It's come to this
Frank and Fisher say only Washington can save the affiliates from their networks
Staff -- Broadcasting & Cable, 4/8/2001 8:00:00 PM
The relationship between the major broadcast affiliates has been severely strained for the past several years. Still, it came as a surprise to the networks, as well as to outsiders, when the combined affiliate bodies of ABC, CBS and NBC —the National Affiliated Station Alliance—asked the FCC to investigate the networks for allegedly strong-arming affiliates, often in violation of long-standing FCC rules.
Pressing the case in Washington and elsewhere have been NASA Chairman Alan Frank (left in photo), of Post-Newsweek, and immediate past Chairman Andy Fisher, of Cox. Here, in an interview with BROADCASTING & CABLE Editor in Chief Harry A. Jessell, they defend the petition as a last-ditch attempt to maintain control over their stations.
How did we get to the point?
ALAN FRANK: We started a few years ago through various affiliate boards that we were part of. We would hear from the groups, the affiliates: Isn't there something we can do? Is there anything we can do to put balance back between the affiliates and the network?
ANDY FISHER: I think there is an irony as well, by the way. All three of the main affiliate boards had pressed very hard over the last 12 months with their respective networks to back away from some of their practices. There were some pretty impassioned pleas made. I participated in one set, with one network, and there were others made to the other networks.
There was a great reluctance from many of us to have to go this route. We really believed that, if the argument could be framed persuasively, the networks would—on their own—decide that they did not need to go down the paths that they were going down.
So what's the gist of your complaint?
FISHER: I would put these into three categories. The first category is the interference in transactions. The second category is the interference in the historical right to pre-empt [programming] without draconian financial consequences. And the third would be the reach for the not-even-yet-born digital age.
And what surprised me was some of the reactions of the networks. To me, there shouldn't be much emotion attached to this. Either the events alleged in the petition happened or didn't. If they're legal, there's no reason for anybody to be distressed. If they are illegal, then it should be easy enough for the FCC to say so, and the networks will have to stop the practices.
Some folks have said that the affiliates have signed these contracts and should live with them. Well, in this country, the reality is that just because two people agree to do something doesn't mean that it's legal. There are all kinds of business decisions that are made by two businesses where the government steps in and says you can't do that.
The government says it's not in the public interest, even if both of you wanted to, and in this case, quite clearly, a lot of owners are saying we didn't want to. We just didn't see an alternative. Well, in the area of the digital spectrum, there is a significant legal question whether or not the networks have the right to, in essence, option their ability to wrest control of all your digital space.
In your filing, you talk about how NBC tried to scare off other potential bidders for KRON-TV in San Francisco. How big a problem is that kind of thing?
FISHER: For 40 years, people could sell a station, from Person A to Person B, and the only issue the network had was, will my contract be fulfilled?
It was only in the last two years that one and then two and then three networks began to say, "Just a second. If you want to sell your property, we want to either have the right to buy it at discount or we want it to make that transaction subject to some additional requirements."
That's every network but CBS, right?
FISHER: CBS is the only network that does not engage in that practice, correct.
FRANK: Let's go to the first point, the right-to-reject rule, which is clearly the bedrock principle of localism and diversity.
One of the things the networks have done successfully is actually persuading people that you only preempt for breaking news for public affairs. Well, that's simply not true. You preempt for whatever reason is appropriate because you hold the license. The local station holds the license. The local station is licensed by the government. Not the networks.
The local station is responsible, and it's the local station that has to determine what they put on and how they schedule it. And we've gone from maybe one hour a week of prime time preemption to what they want now—four to five hours a year. That's a big, big difference.
Do you want the FCC to step in here and fine or somehow penalize the networks?
FRANK: No, we don't want them fined.
What do you want?
FRANK: We were very clear that we believe the networks should be financially healthy. We are for strong network-affiliate relationships. What we want is the FCC to take a look at the current practices—some that we think are illegal and some that we think they need to investigate over and above that—and say these are the rules and the networks have to follow these rules.
You just want the FCC to reassert the rules?
FISHER: Either the rules matter or they don't. You can't have a society in which there are rules which people can decide on their own whether to observe. Everybody has to know whether there are rules or not. Otherwise, what you have is chaos, and you have pirates. And that's not a business. That's not the way the public interest is served in a federally regulated entity. If you don't like the rule, challenge the rule. Don't just ignore it. It's inappropriate.
