
not stopped the networks. Here is a recent letter from NBC Enter-
tainment President Brandon Tartikoff to a member of the Califor-
nia State Senate, in which NBC purports to be interested only in
protecting "the poor, the elderly and the infirm, many of whom
depend on free television as their primary source of entertain-
ment."
Well, of course, Mr. Chairman, the financial interest and syndi-
cation rules have given new life to advertiser-supported TV, allow-
ing independent stations to bloom into significant competitors for
viewing audiences, and giving American viewers more choices and
PAGENO="0903"
901
more diversity. But the networks will audition their "end of free
TV" song wher&ver they think it will succeed.
When they talk with minority and other small producers, the
networks whistle a happy tune of new opportunities for network
exposure and funding sources. But CBS' Mr. Colloff almost ran out
of adverbs qualifying those "promises" before this subcommittee in
Los Angeles.
Mr. Colloff said "hopefully" there will be more minority produc-
ers, and that minority and children's programing "may result indi-
rectly from increasing the diversity of production sources general-
ly."
Unfortunately, Mr. Chairman, the networks~ ignore the efforts
which independent producers have made in programing for special-
ized audiences, and the contribution which independent TV sta-
tions have made in providing outlets for these programs.
I must agree with the statement by Mr. Moorhead that one can
only marvel at the networks' insistence that opportunities will im-
prove if they are free to grab off all the rights and revenues they
want-particularly in the face of the overwhelming sentiment of
producers large and small against repeal of these rules.
I was interested in the story by CBS of a desire by its Philadel-
phia station to put a children's program on the air. That same con-
cern for the children's audience doesn't seem to extend to "Captain
Kangaroo," which was banished to the wee hours of weekend
mornings and the fact that there is no regularly scheduled daytime
programing aimed at that audience.
Mr. Chairman, virtually no organization of consequence which is
knowledgeable about media issues has accepted the network line
on this issue. Groups as diverse as the ACLU, the National Council
of Churches, the International Association of Machinists, the
American Business Media Council, the National Association of
Black Owned Broadcasters, the Association of Mexican American
Educators, and Action for Children's Television, all supporters of
the Committee Against Network Monopoly, have all gone on record
in opposition to the networks' efforts to entrench their monopoly
status.
They are all aware that the networks will continue to dominate
prime time audiences until at least the end of this decade. They
are all aware that network TV advertising revenues continue to
grow faster than bluegrass in Kentucky, and are projected to in-
crease by 11 percent this coming year to nearly $6.9 billion.
They are all aware that the "new technologies" the networks
claim to fear will not soon be available to most Americans, and
that when they do come, the networks will continue to be domi-
nant players.
And they are fully aware that sensible regulation of these domi-
nant entities, against whom all other video media combined are
but a minor nuisance, is necessary if genuine competition is ever to
emerge.
Mr. Chairman, CBS has thoughtfully provided many Members of
Congress with a report, two gray volumes as I recall, which among
other things suggests that deregulation in other industries some-
how mandates removal of these particular restraints from the net-
works.
PAGENO="0904"
902
While CBS liberally cites some of its favorite lawyers and econo-
mists, one authority seems to have escaped the attention of its re-
searchers: this subcommittee's own exhaustive report, "Telecom-
munications in Transition," to which you alluded, in which the
subcommittee observed that "We are headed for a competitive
video market but we are not yet there today."
The average consumer has access to a very limited number of
communications channels. The bright future which advancing tech-
nology portends is not within immediate reach, and provides no
justification for setting free the giants. As the report concludes,
"Altering a regulatory scheme, based on a premise which the data
clearly does not support, is a total abdication of responsible policy-
making."
The FCC proceeding which necessitated this legislative response
calls into question that Commission's responsibility. While the
Commission's Chairman rushes this item before the Commission
for its August 4 meeting, thousands and thousands of applications
for low-power television languish in Commission files.
While the Commission carries the ball on this issue at the behest
of the networks, it fumbles proposals to add as many as 700 new
AM radio stations, and is at a virtual standstill on the question of
adding new VHF "drop-ins" to the television marketplace.
Mr. Chairman, it appears the FCC is willing to abdicate its obli-
gation to regulate for today, while moving diligently to open up the
marketplace of tomorrow. That is why it is so important that Con-
gress step in to clarify its intention that the creation of new outlets
should be the FCC's first priority.
When Americans can at last enjoy a tube of plenty, with vigor-
ous competition from diverse and independent sources, then and
only then might revision of the regulatory framework become ap-
propriate.
For this reason, the Committee Against Network Monopoly
renews its strong support for H.R. 2250 and its companion legisla-
tion in the Senate, S. 1707.
Thank you.
[Testimony resumes on p. 922.]
[Supplementary materials follow:]
PAGENO="0905"
903
SUPPLEMENTARY MATERIALS SUBMITTED IN SUPPORT OF TESTIMONY
OF JOSEPH W. WAZ, JR. (COMMITTEE AGAINST NETWORK MONOPOLY)
BEFORE THE HOUSE SUBCOMMITTEE ON TELECOMMUNICATIONS, CON-
SUMER PROTECTION, AND FINANCE, AUGUST 1, 1984.
A. Committee Against Network Monopoly--List of Supporting Organizations
B. Supporters of Retention of the Financial Interest and Syndication Rules
(drawn from review of filings with the Federal Communications Commis-
sion, copies of letters to members of Congress, and other sources)
C. Letter from Brandon Tartikoff, President, NBC Entertainment, to mem-
bers of the California State Senate, urging opposition to efforts in sup-
port of retaining the financial interest, syndication and prime time ac-
cess rules (NB: p. 2, discussion of "loss of free TV," a discredited line
of argument which the networks are loath to defend In public forums--
see, e.g., network testimony at June 1 hearings in Los Angeles)
D. Letter from James S. Bennett, Vice President/General Manager, KNXT
Television, Los Angeles, CA (a CBS owned-and-operated station), to
members of the California State Senate, urging opposition to efforts
in support of retaining the financial interest, syndication, and prime
time access rules. (Of particular interest is the "list of supporters of
repeal" attached to the letter. Among other irregularities, CBS claims
the support of the Association of National Advertisers.., who voiced
their opposition to the networks' position before the FCC and before
both hearings of this Subcommittee on the subject. CBS also lists the
"support" of two paid consultants, Alfred E. Kahn and Shooshan &
Jackson, Inc. Conspicuously absent from the list is the CBS Network
Affiliates organization.)
E. Article, "Malara pronounces networks healthy," from ~ Maga-
zine, June 20, 1983, at p. 104.
F. Article, "Upfront buying: The bubble breaks at last," from Broadc~~
Magazine, July 18, 1983, pp. 23-24 (NB sidebar "More bullish than ever,"
citing projections by McCann-Erickson senior vice president Robert J.
Coen of network advertising revenues for the coming season of $6. 895
billion, an 11 percent increase over the previous season).
G. Portion of transcript from FCC open meeting on the financial interest
and syndication rules, March 14, 1983, highlighting Commissioners' dis-
cussion of irrelevance of arguments that repeal of financial interest and
syndication rules could mean "the end of free TV."
PAGENO="0906"
904
COMMITTEE AGAINST NETWORK MONOPOLY
SUITE 600
1317 F STREET. NORTHWEST
WASHINGTON. D.C. 20004
(202) 638.2121
SUPPORTERS OF RETENTION OF THE FINANCIAL INTEREST AND
SYNDICATION RULES
Advertisers
Advertising Club of Fort Worth
Advertising Club of Metropolitan Wash-
ington, Inc.
American Association of Advertising
Agencies
Arnold, Harwell, McClain and Asso-
ciates, Inc.
Association of General Merchandising
Chains
Association of National Advertisers
Atlanta Ad Club
Gene Clark Advertising, Inc.
General Mills, Inc.
East Bay Advertising and Marketing Assn.
Gillis, Townsend & Riley Advertising
Greater Jacksonville Ad II
Hoffman, York & Compton
Nashville Ad 2, Inc.
Retail Advertising Conference
Broad-Based Coalitions
Association of Independent Video and
Filmmakers, Inc.
Association of Independent Television Sta-
tions (INTV)
Association of Program Distributors
Caucus for Producers, Writers and Di-
rectors
Committee Against Network Monopoly
Committee for Prudent Deregulation
Connecticut Broadcasters Association
National Association of Independent Tele-
vision Producers and Distributors
National Association of Black-Owned
Broadcasters
National Association of Television Pro-
gramming Executives
National Institute for Low-Power Televi-
sion
Women in Film (Los Angeles)
Children's Organizations
Action for Children's Television
Children's Television Workshop
National Education Association
Guilds and Labor Organizations
Association of Talent Agents
International Association of Thea-
trical Stage Employees locals
(Local 1, New York, NY; Local
52, New York, NY; Local 70,
Youngstown, OH; Local 80, Holly-
wood, CA; Local 164, Milwaukee,
WI; Local 193, Bloomington, IL;
Local 249, Dallas, TX; Local 409,
San Mateo, CA; Local 431, San
Jose, CA; Local 611; Local 685,
Concord, NH; Local 728, Simi Val-
ley, CA; Local 728, Hollywood, CA;
Local 731, Rapid City, SD; Al
Pan zen, Regional Vice President)
Inter-Guild Council (Directors, Pro-
ducers, Screen Actors, and Writers
Guilds)
Local 111, Communications Trades Di-
vision, International Brotherhood of
Teamsters (New York, NY)
Make Up Artists and Hair Stylists,
Local 706 (Hollywood, CA)
Producers Guild of America
Writers Guild of America
Independent Television Stations
Cox Communications, Inc.
Golden West TV, Inc.
KGMC (Oklahoma City, OK)
KJTV (Amarillo, TX)
Koplar Communications, Inc. (K PLR,
St. Louis, MO; KRBK, Sacramento,
CA)
(continued)
PAGENO="0907"
Independent Television Stations (cont'd)
KTRV (Nampa, ID)
Meredith Corp.
Metromedia Corp.
Pappas Telecasting, Inc. (KMPH, Vi-
salia/Fresno, CA; WHNS, Asheville,
NC)
Roadrunner TV & Galaxy, et al.
Taft Broadcasting Co.
Teleco Indiana, Inc.
Tribune Co. Broadcasting, Inc. (WPIX,
New York, NY; WGN, Chicago, IL;
WKGN, Denver, CO)
Television Corporation Stations (WTVZ,
Norfolk, VA; WRLH, Richmond, VA;
WJTM, Winston-Salem, NC; WMKW,
Memphis, TN)
Viacom International, Inc.
WDRB-TV (Louisville, KY)
WPTY-TV (Memphis, TN)
WXXA (Albany, NY)
Producers
Alan Enterprises, Inc.
AIlwhit, Inc.
Bud Austin Productions, Inc.
Phillip Barry Productions
Barry & Enright Productions, et al.
Brandman Productions, Inc.
Carsey-Werner Co.
Public Interest/Consumer Gro~ps Center for Non-Broadcast Television
Centro de Comunicacion Oblato
American Association of University Women The Dick Clark Co., Inc.
American Business Media Council Compass Productions, Inc.
