Dr. Janet McMullen  Fall 2002  MWF 9:00

Updated: 10/18/02

Stations are in business to make money! But stations are also mandated by FCC to serve the PICN (public interest, convenience, and necessity).

Structure and organization of the business is something you must understand to understand how the industry functions in our culture and our economy.

Actually, the industry has taken some major financial blows over the last few years. Look at the figures:

Radio: 

[See back of Broadcasting for updates every week.](2001, 2002 data from Mass Media Bureau at fcc.gov.)

Cable:

[2001, 2002  Data from NCTA, at ncta.org]  

  According to some sources, cable penetration was expected to be 78% by 2000.  

As you can see the numbers have gone down for station ownership, but seem to be coming back up. AM's are still hurting, but the others have rebounded. In the early 90's stations were heavily in debt, and low cash flow caused many to go dark, but revenues have increased significantly. From significant deficits in the early 90's, in 1994 the Big Three earned more than 9 BILLION dollars. (Bstg3/6/95 p. 53) However, during that time, the audience has grown and the number of sets, VCRS, etc. has increased.  In the time since, the revenues continue to grow....However, in the late 90s, those profits were eaten away, and the Big Four TV nets lost huge sums.  We'll address that more in a bit....

Here are some current facts of interest made available by the Television Bureau of Advertising in 2001. (http://www.tvb.org ) 

Total U.S. population = 252+ Million

Only 1.7 % of homes in U.S. without at least ONE TV

More than 5.1 % of homes without telephone

Homes with VCRs = 86.21

Homes with Remote = 93% [ as of 1998]

Multi Set Homes = 75.1% 

Color TV Homes = 99.8% 

Homes with Alternative Delivery Systems

According to Communication Technology Update  (Grant, 2002) 25% of American households have home theatre,

The Average Daily usage :   7 hrs. 35 minutes in 2000.

In 1999, that number was  7 hrs. 26 minutes, and that reflected a continuing increase since 1990 when the average television usage per day was 6 hours and 53 minutes.  While broadcasts have complained about reduced audiences, total television audiences have increased steadily since 1960.     (Nielsen Media Research and TVB, 2001)

Total Viewing Hours Per Day in 2000:

• Men : 4:11
• Women: 4:46
• Teens: 3.04
• Children: 3:07

These numbers also indicate a slight increase over 1999 numbers. The report also shows that as the number of cable options, sets in the home and persons in the home increase, so does television household viewing. Television viewing decreases as household income increases.

According to USA Today reported in 2002 several television viewing records were broken. When President Bush addressed the nation after September 11, 2001, 82 million people tuned in.  That was the most ever for a political speech.  The Super Bowl drew 86.8 million viewers and the opening ceremonies for the Olympics in 2002 drew more viewers (45.6 million)  than any other Olympic opening ceremony.  (Levin, 2002)

Station Organization

Licensee: Owner of the station to whom a broadcast licensee is issued. The licensee may be an individual or a corporation.

General Manager: Supervises the day-to-day operation of the stations. Is the executive who supervises the heads of the following divisions or departments. In each station the following departments will exist, although sometimes they are called by different names.

• Administrative: Supervises the operations of the station, billing, payroll, etc.
• Technical: Sometimes called engineering, this is the department which keeps the transmitter, the cameras and all of the equipment operating. Sometimes this is called the operations department and includes oversight of studios and other facilities.
• Sales: This department is responsible for selling advertising, both local and regional/national spot advertising. It is headed by a SALES MANAGER and there may executives who are in charge of local sales, regional sales and national sales.
• Programming: Headed by the PROGRAM DIRECTOR, this is the department which contains all production and programming. In a radio station, the PD hires the talent, selects programming consultants and fine-tunes the format. In a television station, the PD will work with the SALES MANAGER and the GM to determine what type of syndicated programming will work best, supervises all local production, commercial production and scheduling of programming. There may also be a NEWS DIRECTOR and a PRODUCTION DIRECTOR in charge of those specific areas.

In Television stations, the News Department will usually be a separate division, headed by a News Director.  Promotion Department may also exist as a separate unit.

You should know the functions of the departments and the appropriate job descriptions. Be sure that you understand

Traffic Department: schedules all commercials

Promotion Department: markets the station through promotional spots, contests, etc.

Administrators are on top of everything. It's there responsibility to keep up with all new information that might affect the industry -- government, NAB, new technology, management, etc. This takes a lot of work and the watchword is READ -- everything!

