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Angeles. Also included in the contract is a bi-lateral exclusivity agreement.
Traces Development From Early Formation
Questioned by Judge Sykes on what MBS would do with a profit, since it "operated practically" as a non-profit organization and was a "cooperative network", Mr. Antrim said nothing in the charter would prevent MBS from declaring a dividend, although he added that profits probably could be used to pay wire charges and extend services like the European pickups.
Tracing the history of MBS, Mr. Antrim told of the early overtures of WGN directed at organizing a network to coordinate sustaining and commercial program service between a group of stations, and the ensuing agreement between WGN, WOR, WXYZ and WLW to operate a four-station network which since has grown into "a 110-station coast-to-coast network". He reviewed a 1934 contract between WGN, WOR and WXYZ, which was also orally agreed to by WLW, and another between WGN and WOR, which resulted in formation of the round robin network.
Mr. Antrim also produced a contract dated Jan. 31, 1935, between MBS, WOR, WXYZ, and WGN, describing it as the basic formal agreement entered into by MBS. He explained also that although the original 10 shares of MBS stock, five held by WGN and five by WOR, were increased to 15 in 1936 and the additional five shares taken by WLW, the Cincinnati station in 1937 turned them in.
MBS LINEUP as the FCC Network Inquiry began its fourth month included (1 to r) William B. Dolph, general manager of WOL, Washington, MBS outlet; Adolph Opfinger, program service manager; Andrew L. Poole, trafl[ic manager. Miles E. Lamphiear, auditor. Observers in back row are Phil Merryman, NBC station relations; A. L. Ashby, NBC vice-president and general counsel, and James W. Baldwin, Washington attorney.
and at present WGN and WOR each hold 7^/^ shares. WLW's present status is that of an aflSliate, he added.
Cross-examined by Mr. Porter, Mr. Antrim estimated that wire costs represented about two-thirds of the total MBS expense, with "operating expenses" amounting to only about one-third. Member and participatiixg stations' shares in the general operating expense are determined when the annual budget is drawn, he explained, and the stated amounts, except for WGN and WOR, are maximums. Although no provisions are made in the contracts, the member stations, WGN and WOR, have de
KGW-KEX sells furniture
with
''COVERED WAGON DAYS"
9 Starting its eleventh consecutive year as a user of Oregonian radio service, Gevurtz Furniture Co., of Portland, Oregon is on the air with "Covered Wagon Days" — a thrilling epic of the early West. Says Mr. Brant, manager of the Company: "We credit our KGW-KEX radio advertising as the principal factor in our 30% increase in sales in 1938. Much of this new business came from your secondary coverage area. Suburban dwellers have proved to us their great liking for 'Covered Wagon Days' and your thorough coverage of the suburban as well as city areas."
posited $20,000 each with MBS as working capital for the network, he said, adding that MBS pays 4% interest on these deposits.
In addition to furnishing its own lines to pick up and distribute MBS programs. Colonial pays a full member's share of general operating expenses, Mr. Antrim explained.
Questioned by Acting Chairman Brown and Commissioner Sykes, Mr. Antrim explained that since the 110 stations in general take only "some" and not "all" MBS programs, both sustaining and commercial, the network, when an agency approaches with a list of desired stations, must contact the stations to see if they are available for the account before consummating the transaction. He continued that with MBS ordinarily dealing with the agency rather than the advertiser, the MBS salesmen generally make the actual sale, receiving as commission 2% of the 31/2% received by MBS, leaving the network "in the long run" only 1%% to be applied on expenses of operation.
Mr. Antrim explained that by the agreement of CKLW with MBS the DetroitWindsor station underwrites a $30,000 per year return for the network, then receives 15% of the next $25,000 worth of network business placed on the station, and 50% of all over $55,000. He explained further that since Detroit is an important and valuable market to MBS, the network was anxious to maintain its coverage, after WXYZ joined NBCBlue, and arranged affiliation with CKLW on a basis that would not "unduly burden" the station.
Miles E. Lamphiear, MBS auditor and office manager, explained the financial operations of the net
62 0 KC SODO WATTS DAYS lOGO WATTS NIGHTS
NBC Red
RADIO STATIONS OF THE
DREGoninn
PORTLAND • OREGON
Representatives — EDWARD PETRY & CO., Inc., New York, Chicago Detroit, Sag Francisco, Los Angeles
NBC Blue
work and described a series of exhibits dealing with its dollar volume, payments to affiliates and participations of member stations in profits as distinguished from affiliated stations.
Financial Operations Reviewed by Lamphiear
In 1938, MBS had a gross billing of $2,272,661.99 with net revenue of $1,165,131.90, or 50.78% of its billing. Affiliated stations, irrespective of location but exclusive of the participating stations, had gross billings of $600,991.49 during the year with a net return of $271,483.44, which represented 45.17% of the advertiser's dollar. Eleven stations constituting major market affiliates in the Eastern and Central sections of the coun ! try had gross billings of $358, i 300.43 during 1938 and a net revenue of $223,521.40, representing a net income of 62.3%.
Mr. Porter closely examined Mr. Lamphiear in connection with the exhibits, seeking particularly to ascertain whether WOR and WGN, as the principal participating stations, realized a greater proportion of the net income than other participating stations or affiliates.
The tables showed in the case of WOR that in 1938 it had a gross billing on MBS of approximately $461,000 and a net revenue of approximately $281,000, or 59.35% net. In the case of WGN, its gross MBS billing was $264,455 and its net approximately $121,000 or 43.41%.
Business of Station Governs Net Profit
Mr. Lamphiear explained that the sum total of the net profit depended upon the amount of business carried by the particular stations and that those in the major markets and in greatest demand by advertisers obviously were in a position to absorb their fixed network costs and share to a greater extent in dollar volume in the net revenue although percentagewise the WOR and WGN figures were below those of certain other stations. He explained that if WGN and WOR both had the same gross billings, they would show exactly the same net return. Mr. Lamphiear pointed out, for example, that United Broadcasting Co. (WHKWCLEWHKC) had a gross income from MBS in 1938 of $46,787 but ran a deficit of $727.73.
Still dealing with the respective positions of WOR and WGN as owners of the MBS stock, Mr. Lamphiear declared that if an affiliated station had as large a gross as these stations it would actually realize more net profit since it
Z N £ T
Page 74 • February 15, 1939
BROADCASTING • Broadcast Advertising