News Articles

Compromising Positions

Networks hammer out new affiliate contracts 7/11/2004 08:00:00 PM Eastern

Faced with a looming FCC ruling that would have weakened their power to dictate affiliates' prime time schedules, three of the Big Four broadcast networks caved. Instead of subjecting affiliation contracts to the whims of federal regulators, they worked things out at the negotiating table.

In the past month, NBC and ABC network chiefs Randy Falco and Alex Wallau penned standard affiliation contracts that provide two key clauses: one giving affiliates more power to reject network shows, the other banning the network from monopolizing the additional channels that stations can offer in digital. Fox has made major progress with affiliates, although it still has issues to resolve. CBS brokered a deal two years ago.

Falco, president of NBC Universal Networks, says the contract hammered out with the Network Affiliated Stations Alliance (NASA) sets "a clear basis for resolving any remaining concerns." (NASA in March 2001 asked the FCC to rule stricter network contracts illegal.)

The late-hour bargaining was applauded by FCC Chairman Michael Powell, who had hoped a private deal could be brokered. The two sides made little progress until Powell's staff drafted a plan that gave affiliates most of what they wanted.

The affiliates' hand was further strengthened by the Super Bowl debacle. They used the incident as evidence that the networks frequently foist offensive programming on local communities, which they are powerless to block.

The FCC still has to settle lingering affiliate disputes with Fox.

Affiliates complain that Fox's contract obligates them to keep non-prime time programming open for network shows even though Fox hasn't revealed what the shows would be. The stipulation also applies to affiliates' digital channels.

NASA Chairman Alan Frank says that the provision "unmistakably" violates the FCC's ban on networks' holding options on affiliates' time without first committing to provide the programming.

Now that the other networks have made peace, the big question is: How long will it hold up? One likely flash point: The FCC will soon take another stab at media-ownership rules, including one that affects how many stations a network can own.

For now, the affiliates are reluctant to put all disagreements behind them.

Frank, who is president of Post-Newsweek Stations, says he was "pleased" by a recent court decision upholding the FCC's right to phase out the "UHF discount," which allows CBS and Fox to own more stations than otherwise allowed under federal ownership caps. The discount tallies UHF stations at half their audience reach when an owner's compliance with the national cap is measured.

The FCC plans to phase out the discount for networks when TV goes all digital. Fox and CBS, already pushing up against the government's ownership cap, will likely be forced to sell a handful of stations to stay under the limit, which restricts a group's reach to 39% of national TV households.

Keeping a check on networks' holdings is necessary to "preserve local control over programming and other station decisions," Frank says.

The networks aren't ready to stop arguing, either.

None have raced to rejoin the National Association of Broadcasters, which would signal that they expect a lasting peace. The networks left the affiliate-dominated NAB one by one after NASA took its fight to the FCC.

Still, the networks and the affiliates have ample common interests and shared threats.

Their mutual cooperation is ensured on critical issues, such as fighting to relax restrictions on ownership of two stations in a single market and actively blocking an FCC plan that requires broadcasters to go all-digital years before most viewers buy HD sets capable of displaying the beautiful pictures DTV offers.

Working together on those projects might eventually pave the way for a rapprochement within NAB.

"I'd be stunned if the networks came back anytime soon," says one station-group lobbyist. "In the meantime, we'll cooperate where we can."

September
October

News Technology Summit

DoubleTree by Hilton Baltimore--BWI Airport, Linthicum, MD