FRANK: One of the things mentioned in our filing is that, a number of years ago, NBC blocked books per night. They said, if you want to take ER on Thursday night, you have to clear all Thursday nights. If you want Law & Order on Wednesday night, you have to clear all Wednesday night. That's illegal.
Some network executives say that your petition is intended to discourage the government from relaxing the 35% ownership cap, which would allow the networks to buy more stations and increase their leverage. Is that true?
FISHER: It's unrelated. I mean, if the cap rises or if the cap doesn't rise or if the cap were lowered, all of these rules still are at issue—a preemption being absolutely foremost among these. If you're a network today, your goal is to have a dumb pipe—that is, to have a contract which gives you total control of the local affiliates' airtime.
But that is not what has been the law and practice of this country. And what's at stake here is a social issue. And the social issue is something that the government will have to decide. The social issue is whether or not the historic ability of local stations and a broad variety of companies of all sizes—small, medium, and large—are going to be permitted to make independent decisions that deal with a very narrow margin of the time, or whether the networks have the right to say in their contractual negotiations that we have basically ownership of certain chunks of your day over which you will have virtually no control and from which you can never deviate.
If the answer is let the marketplace prevail, then a certain style of broadcasting that was born in this country and flourished in this country will continue to be curtailed. If it is, in fact, the will of Congress and the regulators that no, the historic difference between U.S. local broadcasting and the rest of the world needs to be maintained, much like zoning laws prevent the pure marketplace from deciding how property is going to be used, then these regulations would be enforced, and the networks would be forbidden from getting that last 3% or 4% of a station's airtime.
Your timing may be bad. We now have a Republican administration with a deregulator at the FCC.
FRANK: We believe that Chairman Powell believes in the law. This is clearly the law of the land, and so we actually think this is a very good time to be heard.
FISHER: That's what he said: He may not create such rules, but he will enforce them.
Over the past 25 years or so, most broadcasters, I would say, have pushed for more freedom from government meddling, government regulation. Now you you seem to be inviting government to come in and enforce some rather archaic rules.
FRANK: We're not asking for regulation. All we're asking for is an enforcement of the laws that are on the books. That's all we're asking for. We're talking about the heart of the American broadcasting system, which is different from any system in the world and is an ingenious system: It's the only local system that the world has. We're talking about the essence of that system, which is the local diversity.
And you think you need the government in order to ensure that you don't get run over by the networks? Big old companies like the Washington Post Co. and Cox?
FISHER: I mean our deals are not up for some years to come, but there are some big companies that have been in negotiations and have found the going to be very difficult in the areas where they believe the law should be clear. I must tell you, I find it to be repulsive that an argument should be made that says I know there are regulations but you shouldn't ask for them to be enforced. That's not the rule of law. Either you get rid of the regulation, or you live by it.
Look, there's something you can do. You don't like the networks? Leave. There's no law that says that you have to have a network affiliation. You walk away.
FISHER: Your view is that, because somebody asks for something that's illegal, you shouldn't ask for the cops to come in and stop them. That's ridiculous. If it's illegal, it should be stopped. The concept that there's something wrong with asking for the law to be enforced is to me kind of bizarre.
I'll get back to my question. If you love localism so much, why don't you become all local tomorrow or as soon as your current network contract ends?
FRANK: Because our system has been a combination of local and national and it's worked. That's been the system. Local and national, and it's worked. And we have worked hard over the years to make it work. The affiliate associations have worked very hard over the years to put in procedures to help the networks to get where we are. We don't want to abandon that system. We can't say this strongly enough.
The whole principle of localism is what's up for grabs. This whole filing is about preserving localism. Yes, you can do it without a network relationship, but the broadcast system we have, the system of local stations with a national network, that's up for grabs. Except in this particular case, there's a law, and we're simply asking that that law which determines the balance between distribution clout and content clout be fought.
Instead of trying to get the FCC to crack down on the networks, why don't you work to get rid of the rules that limit your size: the newspaper-broadcast crossownership ban and the small-market–duopoly ban. If companies like yours consolidate, they just naturally have more clout.
FRANK: Let me say, as opposed to some other companies, the Washington Post Co. has never taken a position on newspaper crossownership.
FISHER: Also, I might add that Cox has never taken that formal position. We believe that newspaper crossownership is a silly rule, but we have not gone and lobbied extensively on this issue.