Belong to trade organizations

• NAB: National Association of Broadcasters
• TvB: Television Advertising Bureau
• Radio Advertising bureau: Radio Advertising Bureau
• NATPE: National Association of Television Programming Executives
• RTNDA: Radio and Television News Director's Association.

Terms you need to know:

inventory: the total number of spots you have to sell

avails: the number of spots which remain unsold -- "available"

make-goods: if a spot does air on time and in an appropriate way, the station or network has to run it again at NO CHARGE, thus "making good" the investment the advertiser has made.

traffic: the people who schedule commercials; important that competing spots are not placed adjacent to each other.

logs: records that stations must keep regarding transmitter readings, when commercials run, and program logs

LPTV STATION: Low power television station. Coverage area : d=10 to 20 mi. What are disadvantages? What local station is LPTV? (few people making profit -- only 6%) 

Network Affiliate:  The local station which airs network programming and has a contractual relationship with a television network.  We'll address that relationship in more depth a bit later in the lecture.

Television Networks:

The "Big Three" television networks were the powerhouses in TV for years, but in the last two decades, that position has been threatened.

• In 1978, the three-network prime-time SHARE (% of people watching who were watching network tv) was over 90%.
• 1983 =less than 80%
• 1991=55%
• 1995=47%
• 1996=42%

(Partial cite: Broadcasting and Cable, March 3, 1992 p. 31)

For the 2001-2002 season, the six networks had a combined share of 55 points.  That was a drop of four points from last year. When you factor out UPN and WB, ABC, CBS, Fox and NBC had 47 share.  That's the first time the big four have dropped below a 50 share.  Cable channels were the big winner with an 8% share gain.  (McClellan, Steve 5/22/2002)  Note that while ratings jumped for television viewing in general after the September 11 attacks, that increase did not sustain itself over the long haul.

 According to AC Nielsen annual reports on television for 1998, the Big Four Prime Time Share --ABC, CBS, NBC, Fox was:

• 1994=69%
• 1995=64%
• 1996=61%
• 1997=57%

These numbers demonstrate how threats from other channels and new technologies have severely impacted TV Network audiences. Numbers in for the premiere week of the '97-98 season aren't encouraging: According to Broadcasting and Cable, Sept. 30, 1997,

"The combined audience share of the four major and two emerging networks for the week (Sept. 16-22) dropped three points from last year's premier week showing, from 77 to 74. In contrast, the combined share of 33 basic and seven pay cable networks jumped 3 points, to 35." 

That slump continued, but after the terrorist attack of September 11 and a delayed network premier week, network viewing actually appeared to be up a bit. When the networks premieres actually aired, viewership was up from the previous year. (Schlosser, 10/1/01) For the week of  September 24-30 Broadcasting and Cable showed the following shares for traditional broadcast networks:

• ABC = 13
• CBS = 14
• NBC = 15   (for a Big Three total of a 42 share)
• Fox =   7    (for a Big Four total of 49 share)
• PAXTV = 2
• UPN =  5
• WB = 3    For at total television network share for that week of 59% of homes using television. 

That means that 41% of homes using television were NOT watching network television.  (Ray, 10/8/01 p. 28)

But...

Even with reduced market share, the Big Four Revenue in 1998 was $21.5 BILLION! (Note that does not indicate profits.) In 1999, all four Networks improved according to a report in Broadcasting and Cable, 3/6/00:(Source: Broadcasting and Cable March 6, 2000 p.11).  But while revenues appeared strong, increased costs and losses of key prime time programs (like Seinfeld) hurt the profit picture.  In most years at least one of the big four networks lost millions of dollars.  So when that changed in 2000, there was cause for celebration!  A May, 2001 article in Broadcasting and Cable proclaimed, "Big Four in the Black!"  Here are some of the figures:

These increases in profits may make the networks position with affiliates a bit more difficult.  Affiliates are not likely to go for reduced network compensation and other cuts in income when the networks have had their most profitable year in a while.  The reality, is those profits may not be around long.  Coverage of terrorist attack cost the networks huge amounts of revenue in lost advertising as regular schedules were abandoned for "wall-to-wall" coverage of events.  Further, costs to cover the events were astronomical. All of that happened after the stock market slide had reduced company assets significantly, and fear of recession had made advertisers less likely to buy expensive commercial time.  Some figures:

In the first week, Ad Tracker Competitive Media Reports estimated:

• $320 million in advertising was lost
• Networks were expected to have lost between $35 and $55 million
• CNN lost between $24 and $36 million
• A TV station in a major market could have lost between $2.5 and $3 million per day.

