Davids vs. Goliaths - Broadcasting & Cable

Davids vs. Goliaths

As affiliates continue to wage war against networks, a conspiracy theory waxes
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That affiliates protest against the networks just keeps gnawing at the big bosses. At last week's Big Picture conference, one day before CBS quit the National Association of Broadcasters, News Corp. president and COO Peter Chernin called the Network Affiliated Stations Alliance's FCC grievance filing against the networks last month "silly and unfortunate." Stations need to get past issues like helping to pay for programming in some way, shape or form, because "stations need us" to obtain costly and quality programs that will draw audiences, he said.

NBC President Bob Wright attributed the most recent network-affiliate contretemps to a hidden force: "Publishing organizations"—station groups such as Cox and Post Newsweek whose roots are in daily newspapers—have "captured" the NAB in their bid to have the newspaper-broadcasting crossownership rules repealed.

It's not a bad strategy, said Wright. It's designed to protect their profit margins and grow them in the future by linking their newspapers to TV stations and the Internet for cross-media sales efforts. All the same, Wright said he's hopeful the deregulation-minded Michael Powell-headed FCC will grant the same freedom to broadcasters as to publishers. (After the formal conference, Wright also said he was surprised other group owners, those without newspaper ties, couldn't see through the ruse.)

For a large part of the conference, Wright hammered home an oft-quoted NBC contention that the 35% ownership cap really means something much less than that. He argued that, even if NBC owned stations in all 214 markets where its affiliates exist, it would capture only an average 16% of viewers because, obviously, one network doesn't get 100% of a market's viewers. He said that, in fact, with the current rules, NBC's owned stations garner about 6% of viewers nationwide.

Yet, he said, in contrast, radio companies can own stations that capture up to 40% of listeners in a market, and cable companies were allowed to aggregate up to 30% of all cable subscribers until recently, when the courts ruled the FCC hadn't justified how it came up with that cap. "It isn't rational, it's politics," Wright said of the TV ownership rules.

James O. Robbins, head of Cox Cable, said he'd love to talk to "any network" having problems with affiliates in Cox's service areas about carrying their shows on cable.

That was a reference to earlier threats by NBC and ABC to take their signals to cable if affiliates resisted network proposals to reduce compensation or have affiliates help pay the cost of high-priced programming like the rights to the National Football League.

Asked by panel moderator Herb Schlosser, former NBC executive and senior adviser and consultant at the Global Media Group of Salomon Smith Barney, about the likely impact of personal video recorders on viewing patterns, Wright said he didn't envision enormous danger. If it comes to the point where viewers simply refuse to watch commercials, "all we have to do is incorporate the ads into the shows." Indeed, some advertisers, including Coca-Cola, have recently struck so-called "product-placement" deals for certain shows.

And as Wright noted, in the early days of TV, product placement was common because the sponsors owned the programs.

But Viacom President Mel Karmazin doesn't see a return to the old days if viewers stop watching ads. Instead, he sees a subscription model replacing the advertising model. "If they stop watching the ads, we'll charge them a fee for the programs," he said. But he does not see the issue's becoming serious for CBS, near term. Viewers have had the opportunity to tape shows and zap spots for years with VCRs. Most viewers don't do it, he claimed.

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