American Civil Liberties Union Comworld Productions
Association of Community Organizations Columbia Pictures Industries, et al.
for Reform Now E.C. Productions, Inc.
Association of Mexican-American Educa- Embassy Communications and Tandem
tors Productions, Inc.
CAFE de California Flipper Animation Filmmakers Corp.
Center for Population Options Fremantle International, Inc.
Chicago Consumer Coalition Charles Fries Productions
Citizens Committee on the Media (Chicago, Gilson International
IL) Samuel Goldwyn Co.
Citizens Communications Center Goodson -Todman Productions
Committee for Community Access (Boston, Hispanic Telecommunications Network
MA) Alan Landsburg Productions
Congress Watch Bruce Lansbury Productions, Inc.
Consumer Federation of California Lilac Productions
Cooperative League of the U.S.A. Lorimar Productions
Fairfax Cable Association Mandelu Enterprises, Inc.
Grey Panther Media Watch Communications MCA, Inc.
Maryland Citizens Consumer Council MGM/UA Entertainment Co.
Media Access Project MTM Enterprises, Inc.
Media Alliance (San Francisco, CA) Motion Picture Association of America
Montanans for Quality Television (Missoula, New Citizen Productions
MT) David Paradine Television, Inc.
National Association for Better Broadcast- Paramount Pictures Corp.
ing Penthouse Presentations, Inc.
(continued) Polygram TV
905
Public Interest/Consumer Gr~2~ (cont'd)
National Coalition on Television Violence
New Jersey Coalition for Fair Broadcast-
ing
New York Citizens Committee for Respon-
sible Media
New York SANE Peace Council
North Carolina Consumers Council
People for the American Way
Seattle Consumer Action Network
Urban Elderly Coalition
WNCN Listeners Guild, Inc.
(continued)
PAGENO="0908"
Producers (cont'd)
Public Media Center
Rattlesnake Productions, Inc.
Roach Studios, Inc.
Rohrs TV, Inc.
Mark Santo (Arnold Shapiro Productions)
D.L. Taffner, Ltd.
Viacom Productions, Inc.
Walt Disney Productions
Warner Communications, Inc.
Washington Area Film and Video League
Worldvision Enterprises, Inc.
Jose Luis Sedano (Mestizo Production As-
sociates)
Religious Organizations
Council for American Indian Ministries
Council of Churches of the City of
New York
National Council of Churches of Cht~ist
in the U.S.A., Communications Com-
mission
New Jersey Council of Churches
United Church of Christ
U.S. Catholic Conference, Department
of Communication
~ypdicators /Distributors
Alcare Communications, Inc.
All American Television
Andrews and Associates
Association of Catholic Television and
Radio Syndicators
Black Entertainment Television
Colbert Television Sales
Crystal Entertainment Corp.
Gilson International
Henry Jaffe Enterprises, Inc.
Lexington Broadcast Services Co.
Paulist Productions
Syndicast Services
Telefilm Sales II
Telepictures Corp.
Teleworld, Inc.
Turner Broadcasting
Victory Television
Wolferz Associates
Other Organizations
Eastern Group Publications, Inc.
Katz Television
MMT Sales
Olvera Street Merchants
Lynn Pleshette
Station Representatives Association,
Inc.
TELEREP
906
6/20/83
PAGENO="0909"
907
A Division ol 3000 WeS A1ameda Avenue
Nation& Broacicaslng Company. Inc Buroani. CA 91523 213.840-3453
Brandon Tartilcoll
President
June 24, 1983
The Honorable
State Capitol
Sacramento, CA 98415
Re: Senate Joint Resolution No. 26
Dear Senator -
it has come to my attention that Senator Rosenthal
has proposed Senate Joint kesolutiOfl No. 26, re-
questing that the President and Congress enact
H.R. 2250, now pending before Congress, which would
prohibit the Federal Communications Commission from
repealing the Financial Interest, Syndication and
Primetime Access Rules for five years.
NBC is opposed to SJR 26, and would like to send
appropriate spokespeople to be heard by the Senate
and Assembly committees which will consider the bill.
NBC feels that the underlying assumptions of SJR 26
are erroneous, and that neither the Joint Resolution
nor fl.R. 2250 should be enacted.
SJR 26 is premised, in part, on the proposition that
the Financial Interest and Syndication Rules "have
protected the public interest and have encouraged di-
versity and competition within the production commun-
ity". Nothing could be further from the truth. The
fact is that, since the rules were imposed, a handful
of the major Hollywood production studies have come
to dominate network primetime series production and
the syndication of off-network programming.
As of 1982, six of the leading eight firms in the
syndication business were Paramount, 20th Century-Fox,
Columbia, ZICA, Warner Bros. and NGM/UA. These firms
also dominate the market for network programming,
which is the major source of syndicated programming.
Since the rules were adopted, the major producers
share of network primetime series programming has in-
creased substantially, to the exclusion of smaller
and newer producers.
PAGENO="0910"
908
Page Two.
SJR 26 is also premised on the fact that "netwc(k
affiliated stations have consistently opposed repeal
of the Primetime Access Rule which is addressed by
B.R. 2250". The inclusion of the Primetime Access
Rule by the authors of H.R. 2250 creates a non-issue.
The fact is that the FCC is not considering any change
whatsoever in the Primetime Access Rule, and NBC has
made it absolutely clear that it does not seek and is
not proposing a change to the Primetime Access Rule.
Thus, the only issue facing the FCC, and the only
issue relevant to SJR 26, is the repeal of the `Finan-
cial Interest and Syndication Rules. Every governmen-
tal agency which has considered the question agrees
that the Financial Interest and Syndication Rules are
outmoded and anti-competitive, and should be repealed.
This includes the Department of Justice, the Department
of Commerce, the Federal Trade Commission and the FCC's
Network Inquiry Special Staff. The Rules make it im-
possible for the television networks, the major source
of free, over-the-air television, to compete freely and
fairly with pay television in acquiring programs. The
fast-growing pay television industry already outbids
the free television networks for popular movies and
sporting events and, increasingly, pay television is
going after series programming. If the free television
networks cannot compete, then the public will be the
loser because, in the near future, most of these pro-
grains will be available only to those who can afford
pay television. The victims, of course, will be the
poor, the elderly and the infirm, many of whom depend
on free television as their primary source of enter-
tainment.
NBC strongly urges you to consider the implications of
SJR 26 before you vote for its passage. We hope that
you will take the time to read the attached materials,
which will give you some additional i~easons for re-
pealing the Financial Interest and Syndication Rules.
NBC will present these and other arguments in greater
detail at the hearings which will be held. on SJR 26.
Thank you very much.
Sincerely,
Brandon Tartikoff
PAGENO="0911"
909
p
J.\L! ~
CBS T~5"~or~ Stat tYit A ~ o' C)~
6121 Su~o~ B~ut~~a't~
Los A~oe~es C to~a S0025
(213)4503421
James S SenseS
Vjce Pesa,rst, Genera) Mana~n'
Dear Senator July 6, 1983
This letter is to oppose in the strongest possible terms the adoption
of Senate Joint Resolution No~ 26. Repeal of the financial interest
and syndication rules will serve the public interest and will not be
a~dvers e to the i it er es ts of Cal if orni a A mor at on tin on F CC
consideration of repealing the rules is simply not justified by any
substantive or procedural concern.
The FCC adopted the rules in 1970, but the rules have been under
criti ci ss vi rtua'lly since they were adopted by econocni c scholars,
teleccnmunications experts, industry practitioners and now the
departments and aoencies of goverrrnent. In the mid-1970's the
Brookings Institution conducted an extensive analysis of the rules
and concluded that they were unjustified and ineffective and should
be repealed. In the late 1970's Congress appropriated funds for a
special FCC study of the rules. That study 1 asted two years, cost
millions of dollars, collected massive amounts of evidence and
concluded unequivocally that the rules were unfounded, ill-conceived
and counter-productive and should be repealed. Recently, the
Departments of Ccrnrnerce and Justice and the Federal Trade CaiimissiOn
conducted extensive, independent investigations of the practical
effects of the rules. All concluded that the rules were unwarranted
and should be repealed. After years of examination, and debate, the
overwhelming weight of expert opinion is that the rules should be
repealed. The State of California should not support congressional
action which would prevent the FCC frau acting on the record of expert
opinion before it.
Senate Joint Resolution No. 26 is predicated on a number of assertions
which are inaccurate. In the interests of presenting the Senate with
a bal anced view of the i ssues involved in repeal of the rules, I would
like to coni'nent individually on several of those assertions.
The. assertion that "These rules ~have Erot he p~Uc~_~~a ~
encoura d diversit and can etition within the roduction ccrrinunit
is no rue. sing a a compi e y e coa u ion o pro ucers an
syndicators urging retention of the rules, it is clear that the supply
of prime time entertairrnent series to the three major networks has
decreased in diversity and, accordingly, the industry has beccrne more
concentrated and less competitive. (See Chart 1 attached.) As the
Department of Justice concluded in its filing with the FCC: "In sum,
the Department believes the current rules do not increase the diversity
of prograoming supplied to the networks. The production market is
competitive and the networks' position as arbiters of the common taste
is unchanged. In our vie~, proponents of the rule have failed to
justify retenti on of the rules on `diversity' grounds ."
32-540 O-84--58
PAGENO="0912"
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July 6, 1983
Page 2
Indeed, sound arguments have been advanced that repeal of the rules
will actually increase diversity and ccxnpetitiofl by providing
addi ti onal sources of ii nanci ng to so all, ri sk- averse producers and
by permitting networks to participate in the production of first-run
syndi cati on progranmi ng. For exampl e, the CBS Owned stati on in
Philadelphia, WCAU-TV, produced two 18-part children's dramatic series
entitled "Candy Apple News" and "Star Stuff." Hc~iever, an inability
to cover costs through regional syndication prompted WC~U-TV to curtail
the series In favor of less costly programming.
The st atanent that "These FCC r4e~ ..were ~ i~~~tu~d ~
concluded that the ublic interest re uires limitation of network
contro an an increase in the opportunity or ey~9~~9t ~
independent sources of prime time roqrallmin " is misleading. First,
it is clear fran the history of the origina rulanaking that the
Commission's concerns were mostly prospective and that the rules were
adopted as a prophylactic measure to ensure that, in the future,
networks were not in a position to act anti_competitively. In
recorrinending that the rules be repealed, the special FCC staff noted
that the Commission's conceT~ns when the rules were adopted proved to
be unfounded because competition in the telecomunicationS marketplace
gr~ at an unexpected pace, acting as a natural curb on any anti-
competitive conduct by any player in that marketplace. Second, the
concensus of experts who have studied the rules is that they have not
achieved their intended result. As the Departiirent of Ccmiierce found:
"Contrary to its intent, the rule appears to have stabilized or
increased concentration in the program supply industry by making it
more difficult for unknown independent producers to find partners with
which to share their risks."
