Limitations on Monopoly
It is ironic that at the moment of their greatest global power, the three networks confronted one of those rare occurrences when the interests of the FCC, Congress, and the White House converged to make forceful regulation a reality. This resulted in a series of rulings adversely affecting network profits, yet never threatening to destroy the "cash cow" that was national broadcasting by the early 1970s. The rulings were several—including passage of the Prime-Time-Access Rule, institution of the Financial Interest and Syndication Rules, restrictions placed on network production, and a ban on cigarette advertising.
They materialized from an unlikely convergence of interests that included FCC idealism left over from the 1960s, the desire by the White House to dilute the political influence of the networks, pressure from consumer interest groups, and medical advice from the Federal Trade Commission and the Office of the Surgeon General. The rulings that materialized in the early 1970s constituted the most serious adjustments of network monopoly practices since the days of Chairmen Fly and Porter.
the prime-time-access rule
By the mid-1960s there was essentially no such commodity as an independently made first-run TV series. Whereas they had been a rich part of the TV mix during the 1950s, when network prime time was from 8:00 P.M. to 10:30 P.M. (EST), the expansion of local news and network news plus the widening of prime time from 7:30 P.m. to 11 P.M. by the early 1960s effectively destroyed this market. FCC and congressional study of this development culminated in 1965 in an FCC report documenting how the network monopoly had suffocated the free-enterprise efforts of affiliate stations and independent programmers. In response to its findings, the FCC in April 1970 enacted the Prime-Time-Access Rule (PTAR).
Effective in September 1971, the rule limited network programming to three prime-time hours per night in the fifty largest markets. The move took from them a total of 10.5 fringe hours weekly, although a later modification excluding Sunday evening lowered the total to nine hours. In unison, ABC, CBS, and NBC passed to their member stations the first half hour—and least profitable time segment—of prime time (7:30 P.M. to 8:00 P.M. EST). Moreover, since the networks found it unprofitable to program for scores of smaller markets, the decision regarding the top fifty markets affected all their affiliates.
Although the FCC's chairman, Dean Burch, newly appointed by President Richard M. Nixon, protested this regulatory action, a majority of the commission, led by Nicholas Johnson and Kenneth A. Cox, was convinced by the 1965 study that TV needed to be more competitive.
In passing the rule, the commission admitted its purpose was to rectify a situation in which three national program services "for all practical purposes control the entire network television production process from idea through exhibition." The FCC foresaw that the extra half hour would afford local stations the chance to air programs of community interest, but its principal desire was that the move would enhance advertising revenues at local stations and increase the business of independent producers, who had seen their share of network programming slip from 33 percent in 1958 to 5 percent in 1968.
the financial interest and syndication rules
In the same action creating the PTAR, the commission ordered the networks to surrender all financial interest and syndication rights in any series they did not produce totally. The Financial Interest and Syndication Rules (FISR—sometimes called "fin-syn") constituted the most damaging attack against the network TV monopoly in FCC history.
Although the networks produced little except their own news programs, by 1970 they held financial and syndication concessions in about 98 percent of all their programming.'' In some cases—especially those involving independent producers without sufficient financial reserves—this was justified on the grounds that the network had advanced seed money to programs during their development stages. But the networks demanded a financial interest in programming, sometimes as much as 50 percent, even if it was produced by a major film studio not needing start-up funds. The networks argued that by airing a series nationally, they were contributing to its value and therefore they merited a financial interest in its present success and in its future syndication.
When it knocked down the financial-interest aspect of such arrangements, the FCC also ended network syndication prerogatives. No longer could ABC, CBS, or NBC distribute series domestically, and they were prevented from syndicating shows abroad unless they had fully financed and produced those programs. This aspect of FISR placed domestic and foreign syndication rights in the hands of the studios actually producing the programming.
FISR cut deeply into network syndication operations, relegating them to news and public affairs programs, which constituted about 9 percent of foreign sales. And to seal the new arrangement, the networks were given one year to divest themselves of their syndication companies. From this in 1972 came the creation of a new company, Viacom International, to distribute CBS films; and the melding of NBC properties into National Telefilm Associates, and ABC interests into the now-independent distributor Worldvision.
restricted network production
In supplementary action taken in 1975, the Department of Justice settled a protracted legal proceeding against monopolistic practices at NBC by limiting the number of hours a network could fill even with its own productions. By this consent agreement, which was not effective until accepted by CBS and ABC, the networks were limited to a weekly total of two and one-half hours of prime-time entertainment shows—sliding to five hours by the late 1980s—and eight hours of daytime shows.'' Unlike the FISR and the PTAR, this agreement was to last ten years. It expired in November 1990.
Clearly, this latter action avoided a permanent curtailment of the monopolistic controls exercised by the networks. In fact,
Variety termed it a "coup" for NBC. Nevertheless, relative to the self policing usually recommended by federal regulators, even this mild prohibition was a striking development. But unlike the earlier FCC rulings, this agreement appears to have been more political than reformist.
Although the Department of Justice had been investigating antitrust patterns in U.S. broadcasting for years, the decision to press the case against network television came from the Nixon White House. After initial hesitancy, adviser John Ehrlichman urged President Nixon in 1971 to give the go-ahead for the lawsuits—but only after a public-relations game plan was devised. In a private memo to Nixon in September, he wrote, "We have to anticipate that the television media will counterattack vigorously and it is necessary for us to have mobilized the film industry, the print media, and others to set forth our side of the case." Nixon agreed in an annotation that it was "vitally important to plan P.R. aspects" before instituting the lawsuit.