And it's not just broadcast stations and networks that are hurt.  The decline in advertising has been felt throughout the cable industry as well. (Higgins and Romano, 9/24/01)

The costs will continue.  Some media analysts expect that it will cost the Big Four News Networks between one and two million dollars per day to cover the story of the attacks. (McClellan, 9/24/01 p. 8) Viacom, which owns CBS and UPN, reportedly lost $200 million as a result of the terrorist attacks.  CBS lost $85 million in lost advertising and its owned and operated stations lost another $40 million.  UPN posted a $3 million loss and the syndicated division lost $4 million.  All of that on top of the additional $15 million that was spent covering the attack. (McClellan, 10/3/01)   

And the expenses aren't over.  Covering the "War on Terrorism" is expected to cost the networks a half a million dollars each day to keep crews in the middle east to cover events there.  How can it cost that much? CNN reports occupying 30 hotel rooms in the Pakistani capital, at a room rate of $230 / night. (You'd think they could find a Motel 6....) That doesn't include meals, airfare, equipment, etc. The terrain and climate are especially hard on satellite and other electronic equipment. You do the math. (Romano, 10/8/01 p. 12)  

And when the battles begin to rage, and the networks go "wall to wall" again, there goes additional advertising revenues.....  That's why it was interesting to flip through the channels when the attacks began on the Taliban on October 7.  While the President's speech was covered live, CBS and Fox went back to NFL games, while NBC and ABC as well as the cable news channels went with continuous coverage.  CBS and FOX had invested so much in NFL license fees, they could not afford to lose the advertising dollars in those games.   This pressure from news costs is likely to continue for some time, and it is a chief reason why ABC and AOL Time Warner are considering pooling resources by  merging CNN and ABC News.  While lots of people would likely lose their jobs (as duplication is eliminated), it would make the new news unit the most powerful in the business. ("CNN-ABC?" 9/30/02)

I spent some time looking for the 2001 revenue and profits, but those have not been published in the usual places and I can't find them at all on the web.  I did find that Disney Corp (the owner of ABC) was 1.5 Billion dollars in the red. (Mermigas, 6/17/02) What we are seeing for 2002 is that advertising sales are way up.  In a article published in Broadcasting and Cable's web site October 16, 2002, it was reported that cost per thousand charges for Big Four Network advertising in the "up front" market was up by 7.5%  That refers to advertising sold at the beginning of the season for most of the rest of the year.  WB and UPN did pretty well also; WP increased its primetime advertising rates by 14% and UPN by 13%.    So even while concerns about economy and war apparently loom, advertisers are enthusiastically buying television and that means the revenues for this year should be pretty substantial.  They may even balance out the increases costs of crisis coverage.  ("Meyers Releases..." 10/15/02)  

So, while we might think that television networks and their parent companies are rolling in the dough, they can, like the rest of us, see it go out as fast or faster than it comes in....That reality is at the heart of the controversy between networks and their affiliates at the present time.  As we wait for military action to be taken against Iraq, the networks can expect additional high news costs and loss of revenue from interrupted regular schedules.  Negotiations between networks and affiliates and approaches toward programming reflect those concerns:

Network Affiliation Issues:

In order to grasp these issues, four industry realities need to be understood:

• The re-alignment of networks and affiliates
• The development of huge station groups
• The nature of the network-affiliate contract
• Changing economic conditions in the electronic media industry.

For many years, network affiliation remained fairly stable. Three networks had a fairly stable amount of affiliates. Those stations would vary some times among the various three, but that was about it.

In 1989, the situation looked like this:

• ABC= 227
• CBS = 193
• NBC= 207
• PBS = 336
• FOX = 122

In 1995, the numbers had changed so much, it was hard to get the data without calling each network in New York. Now, numbers have stabilized somewhat because most of the big switches have already occurred, the one in Birmingham in August, 1996 being one of the last to take place based on that first NFL switch.

A recent check on the Internet will reveal the current status of network affiliation:   (though it is likely to have changed, and they don't make it easy to get these numbers).

• ABC = 204
• CBS = 195
• NBC = 215
• FOX = 177
• UPN = 122 stations as of October 18, 1999 (Broadcasting and Cable, p.61)
• WBN= 93 primary, 14 are LPTV

What happened:   The big changes began when Fox out bid CBS for NFL football in the Spring of 1994. Many CBS affiliates had very close ties to their local NFL team and elected to switch to Fox so they could continue to carry the games.  That caused "the network shuffle" to take place in major markets all over the country, including Birmingham.   It didn't help that this happened when UPN and WB were joining the fray, actively lobbying for stations to affiliate with them.  Even though UPN dumped all its first year shows except Star Trek Voyager, it still went from two nights of programming to three in 1995 and  five in 1998. 