"These financial interest s dication and rime time access rules
rovi e rerun ri ts to ro ucers ena in t an to increase revenue
and inde endence and roduce tru innovative ro rairs." After
extensive investigation the epartment of ustice conc uded that this
was not true: "There is no evidence that the rules have increased the
profitability of producers." And after similar inquiry and analysis
the Federal Trade Ccnimission totally rejected the argument: "...sane
conmentators have suggested that repeal of'the rule will lead to
decreased supplier profitability which, in turn, will reduce the amount
of innovative programming which is produced. This prediction, however,
does not withstand economic scrutiny. Even if the rule has had the
effect of increasing supplier profitability, it is extremely unlikely
that continuation of the rule would promote innovative programming
developments. If innovative programs are profitable to produce, then
there is a reasonable expectation that such programs will be produced.
If such programming is not profitable, by contrast, it Is unlikely that
stockholders of Gulf-Western (Paramount) or MCA (Universal) would assent
to reinvesting those profits fran successful programs in programs that
promise to be less lucrative than other programming ventures."
PAGENO="0913"
911
July 6, 1983
Page 3
The assertion that "The FCC is resentl considerin the re a) of the
financial interest, s dication and rime time access ru es at t e
re uest of the networks that dominate the te evi sion industr " is
inaccurate, he FCC is considering repeal of the ru es because a
2-year FCC speci al staff study recommended the Ccmmi ssi on repeal the
rules. Further, the position of the networks in the progran supply
marketplace must be clarified for the record. Before the rules were
adopted the networks accounted for approximately 75% of television
progran purchases. Today, networks account for approximately 50% of
television progran purchases.
The asserti on that "The nati on' s network aff ii iated stati ons have
~
prime time access rule. However, the Chairman of the FCC has stated
emphatically that the prime time access rule has nothing to do with
the current proceeding considering the financial interest rule. As
a result, the affiliate associations of' all three television networks
have supported repeal of the financial interest and syndication rules
and would accordi ngly oppose H. R. 2250.
SJR 26 lists sane of the groups who would be expected to oppose repeal
of the rules. Attached is a list of sane groups who ~ypp~t repeal of
the rules. You will see that they include minority, religious, senior
citizen, labor and other groups. Support for repeal is, indeed,
broad-based.
As the foregoing indicates, the resolution eiibodied in Senate Joint
Resolution No. 26 simply does not rest on a sound foundation. We urge
that it not be passed.
Sincerely,
The Honorable
State Capitol
Sacranento, California 95814
Enclosure
PAGENO="0914"
912
ABC
ABC TV Affiliates Assoc.
Abel 1 CcxTnuni cati ons, Bal timore, Maryl and
Alfred E. Kahn & Robert Julius Thorne
Anal gam~ted Clothing and Textile Workers Union
American Association of Hones for the Aging
American. Family Corporation
American Federation of Grain Millers
American GI Fortin of the United States
Association of National Advertisers
Atenu Luso Americano
Black Citizens for Fair Media
Buena Vista Cablevision
Buford TV, Inc.
Busby, Finch, Lathom & Wi~nan
~BS Inc.
Caballero Spanish Media, Inc.
Carriere, Joseph A., KBJM-TV, New Mexico
Carter, Richard W.
Cedar Rapids TV Co.
Central Minnesota Television Co.
Chronicle Broadcasting Co.
Coalition of Labor Union Wanen
Commissioners, Broward County, Florida
Congressional Hispanic Caucus
Congressman Claude Pepper, Florida
Congressman John Myers, mdi ana
Connecti cut Broadcasters Associ ati ons
Cosmos Broadcasting Corp.
Cowles Conrnunications, Inc.
Daily Telegraph Printing Co.
Eagle Coomunications, Inc.
Fort Meyers Broadcasting Co.
Forward Coirmunications Corp.
Gannett Broadcasting Group
Garryowen Corporation
Gateway Ccinmunications, Inc.
Gilmore Broadcasting Corp.
Greater Washington Ibero-Ameri can Chamber of Commerce
Gross Telecasting, Inc.
Guaranty Broadcasting Corp.
Gulf Coast Broadcasting Co., Corpus Christi, Texas
Guy Gannett Broadcasting Services
Harron Coninunications Corp.
Hearst Corporati on
IATSE-Local 1
IBEW-Local 1430, New York, New York
Intern atial Longs horonen' s Associ ati on
International Union of Elec., Radio and Machine Workers
PAGENO="0915"
913
KARK-TV, Little Rock, Arkansas
KBIM-TV, Roswell, New Mexico
KCBT-TV, Harlingen, Texas
KCEN-TV, Waco, Texas
KCRL-TV, Reno, Nevada
KFBM-TV, San Diego, California, et al.
KID Bro~dcasting Corporation
KIEM-TV, Eureka, California
KJAC-TV, Port Arthur, Texas
KNOP-TV, North Platte, Nebraska
KOBC-TV, El Paso, Texas
KOLR-TV, Springfield, Mississippi
KQTV, St. Joseçk~, Missouri
KRBC-TV, Abilene, Texas, KACB-TV, San Angelo, Texas
KRCG-TV, Jeff erson City, Missouri
KTTC-TV, Rochester, Minnesota
KTVC, Dodge City, Kansas
KTVL-TV, Medford, Oregon
KVDP-TV, Tucson, Arizona
KWTV-TV, Oklahoma City, Oklahoma
KZTV, Corpus Christi, Texas
King Broadcasting Co.
La Raza National Lawyers Association
League of United Latin American Citizens
Lee Enterprises, Inc.
Loyola University, New Orleans & The Abellor Corp.
Maine Broadcasting Systom
Mexi can Amen can Opportunity Foundati on
Midcontinent Broadcasting Co.
Mount Mansfield TV, Inc.
tBC
NBC TV Affiliates
NOE Enterprises, Inc.
NWG Broadcasting Co.
NY State Department of Corrrnerce
National Black Media Coalition
National Coalition of Hispanic Mental Health, et al.
National Congress of American Indians
National Council of La Raza
National Council of Negro Wanen, Inc.
National Hispanic Arts Endowi~ent
National Urban Indian Council
Nicolas and Barrera
Northern TV, Inc~
Palmer Coarnunications, Inc.
Portal Ccrnrnunications, Inc.
Presbyterian Church in the United States
Rural American Wcmen, Inc.
PAGENO="0916"
914
SER-Jobs for Progress Inc
Santiago Raquelle
Scuro Vincent
Shooshan & Jackson, Inc
Sierra Cascade Communications
Springfield Television Corp
State Of Illinois
The Chicago Coalition
The Church of Jesus Christ Latter-Day Saints
The Evening News Association
United States Department of Commerce
United States Department of Justice
United Communications Corp
United Marine Div International Longshoromen'S Association AFL-CIO
United Rubber Cork, Linoleuu & Plastic Workers of America
Vega Francisco M Hispanic Republicans of Michigan Inc
WBBH-TV, Fort Myers, Florida
WBOC-TV Salisbury Maryland
WcBi-TV WBOY-TV KDUB-TV Columbus Mississippi
WCTV, Thomasville, Tallahasee, Florida
WCYB-TV Bristol Virginia
WGEMTV Quincy Illinois
WHMA-TV Anniston Alabama
WJCS-TV Springfield Illinois
WICU-TV Erie Pennsylvania
WKJG-TV Fort Wayne mdi ana
WKRG-TV Inc
WKYT-TV Lexington Kentucky
WLTX-TV Columbia South Carolina
WO~&-TV Florence Alabama
WRBL Columbus Georgia
KRBT-TV, Baton Rouge, Louisiana
WSLA-TV, Selma, Alabama
WSLS-TV, Roanoke, Virginia
~*ffWO-TV Terre Haute mdi ana
WVVA-TV, Bluefield West Virginia
Wichita Falls Telecasters II
Winnebago TV Corp & Plains Televi sion Partnership
Wyneco Corimunications Inc (KYCU KSTF KTYS)
Ziff-Davis Broadcasting Co
PAGENO="0917"
Midare pronounces netoiorks heoltny~ 7;:' i, ``1'!
sins fdriwcio P~esidrnl Toni'fdaia:a said 102 Thn:coxv f-Jr coo
a Idea' Ençnnnd Eroudcastmf Association meeroig ic boston
r.hattheresa `haiorai cap on the extent is whichcanicpesetio
Lion can goon' "Station execntiven sfionld beconcerneil anon:
audience erosion. lienaid. bnithalproblemis `roanagrabie. not
likely to connone at no present rate and ynur mast important
target audiences are the leant affected MaJa.ca expanded on
that pmnt toBso,sor:us'rvirn Ifenaidthe audience segment least
affected by cable is the 2554-year-old demographic c-loch he
said has the mont dispmable income and doesa dinpropornon'
aie share of me tarring I-ic derended CBS n new pohc,v o)nw
giving adrernners demographic guarantees on their buys
(Boo,sncAsnlNo. Ictay 23) by calling it `fealty cram" to take in
money only to bare to pay ii out again i-fe said his mum
challenge into linda wIno pace eprodnct tnmakeir attractive
to all aocernsers, an matter how the:- fiance their Costa
in his Boston talk. he said the three networkss catingv as far
ABCis sharplyeeducingnumberof hoursof mini'ser,es dutttio 1983' thin yea' are up four-tooths of a paint while their share is
84 season, pnmardy toaceommodatesportsand specialeenri'ts ~ holding at last years level lie said HBD ratings ace qechning
etage on network, according to Brandon Stoddard ptesident of and that the 35 basic cable seni'ivev cohecrive audience repre-
ABC Motion Pictures Stoddard told television rellorters hi Los senrs only a 1 4 roring Cahlenimpast will wane in the future
Angeles last Thursday (June 16) Mystic Warnorand TheLast Days he said, because its prime growth will be in mojsr cities where
of Pompeii will be longest programs no rsmi-setieo slate, tormer sreong independent and subdci'iptisn television already corn
scheduledfor hve hours aodfattet posoibfy longer Thiodlong-form pare with the nerworks "Viewers don't choose techootogy,
project, The Day After Tcrnity, has been reduced tn two and a half they choose programs." Malifd'BlfTB~5hiii&hdlng that the irbT
hours and slated for this season, possthly airing or October. Stod' : tsidf'lW"~7ogoaioiirig eypecience and resources cannot be
daid said ABC hon no current plans to repent Winds of War or matched
Thorn Birds, its highly rated mist-series from last season. butts -
cossidering rerun of Masoda. Stu Samuels, ABC s vice presideot
for novels, limited series arid motion pictures for television, said mill be reconsidered if. as result of DBS plan ultimately adopted,
network iv scheduling about 25 movies f or television thrs season any country is accorded less tfian four "satisfactory channels."
