Instead of just receiving press releases, one Washington news bureau is producing them as well.

Potomac Communications Inc., an independent Washington news bureau, is aggressively expanding into the young and growing business of video press releases.

Video press releases are typically 90-second segments paid for by corporations or other groups that are touting a product or presenting a position. But unlike commercials, the videos are designed to look like locally produced news segments and win the sponsor air time on the local news program.

Industry surveys and video clipping services indicate that these videos, or at least parts of them, are getting on the air. And public relation consultants say broadcast budget cuts will make corporate videos -- paid for by corporations and sent for free to stations -- more and more indispensable to cash-strapped news operations.

In 1985, Potomac Communications formed the Potomac Video division to produce video press releases. This year, it is launching the Daily Business Satellite to transmit news releases produced in-house and by other companies to broadcast stations across the nation.

DBS also will arrange live satellite interviews between corporate spokesmen and local television anchors. The satellite and video services also will be available to corporations that want to communicate with employes, stockholders and other groups.

"The whole area of corporate {video communications} is a phenomenal growth area. It's now a $3 billion business. The estimates are that by 1990 it will be a $10 to $12 billion industry. So that's where the future large dollars are," said Hendrix F.C. Niemann, president of Potomac Communications.

The move into corporate communications means that a news division and a public relations division operate under the Potomac Communications roof -- a delicate and potentially troubling situation for the company.

But company officials say they have taken steps to preserve the integrity of the news operation, which serves as the Washington bureau for 300 local television stations across the nation, including all 200 ABC affiliate stations. Although camera operators, film editors and other technical staff are shared by the two divisions, there are different assignment desks and reporters for each.

"I want to make the point that we keep the {news and press release} staffs strictly and distinctly separate," said Niemann, who was formerly the executive director and general manager of the New Jersey Public Television Network. He compared Potomac Communications to newspapers, where the editorial staff and advertising sales operations are kept separate.

Niemann said there is no attempt to deceive editors about the videos -- all video news releases are identified as public relations videos, and the corporate sponsors are given at the beginning of the tape.

How the stations present the tapes is up to the news editors. He said some television news programs identify the video as a corporate news release, while others do not. Some use only segments of the video, while others run the entire piece.

"It's not at all uncommon, especially for smaller stations, ... to just use the piece as is. The larger stations tend to use them {video news releases} as a launch for their own pieces," just as they might use a written press release, said Vicki Street, assistant manager of public relations for the American Bankers Association.

Potomac Communications, which is on Capitol Hill near Union Station and until recently was called Potomac Telecommunications Group, has 55 employes. Niemann declined to reveal the private company's revenue, but said it was "more than $3 million and less than $10 million."

Its news division consists of Potomac News and American News Bureau. The two bureaus supplement what local stations get from their networks by covering stories in Washington that are of interest to the stations. Typical stories might be the reaction of a congressman from a station's viewing area to a controversial bill, the governor's testimony at a congressional hearing or action on legislation of local interest that might not make the network news.

In addition, Potomac Communications has a programming division, whose productions have included a segment on Sugar Ray Leonard for Entertainment This Week, an interview with Nancy Reagan for PM Magazine, the show "Redskins Saturday Night," and a feature on the "Welcome Home Concert" for Vietnam Vets for Home Box Office.

Bruce Finland, chairman and founder of Potomac Communications, said the heart of the company will always be its news side, but the engine pulling it forward will be the corporate video press releases.

Finland predicted that in the future most of the company's revenue will come from the corporate communciations division.

He acknowledged it would not be all smooth sailing in meeting that goal. Many corporations are wary of the cost of videos when written press releases are so inexpensive. And other companies have never heard of the concept, he said.

"It's a vast undertaking. There is no question about it," Finland said.

Potomac Communications is pinning much of its hopes on its new Daily Business Satellite, which is being tested and is scheduled to start officially in October.

The satellite service plans to transmit several videos starting at the same time each day, an attempt to get editors to review the releases as part of their daily routine. The service is an effort to attack one of the biggest problems facing video news releases: Many videos do not get reviewed by editors.

