Broadcasting Telecasting (Oct-Dec 1957)

VARIATIONS ON FAMILIAR THEMES The report issued last week by the FCC Network Study Staff had many points in common with those in reports issued earlier this year by Kenneth Cox, special counsel of the Senate Commerce Committee [B»T, July 1], and by the House Antitrust Subcommittee, headed by Rep. Emanuel Celler (D-N.Y.) [B»T, June 10]. On two subjects, option time and mustbuys, the FCC staff report, prepared under the direction of Roscoe L. Barrow, dean of the U. of Cincinnati Law School, was especially compatible with the views expressed by Richard A. Moore, president of KTTV (TV) Los Angeles, in testimony before the Senate Commerce Committee a year and a half ago [B«T, April 2, 1956]. Here are summaries of what the reports and Mr. Moore said: OPTION TIME Moore testimony: Option time restricts the tv licensee from exercising its own judgment. Restricts advertisers from using tv on a freely competitive basis. Restricts creative talent from presenting its products on tv. Restricts unaffiliated stations from presenting the finest possible programming. (The same criticisms also were applied to must-buy policies by Mr. Moore.) Operates in much the same manner and serves the same purpose as did the practices of block booking and blind selling in the motion picture industry which were held illegal in the Paramount case. No adequate justifications of economic necessity for option time and must-buys, and both are illegal under the Sherman Act. Should be prohibited by FCC because both practices are in restraint of trade. Cox report: Option time enables networks to exert tight control over programming to the competitive disadvantage of other program services and the detriment of local public service programming. Has made film syndication a risky business by monopolizing prime evening time. "Only if something is done to limit or adjust the option, so as to open up part of the prime viewing periods to non-network programming, can the local and regional advertiser be given free and competitive access to the vital television medium." Celler report: Option time places national spot and local advertisers at a competitive disadvantage. Has effect of "discriminating in favor of networks and network advertisers as against affiliated stations and non-network advertisers." Restricts the public's choice of programs. Asked FCC to consider option time changes and warned it will maintain "a I continuing interest" because of antitrust aspects. Barrow report: Option time is probably a per se violation of the antitrust laws. The FCC should rule it out. MUST-BUYS Moore testimony: Serve the same purpose as master agreements in the movie industry declared illegal in the Griffith theatre case of 1948. Limit the opportunity of the independent film producer to sell to advertisers who do not have complete national distribution. Option time and must-buys give networks "virtually complete control" over what is broadcast by affiliates during prime evening hours. Mr. Moore asked that FCC regulations be amended to prohibit time options and must-buys and that a station be prohibited from accepting more than 75% of its programming from any one source. Cox report: Must-buys bar local and regional advertisers from network television, with few exceptions. Some steps "must be taken by the FCC to open up the best viewing periods to non-network programs and advertisers to allow the national advertiser freer choice of sta doubt as to its legality." The must-buy has given networks a strong bargaining power over affiliates. The FCC should prohibit must-buys and instead sanction a minimum dollar purchase. MULTIPLE STATION OWNERSHIP Moore testimony: Did not emphasize this subject. Celler report: Has hampered competition, and network ownership of stations may lead to undue concentration of control. This would create a conflict of interest on the part of the network as between its affiliates and its owned stations. Cox report: Networks should be permitted to own "some stations, but serious consideration should be given to the possibility that they have exceeded their legitimate needs in this regard." Barrow report: Urged FCC curbs now and long-range objective of one station to a licensee. Recommended immediate rule restricting licensee to no more than three vhfs in top 25 markets. AFFILIATION AGREEMENTS Cox report: Suggested networks be required to "specify the objective criteria MR. MOORE REP. CELLER MR. COX DEAN BARROW tions and to give the independent stations a better chance to sell time . . . [applies to both option time and mustbuy]." Some minimum network requirement is reasonable but it should be based on dollars not stations. Evidence of antitrust violations in both practices. Celler report: No need for must-buys since most advertisers order in excess of basic required stations. Advertiser should not be forced to buy a station it does not want to use. FCC should consider a rule permitting gross minimum time charges instead of must-buys, with the figure low enough to allow the advertiser flexibility in picking stations. (Also same objections as listed under option time.) Barrow report: An antitrust analysis of the must-buy practice "creates serious which they employ in fixing station rates" and that length of affiliation contracts be extended from three to five years. Also suggested that all affiliation contracts be made public. Celler report: Found "widespread, arbitrary and substantial differences in the terms accorded by each network to its individual affiliates," especially in station compensation. These differences favor large, multiple-station licensees, with the small, independently-owned station suffering. The FCC should consider making network affiliation contracts public. Barow report: Recommended all network-station agreements, and proposals for agreements, be made public — including information on compensation to stations. Broadcasting Telecasting October 7, 1957 Page 33