Variety (May 1941)

Wednesday, iWay 7, 1941 RADIO 29 F.CC. ORDERS NET REVAMP Nets Remarks on F.CC. Report The statement* that follow are the official network ^observations on the F.CC. monopoly- report, issued last Saturday (3). ALFBED J. HcCOSEEB (HBS) From the limited opportunity we have had to examine the press sum- marization of the majority monopoly report released today by the F.CC, we find it a scholarly and thorough analysis of the network monopoly problem. Until we shall have had further time to examine the report, we have no further statement to make. WnXIAM S. PAIEY (CBS) About three weeks ago President Roosevelt appointed Mark Ethridge of Louisville, to make for him a study of the whole field of radio broadcasting,, pointing out that he, the President, recognized that the principal function of the govern ment was to determine who should operate the limited number of trans milters and asking Mr. Ethridge to make recommendations as to how to keep radio free, prevent monopoly o£ ownership or operation, and how best to utilize radio in the public interest. Mr. Ethridge's apoinlment came at a time when broadcasters through- out the country were disquieted at the increasingly hostile attitude shown by a majority of the Com- mission toward the industry, and particularly 'toward the principal networks, with the air full of ru- mors that the Commisison's monop- oly report would be destructive. The appointment of Mr. Ethridge was welcomed by the industry be- cause of his broad experience in both broadcasting and newspaper publishing, and because the appoint- ment was interpreted as evidence that the President, who has fostered broadcasting throughout his years in the White House, had not suddenly switched to advocacy of a wrecking operation and was willing open- min'dedly to weigh all the facts be- fore any effort was made to tamper with the existing structure. F.CC. AttltDde 'Defiant' Hardly was Mr. Ethridge em- barked upon his presidential mission when the Commission launches a re- port backed up by regulations cal- culated to torpedo the existing broadcasting structure and appar- ently defiant of the orderly process proposed by the President and de- fiant as well of the very limited powers conferred upon the Commis- sion by Congress. While crediting the Commission with cleverness in cloaking the in- evitable results of its proposed ac- tion in language designed to make the public believe it is promoting what it is actually destroying, I feel it to be a public duty as head of one of the major networks to warn out of the depth of long experience and study that if the Commission suc- ceeds in the venture it now launches, networks will become mere catch- as-catch-can, fly-by-night sellers of programs. Permanence and stability will have departed from the indus- try and incentive to public service will have been removed from the broadcasting the American people knows and likes. Worst of all, the first paralyzing blow will have been struck at freedom of the air, because a Commission which can exercise such drastic powers without even going to the Congress for authority to exercise them, will have reduced the networks and stations of Ameri- ca to impotent vassals, able to sur- vive only so long as they please the regulatory authority. Ramming what the Commission calls 'A Magna Charta' down the throats of the affiliates of the major networks is really taking away from them "that freedom of independent lawful action without which radio itself cannot remain free. This is true even though there may be op- (Continued on page 56) Congress, Rather Than Courts, May Be Industry's Best Al^ Washington, May 6. Litigation, probably time-consum- ing and costly as well as acrimonious, is believed certain to prevent the threatened bonfire of network affilia- tion contracts. Buts:radio lawyers are undecided as'to the^ particular course and dubious about the outcome of court tiffs with the Federal Com- munications Commission. Congress rather than the courts, looks like the best ally of the net- works and their independent affili- ates. Every potential recruit will be sought, however, even including President Roosevelt, in desperate moves to upset the FCC order. Several possible steps are being discussed. They range from seeking immediate injunctions to petitioning for postponement of the effectiveness of the new regulations. It is hardly iikeiy the industry will put on the sort of strategic retreat that would involve waiting until the Commish has~penalized some licensee for not obeying the ultimatum, for the whole situation is unfavorable for such (Continued on page 58) RADIO TAX URGED BY WIS. REPRESENTATIVE WGAR's Flag Drive Cleveland, May 6. WGAR has launched, in' conjunc- tion with the American Legion, cam- paign to raise sufficient money to supply 3,000 American flags for the city's elementary school rooms. Recent survey shows 60% of such school rooms without flags. RULES COME BLITZ-QUICK SLATED FOR BLUE Exclusivity and Option Time Banned as Against 'Public Interest' — Chain Owner- ship of Stations Partially Hit—D. J. Gets Data EFFECTIVE IN 90 DAYS Washington, May 