Broadcasting Telecasting (Apr-Jun 1958)

FILM CONTINUED Producers Mobilize To Fight Tax Formula Morris Stoller of the William Morris Agency has been appointed chairman of a steering committee on taxes of the Alliance of Television Film Producers. The group, whose 22 members account for about 85% of all tv film production, has decided to spearhead the fight against a change in the federal tax formula that "threatens to put the independent producer of films for television out of business," Maurice Morton, ATFP president, said last week in announcing the committee. "Because we consider this the most important single issue to confront us in our existence, the entire executive committee of ATFP is acting as Mr. Stoller's committee," Mr. Morton stated. The group includes President Morton (McCadden Productions); Maurice Unger, vice president (Ziv Tv); Archer Zamloch, treasurer (Hal Roach); Jack Findlater, secretary (Revue); two ATAS immediate past presidents, Hal Roach Jr. and Armand Schoeffer (Flying A), and John Zinn, ATFP executive secretary. "Virtually all tv film companies keep their books on a 'cost recovery' basis," Mr. Morton said, explaining the operation with this example. A company produces a series of 40 half-hour films at an average cost of $40,000 each or a total of $1.6 million. The series is sold to a sponsor for the same figure, $1.6 million. In addition, the sponsor buys 12 reruns at $10,000 apiece, or a total of $120,000. The producing company, therefore, has taken in $1,720,000, has spent $1,600,000 and has a taxable income of $120,000. At 50% the tax would be $60,000. Having paid that to the government, the company has $60,000 in the bank which it can invest in another pilot. What is proposed is a change from the "cost recovery" system to an "amortization" method of calculating the tax on tv films, he stated. Under this method, the probable life of the film series is estimated and the cost of production spread over the entire period. Various tax officials have set varying probable life spans, he commented. Arbitrarily taking a two-year figure for his hypothetical case, he pointed out that producer's income for the year remains at $1,720,000, but he can now charge off only $800,000 of his cost as applicable to the year. The taxable income is now not $120,000, but $920,000. The tax is not $60,000, but $460,000. "Instead of paying his tax and having enough money left to start work on a new series, our producer finds himself with $120,000 on hand and a tax bill of $460,000. So he has to borrow $340,000 just to pay his federal taxes, assuming he can get a loan for that purpose, and he's left with no capital for future operations," Mr. Morton commented. The question of an amortization vs. a cost JACKSONVILLE'S FAVORITE COWBOYS "Jaxie" says there's a chuck wagon load of results waitin' for you, pardner, when you corral this top western talent in Jacksonville's $ly2 billion market. "Six Gun Saturday" is a rootin', shootin,' laugh-filled 2i/2 hours of entertainment for the youngsters from six to sixty. They'll en joySunrise Ranch starring Gene Autry— 7:30 8:30 AM Cartoon Corral with Tommy Tucker— 8:30 9:00 AM Prairie Playhouse starring Roy Rogers — 9:00-10:00 AM m If "Jaxie" suggests you stake your claim H early for one minute availabilities. Call U Ralph Nimmons in Jacksonville at ELgin i 6-3381 or your nearest P.G.W. "Colonel." Represented by Peters, Griffin, Woodward, Inc. NBC— ABC life' recovery tax formula hinges on whether a film series is sold outright or rented, a spokesman for the Internal Revenue Service in Washington said. It would not be reasonable, he said, to figure rental income on a cost recovery basis, if a series can be rented for indefinite reruns, just as income from building rental is not written off on an immediate cost recovery basis but amortized over a period of years. "We aren't trying to dodge our just taxes," the ATFD president declared. "There is no reluctance about paying taxes on income actually received. But we don't want to be taxed on money we don't get. "This is a risky business. Several hundred pilots are made each year, but only about 20 new film series ever get on the air. The odds have been put at about 18 to one. And when a series is sold, the producer is usually working six to eight weeks ahead. This means he's carrying a $250,000 investment, usually financed through a bank loan which he can get because he has a contract as collateral. But who can finance a loan of $340,000 with nothing to show for it but a receipted tax bill?:' New Rogers Firm Set For Tv Distribution Formation of Empire Productions Inc. to handle syndication of the 100 Roy Rogers tv film programs sponsored by General Foods on NBC-TV as well as the production of new tv programs is being announced today (Monday) by Roy Rogers. Edward L. (Ned) Koenig Jr. has resigned as vice president in charge of sales for Hal Roach Studios to become president of the new company. W. Arthur Rush, executive director of Roy Rogers Enterprises will be chairman of the board. Mr. Rogers will also be personally active in the management. Empire Productions will headquarter in the building owned by Roy Rogers Enterprises at 357 N. Canon Drive, Beverly Hills, Calif. The new company is the first independent tv production firm to set up its own sales organization for the direct mail of "off-thenetwork" programs, Mr. Koenig stated. "The decision to market our own products," he said, "was made in the interest of reducing increasingly-high distribution costs with which advertisers, agencies, stations and producers have been unnecessarily burdened in recent years. Top-rated off-thenetwork films with which the buyers are completely familiar do not require 35% to 50% distribution costs." Empire Productions has $5 million of assets in film and story properties, Mr. Koenig said. It will produce a number of spectaculars during 1958 as well as a variety MR. ROGERS WFGA-TV Channel 12 III Vfl I V Jacksonville, Florida FLORIDA'S COLORFUL STATION Page 72 • April 7, 1958 Broadcasting