Broadcasting (Jan - June 1939)

MUTUALLY interested in the FCC Network Inquiry proceedings were (1 to r) Percy Russell, MBS associate counsel, George Davis, consulting engineer of the Page & Davis firm, and Fred Weber, MBS general manager, who talk over some problems raised by the evidence. are differentiated between sustaining and commercial activities, he said. As for sustaining features, he explained, stations are encouraged to provide the best programs possible and to make them available to others, taking into consideration time of day, program balance on the network as well as on individual stations, wishes of listeners, and coordination of all individual program facilities for network service, i. e., shifting individual schedules to make certain programs more conveniently available on the network. On commercial schedules, MBS charges the maximum card rate of stations, each station may accept or reject any program, the standards of the originating station are accepted by the network and determine whether the program goes on the air at all, and in addition each station on the network exercises its own discretion in matters of policy, as with its own programs. Mr. Weber explained a series of exhibits, including a schedule of network rates and various forms used by the network from the time of its first contact with an advertiser's agency, through its inquiry for available facilities, to station commitment and final memoranda on the details of the contracted advertising programs. The contract with the advertiser, he pointed out, carries a provision allowing MBS "at its discretion, vdthout liability" to appropriate scheduled commercial time for special events broadcasts of importance, which, he added, was done "from time to time". The station commitment form, sent to all stations to familiarize them with the provisions of the pending contract with the advertiser, must be signed individually by the stations, and no agreement is reached with the agency until all stations participating in the schedule have signed, he explained. Station Availability Creates a Problem The need of sending out "availability inquiries" leads to difficulties in soliciting business for MBS, he stated, since the salesman cannot approach the advertiser with assurance either that a definite number of stations or a definite time over a period will be available for the account. All this must be settled subsequently after communication with the stations desired by the advertiser, he explained. Mr. Weber also discussed MBS gross billings by agencies during 1938, listing 52 agencies, with billings ranging from $397,393 to $1,400 during the year. Listing commercial programs and sponsors on MBS for 1938, he pointed out that last year the network carried 10 cooperative programs, a growth of 1,000% from the single cooperative feature carried in 1936. Receipts from cooperative programs amounted to $52,512 in 1936, he said, 2.5% of the total MBS billings for the year. In 1937, with three cooperative programs on the air, receipts jumped to $114,811, amounting to 5.1% of total billings and a 118.6% dollar increase over 1936. Receipts nearly tripled in 1938, amounting to $339,819 for the 10 programs, 11.6% of total billings, and representing a 195.9% dollar increase over 1937. Programs from foreign sources carried by MBS he divided into two classifications, those originated by the network's foreign representative and others originated by foreign stations and transmitted to MBS for distribution on the network. He also discussed two pieces of "typical promotion literature" of MBS, offered as an exhibit to demonstrate the efforts of MBS to sell the network idea to advertisers. The tendency is toward larger network hookups because of higher program production costs, he commented, citing the current labor situation in the radio industry as one reason for increased expense. Since a larger amount must be spent on talent and production, a larger distribution is necessary to yield a comparable economic return to the advertiser, he explained. In 1938, of the 56 advertisers using MBS, counting cooperative programs as one account, he said 41 used MBS exclusively and 15 non-exclusively. Of the 83 using CBS, 52 operated on the network exclusively and 31 non-exclusively, he added, and of the 116 on NBC networks, 88 were exclusive and 28 non-exclusive. Policy in Adding New Affiliate Stations Classifying MBS advertisers by expenditure groups, he said there were 11 advertisers, constituting 23.4% of those using MBS, who in 1938 spent under $50,000 annually for advertising in all media ; 8 (17.03%), who spent $50,000$100,000; 6 (12.77%), 100,000$200,000; 12 (25.53%), $200,000$500,000; 5 (10.64%), $500,000$1,000,000; 1 (2.12%), $1,000,000$2,000,000 and 4 (8.51%), over $2,000,000. He also explained an exhibit classifying NBC, CBS and MBS stations according to authorized power, which showed that MBS serves 32 stations with other network affiliations. Mr. Weber briefly explained the history of MBS, tracing its growth from