Okay, but my question still stands. Why not go that route? Try to get bigger? Just try to get bigger?
FRANK: There are some of us who believe that our system of fairness in this country is not necessarily based on the fact that you have to be big to be treated fairly, and we really think the rules serve this country best by enabling small broadcasters to continue to thrive, to continue to operate in their communities.
What assurances can you give me that, if the FCC steps up and starts enforcing these rules, that we're going to see more local programming? Frankly, I don't see too much. So what are we really fighting for here?
FRANK: You're right. The trend is less, but I do believe one of the reasons is the network pressure. What happened is, the network started applying more and more pressure on certain preemptions, and stations that weren't predisposed to do it stopped it. A lot of us who are predisposed to do it are continuing to do it, but not in the same quantity we used to because it's just painful. It is just painful.
FISHER: I'll give you specific examples. Local sports, even if they're professional teams, have essentially disappeared from affiliate television. I don't know if that's good or bad, but the reality is that what used to be a type of event that was available for free now requires pay television.
Do you think that's a direct result of the networks?
FISHER: Oh, absolutely. I could tell you with one network that was a principal deal point. They wanted baseball from one of our television stations. And it was a two-year negotiation.
Didn't your San Francisco Fox affiliate just re-up with the Giants?
FISHER: We have re-upped with the Giants. We had to take an arrangement in which it is now going to be shared with pay television. Fewer games will be over the air, and, in significant part, that is the result of the negotiations with Fox.
Again, if this is all about localism, why do you run to the syndicators to fill your access hours? How much Jeopardy does America need?
FISHER: Syndicated programming on a strict basis is the only thing that has been successful. Very, very few locally generated shows have the economics that can survive. Syndication is a way of sharing expenses. But the beauty of syndication has been that there were so many vendors. That's another change that has occurred over the last five to seven years: the vertical integration of the studios and the networks. Today, as a result, there are a small fraction of the shows being successfully launched each year as there were just 10 years ago.
It's a serious issue, and the networks enjoy saying, but look how many vendors there are on the floor of NATPE. But at the end of the day, the smallest number of shows are being launched in syndication in the history of the business. That is a sharp reduction in diversity. The way in which the networks, because of their vertical integration, because their ownership of syndication, have changed the picture is dramatic.
Allow me to play the devil's advocate a little more. Aren't you simply trying to gain a little leverage against the networks by threatening the government intervention?
FISHER: This isn't a threat. This is a request for the government to review the rules. Only if you work inside Washington do you believe that everything is a matter of looking for an edge or pressure or that it's dealmaking or it's negotiating. Actually, for a lot of folks who don't live in Washington, when you ask for somebody to tell you whether something is illegal or legal, that's actually what you're asking for.
FISHER: No, no, no. No come on. This is not a negotiating point. If it were a negotiating point, it would be framed as a negotiating point. When you call for an FCC review, that is not a matter of negotiations. Only in Washington could some people perceive that. But not in the real world.
Is this about compensation? Are you worried about the loss of network compensation?
FRANK: You know what? Compensation is not mentioned. We feel strongly that those are contractual discussions that different companies have with their affiliations. You make a choice—it's what I said before—you make a choice to do a contract or not do a contract. As long as it's all legal, you can choose one way or the other. Terms can be distasteful. But if it's legal, then you can choose to enter that agreement or not.
FISHER: No. I can't imagine how the government can get involved in compensation discussions. There's never been an historical basis, there's no legal basis. This has nothing to do with compensation.
I am aware that Fox made a big grab for the digital TV stations. But I'm not aware that the other networks did?
FISHER: Yes. They indicated a desire to have control of certain levels of the bandwidth of the stations. They're unhappy with the concept that any of the digital spectrum would be utilized by local broadcasters for content other than network content.
You complained about the vertical integration of networks and studios, but the affiliates supported the networks in getting rid of the financial-interest-and-syndication rules so they could become vertically integrated? Do you regret that support now?
FISHER: For what it's worth, no. I have no regrets over the compromise that was made years ago. It was a good compromise, but the deal, the handshake, was, the network would get fin-syn and a slight raise in the ownership cap, and they would let us do our business.
What was disturbing was that, after the deal was made, none of the extra cash flow ever got reported to the network and, within two years, they were once again saying, "Well, we still don't make any money, and, therefore, it's not enough. At that point, unfortunately, the compromise, the handshake, began to break apart.
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