For more information or clarification, see the following articles in BROADCASTING AND CABLE: 12/11/95 p. 14; 3/25/96 p. 6; 8/26/96 p. 5; 7/11/94 p. 15; 7/18/94 p. 10, 14, 15 ; 8/8/94 p. 8/22/94 p. 6, 12; 8/28/94 6; 9/12/94 p. 11; 9/19/94 p. 27; 10/3/94 p. 15 These issues will be discussed in more detail later in the notes.

[Local Interest: Birmingham affiliation swap: Sept. 1, 1996 -- two UHF stations switched from CBS to ABC. WBRC-TV switched from ABC to Fox. (9/2/96 p. 60). In 1999, WOWL was sold and affiliation switch was made UPN.]

We have already discusses some of the economic realities and the beginnings of the re-alignment of nets and long-time affiliates.  The change in ownership limits and the development of large station groups is the another key factor:

STATION GROUPS:

Economies of Scale: buying at a bigger scale allows costs to be reduced, thus owning more stations make the operation of each individual station less.

Group ownership has been around "forever", but some new things are happening. 

First, the FCC gradually began relaxing ownership rules.  For decades, stations owners could own no more than 7 AM, 7 FM and 7 Television stations.  Later, that number was relaxed to 12-12-12 and later 18-18-12.  But always, it was considered that too few owners with too many stations would undercut the importance of "public interest convenience and necessity" and emphasize the "bottom line." That would change.

In 1994, we started to see that happen when specific groups were formed for the purpose of affiliating with a particular network.[ Background Information regarding station groups is found in BSTG 7/1/96 p.27; BSTG 7/22/96 p.12 & p. 6; BSTG 3/21/94 p. 52.] It was this realignment as the result of CBS's loss of NFL Football which set the stage for the major mergers which took place in 1995. For this reason, it is important for you to have a feel for the "old order." You need to know what was, in order really understand the significance of what is......

Notice how few stations these television groups had. The radio groups had more, but they, too, were seriously limited.

Most group-owned stations are network affiliates, but some have historically been independents. The trend in 1994 was for station trading deals to be put together to align specific groups with a particular network:

Example: SF Broadcasting was formed in March of 1994 by Fox and Savoy Pictures for the purpose of buying WLUK-TV in Green Bay, and converting it to a FOX affiliate. NBC filed a suit saying that SF was formed so Fox could get around the ownership limits. (BSTG 10/3/94 p. 15]

Radio Groups by that time could own up to 20 AM and 20 FM (as of 9/16/94)

Television Groups could own up to 12 total TV stations with a "reach" of no more than 25% of the U.S. population.

CBS and Group W made an historic alliance in July, 1994 : All five Group W TV stations would be bound to CBS for 10 years. (2 of those stations previously were NBC affiliates) In addition, Group W and CBS  formed another company for the purpose of acquiring additional stations to become CBS affiliates. Group W would be the majority stockholder and thus, the stations would count against Group W's total count. This was the beginning of the strong relationship between Westinghouse and CBS, which was threatened the next summer when several buyers were interested in taking over CBS. Ultimately, Westinghouse made the buyout in 1995.

Scripps Howard cut a blanket affiliation deal with ABC earlier in the year which took ABC affiliation away from one of the Group W stations at that time. (Bstg. 7/18/94 p. 14]

Non-network affiliated stations are independent stations, they have traditionally had a much more difficult time making ends meet. The launching of Warner Brothers new network, and Paramount's attempt at a 5th net have given those remaining indies a potential home. FOX eliminated many traditional indies from several markets. As FOX strengthened its network identity, others attempted to also do what was always considered "undoable."

In 1994, we were warned to keep an eye on the trade magazines for developments here. If Time Warner was successful in purchasing one of the big three nets, they would be precluded from having their own network by the current FCC Rules prohibiting a single entity from owning more than one network. In addition, Larry Tiche wanted out of CBS...Ted Turner was looking for a broadcast network.... CHANGE is the key word in this field........

The summer of 1995 proved the fulfillment of that prophesy.  It became a one of the most historic periods in broadcast history.