(up slightly from the 1882-83 seoson( to rsclude Cash Grande Otherwise, cosfetenve activity was concerned largely with nrga-
(starring Robert Mitchum) and The Dollmakec starring Jane niaatinnul mutters Mexican, Luro Valencia, was unopposed for
Fonda) lltoddard said ABC iv currently negotiating with Para' electron as chairman of conference, and U S delegation head,
mount Television regardIng possible sequel to Winds of War Abbott Washburn, was one of three vice chairmen named Others
based on Herman Wosh's follow-up novel, "War and Remem- were Cuban and Argestinian
brasce" "We hoØv to do this project," Stoddard told reporterS, 0
Heritage Coestousic,atians Inc., Des Mcones, Iowa-based MSO, has
ta L 01 we 01 H y d N h I Cl y St dd d ~° h lb if fist I d CM Co p 62 000 b y dm
qt5 d Tb D gAfteT Y y th mt Ip hI if b I ly tp tfrgu tab t$5Omll n F d f put
film we've ever dnne" that "deals,visth an entremely important chase were tamed by ltgitted partnerohrp offertng throsgh 6 F
possible event" Movie for tefev n wilt be completed next Hutton add bash borrowIngs. Seller is owned by brothers, Gerald,
month, at reported cost of mote tl~~ $6 milk
with 291,641 basic subscribers Indiana Cablevision passes
ABC Teleefsfon President John Seserino would neither nentirtn ~- 120,800 homes Daniels & Assoctateo brokered sale
deny published reports that Entertainment Division President An. 0
thonyD.Thomopoutoswouldsoonbe esitinghispost, tobesucceed- Actfon for Chftdrens `I'eteeision, I'fewtonville, Mass, along with
ecf bydtvtston s wee presrdest for prime time programing, Low California pub5c interestlawlirm, Pubfic Advocates Inc has asked
ABC In Pt in w if lyp ph aff d by FCC t lh tech t gy h w Id mlr p ibl test
h t Th m p f 0 m os p if t f diem d 1 g ly w to mm 0t ~ ~ I d b) ACT
pa bI f no e th p 1 y T yho ~ cc dbl I q I ItS b if if I
rymp coax old ytnthlut f ABC Ash tdt ilyd all mm if cc g ci r~°at hId Th ACT tb
through fall season, Sevenno replied "I don't know." parents could attach to television set to automatically block out
0 commercials ..."Parents who choose to will soon be able to weed
U.S. delegation Ii, Western Hemisphere conlereece in Geneva on out those mesnages with the aid of an inexpensive attachment to
direct broadcast satellite service was left at end of Oust week on the TV set." ACT Piesudent Peggy Charren noted, `For yearn.
Friday with two teoubteseme issues to think about over weekend broadcasters have been stoughing off their rospossibulty for doecr-
One wusfatlurethaslarto rearbagreenrentw'dhCasadaostecbeiCal mg ado to young audiences. claiming that it's the reoponvibulity rf
parameter's each b ptoposmg for 050 systems Two sides were to parents to monitor their children's viewing. The technology is at
csntmue working ovet v'eehvsd, as thcy faced Monday deadline hand to do that ettectivefy, nod 1 s up to the FCC so give porevt.n
for Ming DBS requttements Other ivsuv involves bne robe used lot the chance
dieidfng 12,1.12.3 afro betmeen fined s,atetfile and DII 5 n.oevices, D
Planning committee on Thursday recommended to plenary san' Weld C.etnwaotcations suboidary of Robert Wolf Co. wsll star:
sron that tine be at 12 2123 ghz set aside for DBS U S had traosmiOiisg rio satsli.te Lion cenorage of FCC open nteelings nb::
proposed that division But committee added quafifier Dtvtsion mg J,tne 23. Ar',yooo interetied us receivuvg Iced s from Woud
915
Fioistsn Purioa Cu, p,:~ t:,;o Iirst kuyee ol eetrnerk pregrarus Inn
16) Ic: tkb3-b4 season Major uplroc: buys were maoo' lot Foo:oior.
thrcugh Paul Schuimuc Co - New York division of Gardser Adver
tuning. llt Louis MaloI commitments are on ABCs Dyonsty, 20
20, Hart te Had, Hold and Weboior "a sleeper hit." accorduoll to
Schulman), no CBS's 60 Minutes. Dallas, Alice. Magnum P.1 and
Scarecrow and Mrs Krog("a hot"(, and on NBC'nA Team. Reming-
ton Sceele, Cheecn, Hill Street Blues and YellowRosel"besi cantos
telewsron"( Schulman said pricing is "nery lair" but iferboed to
drvslge specukcs and noted that negotiations were "tosgh bit ran
smootMy." F.L Zingale. media conumurocatloos director for Ral-
ston Purina upon his return from busineso Dip tO New York, said
company was "close in hnmshing" burys. He woslifn't say how
much company ms spesding, but noted it was "not a tremendous
change' over last season Ralston Purina tnvested more than 182
mithon th network television or 1982, according to Television Bu'
roan of Advertising Atari and Chesebrough.Ponds are also report-
ed to have sal ball rolling and submitted plans to networks last
week
E.
104
PAGENO="0918"
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916
__________________ F:
~ ~c~ftJtJD ~E~3
VoL 105 No. 3 /
Upfront buying: The bubble breaks at last
Buyers finally stopped sweating the key factor in the sudden surge in upfront omy as an incentive spumng early and
the sellers out last week as activity was agency realization that the pric- strong sales. He also cited reports that appli-
orders for network placements ing had reached a level that advertisers con- ance sales are on the rebound-purchases
mounted at NBC and ABC; sidered acceptable. Keever estimated that that usually occur when consumers have cx-
CBS still playing it close price increases were in the 10% to 14% tea money to spend.
to the vest; daytime neat range. As for total upfront purchasing by the
According to Keever, ABC-TV has more three networks, Btackmore estimated that
The upfront baying season, pent up since the than 45 advertisers in the fold (with ordersor this year it would hit $1.9 billion, up from
July 4 holiday, finally burst open last week "on hold"), including Ralston Parina (signed the $1.7 billion total of last year. By early
with activity described as "strong" and cost- last month), Pfizer, iC. Pauney, Quaker this week Blackmore estimated already $1.3
per-thousand average increases reported is Oats, Helene Curtis, Krufi, AT&T, Mazda, billion in advertising woatd be committed in
the 10% to 14% range. Colgate-Palmolive, Coleco, Revlon, Ameri- upfront purchases to the networks.
Network salesman and agency buyers- can Motors, ColambiaPictures, Papsicoand He declined to identify who was baying,
formerly at odds on pricing-in many cases Wrigley's. bat indicated big spenders were the informtr
seemed to have reached compromises last "And now the upfront daytime is starting tion, communication, financial and phone
week. So far, network sales executives re- to perk," Keever said, "I think all network service companies. Also high on the list are
port, the flurry is'ahead of last year's. TV is strong-alive and well." theatricals, fast food and beverage and aUto-
H. Weller (Jake) Keever, vice president, NBC is "heading into the $500 million motives, which "all appear 10 be up." He
TV network sales, ABC-TV, said the sales area," reported Bob Blackmore, NBC senior described the activity as "very close to last
explosion erupted when agencies decided vice president, sales. As of late last week, he year's paco... We're in good shape."
that the time and prices were right. He noted said, NBC had signed up about 60 adver- CBS-TVofficials do not discuss sates per
that many of his salesman and associatell users. He described itas a "double digit mar- gress as a matter of policy, bat word from
personnel worked until I am. to organize ketptace." and looked to having three-quar- other sources-including competing net-
the details of the orders. tees of the upfront season sold by the end of works-was that CBS was sharing in the
Keever said the sates pace now is torrid, last week. prottferating sates. One agency executive
Counting orders and plans "on hold" (orders Although traditionally about 50% to 70% estimated Friday that CBS had written $350
requiring only advertiser approval), ABC- of a network's commercial inventory is sold million to $400 million in upfront business.
TV had about $450 million in upfront sales through upfront sales, Blackmore noled,this A high CBS source would not talk figures
as of Friday (July 15) morning. year "people are looking in the 60% to 65% but said the market had become "very ac-
"ByJuly 15 of last year, we had only $149 range." In general, he observed, upfront nyc" and "everybody here is very excited
million," Keever volunteered. "That's an buying is running a "couple of weeks ahead about what'shappening." Jerry Dominus,
idea of how quickly sales are moving." this year." CBS-TV sales vice president, said. `We
Keever expressed the view that perhaps Blackmore pointed to the improved econ- think yesterday [Thursday, July l4[ was the
23
Morebullish Ihan ever. Total media udvertisivg eopendiiures are eopecied to increase 11%
ihis yearover 1982 and hit nearly $74 billion, greaterthanthe protected 8% increase in gross
national product. This estimate came from Robert J. Coon, senior vice president. McCann-
Erickson, iou briefing for analysts and business press in New York last week Coen revised
upward his December 1982 estimute of 9.2% because "the aconomic recovery has arrived
sooner than eopected and it has been accompanied by a cleat improvement in advertising
spending, particularly by retailers and for classified newspaper iisting,' he naid.
Coon said rietworkielevision advertising tevenuesforthefirstfive months sf1983 were up
an average of 11% over 1982 with NBC panting he largesf gain 8118%: ABC was second at
11%. and CBSwasthird at 4%. Spottelevision advertising increased 10% in the first quarter
of 1983. he said. and is eopected to rise 8.5% for the whole year.
First-quarter 1985 spot television safes also posted gains over network television sales,
Coos reported, intouroulof sevenlop productcafegories. fnlhe candy/soft drink category
spotlVadvertising increased 25%inthetirsf quartetotthisyear.while networkadvertising in
thatcalegory decreased 5%. The cleaners/wanes category showed a 52% increase on spot
`t'4 comparedlo 12%for network. Automobiles, however. posted a 33% increase on neiwork
versus an 8% increase in spot.
CoonS outlook for 1983 included an 8.5% increase in spot TVadvertising to $4.73 billion;
11% increase in networkTVadverbsingto$6.895 billion; 11% increase in magazine advertis-
ing to $4.12 billion: 8% increase in nulionol newspaper advertising to $2.65 billion; 20%
increase in network radio to $305 million and 9% in spot radio to $1 billion.
PAGENO="0919"
917
biggest [nales]day in ourlnistory We're right to demonstrate their dispteasure, are consid-
on tatget." ering buying time on onty two networks.
Butthe ageectes appearlest sanguinrthan The networks appearto have responded to
the networks. Negotiations were described thepressare. Buyers at the othermajor agen-
as "much tougher" than previous years, and rica report increases in the low doabte dig-
the tones of reports often hinted at strain, its. "At this point it appears the networks are
Robert (Back) Buchanan, executive vice more reatisttc this year than tast," said one.
president and U.S. media directorof,l. Wat- Although some advertising agencies are
tsr ThompsonlUSA, confirmed the upfront predicting a dire future for network televi-
season opened taut week bat noted adver- nion, ABC-T\~ for one, is jubilant over ad-
05cm are "restating the increasen." He said vertising prospects. It's undeestood that for
advertisers are increasingly considering oth. l9~3-g4, ABC-TV already is coasting on
er media considerations. $1.2 billion including upt'ront prime time
"No, we're not going to pay the 15% to ($450 million), nummer and winter Otym-
20% [as) the networks Were originally ask- pica ($600 million and 96% sold) and the
ing," Buchanan said. Advertisers, he said, remainder for World Series and Monday
Night Faatbait. ABC-TV's second quarter
reportedly finished up with results second
only to the ftrst qaarterof this year-despite
agency critics who were pointing to a slug-
gish second quarter in daytime, the second
quarter was the best in ABC-TV history
According to one agency buyer, NBC set
the events in motion by taking a "very ag-
gressive" position early in the week. The
rent of the week, he noted, ABC and CBS
tpent "aggressively trying to catch up." An-
other buyer said he has actually, in some
eases, seen "C-P.M's go down from last
year," but in other instances has seen them
rise. He called the puoemn of events unfold-
ing last week "kinky, weird." 0
PAGENO="0920"
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At the FCC'S oral arguments on the Financial Interest
and Syn~dication Rules on March 14, there was a particularly
interesting exchange anonig Commissioners Dawson, Jones &
Rivera and Chairnan Fowler commenting on statements by
several public interest representatives who express concern
over the potential demise of free television and, therefore,
the need to repeal the rules.