The antitrust prosecution was but another blow by the White House against a perceived political enemy. But it was not a purposeless campaign: from the beginning the administration understood what it wished to accomplish, and the speech by Spiro Agnew in November 1969 had been only the first shot in a virtual war against the networks.
The White House goal vis-ą-vis national television was well delineated by Patrick Buchanan, who wrote to the president in late 1972 that "The Nixon White House and the national liberal media are as cobra and mongoose—the situation extends beyond the traditional conflict between democratic government and free press." For the "New Right" Nixon adviser who three years earlier had penned Agnew's attack on TV news, nothing less than the future of the nation depended on the destruction of network power:
A small, ideological clique has managed to acquire monopoly control of the most powerful medium of communication known to man; and they regularly use that unrivaled and untrammeled power to politically assault the president and his administration. This is not a question of free speech, or free press—it is a basic question of power. Shall we acquiesce forever in left-wing control of communications media from which 50 percent to 70 percent of the American people derive their information and ideas about their national government? The interests of this country and the furtherance of the policies and ideas in which we believe demand that this monopoly, this ideological cartel, be broken up.... again, this must be viewed as a question of "power.". . . We should move against it the way TR moved against the financial monopolies. Our timing should be right, but we should be unapologetic about what we are doing.
ban on cigarette advertising
When Congress voted to ban cigarette advertising from TV and radio, the issue clearly seemed to be about improving the health of the nation, and particularly discouraging the addiction of young people to nicotine. Interestingly, this action was suggested as early as 1964 after the surgeon general announced the causal relationship between cigarette smoking and cancer. But it required years of political wrangling before Congress enacted legislation banning cigarette advertising on television, commencing January 2, 1971. In a cynical final gesture, however, New Year's Day 1971 was avoided, since the football bowl games that day allowed broadcasters one last lucrative opportunity to sell airtime to the cigarette makers.
As with most regulatory decisions in U.S. broadcasting, this ban derived not from social concern as much as from hard political decisions. To many senators and representatives the issue was a medical problem as well as a budgetary question, since a rising number of cancer cases represented a drain on public health funding. There was also pressure for congressional action from consumer groups and professional medical associations. Perhaps most decisively, however, when a federal court ruled that under the fairness doctrine TV stations had to provide free airtime for antismoking groups to answer pro-tobacco propaganda, TV stations and manufacturers reluctantly agreed that a ban would be preferable.
Still, the ban was upsetting to the TV industry, since broadcasters earned about $250 million yearly (about 20 percent of annual billings) peddling tobacco. Moreover, the reliability of tobacco accounts was strategic by 1970 because network advertising in general was in decline as the U.S. economy entered a recession.
The networks were nothing if not flexible, however, and except for a short-run dip in annual revenues, the restrictive rulings of the early 1970s did no lasting damage to broadcasting. The networks still dominated national TV, and national video still dominated the leisure time of the American public. For advertisers wanting access to the broadest possible audience there was still no alternative to national television. And there were such advertisers, hundreds of them, waiting to buy time if the price were right.
Led by CBS, the networks in December 1970 adjusted their advertising schedules to the new realities: commercial rates were raised by establishing the thirty-second commercial rather than the one-minute spot as the standard unit. In this way companies unable to afford a minute on NBC's
The Flip Wilson Show at $65,000 or Ironside for $60,000 could now purchase a half minute from the network for $40,000 and $38,500, respectively.
The strategy worked. Whereas pretax profits at CBS had fallen dramatically, from $92.7 million in 1969 to $50 million in 1970 and to $53 million in 1971, by 1972 the network was again booming, making almost $111 million and more than double that figure in 1974. Even lowly ABC did well, company pretax profits exploding from about $25 million in 1975 to more than $200 million four years later. Advertising billings for the entire industry demonstrated similar rejuvenation, moving from $3.6 billion in 1970 to $4.1 billion in 1972 and to $7.5 billion by 1977.
Above all, the networks could rebound because the American audience continued to choose their programming. Daily HUT (homes using television) figures averaged a record-high 62.1 percent during the 1969‑1970 TV season. As early as November 1963—only two months after CBS
and NBC expanded their evening newscasts to thirty minutes—TV for the first time overtook newspapers as a Roper poll indicated that by 36 percent to 24 percent Americans found TV a more reliable news source than print. Even after the turmoil of inner-city rebellions that marked a collapsing civil rights movement, and years of dissent over the U.S. involvement in the Vietnam War, the differential between video and newspapers spread to 44 to 21 percent in 1969 and to 48 to 21 percent in 1973. Also in 1973, by a margin of five to one Americans even judged commercials as "a fair price to pay for being able to view the programs."
In a span of two decades, the American public had come to rely on television. While popularity was not synonymous with profundity or adequacy, the medium occupied a position of great social authority. One person urging the industry to exert its influence more responsibly was Lou Harris, whose polling organization was a respected gauge of public opinion. For Harris, having the trust of the nation required those in television to exercise social leadership by facing and reporting the truth. Speaking in late 1970, he argued that "what the American people want more than anything else today is leadership which will not back off the hard truth." In a statement with ramifications for developments that would confront the industry in the early 1970s, Harris asserted that TV
must be willing to stick its neck out by a willingness to take these major substantive areas and to report them, research them, explain them, and even take stands on where we ought to go to solve them, albeit giving wide open access to all those who disagree. Leadership is not simply to reflect, but to be prepared to go that step beyond the present and to spell out the implications, the costs, and the sacrifice and pain involved in going through the crucible of genuine betterment of mankind."
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