• Disney bought Cap Cities/ABC
• Westinghouse bought CBS (remember that affiliation agreement made earlier....?)
• Time Warner and Turner made a deal to merge. (That deal will finally be cleared through FCC and FTC, October, 1997)  

Also, in 1995, two new networks emerged:  

• WB on January 11, 1995
• UPN on January 16, 1995

The third "netlet", PAX, entered the scene in the fall of 1998.

Then in February of 1996, Congress passed the Telecommunications Act of 1996 which eliminated most ownership rules, in stead placing limits on national "reach". The result was a flurry of station trading, which resulted in the reorganization of the ownership structure of the broadcasting industry in the United States. The situation is so volatile, that from one week to the next, the rankings change. In fact, Broadcasting published it's annual compilation of the Top 25 Television Groups in the 8/8/96 issue, and by 7/22, it had to be amended!

TOP TEN TELEVISION GROUPS as of July 22, 1996

(Broadcasting and Cable 8/22/96 p. 6) 

In the first 6 months of 1996, there were $5.2 BILLION in radio ownership deals. (In 1995 only 3.9 Billion in deals occurred, and that was considered a banner year.) Result:

Source: Broadcasting and Cable 7/1/96 and 10/12/98.

In the year 2000, consolidation among radio groups had begun to slow, but it's impact had made the industry more financially sound.  The top 25 radio groups controlled 57% of the total radio advertising revenue, more than $10.2 billion!  These same top 25 control 24.3% of the stations in the country.  If you want to see the rest of the list, take a look at the September 3rd, 2001 issues of Broadcasting and Cable. (Kerschbaumer, 9/3/01)

Top Radio Groups 2002  

Winslow, George. "Security in Numbers" Broadcasting and Cable 9/9/02. 

It is important to note that the top 25 radio groups control almost 25% of the radio industry.  While revenues are down from last year, the bigger the group, the better they seemed to fare.  The top twenty five actually made 2% more than they did in the previous year, even with the 2001 economy dragging. (Winslow, 9/9/02)  To read the entire article, go to http://www.tvinsite.com/broadcastingcable/index.asp?layout=story_stocks&articleid=CA242656&display=archives&title=Security+in+numbers&pubdate=09/09/2002  

Top Television Groups 2002

(Staff, Broadcasting and Cable. 4/8/02)  To see all the information provided (and this is a great article) Go to http://www.tvinsite.com/broadcastingcable/index.asp?layout=archive&year=2002 , which is the TVInsite Archive page. Scroll down to the bottom and select the April 8th Issue, and you'll find the article.  That's easier than trying to put a long URL in here.

NETWORK AFFILIATE AGREEMENTS:

Networks have similar structure to stations, but the structure is subdivided into many more categories. All of the same functions are there, but because the organization is so large, many more positions are required to provide those functions for the whole organization. Your text has a great diagram to illustrate how that works.

Some of the key NETWORK areas which are unique are:

• Entertainment Division
• Daytime Programming Division
• Sports Division
• News Division
• Standards and Practices Divisions (although this one has been de-emphasized over in the last few years.)

In the past nearly 60% of all full-time commercial TV stations were network affiliates. Now that number will be much higher, especially with the success of  Warner, Paramount, and Pax.

In many ways, it was advantageous for a new network not to be considered a full-fledged network. This was position Fox took for years.  There was one key reason:

• Because of FIN-SYN regulations, they would have had to get out of the production business had they aired more than 15 hours per week of programming and reached 75% or more of the U.S  population.

In 1993, FOX was exempted from Fin-Syn Rules and added a 7th night of programming which placed them at 18 1/2 hours per week. The fin-syn rules were eliminated in April of 1996. More on this later.

Note: There are lots of smaller networks around, but they are generally specialty or regional networks. Many are sports networks. These are sometimes called AD HOC networks. ABC, NBC, etc. are FULL SERVICE NETS.

There are two types of affiliates:

PRIMARY AFFILIATES: only affiliate with one network

SECONDARY AFFILIATE: more than one network. Usually occurs in market with only two stations. One will be a primary affiliate. The other will have a primary and secondary affiliation (usually with the two weaker networks; this is usually the weaker station as well].

Stations agree to CLEAR time in exchange for:

• 1. compensation (that means $$$$)
• 2. prestige
• 3. programming

About 60% of day is devoted to network programming. That number used to be higher but nets have given back.

Network affiliations offers affiliate FIVE THINGS:

• 1. structured program service
• 2. simultaneous program delivery
• 3. appealing advertising environment
• 4. $$$$ compensation
• 5. sales organization that draws national advertisers

All of these things are contained in the network-affiliate contract. Each net has a different one. The FCC has specific rules about what can/cannot be in it.

