To hear the contestants tell it, the future of television is at stake in the fierce fight over repeal of the federal broadcast financial interest and syndication rule.
To some onlookers, the outcome of the battle being waged in Washington between the networks--which want the rule repealed--and the producers--who want to retain it--will be less world-shaking. "It's a clash of near-giants, who want more than they have already," says a doubtful congressional aide.
The truth presumably lies somewhere in between. The decision on whether the television networks or the Hollywood production community controls the development of TV programming and its syndication for reruns involves hundreds of millions of dollars and could affect the kind of shows viewers see at home. The decision also will determine the future power of the commercial networks as the industry undergoes a major transformation.
At issue is a Federal Communications Commission rule prohibiting the networks--American Broadcasting Companies Inc., CBS Inc. and National Broadcasting Co.--from owning or syndicating the programs they broadcast. A program such as "Hill Street Blues," for example, is produced independently of the networks, which buy the rights for limited showing. The owners of such shows can later sell rerun rights to individual stations.
When it adopted the rule in 1970, the FCC was making an effort to open the production and syndication market to additional competition at a time when the networks were, without question, the dominant forces in television. The expansion of cable television had not yet begun and independent television stations, principal customers for syndicated, off-network shows, were only beginning a decade of dramatic growth that saw their number grow from 65 in 1970 to a current total of 179.
The television business is continuing to change dramatically, with a rash of mergers, joint ventures and new enterprises in anticipation of the spread of pay TV broadcast via air and cable. The effort by the networks to have the syndication rule repealed reflects their concern about their place in the video world of the future.
Even if the networks win their case before the FCC, they still face another hurdle. The Justice Department, in consent decrees with each of the networks in 1980, adopted the same syndication and programming guidelines. Only with a court-approved modification of the decrees would the networks be free to adopt new syndication and program-ownership practices.
Last week the Justice Department--as well as the Commerce Department and Federal Trade Commission--sided with the networks in recommending to the FCC that it repeal the rule.
But the networks' opponents haven't given up, and skirmishes took place throughout the capital. The two sides have sought support from labor unions, citizens groups and members of Congress, and even top White House staff members were aggressively lobbied on the issue.
That lobbying caused Reagan administration officials to put a hold on the release of Office of Management and Budget comments on the rule pending publication of a report prepared for the film industry's lobbying group, the Committee for Prudent Deregulation.
The Hollywood committee also has won the backing of Rep. Timothy Wirth (D-Colo.), chairman of the House telecommunications subcommittee. Wirth, in announcing his intention to fight repeal of the regulation, said he was "concerned about maintaining a marketplace of competitive programming, a marketplace of competitive outlets and a marketplace of robust creativity. It is an issue that goes far beyond dollars and cents."
Although the networks' continued dominance of the television business is in doubt, they are still very profitable. From 1970 to 1980 their earnings rose 550 percent, and 1982 was a banner year for both ABC and CBS despite the recession.
But network executives are concerned about the steady erosion of audiences to independent stations and pay television and cable networks. While maintaining that they'll be able reach more homes than any medium for the rest of the decade, they note that the alternatives, like Time Inc.'s HBO and Warner Communications Inc.'s Movie Channel, have the potential ability at a time of ballooning programming costs to match the networks in just about any bidding war.
"Somewhere down the line, not this or next year, we are going to need supplemental new streams of revenue to enable us to provide expensive, well-balanced programming services we've been offering the public," said Everett Erlick, ABC's senior vice president and general counsel.
Third-ranked NBC, in particular, argues that the rules and their limits on network activity threaten the future of advertiser-supported television. "The competition between free and pay TV is not fair," warns an NBC newsletter. "An increasingly dark shadow looms over the programs Americans have come to expect from free television."
CBS Chairman Thomas Wyman, who views repeal of the rules as his highest priority, similarly warns that "the appeal of networks and their ability to compete with alternative distribution techniques will be sharply impeded" if the rules are not wiped off the books.
But such network assertions are treated with scorn by members of the Committee for Prudent Deregulation and their supporters. They maintain, in the words of spokesman Alan Horn, chairman of Embassy Communications and Tandem Productions, that little has changed in the 12 years since the rules were issued, that "there is no level playing field in television today nor will there be in the foreseeable future."
In particular, the committee is concerned about the syndicating of prime-time programs like "M*A*S*H" and "Little House on the Prairie" which has led to the development of a powerful ad hoc network of independent stations.
The producers of those shows range in size from Warner Communications to small mom-and-pop studios, all of which claim they could be financially damaged or driven out of business if the rule is repealed.
And Ralph M. Baruch, chairman of Viacom International Inc., asserted, "What the networks are really after is an all-out attack on the independents." The FCC reported that in 1980 independent stations had total revenues of $930 million.
With control of syndicated markets, "the quality and quantity of programming available to the public will decline," argued Philip Verveer, a lawyer representing the committee. "Viewers are going to get hurt because they won't be able to see what they want to see when they want to see it."
Other spokesmen for the film industry say there is little doubt that the networks, aggressively looking for niches in every facet of pay television, are well positioned for powerful, potentially dominant roles in cable and other alternative distribution systems.
"By the end of the decade they will be in every arena of the so-called new media because they will be the new media," said Jack Valenti, president of the Motion Picture Association of America.
In the meantime, however, influence in Washington is the focus of the antagonists. The networks clearly led the charge on the issue, and most Washington and industry observers on both sides believed as recently as Christmas that the networks had the momentum.
As with most similar regulatory fights, both sides claimed victory when last week's vollies ended. Particularly significant was the position of the Justice Department and its view that the rule should be rescinded.
More important, however, the department's antitrust division gave both sides ammunition for believing that it was leaning their way on the second step of the process--the question of the consent decrees' future. While urging that the rule be eliminated, the department's FCC filing warned that the competitive problems that existed in 1970 have not been completely alleviated and said that a "narrow" rule particularly addressed to the syndication of prime-time programming is probably necessary.
Therefore, according to Verveer, the Hollywood studios' lawyer, the Justice Department's position "is tantamount to a significant blockade on the networks' getting what they wanted" and "a devastating defeat for the networks."
Predictably, network representatives like David Boies, a lawyer representing CBS, disagrees. "I don't believe the antitrust division can continue to support provisions of the consent decrees that are comparable to the FCC rules which the division recognizes are anticompetitive," Boies said.