The three television networks are appealing for an end to rules that restrict their financial interest in TV programs and prevent them from syndicating them. In doing so, they portray themselves as helpless underdogs, tethered by the Federal Communications Commission so they cannot compete with cable television and other video technologies that will rob the American public of free, advertiser-supported television. This was the argument put forth by NBC vice president M.S. Rukeyser Jr. in The Post (Free for All, Dec. 18).
This script is brought to you by profit- making networks that are the sole outlet for 69 percent of all prime-time programs, whose share of all such viewing is 82 percent and who, by any measure, dominate the television industry. Their control would be absolute were it not for the Federal Communications Commission's Financial Interest and Syndication Rule, which was adopted in 1970 to promote the public interest in fair competition and diversity in prime-time television programming.
Such was the power of the networks before 1970, when the FCC found they had exploited their "undue concentration of control" over the television industry to determine not only what most Americans saw on television but what they could not see. The Justice Department followed with antitrust suits, charging that "the three national television networks for all practical purposes controlled the entire network television program production process, from idea through exhibition."
The networks controlled the pipeline to the television screen and used their enormous leverage to demand concessions from producers that would not have been granted in a competitive marketplace. For example, they accepted virtually no entertainment program for network exhibition in which they did not have a financial interest, routinely barring programs from the air unless producers gave up half their profits from subsequent non-network uses.
The Financial Interest and Syndication Rule simply prohibits the networks from domestic distribution and profit participation in non-network shows. Consent decrees entered into by the Justice Department and networks in 1978 and 1980, essentially replicate the FCC rule.
Even under this rule, the networks decide which programs enter the video pipeline, since they buy the first-run programs. But they no longer can lock up a series once it has run on the network, or heavily favor only those in which they have a financial interest. This has enhanced competition in the secondary market of syndicated programs (reruns of popular series such as "M*A*S*H") upon which independent stations depend. Indeed, during the decade the rule has been in effect, independent stations have become increasingly viable and their number has doubled.
At the same time, producers have become more willing to risk larger investment in new shows, knowing that the financial rewards for later off-network showing will not be diluted by forced surrender of part of the profits to the networks. There has been a 51 percent increase in syndication program suppliers. A first-run syndication market also has developed in which specials and series, such as "A Woman Called Golda" and "P.M. Magazine" are produced and sold directly to non- network station groups. In other words, the rule has worked to expand program choices and competition on over-the-air television.
A competing video marketplace of new technologies also is beginning to emerge, but the networks remain dominant. Their 82 percent share of total viewing is projected to remain above 70 percent by 1990, when ABC forecasts the networks will reach a greater number of viewers than today because of the rapid growth in television households. The FCC, the Justice Department and a 1981 House committee staff report have concluded, respectively, that cable television creates no applicable diversion of network viewing, that cable programs are not substantially competitive with network programs and that there are no realistic competitive alternatives to the networks now or in the near future. Meanwhile, ABC and NBC are reporting increased profits from television operations. Only CBS, whose profits rose by 25 percent in 1981, reported a recent decline, due in part to its own unsuccessful CBS Cable venture-- which suggests inflated expectations for this new technology on the part of CBS.
Repeal of the FCC rule also is being ballyhooed as deregulation. Yet the premise of deregulation is that the public interest is served best through a free and fair competitive marketplace. It was precisely because the marketplace was distorted through an unhealthy concentration of network control that the rule was instituted. Scuttling it now will restore the networks' ability and incentives to compete unfairly by using their monopoly powers.
The consequences would be diminished competition in the television industry, a crippling of the emerging first-run syndication sector, the elimination of most independent syndicators, a serious weakening of independent stations and stifled innovation and diversity in television programming. Anti-trust actions--which are lengthy and expensive--would be virtually useless in preventing or reversing this.
Yet the issue is larger than concentration of economic power or the FCC pulling the rug out from under those who in good faith entered the television marketplace on the basis of the rule's protection against unfair competition. Repeal would result in the networks' having creative control over the content of all television programs, raising profound philosophical and constitutional concerns for a free society over the concentration of power in the marketplace of ideas.
To abolish the rule now could set back overall deregulation by impeding the development of genuine competition giving the public increasing choices among a diversity of programs and programming outlets.