Your book has a great discussion of these contracts (check it out thoroughly)

Contents of the Network-Affiliate Contract:

1. Renewal: Until 1989 contracts were limited to 2 years. Now they are negotiated by individual nets. A recent deal between CBS and Group W binds Group W stations to CBS affiliation for ten years! (Bstg. 7/18/94p. 14)

2. Exclusivity: Exclusivity means that one or both parties insist they be the only one to air a specific program.  A network cannot demand iexclusivity! That would be against FCC Chain Broadcasting Rules. These rules allow secondary affiliates. If primary affiliate refuses show, the program can be offered to another station. WZDX in Huntsville at one time carried NYPD BLUE (1994-95 season) because WAAY refused it on content grounds. Affiliates depend on exclusivity to draw viewers to their station.

3. Network Compensation: This money that networks pay the affiliates for carrying their programs is based on key issues:

• hours of programming taken
• market size
• popularity of station in market
• how many commercial the net sells in the program taken
• time of day the program is taken

4. Rejection of Programs: A station has right to refuse programs for whatever reason. Advanced notice of 72 hours is recommended so the network can offer it to someone else.

5. No CLIPPING: - can't sub your advertising for network spots or programming. Promos that local stations do over the credits of ER, and other programs are done with specific permission of the networks, as a form of "give back" in exchange for reduced monetary compensation.

6. Rate Control: Net cannot influence station's non-network rates.

7. Sales Representation: Net can't function as a sales rep for non-net spots on affiliate by national advertisers.

The relationship is based on MUTUAL NEED AND POWER. Depending on the strength of one or the other, either the network or the affiliate may have an advantage in any negotiations. This becomes evident in several issues:

For back ground information on how the power structure changed, follow this link: Background on net-affiliate relationship 

Key Issues:

• Compensation:   Over the years, as network revenues fluctuated and network shared steadily dropped, it became apparent that the old way of doing things wasn't going to work any more. At the same time program costs sky-rocketed, especially for prime-time dramas like E.R. and big-ticket sports events like NFL and the Olympics.  Networks claimed they could no longer compensate stations for time as they once did and gradually they reduced those payments by returning daytime hours, returning commercial minutes in exchange for compensation, and by aligning compensation to station performance.  Eventually they began eliminating it all together for NFL and other expensive programming.  By 2000, there was serious discussion of making affiliates pay for programming, something that had never been done before.
  • Renegotiation of NFL and other sports contracts has been a big issue in 2002, especially for ABC.
• Clearances:  While the contracts and FCC rules and regs insist that local stations can reject programming, it's risky business to do so.  If there are more than three stations in the market, the network could shop for a new affiliate. This contributed to the loss of affiliation for KRON-TV in SanFrancisco.
• Repurposing/Exclusivity: Networks want to be able to get "more bang per buck" for their prime time programming.  The best way to do that is to air the program more than once on the broadcast network and to also air it on a second or third cable network.  Affiliates don't like that because they believe exclusive rights to network programs strengthens their own ratings. If audiences know they can watch the show a couple of days later on another network, they have not need to make an "appointment" with the affiliate.  Networks believe repurposing is necessary to cover rapidly increasing program costs. 

New agreements in 2002 between networks and affiliates focused on the role of repurposing, and while local stations were able to hold repurposed product to 25% (ABC) Some of the shows being repurposed in 2002-2003 season are:

• Fastlane (Fox to MTV)
• 8 Simple Rules for Dating My Teenage Daughter, Less than Perfect, and That was Then (ABC to ABC Family in order to revitalize the cable network.)
• Law and Order, Special Victims' Unit, Criminal Intent (NBC to USA Network)
• Charmed (WB to TNT)
• Late Night with Conan O'Brien"  (NBC to Comedy Central  at 1:00 and 7:00 p.m. the next day)

NBC is trying to purchase a cable channel, BRAVO, for its own repurposing outlet.  It already owns 17% of Bravo, and is offering a billion dollars for the rest of it. So far, no takers.

• Network Power over Affiliate Sales: Should the network have anything to say about whether or not a local station is sold?  Networks say, "yes," and in some cases have threatened to withhold network affiliation if a station was sold.  Obviously you buy a station because it is doing well, and it's doing well because of its association with a network. If it lost all of that network programming, it would be a different entity and not worth the money you paid for it.... Hence the tension.

