Broadcasting Telecasting (Oct-Dec 1957)

NETWORKS continued SALANT SLAMS BARROW REPORT • CBS executive defends tv network practices in L. A. talk • He criticizes broadcast pay tv, but warns CBS won't run last Pay tv, the "Barrow Report," option time, must buys, where tv networks get their money and how they disburse it were among the topics discussed by Richard S. Salant, general vice president of CBS Inc., Wednesday in a 90-minute address on "Network Television" made to the "Basics of Television" course being given by KNXT (TV) Los Angeles for advertising people of that city [Advertisers & Agencies, Oct. 28]. Mr. Salant's underlying theme was that networking is a complicated subject, difficult to comprehend; but with so many proposals emanating from Washington that could radically change the nature of tv network operations as they now are, it is essential that everyone in broadcasting or using radio and television as advertising media understand how a network functions. With that understanding, it will be easier to understand the meaning of the various proposals made to change network operations and to measure their probable effects, he stated. For example, the "Barrow Report," containing the findings of the FCC Network Study staff headed by Dean Roscoe Barrow of the U. of Cincinnati Law School [Lead Story, Oct. 7], would abolish "must buys" — the network requirement that an advertiser must buy a certain number of key market stations — Mr. Salant pointed out. There has never been any trouble with advertisers about this, he said, since they are anxious to spread the cost of their programs over as many viewers as possible. Furthermore, a national network is designed for use by national advertisers, and it is no more reasonable to expect a network to clear time for a three-station hookup than to ask Life magazine to sell an advertiser coverage in Minneapolis only. But, Mr. Salant commented, an attack by "a Los Angeles gentleman" (whom he did not identify further but who was readily recognized as Richard A. Moore, president of KTTV [TV] Los Angeles), who challenged networks' "must buy" and option time practices a year and a half ago in testimony before the Senate Commerce Committee [Lead Story, April 2, 1956] led the Barrow group to investigate these practices. It was found they did not harm the stations, Mr. Salant said, but apparently the burden of proof is on the networks and they haven't proved the "must buy" policy to be essential, so the report recommended it be outlawed. The Barrow Report would eliminate option time, Mr. Salant noted, calling this "the very thin thread" between a network and its affiliates that gives the network salesman some assurance that when he offers an open period to an advertiser he can get enough clearances to make the sale. Option time, which permits a network to call on an Page 64 • November 25, 1957 CBS' SALANT affiliate to make a limited amount of time available for network sponsored programs, is pretty much a "gentleman's agreement," he said, since the network has to give the station 58 days advance notice, and even then the station can always say no. If there are enough nos — and six or eight from major markets are enough — there will be no sale, Mr. Salant said, commenting that without the option time provision it would be virtually impossible for a network to function. "The Barrow Report said that if things get too bad the FCC can restore option time," he reported, "but knowing how fast the FCC moves — six or seven years is speedy — we could be dead in that time." Referring to the report's proposal to curtail bslow present limits the number of stations a network can own, Mr. Salant said that in 1952 CBS-owned tv stations accounted for only 12% of gross sales, to 88% from the CBS-TV network, but that all the profits from tv that year came from the owned stations; in 1955-56, the network had 85% of the sales and 58% of the profits, the stations accounting for 42% of the profits with only 15% of the sales. Parenthetically, he noted that in radio "we couldn't operate the CBS network without the profits of our owned stations." In addition to its recommendations, the Barrow Report's "near misses" will "haunt all of us for generations to come," Mr. Salant stated. "What they didn't quite do this time, they'll come back to later on." Reiterating the CBS opposition to "overthe-air" pay tv "because we believe it's bad for the public," he said the company has taken no position on wired pay tv and cannot properly do so because this is "only a new form of competition." Actually, to the tv networks, it makes little difference which method — if any — of toll tv is adopted. "We have 11 years of experience, a successful record, and if the FCC decides to give air space to pay tv, we'll go into it with both feet and we'll do all right." He predicted that if given the use of the air, toll tv will take over first the best stations and then the best programs, if it can get over the initial costs. "That first hump is tremendous, but after that the road seems clear," he stated. The willingness of the average family to spend $75-$ 1 00 a year for pay tv programs indicated by a number of surveys, he said, means that after operating costs the toll tv operators would have four times as much to spend for programs as is now being spent by free tv. "There's no question that pay tv will siphon off the best talent," he declared. Mr. Salant found it "significant" that no one has suggested a "majority test" to de termine democratically what most of the people want, but that the only tests called for have been those to determine if enough people are willing to pay enough for pay tv programs to make the business economically feasible. For example, he said that if one of every 8-10 families would pay 50 cents to watch Ed Sullivan, the pay tv operator would have 3-4 times as much to spend for the program as it now gets, so it would doubtless move from free to pay tv, leaving 7-9 families without the show. Toll tv won't kill free tv entirely, Mr. Salant opined. "Free tv will survive," he said, "by dribs and drabs, on a local basis and during the daytime. To some extent, those who pay will get something different from pay tv, maybe even something better, but it's a terribly high price to pay." Mr. Salant credited the tv networks with providing most of the impetus (and money) which won for tv an acceptance by the American public that in only 1 1 years has caused 41,300,000 U. S. families to spend $19.4 billion for tv sets and maintenance and, last year, to spend five hours a day watching those sets. CBS alone invested $54 million in television before its first year in the black, 1952, he said, expressing his conviction NBC and ABC had made comparable investments. The networks' willingness to provide good programs, great programs, at a time when the circulation and revenues did not justify such expenditures, made television what it is today, he said. For a thorough, though rapid, exposition of the economics of tv network operation and the parts played by advertisers sponsoring network programs and affiliate stations broadcasting them as well as by the networks themselves, Mr. Salant drew heavily on a memorandum on network practices prepared last year to supplement the testimony of CBS President Frank Stanton before the Senate Commerce Committee [Lead Story, June 11, 1956]. Shift to Divisional Status Seen for CBS News Department CBS News, which has been operating between staff and divisional status since August 1954, may become a full division of CBS Inc. early next year. Though no action has been taken, discussions have progressed to the point of placing CBS News and Public Affairs on par with other divisions. This past summer, CBS News moved towards semi-divisional status when Sig Mickelson, vice president of news and public affairs, began functioning as general manager of the department. Mr. Mickelson, it is understood, would assume the title of vice president and general manager of the division should such a move be made. NBC News and Public Affairs will not follow suit, according to William R. McAndrew, NBC News director. The NBC news department was detached from public affairs earlier this year, with Mr. McAndrew's news department being placed on a par with the NBC program department, reporting directly to Executive Vice President Robert E. Kintner. Public Affairs, under Vice President Davidson Taylor, also reports to Mr. Kintner. Broadcasting