Clinton Bond, assignment editor at KXAS-TV (NBC) in Dallas-Fort Worth, said his station is offered at least three or four video press releases daily, but only reviews one or two from the satellite service every week.

Potomac Communications also hopes to capitalize on the fact that the video production and transmission facilities allow it to offer one-stop shopping. And Niemann said the firm's news background will enable it to meet tight deadlines and to produce segments that will appeal to news directors.

But Potomac Communications faces some tough competition. PubSat, a Washington-based video company, also offers one-stop shopping. And MediaLink, a New York-based company, already transmits video press releases via satellite. In addition, a slew of public relations firms, video production houses and former news personnel have entered the business.

Potomac Communications said production costs for a video press release can range from $5,000 to $10,000, depending on the requirements. Distribution can be as low as $2,000 or as high as $5,000, depending on how many stations are to get the video, how the stations are to be informed the video is coming, and how extensive the follow up will be to determine if the video was used.

PubSat said its rates for the complete package range from $10,000 to $15,000. The price includes a survey of 25 percent to 30 percent of the stations to determine if and how the video was used. Media Link, which charges $3,750 to send a five-minute video, uses A.C. Nielsen to monitor stations' use of the releases.

All those firms said they expect the industry to expand in the next decade. Already television news directors say the trickle of video press releases they saw in the past has turned into a flood.

Bob Young, news assignment editor at WJBF-TV, an ABC affiliate in Augusta, Ga., said the station gets video press releases from corporations, politicians, public utilities, universities and even the state highway department.

"You just never know who's going to send you one next," Young said.

Satellite transmission has made the big difference in the past couple of years, said Ernie Schultz, president of the Radio and Television News Directors Association.

Satellites mean videos can be sent to all 650 television news operations across the nation, more quickly and more cheaply than if the tapes had to be duplicated and mailed.

According to a survey of news producers by Nielsen Media Research for Medialink, a majority of the television stations surveyed used video press releases.

In the survey of 106 news producers taken in April, 62.5 percent said they had used at least one video release in the past week.

In a July survey, Nielsen quizzed 68 news producers more closely about how the tapes were used. About 27 percent, said they had run an entire video press release in the previous week. Of those, most used one or two, although three stations said they had used three video tapes in full, two had used five and one had used 10 in one week.

A larger group, 67 percent, said that during the previous week they had used part of a video press release, combining it with reporting by their own staff. Of those, most said they had used parts of one to three video releases, but one station said it had used 13 and another station 23.

Thirty-one percent of the stations said that when they broadcast a video press release, it is their practice to identify the company that sponsored the segment. Another 18 percent said they only identify the company if it is relevant to the story, while 12 percent said they do not identify the sponsor.

Penelope Holt of Michael Klepper Associates, a New York communications firm, said video press releases seem to be gaining acceptance among news stations, in large part because clients are beginning to understand they cannot be obvious when they push their products or positions.

"If they look too commercial, news directors will reject them out of hand," Holt said. "Clients are beginning to wise up."

Thus a video touting suntan lotion might look more like a segment on skin cancer. A plug for a new computer might be packaged as a consumer trend segment.

Consumer, health or personal finance are the subjects most likely to catch the eye of many editors, according to editors and communications firms.

An ABA video on alternatives to personal bankruptcy made it onto several news programs, Street said. She expects a similar response to a video she just completed on the proper uses of home equity loans.

"I'm certainly not going to spend $8,000 to $12,000 {on a video release} if stations are not going to play it," said Street, who uses Potomac Communications as well as other companies.

Young said that in the past year and a half his station used one corporate video news release in full. It was on alcohol equivalency, sent by Seagrams during the holiday season, when there was community concern about drunk driving.

Young said it was a good, well balanced piece. It was not identified as a piece sponsored by Seagrams.

Paul Davis, news director of WGN-TV in Chicago, and independent station, said that except for hard-to-get footage, such as a shot inside a human artery, "We rarely if ever use them" or even look at them. "But there seems to be this new generation of journalists who think this is wonderful," he added.

That's precisely what Potomac Communications is banking on. "This is not something we expect is going to be an overnight success. But we do know it will be a success. It has to, because it makes so much sense," Finland said.