Desire for New Economic Model: Ultimately the breakdown between KRON-TV in San Francisco led to NBC pulling affiliation when NBC was not allowed to buy the station.  KRON, an NBC affiliate for decades was left without a network, and NBC was able to get a smaller station across the bay (KNTV) to actually PAY the network for the affiliation to the tune of $36 million per year for 10 years! 

The push for a new way of doing things began when WB instituted a "reverse compensation plan" for their affiliates.  That meant the affiliates actually paid the network a fee (instead of the the other way around) drawn from the profits the local station made as a result of the WB affiliation.  Shortly thereafter, Fox got it's affiliates to kick in big bucks for expensive NFL license fees.  But even with those events, the KNTV deal with NBC rocked the industry.

Key elements of the new model would include:

• Limited exclusivity so repurposing can be done at the network's discretion
• A new business relationship so that affiliates would share the cost of major sporting events and other special "appointment programming."
• Multiple use of programs, including news.
• Compensation linked to affiliate performance (if paid at all.)

The affiliates have not received the new concepts well.  In 2001, the relationships between affiliates and networks was so damaged that Network Affiliated Stations Alliance (NASA) filed a petition with the FCC charging that nets have repeatedly broken FCC rules and regs.  NASA claim the nets have denied stations the right to reject programming and have forced the networks to turn over new program capabilities of digital ( use of sidebands for digital delivery of additional programming and interactive services).  The networks claim the affiliates aren't recognizing their financial responsibility for the success of the industry, and that in this competitive and changing environment, they can't expect the networks to shoulder all the risk alone.  (McConnell, 7/30/01)  One of the big issues is whether or not individual station groups and contract to deliver data services on the sidebands of their DTV channel.  At least 27 television groups have contracted with datacasting services.  The networks now say their affiliates can't do that because the networks may want to offer datacasting services (though they haven't yet announced specific plans).  Another concern is that some of these contracts may reserve so much of the digital channel bandwidth that individual stations may not have the spectrum to broadcast full high definition television.  The network don't want their affiliates to enter into any contract that might limit what the network might want to do in the future. Affiliates believe that is unfair and cite the fact that networks haven't always been honest about their intentions.  (Kerschbaumer, 4/3/00)

The tension was so high that the traditional network-affiliates meetings were cancelled by all of the Big Four nets.  A headline in Broadcasting and Cable (2/12/01) read, "NBC: The Party's Over."   NBC said it was replacing the "anachronistic practice" with something that worked better in today's business environment. (McClellan)  Further, all but one broadcast net pulled out of the NAB. Now, only ABC remains with the national trade and lobbying organization, and that could hurt the networks if and when Congress decides to institute new legislation affecting broadcasting.  The affiliates will still have a powerful representation on the hill, but the nets will have to lobby on their own. The NAB could rewrite by-laws to exclude them from later return to the organization. (Jessell, 2/12/01) 

The reality of the situation is that some small television station may not make it if the "model" changes.  In a cover story run in Broadcasting and Cable in August, 2001, focused on the problem.   While network compensation may make up less than 20% of a stations' annual income, for some small stations, the overall profit margin is less than than amount.  If compensation is withdrawn, or additional fees to the networks are required, these stations will not be able to afford digital equipment for the transition to DTV. Indeed many of them will not be able to make a profit at all, and as a result, may cut local newscasts or may go dark.  One local broadcaster was quoted, "Compensation underwrites my news department."  Montgomery, AL broadcaster, David Woods, owner of WCOV-TV. a Fox affiliate, said he wouldn't have any profit margin for 2001.  "Thirty percent of my cash flow will go to Fox this year for the buyback fee." (This is a reverse compensation fee tied to returning some commercial inventory to affiliates. This was instituted in 1998.)  He said he knew of some stations in larger markets which were paying more than half their annual cash flow to Fox to cover the buyback.  Another broadcaster summed it up this way, "It would take an awful lot of guts to continue on in a small market broadcasting."   Considering a $3 to $4 million dollar bill per station to convert to digital, the additional financial demands of the networks, and the impending 2002 deadline for conversion to digital are making the bottom line a nightmare for these broadcasters.  (McClellan, 8-6-01)

Many of those agreements were up for reconsideration in 2002 but the networks are holding their position.  Program costs continue to increase and the economy is weaker.  Some figure illustrate that point:

• Katie Couric renegotiated her contract with NBC for 65 million for 5 years. That's 13 million per year.
• Mat Lauer's new contract is for $8 Million per year for three years.
• David Letterman's 2002 contract is for $31.5 million annually.
• The cast of Friends each get $1 million per episode for 24 episodes for this season. That's 24 million x six for nearly $300 million dollars for cast members only.