Participants in this panel were:
Favoring repeal
Pluria Marshall, National Black Media Coaltion
William Hutton, National Council of Senior Citizens
Bill Guilford, COrnma/OCC Media Department
Emma Bowen, Black Citizens for Fair Media
Bill Juie, Office of Media Communication for Presbyterian
Church in the U.S.
Peter Bommarito, United Rubber, Cork, Linoleum and
Plastic Workers of America
Opposing Repeal
Joseph Waz, Committee Against Network Monopoly
Mary Ledding, Women in Film
Samuel Simon, Telecommunications Research & Action
Center
A transcript of the exdhange among the commissioners
follows:
PAGENO="0921"
919
Commissioner Dawson - I'm absolutely astounded by the amount
of education that must have gone on to get this group
together to talk about the immediate demise of the three
networks. I'm just astounded. I mean the scare tactics
we have seen today are rather frightening. And the networks
themselves talk about having a dominate position into
1990. If they're going to be in new technologies their
competitors are going to be themselves. I didn't come
here to take sides one way or the other in this issue.
I'm here to learn from you, but I'm concerned in terms
of the information that has been given out on this
subject matter. Unless the information that I have
on this subject is totally wrong and what we have been
doing in all the new services and what I know to be the
financial viability of the new technologies and how long
it takes to launch them and who the major investors are
likely to be there's some very wrong information going
around here today,and I would urge everyone here to
look further into these questions.
Commissioner Jones - I would think even some of the comments
by network executives today would allay alot of the
fears that are expressed by this group. I admire
Commissioner Dawson for raising it. I think someone
has been doing a hard sell in the guise perhaps of
an educational program. I think there is more fear
than there need be.
PAGENO="0922"
920
-2-
Commissioner Fowler - I think though that just to state the
other side and just compare we heard many of the CPD
people talking about the dominance of the networks
we've heard that all day too and I think that dominance
may be -- there are different ways of defixiing dominarce.
Looking at the nap over here, where NBC reaching 68 million
TV homes each week, ABC 69 and I think CBS is something like
71 and some would say that that dominance is another word for
efficiency. Efficiency means that you provide services
to people at the lowest cost and the highest quality
and some would say that the networks with that dominance
actually have served the peoole, poor people, median
income people and yes wealthy people very, very well
over the years. And I think what they're saying here
is that some of then are very concerned at the lower
end and Mr. Stigler the noted economist makes the point
that when you're talking about large entities that are
very efficient such as automobile makers or in this case
the networks and efficiencies are dominance the poor
may be the ones that lose the most if you either eliminate
those efficiencies or through regulation preclude them
from being as efficient as they could be because that
translates into a lower quality of service or higher prices.
And I think therefore what I'm picking up from some of
these people here is not scare tactics but simply an
honest concern on their part. We may or may not agree
with that and that's up to us to evaluate that. But I
think we do a diservice if we say that they're being
used necessarily as tools for their scare tactics and I
think we ought to be careful of that...
PAGENO="0923"
921
-3-
Commissioner Dawson - I didn't call them tools.
Commissioner Fowler - I'm not saying that you said that, but
I'm just saying that we need to be careful the other way
too. I think it's valid of you to bring that point up,
but I just wanted to state the other side.. I don't
want then to think that we're just brushing off what
they're saying. .
Commissioner Dawson - Well, I'm rather concerned about what
they're saying. I'm very concerned by what they're
saying. I think that reasonable people can differ over
what network dominance is, what exists and whether we
are not intruding ourselves into a marketplace situation,
but I'm concerned about the suggestion that the demise
of over the year free television is before us and I think
sugaesting that is a much stronger statement than
the economic argument about what is dominance and what
a relevant market is. .1 think that's a much
Commissioner Rivera - I agree and I think that that's way
Mr. Simon's points were very well taken if we uncover
in this proceeding that the free television system as
we know it is about to collapse then we should institute
a proceeding to look into that.
ComisSioner Jones - I think that's the message I would want
to give you too. I really don't think that you should
sit here or leave here with the feeling that we are
not mindful of your concerns. I think that what we're
saying is we don't think that that is necessarily involved in
this proceeding and as Commissioner Quello said the day that
we see that as a real threat will be the day that a lot of
us will be very concerned. We're not dismissing it,
and we don't really think it's involved here and we don't
want you to be concerned whatever action we take, that
that's going to deprive you of free, over-the-air television.
Commissioner Dawson - Absolutely.
PAGENO="0924"
922
Mr. WIRTH. Thank you, Mr. Waz. I could not agree with you
more in the final statement you made about the priorities of the
FCC. The gentleman from Iowa earlier cited the emphasis by some
on the subcommittee to the question of diversity and some of us
have also encouraged competition, figuring that is the best way to
govern the marketplace.
It is strange to me that such enormous time and effort is spent
while low-power television languishes, as you point out, the fear of
competition in radio seems to dominate.
It is extraordinary to me, but I think that points up one of the
reasons why we are here.
Let me ask you, if I might, why do you think that the networks
are pushing this so hard? That may seem like a simple question.
One answer might be that they would think there would be better
programing available in prime time if they were responsible for
that.
That is one possible answer, isn't it? But presumably, that is not
an answer, because they are not using all of their prime time pro-
graming anyway, as they suggested in the earlier panel.
Is there any debate on that? That is not the reason they are
pushing that?
Mr. HARGROvE. I think the reason they are interested in this
issue is because it will enhance their profits. There isn't any ques-
tion about that. But it is the hope of local television stations, specif-
ically affiliated stations, that those profits will ultimately be re-
flected in better programing.
The concern that local stations have is that with all the new
technologies available to siphon off funds, talent, resources, that if
you encumber the over-the-year distribution system with this kind
of constraint, artificial constraint, that the networks will be tempt-
ed to divert their resources into producing programming for the
non-over-the-year system and that-let me say, Mr. Chairman, the
ABC affiliates spend most of their time at war with ABC.
One of my responsibilities is to make sure that the network deals
fairly with its affiliates and those are the kind of confrontations we
have as an affiliate body. The affiliate body spends a considerable
amount of time looking at this issue.
I might add that its initial reaction was, if anything, was hostile
to repeal of the rule, but the more the affiliates learned of the sub-
leties of how programs are produced, sold, marketed and distribut-
ed, the more they became concerned that artificial regulations such
as these that impair the networks' ability to maximize its profits in
the programing it acquires will ultimately be reflected in an inferi-
or product.
Mr. WIRmi. Wouldn't that same argument hold for repealing the
prime time access rule?
Mr. HARGROVE. No. The FCC has not proposed to repeal the
prime time access rule so it is not in issue. But let there be no mis-
take about the position of network affiliates that they very much
favor the prime time access aspect of this legislation.
Mr. WIRTH. It seems to me that what is good for the goose ought
to be good for the gander.
Mr. HARGROVE. No. you are confusing the rules.
PAGENO="0925"
923
Mr. WIRTH. The concern, as I understand, in the repeal of the
rule, you say that is necessary to maximize the profits of the net-
works for the purpose of maintaining a high level of programing in
the face of an enormous amount of competition.
Wouldn't the networks be very happy to have control over all
prime time and have no prime time access?
Mr. HARGROVE. I am sure they would.
Mr. WIRTH. But to be consistent, if, in faót, you all are arguing
for the repeal of the rules on financial interest and syndication for
the purpose of increasing the financial standing of the networks,
you should also be supporting the repeal of the prime time access
rule, shouldn't you?
Mr. HARGROVE. Not at all.
Mr. WIRTH. Oh?
Mr. HARGROVE. I understand the point you make, and it is not
without validity. But these are entirely separate rules with sepa-
rate purposes. They deal with separate problems. We feel the
prime time access rule, not the syndication and financial interest
rules, is chiefly responsible for the diversity of program sources
that we now have and for that reason, we support the prime time
access rule.
We very much favor that diversity of sources. If network affili-
ates thought for a moment that repeal of the syndication and fi-
nancial interest rules would ultimately compromise the availability
of diverse sources of programing for them in the access period, as I
pointed out in my statement, they would be very much opposed to
that.
Mr. WIRTH. The argument made relates to network dominance,
right? That is how-it seems to me the consistency is not there
from your perspective. I understand completely. You are affiliates
of ABC, NBC, and CBS, and you have to be nice on the one hand;
but on the other hand, you have a good deal with the prime time
access rule so consistency doesn't necessarily have to be there.
I understand your position. I just want to point out that that is
the case.
My time is expired at this time. Mr. Tauke.
Mr. TATJKE. Thank you, Mr. Chairman.
Mr. Waz, earlier, we had some discussion about some statisticS
which allegedly came from your organization and were those which
purported to show that during some period of time, there was a
shift in the amount of programing coming from independent pro-
ducers, a shift that would seem to suggest that financial interest
and syndication rules actually have not improved access of inde-
pendent producers to the airwaves, but rather decrease that access.
Do you have any comments on that study and those statistics?
Mr. WAZ. Yes, sir.
Some of what Mr. Blumenthal referred to in the study done by
ICF For the Committee for Prudent Deregulation is in fact my un-
derstanding of the way that data was developed as well. What ICF
did was to take a given week at the beginning of the TV season
through each of the seasons and developed a total number of--
Mr. TAU1~E. Let me interject. Was it your committee that did it,
or was it another committee?
PAGENO="0926"
924
Mr. WAZ. Yes, the Committee for Prudent Deregulation of which
Mr. Lear and Mr. Blumenthal are members. But I am quite well
acquainted with it.
Mr. TAUKE. OK; go ahead.
Mr. WAZ. The point Mr. Blumenthal made first about the fact
that it was a snapshot of a given week in time, does not take into
consideration the fact that over the course of a broadcast year, a
number of series could be canceled and new programs with new
producers put in their place; that over the course of the year a va-
riety of mini series from a variety of producers are brought in;
similarly a number of movies of the week are brought in with dif-
ferent producers.
Mr. TAUKE. I am sorry for interrupting but let me ask you, are
those statistics for the week looked at? Are those statistics mislead-
ing? Is it true that independent producers have less access to pro-
graming time than they used to or is the opposite true?
Mr. WAZ. Well, the point you make about there being less access
to broadcast time is the function of the fact that networks make
less time available in prime time.
Mr. TAUKE. These figures were on a percentage basis, percentage
of time available. Maybe I will just ask you directly, do independ-
ent producers have more access or less access than they did before
the rules were put into effect?
Mr. WAZ. Rather than debating the ICF study which I think
raises a number of questions of the sort you discussed, I did look at
Weekly Variety. A few weeks ago they did their annual review of
the programing the networks took options on for the coming year,
movies of the week they have put in orders for, commitments for
network programing as midseason replacements, and then I totaled
up the number of producers represented.