6. Monopoly report ot the Fed- eral Communications Commis- sion will be turned over to the Justice Department for any sup- plemental action the trustbusters see fit to take against the radio industry under the Sherman Act, Chairman James L. Fly said Monday (5). No recom- mendations will be volunteered, however, and decision about in- voking punitive provisions of the antitrust laws Is 'up to the Attorney tieneral.' The voluminous record made during the six months of hear- ings, along with the weighty summary ot evidence and re- port of the special F.CC. in- vestigating committee, has been in the hands ot the D. o( J. antitrust division tor months, while there has been cooperation betwen the two agencies over the past year. Evidence of close relations was the appointment of Robert Cooper, former antitrust division attorney, to the F.CC legal staff and his assignment to the chore of readying the final report. - (Cooper recently re- signed from the Commish force, but is still doing work for the D. of J.). Wondering where the un- expectedly speedy Federal Com- munications Commission leaves him, Mark Ethridge (WHAS, Louisville) arrived in Washing- ton on Tuesday for huddles about the sudden climax to the monopoly investigation. Hoping to have it out with President Roosevelt, who drafted him two weeks ago to make a thorough study of all matters involving government relations with the industry, he intends to find out just what purpose the President thought his report would serve. Washington, May 6. Rush act in passing the FCC mo- nopoly regulations started Thursday (1). Minority never had the galley proofs in hand until that day, though the document has been in preparation for several weeks. Pro- posed regulations were not made available until about 10 minutes be- fore the official closing hour the same day. Just before the gong sounded, word was circulated that a special meeting would be held at 9:45 the next morning—17 hours away—to act on the rules. The same tempo existed on Friday. After relatively brief discussion. Commissioner Paul A. Walker moved. adoption of the rules. Com- missioner Ray C. Wakefield, who was sworn in only a month ago, par- Washington, May 6. Talk about a special tax on radio broadcasters' revenues is having some effect in Congress. The House Ways and Means Committee, ponder- ing methods of upping Federal rev- enues $3,500,000,000 a year, has ordered its expert to look into the . - . possibilities of such a levy, which ] tlcipated in the votmg though he ad has been agitated by the printing | mitted he never had seen the pro- trades unions. . posed dissenting statement of Case Recommendation for a unique pro-; and Craven. By lunch time, every- vislon of the revenue law singling thing had been washed up, with Fly out the broadcasting industry was' authorized to make a few mmor made by Representative Harry Saut- phraseology changes and see to hoff. Wisconsin Progressive. I (Contmued on page 58) Radical overhauling of the entire broadcast industry structure, with network affiliates becoming veri table common carriers and webs only program conduits, is required under new chain anti-monopoly reg- ulations promulgated Saturday (3) by the Federal Communications Commission as climax for the pro traded investigation into ways of increasing competition. Using the public interest prO' visions of the Communications Act as a legal tent, the Commish, by a five to two vote, imposed bands on exclusivity, dual networks, option time, and long affiliated contracts. While expressing conviction that web operation is indispensible to satisfactory service, the group headed by Chairman James L. Fly laid down rules which web people maintain endanger the economic sta billty of the entire industry. Mean time the sweeping character of the regulations drew tart criticism from the minority—Commissioners T. A M. Craven and Norman S. Casi who said either 'anarchy' or 'chaos' is a likely consequence. Minority Squawks The way in which the report and regulations- • saw daylight typified the bitter debate which has raged for the last two years. While Chair- man Fly defended his course, there were growls that Ca.se and Craven had been 'double-cro.ssed' and that the majority group conspired to gag all criticism ol the new policies. DLssenters .squawked that rules were crammed down the throats of the Commish, being submitted for study less than 18 hours before a sudden- (Continued on page 61) Digest of F.CC. Monopoly Rules The FCC's 'Report ^fi Chotn Broadcasting' issued Saturday (3) con- tain eight major regulations, tu)o of u>hich apply fo the networks them- selves, and six to practices and contractual arrangements between net- works ond a^iliated stations. The regulations, in tabloid, are; 1. It is against the public interest for networks to operate stations in areas where the facilities are so few or so unequal that network competition Is seriously restricted. Said the FCC: '. . . The commis- sion will not license to a single network organization more than one station within a given area, nor will it license stations to any network - organization in communities where the available outlets are so few or of such unequal desirability as to require that all facilities be open to competition among networks for outlets and among stations for networks.' This rule may be extended from time to time in order to permit the 'orderly disposition of properties.' 