Broadcasting Telecasting (Oct-Dec 1957)

BARROW REPORT continued cific programs (fortune telling, horse racing, questionable medical advice, attacks on persons, officials or religious bodies). The report pinned this down in these words: "The three major policy themes followed by the Commission in implementing the public interest standard— competition, diversification of ownership and control, and licensee responsibility — are all linked to programming as the ultimate criterion . . . ". . . administering the Communications Act in accord with the public interest standard necessarily involves the Commission with the programming standard. It is only through a consideration of service or programming structure that the public interest concept can be given meaningful content."' The entire tone of Chapter 3 carries a strong implication that the Commission has been remiss in not being more rigorous in its implementation of some of the criteria which, in recent years, have been under strong attack. Primary approach, the report stressed, is the public interest. Allied with this is the free and open competitive basis for broadcasting, it was emphasized. The section primarily is a "law journal" article, citing Commission and court decisions, on such elements as the economics of broadcasting, the duopoly rule, deintermixture, monopoly, newspaper combination practices, antitrust laws and rules, multiple ownership, and other fundamental laws and regulations. Diversity Emphasized It is when the report reached the diversification issue that a strong attitude was ascertained. "The seemingly vigorous support given the diversification policy by the Commission in many of its official statements has been seriously eroded by a long series of qualifying decisions," the section stated. This policy should be "accorded a high order of priority on the relative scale of comparative factors," the report said. Because, it continued, as the diversification factor is minimized, so are such other factors as local ownership "which it frequently tends to reinforce." The importance of local ownership, the staff noted, has been diminished recently by the significance accorded broadcast experience. The report also noted the subject of licensee responsibility, and coupled this with the option time provisions of network affiliation contracts. It referred to the 1950 Don Lee case in which the west coast network was charged with violating certain chain broadcast provisions. This case ended with the FCC renewing Don Lee stations' licenses only because revocation was considered too radical a punishment. Throughout this portion of the report a strong feeling can be discerned for the merits of comparative hearings where the Commission can delve into factors beyond the "minimum" standards of legal, technical and financial qualifications. It is apparent that the staff was impressed with the powers of the Commission — if it wanted to exercise them. It was also obvious that the staff was much taken by early, formative decisions upholding the Commission's right to regulate (Chain Broadcasting Rules, multiple ownership, economic considerations, editorializing, etc.), but felt that more recent decisions (St. Louis, Boston, Indianapolis tv cases for example) were qualifying these principles. chapter 4 Measurement of Network Concentration and Control Network ownership of stations, though confined to major markets, does not provide serious concentration of control of the national tv market, according to the chapter devoted to this subject. The spot representation of a limited number of stations by NBC and CBS is not taken too seriously and "termination of representation by a national spot agency is a matter of substantially less consequence" than loss of network affiliation since there are plenty of other "spot agencies." The three tv networks were found to control 28.9% of total national spot time sales as station owners and sales agents for other stations and 69.9% of total network and national spot sales (1955 data, before commissions). These networks controlled 20.2% of the total network-national spot market through station ownership, 46.6% through affiliation agreements and 3.1% through spot repre THE Network Study Committee of the FCC comprises three commissioners: Chairman John C. Doerfer, Rosel H. Hyde and Robert T. Bartley. They were named to this post by former Chairman George C. McConnaughey two years ago. Mr. McConnaughey included himsely on what was then a fourman unit and after his retirement from the FCC, the Commission decided to maintain the group as a three-man committee. sentation of independently owned stations, or a total of 69.9%. The report said, "It can be concluded that networks do not have a high concentration of market control with respect to national spot time sales." While networks control only 19.5% of the network time sales market through station ownership, the report said their control of network time sales of affiliates is substantial. Control of 62.1% of the national tv time sales market by CBS and NBC (including network sales of affiliates and national spot sales of represented stations), or 70% by the three networks, was said to be "a high degree of concentration by any standard." Control over tangible telecasting assets nationally "is very low," it was stated, amounting to 27.7% of total industry tangible property or $87.3 million. Conceding that access to a significant share of the audience is essential to successful network operations, the report said the network access through station ownership can't be called "excessively high." Each network was found to have access to 20-25% of the national audience through station ownership but it is compelled to compete for audience attention with other networkowned as well as independently-owned stations. As to program control, the report cited Senate Commerce Committee data showing ABC producing 13.2% of its programs, CBS 22.7% of sponsored hours and another 27.1% in collaboration with non-network program sources, and NBC 28.4% plus 18.5% from non-network sources in which NBC had a financial interest (total tv network program time for this data). Investigation of network control of station time was summed up this way: "In all markets combined in which at least one of the three networks has a primary affiliate, over 100 markets in all, the three networks account for over three-fourths of the total evening time subject to option and for nearly one-third of all the remaining prime evening hours falling between 6 and 1 Ijp.m. Moreover, the network's share of the total tv audience in these markets is probably even greater than their percentage time occupancy." In terms of total telecasting revenues or expenses, it was stated, the three networks together with o&o stations accounted for about 50% of the telecasting industry in 1955. The networks accounted for 22.5% of total profits (before federal income taxes), or 45.3% when o&o stations are included. This was spread as follows (including o&o): NBC, 21.4% of total tv revenues, 21.7% of expenses and 20.1% of profits; CBS, 20.6%, 20% and 23.2%, respectively; ABC, 7.2%, 8.1% and 3.7%. Paths to Power The basic sources of high network concentration were listed as the shortage of tv stations, and the market environment and commercial incentives supporting networkstation affiliation. Affiliation, it was said, brings stations a comprehensive daily program service, substantial pay for carrying programs and associated commercial messages plus incentives attracting non-network advertising. "The station selling two announcements in the half-minute interval between network programs may receive as much in net revenues therefrom as it obtains from the network for the previous halfhour," according to the report. Besides, it was added, affiliation cuts down station operating expenses. Data showed all but four of the 30 affiliated stations in markets of four or more vhf outlets were profitable in 1955, with only five of 16 nonaffiliates reporting a profit. In smaller markets network affiliation "may be the key to survival," it was explained, with NBC and CBS having special plans to aid affiliates in these markets. The chapter dealt at length with the difficulty a new network would have entering this market because of technological and economic problems. The spectrum limits on CONTINUED ON PAGE 92 Broadcasting • Telecasting October 7, 1957 • Page 39