Broadcasting (Jul - Dec 1944)

IT TAKES 4 2200 H.P. Motors to Drive a [^b^^ # IT TAKES A 50,000 watt station in Denver to seil this market and the Mountain ancf P\tx\n States Region, s the famous NBC Station in Denver and the only one with: Power (50,000 watts) Top NBC Programs Coverage (7 states) Listener Loyalty (69%)* Dealer Preference (68.8%)** *NBC Tale of 412 Cities **Ros5 Federal Survey Prices Far Above Stations^ Value Cause Durr^s Dissent in Three Sales, He Asserts PRICES which appeared to be many times more than the "net worth" and several times the "net profits" of stations involved caused Commissioner C. J. Durr to dissent in the sales of WJLD Bessemer, Ala., WINX Washington and WQXR New York, he stated in a memorandum released last Wednesday by the FCC. In view of the speculation and misunderstanding because of his dissent. Commissioner Durr said he wanted to make his position clear. He said a letter by FCC Chairman James Lawrence Fly, addressed July 25 to Chairman Wheeler (D-Mont.) of the Senate Interstate Commerce Committee, and Rep. Lea (D-Cal.), chairman of the House Interstate & Foreign Commerce Committee, on the increasing prices of stations, indicated there was little disagreement between Commissioners with respect to the seriousness of situation (see page 13). Following is text of his memorandum : Memorandum ; Re : J. Leslie Doss, transferor, George Johnston, transferee, Bessemer, Ala. (WJLD); Lawrence J. Heller, et al, transferors, Eugene Meyer and Agnes Meyer, d/b as The Washington Post, transferees, Washington, D. C. (WINX) ; John V. L. Hogan, transferor. New York Times Co. transferees, New York, N. Y. (WQXR and WQXQ). My reason for voting against approval of the above assignments of license was the same in all three cases. The prices being paid for the stations seemed to me to raise serious questions of law and public interest, and I therefore think that each application should have been set for hearing to ascertain: (a) Whether or not any part of the purchase price represents payment for a radio channel in violation of Sections 301 and 309 (b) of the Communications Act of 1934, as amended, and, (b) Whether the amount being invested in the station by transferee will affect the operations of the station in the public interest. Station WJLD, Bessemer, Ala., is a 250 w station operating on a local channel. The replacement cost of all its physical properties, real and personal, is only $12,269, and the original cort S12.019. The net worth of all of its assets, tangible and intangible, according to its books, is $14,236. For the year 1943, its net income before Federal taxes and without deduction of any salary for the proprietor was $4,966. The purchase price being paid is $106,000, which is more than seven times the net worth of the station and more than twenty-one times its net profits before Federal taxes. Station WINX, Washington, D. C, is likewise a 2-50 w station operating on a local channel but operates with a booster which serves to extend its coverage. The replacement cost of all its physical properties, real and personal, is only $58,492, and the original cost $56,966. The net worth of all of its assets, tangible and intangible, according to its books, is $48,254. For the year 1943. its net income before Federal taxes was $20,186. The purchase price being paid is $500,000, which is more than ten times the net worth of the station and more than twenty-four times its net profits before taxes. Station WJLD was first licensed only a little more than two years ago and Station WINX less than four-and-one-half years ago. The purchase price being paid for WJLD represents a profit of nearly 800% on the cost of its physical properties and over 650% on its net worth. The • purchase price being paid for WINX rep A 50,000 watt audience at a 250 watt rate C. E. HOOPER TAKE A LOOK AT THE^ RECORD maiA! MORNIW INDEX HON. THRU FRI. 8:00 12:00 A.M. A WGRC B C 14.2 28.1 33.7 24,0 AFTERNOON INDEX HON. THRU FRI. 12:00 6:00 P.M. A WGRC B C 28.9 27.6 25.1 17.5 SU^. THRU SAT. EVENING ItOEX 6:00 10:00 P.M. A WGRC B c 40.6 12.6 36.7 9.7 LOUISVILLE'S TRACS 477. OF KENTUCKY'S POPULATIOH 1^=57^ OF ITS BUYING POWER BURN-SMITH "National Representatives resents a profit of nearly 800% on thf ' ' cost of its physical properties and ovei 950% on its net worth. Station WQXR, New York, N. Y., is t 10 kw station and WQXQ is a frequenc;modulation (FM) station. No figure -'J' were before the (Commission as to the replacement cost or the original cost of thf physical properties involved in the transfer. However, the net worth of all of the assets of the present licensee corporation, both tangible and mtangale, is $227,037. For the year 1943, its net income before Federal taxes was $30,320. The purchase price being paid is approximately $1,000,000, which is approximately j our-and-onehalf times the net worth of the licensee corporation and nearly thirty-three times its net profits before taxes. Radio broadcasting is competitive and it is not the function of the Commission to protect either the buyers or the sellers of radio stations from the consequences of the exercise of their own business judgment. However, the Commission does have the responsibility of seeing to it that licensees observe the provisions of the Communications Act and that licenses! for the operation of broadcasting stations, are neither granted nor transferred un-'f"' less the public interest will be served. Its f responsibility in approving transfers is no less than its responsibility in making original grants of licenses. Section 310 (b) of the Act provides: ''The station licence required hereby, the frequencies autnorized to be used by the licensee, and the rights therein granted shall not be transferred, assigned, or in any manner either voluntarily or involuntarily disposed of, or indirectly by transfer of control of any corporation holding such license, to any person, unless the Commiision shall, after securing full information, decide that said transfer is in the public interest, and shall give-f" its consent in writing." (Italics supplied). Sections 301 and 309(b) of the Communications Act provide clearly that radio chsnnels are public property and incapable of private ownership. It follows that neither the channels nor any right to use them is for sale, either by private individuals or by the Government. The Communications Act provides that they are to be licensed by the Commission, only for ' limited periods of time, and only to those whom the Commission finds best qualified, by ability and intention, to use them in the public interest. Ability to outbid others in the price offered for a station has no relation to qualifications of this kind. In each of the three transfers under con ^ sideration, the price being paid appears, on its face, to be greatly in excess of any demonstrated value of the properties and business being sold. For what is this excess being paid ? Are there elements of value in the transferor's properties and businesses which are not apparent from the information contained in their applications, or are they selling something they do not own and have no right to sell, namely, the use of a radio channel? ; Moreover, the new licensees are taking on financial loads many times greater than those of the old licensees. All of these stations are commercial stations, , and it is reasonable to assume that the purchaser of a commercial station buys with the expectation of earning at least ^ a reasonabe return on his investment. In the present cases, do the transferees ii regard their purchases as business ven . tures, or do they intend to operate the r stations without regard to profit? If the ^ former, how do they expect to operate the stations so that they will be self-sus ' taining and at the same time yield a fair business return on investments ranging " an from four-and-one-h^lf to ten times the u investments of the former licensees ? Is it anticipated that profits will be increased ( Con tinued on page 51 ) In the old days they fired a gun from The Citadel in Halifax, Nova Scotia, to tell the time. — • — Today the population listens to CHNS for the time. NOTE: They Still Fire the Gun Keeping Up the Old Traditions! Traditions, However, Don't Get Much Business. CHNS Does— Try It. 50 • July 31, 1944 BROADCASTING • Broadcast Advertising