Nets vs. affils: Another round

Viacom/CBS joins NBC, Fox in exiting NAB; ABC remains

Viacom/CBS' exit from the National Association of Broadcasters last week is only a symptom of the Grand Canyon-size rift that has opened between the networks and their affiliates.

The fight is centered on one simple rule: Congress has limited broadcasters to owning only as many TV stations as cover 35% of the nation's 100 million TV homes. The networks want to own more—up to 50%—while affiliates want to limit the networks' power by keeping the cap where it is.

But that's just one reason affiliates and networks are at war. As they told the FCC in a petition filed last month, affiliates are angry at networks for forcing them to air programming they don't want, like the XFL and baseball games instead of presidential debates. They also don't appreciate network threats to revoke affiliation agreements if they don't approve of a station sale.

For their part, networks say they aren't profitable on their own—they make money from their owned stations—and that it's only fair that they should be able to own a sizable part of the distribution when they are taking all the financial risks on the programming.

With its decision to leave NAB (and take about $1 million annual dues with them), Viacom/CBS, its 35 TV stations and 180-plus radio stations joined Fox and NBC. Both left last year over the same issue.

"We must reject an agenda that is inconsistent and misguided, and which fails to address the very real competitive and technological challenges to our industry's future," wrote CBS Television President Leslie Moonves and Infinity Broadcasting President Faird Suleman in their letter of resignation.

"I'm very disappointed that this issue should rise above every other issue ahead of us," said Andy Fisher, executive vice president of Cox Television and a member of NAB's television board.

Of the Big Four networks, only Disney-owned ABC plans to stay.

"ABC will remain a member of NAB and work from inside the organization with the twin goals of restoring broadcast industry unity, and embracing consistent and principled deregulation of broadcast ownership rules," said Preston Padden, executive vice president of government relations for The Walt Disney Co. in a prepared statement.

Some onlookeers think the NAB will remain a force in Washington because of the sway local broadcasters have with their members of Congress, but would be better off with the networks on board.

"I think generally speaking it weakens broadcasters collectively when it comes to lobbying successfully on a wide range of issues before Congress," said Ken Johnson, spokesman for House Energy and Commerce Committee Chairman Billy Tauzin (R-La.). "When you consider the ramifications of campaign finance alone, this is not a good time for broadcasters to be estranged."

Broadcasters have a broad range of issues on which they want Congress to act, from killing a bill passed by the Senate two weeks ago that would require stations to give politicians deep discounts for ad time, to helping broadcasters make the transition to digital.

CBS' departure was preceded by three key and related events:

  • The U.S. Court of Appeals at the D.C. Circuit last month struck down a 30% national audience limit on ownership of cable operators, saying the number seemed to be "plucked from thin air," and suggesting that 60% might be a more appropriate limit.
    That let Viacom/CBS know it might be able to hang onto all the stations it acquired when the two companies merged, bringing its station reach to 41%. The D.C. court last Friday granted Viacom a stay of the May 4 deadline that the FCC had set for Viacom to divest, while the court considers a petition from Viacom, NBC and Fox as to whether the 35% national broadcast cap is constitutional.
  • In early March, the Network Affiliated Stations Alliance (NASA) filed a thick complaint with the FCC, outlining a long list of abuses affiliates feel they have suffered at the hands of the networks. Viacom/CBS execs were shocked by the petition, and upset they weren't given fair warning that it was going to be filed. (See BROACASTING & CABLE's Q&A with two of the leaders of the protest, Cox's Andy Fisher and Post-Newsweek's Alan Frank, page 18).
  • The last straw for Viacom/CBS came when NAB's television board last week voted to file together with NASA against raising the 35% cap at the D.C. Court. It probably didn't help that the same lawyer who wrote the NASA brief—Covington and Burling's Jonathan Blake—is involved in writing the NAB/NASA petition for the court.

The complexity of the situation is also changed because Republicans are now in charge of Congress, the FCC and the administration, and Republicans are much more inclined toward deregulation than the Clinton Democrats were.

FCC Chairman Michael Powell has made clear he favors less regulation in broadcasting, and if the court follows the same logic it used to scrap the cable cap, Powell will have all the justification he needs to make similar changes to the broadcast rules.

"You've got to stop focusing about the allegations of the businesses and start thinking about the consumer," Powell said last week during a press briefing. "Will the government's role be different if one-third of Americans are still receiving news, entertainment and information over the air than it would be if 95% of them are receiving it over cable? My own view is the government role would probably be different."

Even if all the networks ultimately leave, most broadcast executives don't think the networks will form their own lobbying group. "We can work together without having an association," one exec said.