2. The maintenance of two separate networks by a single organiza- tion (such as NBC's dual ownership of the Red and the Blue) is a method to 'forestall competition' and 'it is not in the public interest for a station to enter into a regular affiliation contract with a network's organization maintaining more than one network.' • * * 3. Stations affiliated with one network may nevertheless carry also the programs offered by any other network. This voids the 'exclu- sivity' clause in network contracts. « * * 4. 'Territorial exclusivity' is banned. Under this type of agree- ment, a network currently is bound not to send a program to any station located in an area served by its affiliated station, even though the affiliated station rejects the program. • * • 5. Contracts between networks and affiliates will be limited to one year.. Said the FCC: '. . . No showing has been made that there is any business need for ati affiliation contract longer than one year.' • • ♦ 6. Option time—which allows a network to take precedence on any (or all, in some cases) hours of the affiliates' time—is 'against the public interest' because 'a station licensee must retain sufficient free- dom of action to supply the program and advertising needs of thar local community.' • • * 7. Network contracts may not hamper affiliated stations in the right to reject network programs. • * * 8. A network contract may not prevent an affiliated station from selling time to national advertisers at a rate lower than the network rate. Said the commission: 'We believe that it is against the public interest for a station licensee to enter into a contract with a network - which has the effect of decreasing its ability to compete for national business.' • • • Regaiding the date of effectiveness, the FCC said: 'The new regu- lations are effective immediately, except that with respect to existing contracts and arrangements, the effective date is deferred for 90 days.' Agencies-Sponsors Anxious Over Web Fate; Mutual Pushes Sales Drive It's About Time Minneapolis, May 6. WCCO has Inaugurated a new type of news broadcast spon- sored by the Minnesota Federal Savings company. It's called 'Sunny Side of the News' and is- devoted entirely to the day's cheerful news, with all war, crime and disaster stories barred. N.A.B. MEETS TO DISCUSS TACTICS Executive committee of the Na- tional Association of Broadcasters meets at the Roosevelt hotel, N. Y., at 10 o'clock this morning (Wednes- day) to discuss the stand that the association is to take toward the FCC's monopoly report. The move is the most ticklish one that the NAB has had to face since its incep- tion 18 years ago because it can re- sult in an explosion that will rip the membership ranks wide open at the NAB convention in St. Louis. Mutual has taken the stand that the monopoly matter does not come within the province of the NAB since it deals with a competitive situation within the industry and there have been intimations from this same source that if the NAB does take a stand on the FCC re- port there will be wholesale resig- nations from the association by Mu- tual key station.s. As the NAB's di- rectorate rosier slands, 22 members represent either NBC or CBS (Or NBC and CBS affiliated stations) three are connected with Mutual, and one is designated as independ- ent. NBC has already acted to allay the concern with which advertisers and ad agencies received t>,e FCC's monopoly report. At a special meet- ing called of all NBC salesmen, both network and spot, Monday afternoon (5), Nlles Trammel outlined the steps that NBC was going to take to combat the FCC's demands, and ad- vised his sales staff to assure their contacts that they could expect to enjoy the same business policies with the network as now prevailing through the long period in which the issues will be fought out. It is also proposed to have the sales staff meet daily with their executives, so that they can exchange comments from customers and information on the latest developments on the net- works-FCC front. Meanwhile Mutual is using the FCC's order against NBC as far as the Blue network is concerned as ammunition for a raid upon th« Blue's present and prospective cli- ents. Latter are being told by MBS' salesmen that the future of their re- lations with the Blue is an uncertain (Continued on page 60) MEN REPORTED AS EYEING THE NBC BLUE Washington, May 6. Among those reported making be- hind-the-scene moves toward fi- nancing the purchase of the NBC- Blue is George E. Allen, former Dis- trict of Washington Commissioner. He is supposed to be representing a .syndicate which Includes Halsey- i Stuart, Chicago Investment house.- i Allen is_a. constant Innchcon com- panion and all-around pal of Steve Early, the President's press secre- tary, and Harry Butcher, CBS v.p. in charge ot Washington operations.