These are now representative of the total marketplace of produc-
ers who are competing for network broadcast time. Not necessarily
those that the networks ultimately give a slot to, but who are able
to compete for the time because in many cases they have built
their profitability on the financial interest and syndication rule.
I counted 97 different production entities, plus the networks who
*happened to be coproducers of movies of the week, all budgeted for
broadcast time, all with some time from the networks. On top of
that there are many more that did not get a pilot idea accepted by
the networks this year. There are many more that had programs
this year or last.
Mr. TAUKE. This is all very interesting but I am not getting an
answer to my question which I seem to have a hard time getting
today. I still don't know how much a program is worth. But Mr.
Bortz, do you have any comment?
Mr. BORTZ. I am interested to see how quickly the supporters of
the work done by the Committee for Prudent Deregulation are run-
ning away from its methodology. What the committee did was take
a given week in a season and look across a number of years, I be-
lieve going back to the mid-1960's for the same week. That really, is
an appropriate approach. If we assume that year-to-year the initial
week of the season isn't going to be terribly different we can com-
pare year-to-year. By using the committee's numbers, it is clear
PAGENO="0927"
925
that indeed there has been a decrease in the number of producers
over time.
So I can understand post facto why people are wanting to go
back to anecdotal stories rather than to data they developed.
Mr. TATJKE. Mr. Waz.
Mr. WAZ. If I may return to that point, too. There has been devi-
ation in the number of producers represented in prime time during
these snapshot weeks over the course of the years. I do understand
that during the 1981-82 season that the total number of program
suppliers in the snapshot week was 67 which represented the
lowest concentration figures in a decade.
The Heffendahl index was 309, according to information I have
seen, which is the lowest since 1967-68, and it represented the
second highest number of programers ever. Obviously while there
may have been a lull in that sort of-while there may be a lull in
the programing of independents for a period of time, there is dem-
onstration in the marketplace of today that there are indeed as
many programers represented in prime time as ever.
The second difficulty in counting the number of producers repre-
sented in prime time, as was done by our friends interpreting ICF,
was to lump any producers who had a coproduction deal with one
of the MPAA members as that being a production of one of the
MPAA companies.
Obviousl~r coproduction deals are a way of life, networks routine-
ly "lay off, as I believe they call it, a program brought to them by
a small independent on one of the larger producers.
Mr. TAUKE. Ms. Salhany, a quick question for you assuming you
represent independents. Are the independents more concerned
about the financial interest rule or the syndication rule?
Ms. SALHANY. They are concerned about both.
Mr. TAUKE. If the syndication rule were retained, maintained by
the FCC, and the financial independence rule were changed, what
impact would that have on independents?
Ms. SALHANY. We are concerned because we don't know how you
would legislate that. We don't know what percentage of control
there is in financial interest and what kind of deals might be made
for the syndication marketplace. No one knows about that. How do
you legislate that? How do you find that out?
Mr. TAUKE. It is pretty tough if you don't know what the FCC
will propose. I agree with that.
Yes, Mr. Hargrove.
Mr. HARGROVE. Mr. Tauke, I think the concern of independent
syndications springs from a concern that networks will warehouse
programing.
Mr. TAUKE. That is my understanding as well.
Mr. HARGEOVE. That they will keep it off the market.
Mr. TAUKE. So that is the syndication aspect.
Mr. HARGROVE. That is the syndication problem. Some of the net-
works have publicly stated that they would have no objection to a
narrowly drawn rule that would preclude them from warehousing
or engaging in abusive practices. Now, if affiliated stations thought
for a moment that their ability to acquire off-network programing
in the access period-which is the most profitable period for
them-they would be against repeal. They are not convinced that
32-540 O-84-----59
PAGENO="0928"
926
the networks would do that in the first place because historically
they did not.
There was evidence that the FCC adduced in hearings from the
manager of the NBC affiliate in Paducah, Ky., who said that NBC
which owns the rights to "Little House on the Prairie," sold that
program to his competitor across the street. And in all of the pro-
ceedings at the FCC there has been a lot of concern by independent
stations about warehousing but there is no evidence of it.
Mr. TAUKE. Are you in the same boat as the independents on
that question?
Mr. HARGROVE. Well, me?
Mr. TAIJKE. Yes. Are you in the same boat?
Mr. HARGROVE. We would be very much concerned about ware-
housing, yes, sir, very much so.
Let me-Ms. Salhany made reference to some--
Mr. TAUKE. She is about ready to respond.
Ms. SALHANY. I just want to answer, it is not only warehousing,
sir. It is a time period restriction. It is already going on. You
cannot run "Saturday Night Live" on Saturday night.
Mr. HARGROVE. That has nothing to do with these rules.
M5..SALHANY. I know, obviously. You cannot--
Mr. HARGROVE. That is an exclusivity question.
Ms. SALHANY. They pulled the "Johnny Carson Show" out of syn-
dication, Columbia may have to eat all those shows because they
could not syndicate. We could not run "Johnny Carson" late night.
So I cannot figure out-it is not only warehousing, believe me, it is
time period restriction. That will hurt everybody.
Mr. TAUKE. Could I just ask a question, and I know I am over my
time.
I guess it strikes me as-I am not sure I am offended by the fact
that you cannot run "Johnny Carson" at the same time NBC is
running "Johnny Carson." I am not sure 1 should be upset. I
wouldn't expect McDonald's to put Big Macs over at Hardees to sell.
Ms. SALHAIS~Y. I am not concerned with 11:30, but what about 11
o'clock? "Johnny Carson" isn't on at 11. It is the half-hour version
of "Johnny Carson." Why can't independents run it at 11 o'clock?
That is a program alternative.
Mr. TAUKE. I was thinking you were saying at the same time.
Ms. SALHANY. No, I said 11. The restriction was not only for
11:30.
Mr. TAUKE. Mr. Chairman, I think I will need help in ending
this.
Mr. WIRTH. Mr. Leland.
Mr. LELAND. Thank you, Mr. Chairman.
Mr. Bortz, you were saying that diversity will be encouraged if
the financial interest rules were repealed; is that correct?
Mr. BORTZ. What I was saying first of all, is that diversity and
quality of programing is not maintained, is not encouraged by the
financial interest and syndication rules. They are essentially unre-
lated, unrelated to diversity and quality. If we have a free market-
place in which the producers come out from the shelter of this
highly protected highly leveraged network marketplace that has
been legislated or mandated by regulation, if they no longer had
PAGENO="0929"
927
such protection, it is my view that we would see more diversity for
programing.
Mr. LELAND. Let me ask you about the diversity of programing.
You heard my questioning before or my comments anyway. I am
concerned about what is happening with ethnic minorities in tele-
vision. The networks have had the ability in the past to put them
on television, to produce dramatic series, miniseries if you will,
and place the moneys that they did behind "Roots," for instance.
But they have not done that.
How is it that-why should a person like myself who is a minori-
ty who sits on this committee, who does indeed have a subjective
interest if you will, but a subjective interest that is probably justi-
fied some justification if you will.
How am I supposed to look at the networks?
Mr. BORTZ. If your evaluation is that they have not done that
and they have not done--
Mr. LELAND. You agree with me that they have not done that,
Mr. BORTZ. We certainly would-we are seeing more diversity as
we have new channels of distribution. We have a mass advertising
medium here and people like to ignore that.
The point I would like to make is the concerns you express are
concerns that have occurred during a period when the financial in-
terest and syndication rules were in effect and there is absolutely
no basis when you say that retention. of the rules would somehow
change that.
Mr. LELAND. Wait a minute now, Mr. Bortz. Before the rules
were in effect there was television, right?
Mr. BORTZ. Yes.
Mr. LELAND. There were no blacks for all practical purposes then
on television doing anything. Nat King Cole tried desperately to
stay on television but he was black so eventually they had to take
him off. So the networks had control of that if I remember correct-
ly. I was a little boy at the time.
Mr. BORTZ. But it had no relationship at all to the financial in-
terest and syndication rules.
Mr. LELAND. Are you saying this has no relationship whatever,
that I should not be considering these matters in this whole light?
Mr. B0RTz. You should be concerned about quality and diversity
and I agree with you. There is absolutely no relationship that has
been established in an extensive record between quality and diver-
sity and the financial interest and syndication rules. This is simply
a Government intervention in the marketplace.
Mr. LELAND. And I am in the Government, I was elected by some
70,000 or 80,000 people, or however many people voted for me in
my last election, and I am trying to get a handle on what we are
going to do about rights of people who have been denied those
rights, opportunities for people who have been denied opportuni-
ties.
What purpose would it be for us to have a Voting Rights Act to
provide opportunities for black people and other ethnic minorities
to serve in the U.S. Congress? That is a law. That is a Government
intervention into the affairs of our society in order that we can fa-
cilitate those opportunities. I serve for that reason. Otherwise the
legislature of the State of Texas could have drawn me out of a dis-
PAGENO="0930"
928
trict and a white person could have come here to serve the inter-
ests of the people of the 18th Congressional District.
OK? So I have come with a certain set of problems from my dis-
trict to try to resolve them. The only way I can resolve them is to
use the tools that I have available to me as a Member of Congress.
Mr. BORTZ. But I believe with all respect that you have picked up
the wrong tool. I think this tool, the financial interest, and syndica-
tion rules, is unrelated to the objectives and I tell you~--
Mr. LELAND. But if I supported repeal then I am rewarding the
networks. As far as I am concerned the networks have been the
perpetrators of the real problem, the real problem is that there has
been no facilitation of opportunities for minorities in television.
Now you have to agree with that. The networks themselves have
agreed with that, ~the independent producers have said that they
are at fault, too. So you have to agree with that, right?
Mr. BORTZ. I think we have all agreed on basic principles and
goals. The point I repeatedly `make is that the legislation under
consideration, H.R. 2250, would do nothing to address your con-
cerns.
Mr. LELAND. Except I have gotten the networks' attention and at
least some of them are saying, well, Mickey, we ought to sit down
and talk about it. If that is all I have got that is all I got, brother.
That is all I got.
Mr. BORTZ. If you acknowledge that that is your intent, then I
cannot disagree with that. I think it is important to get on the
table that the rules themselves do not directly address your issue.
Mr. LELAND. I don't know if I necessarily agree with that because
I hear the argument and I have not been convinced yet that cre-
ative latitude is not given if the rules.are repealed. I am concerned
about that.
If that creative latitude is not given, then in fact there will be
less opportunity' for minorities to participate in the productions of
these series or these programs on television. So why further re-
strict opportunities by giving the networks the ability to say, OK,
we are going to have only white people in major leading roles on
television; or we are only going to produce dramatic series like
"Dallas" and "Dynasty" and those programs where they are going
to be literally white.
Mr. BORTZ. With all the investment that the production commu-
nity has made in this series of proceedings they have been unable
to relate the quality and content of programs to the financial inter-
est and syndication rules.
Mr. LELAND. I further challenge you, why is it that we ought to
reward these people when they have not done what they ought to
be doing?
Mr. BORTZ. I cannot recommend your policy approach, if you
want to use these rules, unrelated to your goals, as a weapon to
achieve your goals.
Mr. LELAND. I don't think they are unrelated. Let me relate
them then.