the 4-station hookup of 1935, with each station originating one commercial program to be carried by the others, to the present coast to-coast coverage, which he said was the result of an increasing demand for expanded coverage by satisfied advertisers and for network program service by stations. MBS' policy in taking on new affiliates centers principally on obtaining coverage in unserved areas, he commented, although the network is "blocked out" in many cases by restrictive or exclusive contracts of stations with other networks. Because MBS stations are served programs originating in many points over the country and are encouraged to originate programs themselves, probably better than usual because they are to be carried on the network, MBS stations get a more widely geographically distributed program service, he said, adding that in no week have MBS programs originated in less than 18 separate areas of the country. There is a complete lack of adequate facilities in some areas, he continued, in addition to the lack of facilities in other areas because of contract restrictions. If it were not for limitations, the station would have no reason for not taking the MBS schedules, Mr. Weber commented, because it would get the same card-rate revenue as it would for local commercial programs, it would get programs of better quality, and it would benefit from better programming, which would boost listener interest and work to help local sales. Concluding his direct testimony, Mr. Weber said that MBS' return from business placed on affiliated stations, apart from the two members and participating groups, amounted to a 15% commission on the net card rates after the 15% agency commission had been deducted, with the individual station paying the cost of wires connecting with MBS lines. Discusses Effects of Restrictive Contracts Questioned as to the effect of restrictive contracts, under cross-examination by Mr. Funkhouser, he said that fundamentally a restric tive contract operated to deprive certain areas of a greater choice of programs and "a valuable additional service". He added that although listeners might not have "an actual preference" for a certain program not available to a particular area because of restrictions on the network operations of the stations serving the area, they do have a "desire" for the program in many cases. Continuing his discussion of the restrictive situation, Mr. Weber reviewed the available facilities and network connections of stations in Kansas City, Cleveland, Baltimore, Birmingham, Providence, and Omaha. He said there were only 42 cities in the country with three or more fulltime stations of substantially equal facilities, including local stations with adequate coverage, in which the three national networks could operate on anything like equal terms. MBS' business has developed rapidly, he admitted, but "we are not satisfied". He pointed out that MBS, since its start, has been presenting new developments and expanding, and for this reason agencies have welcomed the third network as a healthy stimulus to competitive development among the networks. The restrictions, which he said were "of great concern" to MBS, from an economic standpoint deprive the stations of the opportunity of carrying programs, at their regular card rates, which they could otherwise carry. Because they can refuse an MBS program, MBS affiliates hold a stronger position financially with regard to the commercials they can carry, he commented, since although they do not carry a particular network commercial program, they still have their pick of network commercial and sustaining programs as well as the opportunity for local business. He pointed out that in 1938 affiliates received an average net of 45.17% of their card rates for the MBS programs they carried. Stating that he thought competition should exist "on a similar basis", in response to the question by Mr. Funkhouser on whether he thought the competition of NBC's two networks was "a competition that could be naturally expected", Mr. Weber cited the case of a client approached by MBS who put his show on NBC-Blue because through heavy use of time on NBCRed he had become entitled to a 25% discount on the Blue, a situation with which he said "MBS cannot compete". Religious Programs Subject to Questioning When Mr. Funkhouser cited the three "religious accounts" listed among MBS sponsors — Old Fashioned Revival of Gospel Broadcasting Assn., Lutheran Hour of Lutheran Laymen's League, and Let's Go Back to the Bible of Moody Bible Institute — Mr. Weber explained that although the network furnished free time for all religious faiths, sectarian groups can buy time for an extended series of special programs through the local stations on the network. He estimated that MBS in 1938 received "less than 10%" of its 1938 gross revenue from programs sponsored by religious groups. Sunday is a good commercial advertising day for MBS because audiences are large but principally Page 76 • February 15, 1939 BROADCASTING • Broadcast Advertisi