I sit on this subcommittee, right? I am going to do what I can to
change the circumstances that prevent blacks, Hispanics, Asian-
Americans, native Americans, to participate in a medium that re-
flects or should reflect the American way of life-and it doesn't
PAGENO="0931"
929
now. I realize we get into a problem of first amendment rights and
all that kind of stuff. You know, but maybe that ought to be chal-
lenged to some extent.
God save me if I have ventured to try to solve that problem. But
my problem-do you understand my frustration?
Mr. BORTZ. I understand your strategy cOmpletely, Mr. Leland.
Mr. LELAND. Thank you.
Mr. BORTZ. I understand that completely.
Mr. LELAND. Mr. Hargrove, would you comment on that?
Mr. HARGROVE. I understand what you are saying very much and
I would have to agree with Mr. Bortz that quite candidly the con-
cerns that you have really are not a part-they are really not a
part-they are very proper concerns. Mr. Lear who sat here today,
who is responsible for much of the programing on television today,
except in responsibility, and we all heard the network people
accept responsibility, and I would respectfully urge you not to ap-
proach the issue in terms of punishing the networks--
Mr. LELAND. I am not trying to punish them, I am just trying to
give them a 5-year probation period if you will. I intend to be in
Congress 5 years from now and I want to review what they have
done in 5 years in light of the fact that they have agreed that this
is a problem.
Mr. HARGROVE. As Mr. Bortz pointed out, Mr. Lear and Mr. Blu-
menthal and those people sitting here earlier today are chiefly re-
sponsible for what we have on television.
Mr. LELAND. Now wait, we also know and we have heard them to
say in California and Los Angeles that they are as responsible as
their producers. Now, I understand, too, that the networks have
some control over what goes on the air. I understand, too, that they
have hired consultants. We know of evidence of at least two con-
sultants that have been hired and reported to the networks to say
that you should not hire black people to serve in leadership roles
and in programs.
Now, let me ask you one question that I failed to ask them-you
and Mr. Bortz-and can I ask, are the networks racist? I would like
to know. Are they racist? You know the effect is that they are. I
am just asking if the people who run the networks are racist?
Mr. BORTZ. That is not a question I think that I can answer. I
can say certainly I know network people. But this is not related. It
is totally unrelated to the hearing today.
Mr. LELAND. Let's be irrelevant to the hearing then and answer
the question~ Are they racist? Are the people who run the networks
racist because the effect is that the programs that they put on
don't illustrate or reflect the real society that we live in in Amer-
ica today. We find that the statistics don't bear out that they give
the same opportunities to blacks, Hispanics, and other ethnic mi-
norities that they give to white people, particularly white males.
Are they racist and are they sexist?
Mr. BORTZ. This is a "have you stopped beating your wife" kind
of question.
Mr. LELAND. No, it doesn't have anything to do with that.
Mr. BORTZ. I think the situation we have is an increasing, a bur-
geoning growth of alternative video distribution modes. It is not in
the future. There are two-thirds of all households passed by cable.
PAGENO="0932"
930
There are opportunities to program for smaller audiences, to try
and take--
Mr. LELAND. Wait a minute. Let me ask you something about
those smaller audiences. Twenty percent of an audience, is that ap-
preciable enough to pay attention to it and to project what the
characteristics of that 20 percent represents?
Mr. BORTZ. For certain types of programing, but as you intervene
in the marketplace and force programing up in terms of price I
would say no. I would say that the effect of this rule which allows
producers more leverage is to force the networks to seek larger and
larger audiences in an attempt to regain the margins that they had
in the past.
Mr. LELAND. They are going to ignore the 20 percent? Black
people spend disproportionately more money in buying the prod-
ucts that are advertised on television than anybody who views tele-
vision in America today. Do you realize that?
Mr. BORTZ. Absolutely. We have a diverse set of programing.
What you want is more diversity.
Mr. LELAND. You have a diverse set of programing. You have
"The Jeffersons" and "Mr. T" and you have Gary Coleman and all
of those comedies. How many dramatic series truly reflect the real-
ism of black life in. American today? To balance off--
Mr. BORTZ. Who is going to interpret that?
Mr. LELAND, To some extent I am a standup comedian myself. I
can get in the well of the Congress and make everybody laugh, but
that does not say very much if in fact there were not 20 other
Members of Congress who are black who presented themselves in a
dramatic way to reflect the real character of black life in America.
The same thing is true in television. What we are doing is poison-
ing the minds of the American people to believe that black people
only understand comedy. And Sidney Poitier disagrees with that
and I would suggest to you that Lou Gossett, a lot of other black
actors and actresses, disagree with that. Hispanic actors and ac-
tresses have not even had a chance to approach what black actors
and actresses are, and yet you folks are not projecting the real
image of what they represent in America. I do not care how irrele-
vant you think this is to financial interest and syndication, the fact
is that it is relevant to the American people and its future. Do you
think that the effect is racism?
Mr. BORTZ. I think that we are not in a position, I am certainly
not in a position to support your approach saying that by withhold-
ing an ability to return to a free marketplace that we are going to
affect your choice of programing.
Mr. LELAND. You are going to tell me the networks do not par-
ticipate in a free marketplace. The competition among the three
networks themselves is a matter of their participating in the free
marketplace.
Mr. BORTZ. The program marketplace is a regulated marketplace,
regulated by the financial interest and syndication rules in support
of the production community.
Mr. WIRTH. Would the gentleman yield?
You would support then the repeal of prime time access as well;
is that right?
PAGENO="0933"
931
Mr. BORTZ. In our work for the American Broadcasting Compa-
nies we did not even address it. I do not believe that it is an issue
at this point.
Mr. WIRTH. What is the difference between a free marketplace
that has prime time access as a rule and a free marketplace that
has syndication rules or financial interest rules?
Mr. BORTZ. Mr. Chairman, I think that as we all know, none of
us are going to foresee the future exactly. Let us see what develops.
Mr. WIRTH. No, tell me what the difference is. What is the differ-
ence between a television marketplace that has prime time access
as a rule and a television marketplace that has prime time access
and financial interest and syndication?
Mr. BORTZ. Prime time access is a matter primarily between the
networks and the stations. The financial interest and syndication
rules address the relationship between the networks and the pro-
ducers.
Mr. WIRTH. But if you are going to argue for a "free market-
place" then you are arguing to get rid of the prime time access rule
too.
Mr. BORTZ. I believe it is unrelated to what is being considered
here. The prime time access rule dealt with the issue of prime time
programing in an attempt to achieve diversity. At least it directly
addresses diversity. Financial interest and syndication does not ad-
dress diversity.
Mr. Wrnm. The whole purpose of all of those rules goes to the
question of network dominance, does it not?
Mr. BORTZ. We are talking about a different relationship. You
have I think no basis to say that the prime time access rule which
deals with the relationship primarily--
Mr. WIR'rii. Where did the rule start from to begin with?
Mr. BORTZ. The FCC special inquiry staff, the Department of Jus-
tice and the Department of Commerce all concluded, and looking at
the record at the time the decision was made, that there was no
basis for it. It was based upon supposed behavior for which there
was no documentation. It has never been shown that indeed that
behavior existed and so it was passed in anticipation of something
that might happen. These are independent people, independent
agencies with no stake in this deal and they concluded that there
was no basis in fact--
Mr. WIRTH. This goes back to the seventies, does it not?
Mr. BORTZ. To the sixties.
Mr. WIRTH. What was the problem that the Department of Jus-
tice is concerned about? Was that network dominance?
Mr. BORTZ. To be candid, I think there is a knee jerk reaction,
assuming we have these three networks programing our minds and
whether a rule was related to it or not, it was passed in anticipa-
tion that it addressed it. Careful examination showed that it did
not address it at all.
Mr. WIRTH. Was it a knee jerk reaction on the part of the net-
works when they signed a consent decree with the Justice Depart-
ment?
Mr. BORTZ. If you had been a party to the consent decree negotia-
tions, I suppose it is a knee jerk when the hammer hits your knee.
PAGENO="0934"
932
Mr. WIETH. It was a knee jerk reaction, they should not have
signed the consent decree?
Mr. BORTZ; `I personally was not supportive of it.
Mr. WIRTH. Are you talking about yourself or are you talking
about your client? When did the networks sign the consent decree?
Mr. BORTZ. In 1979 or 1980.
Mr. WIRTH. 1980, about 2 years before then, they came back to
repeal this. That was their knee jerk reaction, was to sign the con-
sent decree and then to come around the other direction. There
was no sense of network dominance. Network dominance was the
original reason the Justice Department got interested; is that
right?
Mr. BORTZ. The Department of Justice said that there was no
basis for financial interest and syndication rules with one narrow
exception and they, are on record and have proposed to deal with
the issue of warehousing.
Mr. WIR'rii. I am talking about how this came about in the con-
sent decree that was signed by the networks in 1979 and 1980. It
was focused on the question of network dominance, is that not
right?
Mr. BORTZ. That was the theory behind it.
Mr. WIRTH. That was the theory behind the syndication rule and
the theory behind the financial interest rule. What was the theory
behind the prime time access rule? Was that also network domi-
nance?
Mr. BORTZ. These were theories that have been analyzed and
shown to have no basis.
Mr. WIRTH. What was the theory behind prime time access? Was*
that network dominance? That was why the prime time access rule
was put into effect, was it not?
Mr. BORTZ. I fail to see the connection to try to link prime time
access to. financial interest and syndication.
Mr. WIEm. It all has to do with the sense of network dominance.
That is why the three are on the book. I am trying to get you to be
consistent in the alleged analysis that you were making to say that
if in fact you want to get rid of the financial interest and syndica-
tion rules because you ought to let the free market work, then the
same thing should be said about the prime time access rule. If you
are going to get rid of the others because of network dominance,
you get rid of the prime time access rule because of dominance.
But you are not willing to say that because you do not want to al-
ienate your affiliates out there who like the prime time access rule,
as Mr. Hargrove has pointed out. I just want to make that point for
the record. If I were sitting where you are, being paid by ABc, fine,
you can make that point. I just want to point out for the record
that there is a certain amount of consistency we would like to keep
in this and we could point to the linkage between these various
items, which are very important.
Mr. BORTZ. Why has this committee ignored the work done by
the Department of Justice, by the special inquiry staff, and by the
Department of Commerce, where these people should have a dis-
passionate and public interest position. They have analyzed the
issue and found it wanting.
PAGENO="0935"
933.
Mr. WIRTH. I will recommend to you some very good reading, a
good bargain from the Government Printing Office, and that is the
competition report done by the subcommittee in 1981, in which we
thoroughly analyzed and included the data from the special in-
quiry. That is available and we can probably get you a copy.
Mr. BORTZ. It has not been introduced in consideration of these
rules. That data has not been introduced here, the work that was
done by these different parties.
Mr. WIRTH. There are a vast number of people on this committee
who were deeply involved and we can remember what was there
and what was not there. It is not difficult to do to remember that
particular set of issues.
Mr. LELAND. Mr. Chairman.
Mr. WIRTH. It is the gentleman's time. I am sorry.
Mr. LELAND. I know I have run out of time, but if the Chair
would indulge me. I am not trying to browbeat you, Mr. Bortz.
Sometimes in these hearings we find that issues are raised that we
think are relevant to those issues and give rise to ideas about legis-
lation. You have suggested that my concerns are irrelevant to fi-
nancial interest and syndication. Would you support in your vast
experience with ABC, would you support and come and testify on
behalf of a piece of legislation that would be something similar to
the Civil Rights Act, but the Civil Rights Act for the network in-
dustry or the television industry?
Mr. BORTZ. No, I believe that Government intervention in pro-
graming decisions is something I would not support.,
Mr. WIRTH. Then you would not support the prime time access
rule. What is the difference?
Mr. BORTZ. There is a tremendous difference, because we are
talking about program content.
Mr. LELAND. Wait a minute, now, Mr Bortz. We are talking
about people who historically have been deprived of opportunities
in this country. We are talking about truly fulfilling the goals and
aspirations of the Constitution of this country. We are talking
about making this society's elements of participation available to
everybody. Are you telling me that if in fact the networks have
failed, and we have exhausted all other kinds of efforts, you are not
interested in solving the problem? The NAACP, LULAC, and other
organizations have been at the negotiating table with the networks
and they have tried to get some sense out of the networks and de-
velop some contractual agreements in the spirit and framework of
the free enterprise system. They have tried all those things and
those things have failed. We are finding that fewer opportunities
exist for minorities today in 1983, which does not make any sense
to anybody. Are you telling me that Government should never get
involved?.
Mr. BORTZ. I support your objectives very definitely. I think that
by getting into specifying program content, that is something that I
simply could not support.
Mr. LELAND. Let us quantify programing content, let us quantify
characteristic content or participation. Can we do that?
Mr. BORTZ. I speak only on my own behalf.
Mr. LELAND. Then we get into problems with quotas, right?
Mr. BORTZ. Absolutely, in terms of programing on the media.
PAGENO="0936"
934
Mr. LELAND. Do you think that is fair and just, that when an in-
stitution like the broadcast institution of particularly television has
failed and has not met its responsibilities of fulfillment of the
dreams and aspirations of a vast segment of American citizens,
that we should do nothing, we should stand by and watch the
future pass us by and deny these beautiful, intelligent, very talent-
ed people from gaining access to that theater called the networks?
Mr. BORTZ. I think I have a much more exciting and much more
dramatic view of the future than you are painting, because as I
pointed out in my testimony, the dollars devoted to programing off
of the networks and onto the new forn~s such as cable are going to
equal or surpass what the networks have.
Mr. LELAND. Wait. We are talking about the networks now. Let
us get back to your boss. Let us talk about ABC, let us talk about
"Dynasty." Is it "Dynasty" on ABC? I get them confused because
they look alike to me and it really bothers me.
Your boss did a beautiful thing. Your boss put on "Roots" and
created opportunities, but you know "Roots" had stars whO were
white and black and otherwise, I guess. That was a beautiful pres-
entation of American history, if you will. But then you go back and
you try to beat up on "Roots" with "Winds of War," and all of .a
sudden all you show is white faces, not even a black janitor any~~
where. You know, we had Dory Gray-Dory Miller, who was a hero
in World War Il-a black gunner-somebody sitting on the side-
lines. The Spook Who Sat by the Door was not even on "Winds of
War." It appalls me to realize what you are saying, what your
bosses are doing. They are not giving our folks an opportunity. If
you cannot stand up and tell a joke or make people laugh on televi-
sion and you are black, then you are out of a job. You do not have.
the same opportunities that everybody else has. Does that not
bother you?
Mr. BORTZ. I think you are correct in expressing those concerns
and you have done it to network executives and to program produc-
ers.
I think, again, that your approach of trying to use these rules to
bring that about is not going to be what does it. We are talking
about the structure of the program marketplace. That is what you
are discussing.
These rules are not going to touch your concerns.
Mr. LELAND. If I have got to use a two.by-four to hit the donkey
across the nose to get his attention, I am going to do it. I don't pre-
sume any kind of power.
I am just one person and one vote on this subcommittee, one
person with one vote on the full committee and one~ person with
one vote on the floor of the Congress.
That is all I represent. I don't presume any real power in this
Congress. I am relatively new to it.
But I will tell you that I am going to raise this issue. I don't care
how irrelevant you think it is. I think it is very relevant..
If we are talking about the future of the networks and its rela-
tionship to the people of America, then this is a relevant issue as
far as I am concerned.
PAGENO="0937"
935
I beg to differ with you. I would hope that you would go home
and search your soul to determine exactly where you are on this
matter, because I think it is a problem for everybody.
I am jumping on the independent producers, too. Just the other
day I asked Larry Hagman why was it that there were no blacks in
"Dallas." He said there are no blacks in Dallas, there are no Jews
in Dallas, there are no Hispanics in Dallas. Well, in Dallas, Tex.,
there are all of the above.
Dallas ought to reflect what that represents, if, in fact, it is going
to be not just a good dramatic series making money for a lot of
people, but one that commits the networks to fulfilling the goals
and aspirations of those people who are citizens of this country.
I am sorry, Mr. Chairman.
Mr. WIRTH. The gentleman's time has expired.
Mr. Waxman.
Mr. WAXMAN. Mr. Chairman, I think we have discussed the
issues thoroughly, and I am pleased that we have had this fourth
opportunity in the subcommittee to go into this question. But I
would submit that there is a relationship between these rules and
the diversity and creativity that we want to see more of on televi-
sion and if we eliminate these rules, and eliminate the prime time
access rule, and eliminate the fairness doctrine and equal time
rules, we will provide the opportunity for the networks to become
even more dominant than they already are.
There is virtually nothing on televison today, particularly with
the three network affiliates, that hasn't gone through some kind of
screening by the networks and hasn't met their approval.
What is at stake is power. It is a question of power, a question of
whether the networks are going to have power over independent
TV stations so that they can control the syndication of successful
televison programs, deny those programs to independent stations
and thus get a competitive advantage over them, and the question
is power over the creative community, those people who work on
making the programs, and who have an ongoing struggle at the
present time where they have all the disadvantages because they
must deal with the three behemoths in the broadcasting industry,
the three networks who even today without changes in the rules
pretty much call the shots.
If we eliminate the financial interest and syndication rules, then
there is no end to the amount of power that the networks will be
able to accumulate. The best arguments we have heard from the
networks is that if they can accumulate more money, they will
produce more good shows.
That is a major risk that we would be taking to rely on their
promises alone that television programing would improve.
There is no evidence for it. I don't think that anyone would be-
lieve it.
In effect, we would be allowing absolute network domination of
all televison programing. I note with interest that even the news
director of NBC talked about Roger Mudd as one of the best politi-
cal reporters in the country, a consummate journalist, while the
same time dumping him as an anchor for "NBC News," and only
because, as Roger Mudd indicated, they were receiving pressure
PAGENO="0938"
936
from the corporate side and the affiliates that the ratings were
not high enough.
The ratings are dominating the .industry. We have talked totally
about televisons' golden age, But in the fifties, we didn't have rat-
ings calling all the shots as to what would be and would not be on
television.
Now that ratings are the sole determiner for what the corporate
people and the networks think are appropriate or not appropriate
for the American people, we have, I think, a deterioration of qual-
ity of television programing and we ought not let that deterioration
continue by allowing the networks and their ratings dominate
their decisions even further as to what will be available to the
American people.
I have no questions of this panel. If anybody wants to respond to
what I said, I welcome it, but I think that we are all sort of ex-
hausted after today's 4 hours of discussion.
I thank the chairman, again, for holding this hearing. What is at
stake is a major question of public policy and public interest con-
sideration, and that for the future of television broadcasting, free
television broadcasting, whether three program producers will
make the decisions for all of the American people or whether there
is going to be competition because,there can be a prosperous, inde-
pendent television station market and that television producers can
battle for an opportunity now and then to come up with a creative
idea and get that idea on TV.
Mr. WIRTH. Mr. Hargrove.
Mr. HARGROVE. I wanted to comment on Ms. Salhany's observa-
tions that she supposedly made on behalf of broadcasting. I would
like tO point out for the record that Ms. Salhany works for a multi-
million dollar program production company, so it is not surprising
in the least that she would like to tilt the marketplace in favor of
her production company, and that is understandable, but it is quite
clear she does not speak-when she favors retention of the syndica-
tion of financial interest rules-for the majority of local television
affiliated stations in this country.
She talked about restrictions on when certain programs can play
and when they cannot play. It would be. interesting to see if the
programs that her company produces and syndicates do not have
the same kind of exclusivity restrictions that preclude those pro-
grams from playing in the same market at the same time. The
complaint she makes is not quite a proper complaint.
I mean ithere is nothing sinister about exclusivity. She is talking
about exclusivity, and exclusivity is part and parcel of the program
syndication market.
Exclusivity is one right among the bundle of rights that Mr.
Lear, Mr. Blumenthal, and Ms. Salhany's company and the net-
works all, bargain for when they acquire, market and distribute
programing.
There is nothing wrong with exclusivity and it is not addressed
by these rules. I think it would be unfortunate if somehow the im-
pression were created that retention of these rules would somehow
enable "Saturday Night Live" to be played on Saturday night
when it is in syndication.
Mr. WIRTH. Ms. Saihany.
PAGENO="0939"
937
Ms. SALUANY. I speak on behalf of the Taft Television Station
Group and NATPE. As far as exclusivity, I am not sure exclusivity
and restrictions are the same. I clçn't know what our company has
in its contracts because World Vision and the Taft Station Group
are really at odds, because they are selling and we don't always
buy from them.
That is separate. When I talk about restricticths, I go back to
things like "Match Game" which wasn't allowed to be run before
5:30 because the network was afraid it would compete with them.
They are afraid of competition. I could talk about "Family
Feud." The netw9rk version is separate and then there is a syndi-
cated version but the syndicated version can't run in the daytime
against ABC programing because ABC is worried about competi-
tion.
So 1 think that is a little different than exclusivity, Mr. Har-
grove.
Mr. WIRTH. Are there any further comments for the good of the
record?
Mr. HARGROVE. Thank you very much, Mr. Chairman.
Mr. WIRTH. Thank you very much.
Let me ask you finally, Mr. Bortz, as you were concerned about
interference with programing, do you also think we ought to get
rid of equal time and the fairness doctrine?
Mr. BORTZ. I believe that you would like to open this into a com-
prehensive hearing.
Mr. WIR~m. No, I want to get out the consistency in this. You say
why is there an equal time and fairness doctrine. Because of net-
work~dominance, a few stations' dominance, not enough competi-
tion. Would you argue for getting rid of that, too?
Mr. BORTZ. I can only return to the subject of this hearing, which
are the rules at issue in H.R. 2250, and all I have heard today is a
discussion over here on quality and diversity with very excellent
public interest goals, and no linkage established between the rules
and those public goals.
Mr. WIR~1. I just want to give you the opportunity to make your
position thoroughly consistent and see what it was.
I remain confused about that anyway. Thank you all very much.
We are very glad to have you here. We appreciate it.
The subcommittee will be adjourned.
[Whereupon, at 6 p.m., the subcommittee was adjourned, subject
to the call of the Chair.]
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