While sports programming has always been cost-prohibitive, entertainment programming had been more manageable.  But when Jerry Seinfeld contracted for $1 million per episode in 1997, that changed.  Entertainment programming, particularly established program, saw production costs increase by huge multiple because of salary demands by actors. (Fraser, 2002)

ABC reached an agreement with its affiliates' board of governors to approve a new two-year NFL contract. Affiliates must ratify the plan by October 11 which includes the following provisions:

• Affiliates will pay $34 Million for NFL rights, about the same as the old agreement.
• Networks have the right to repurpose up to 25% of prime time programming.
• The type and amount of cross-platform promotion (promoting an Disney channel on ABC for example...) is specified.
• Network will no longer try to block or threaten to remove affiliation when a TV station is sold. 
  

While the affiliates got some of what they wanted, they had reason to be nervous.  In September it was announced that ABC was considering the purchase of CNN, and on October 2, 2002, Michael Eisener told investors and market analysts that he did not consider ABC to be one of Disney's top brands to go forward. This made affiliates wonder exactly what he planned to do with the network, especially if the CNN deal goes through. He also talked openly about a willingness to sell not only company-owned sports teams but ABC radio and general plans to restructure the company .(McClellan, 10/2/02; 10/3/02)

Repurposing is a key part of the new model. 

 NBC's effort to buy Bravo is indicative of the desire to create that new model.  The other networks each have an owned and operated cable channel which provides a potential second revenue stream for network programming.

• ABC has ABC Family
• WB, owned by AOL/Time Warner, has TNT and TBS
• Fox (owned by News Corp.) has FX
• CBS (owned by Viacom) has TNN

Pros:

"The basic business model isn't making sense anymore.  Ratings are down, revenue is down and the cost pof production is going up.  But the need to have quality programming on the air hasn't changed," according to Arthur Schreibman, of Initiative Media, (NYC).

Provides more exposure to shows which makes them more valuable in syndication.

Cons:

Syndicators: too much exposure for network shows makes them worth less when they go to syndication; viewers are tired of them.

Affiliates:

• Loss of exclusivity.  People less likely to make time to watch a show on their station, or even bother to record it if they can just watch it at a later time somewhere else.
• Fear of "diluting" a popular program, killing "appointment " television
• Devalues "Brand Equity"  affiliates have in their shows and the network

Sometimes reverse repurposing:

Court TV's Forensic Files has been aired on NBC and NBC asked for additional episodes for network air.

USA's Monk had successful air on ABC

Example of smaller cable nets doing very good programming seen by a very small audience. Works well for all concerned when those shows get exposure on the broadcast nets. (Albiniak, McClellan, Trigoboff, 9/30/02)

The overall effect is that traditional, over-the-air broadcast networks are finding themselves in an increasingly de-valued and competitive situation with more media not only from outside of their own organization but within it as well.  From an audience point of view, the three major networks are not unique entities, but three among a sea of other cable networks. For people who have never received their television signal through an antenna, there may be no distinction at all, aside from the fact the network affiliates provide local news.  Thus, the only way the companies which own the networks are going to maintain audience share and profitability for the programs they make will be to reach audiences across multiple platforms with those programs.  This is a radical change from the way broadcast networks have operated for more than 75 years. 

PRIME TIME ACCESS RULE:

The Prime Time Access Rule was designed to help struggling independents in the 1970's. It allowed independents a chance to counter-program against the net affiliates in the first hour of prime time. It restricted network affiliates in TOP 50 markets from airing OFF-NETWORK syndicated programs in the first hour of prime time.

FCC decided in July 1995 to ditch the rule in one year, but after the affiliation swaps of the summer, there were a lot of stations which could no longer air programs in early evening for which they had paid hefty syndication fees. This was because they might now BE a network affiliate which had as an independent purchased an OFF-net show for air at 6:30 p.m. (And probably paid a BIG license fee to get it!) In the fall, the FCC basically said, "forget it; it's gone...."

This rule provided that cable companies had to carry all local TV signals. BUT it was eliminated in 1987, and many Indies were dumped from cable carriage or moved to higher, hard-to access channels. This put them at a severe disadvantage, and they suffered terribly because of it in some cases. The rule was REINSTATED in the CABLE COMMUNICATIONS ACT OF 1992. A retransmission consent option was also available, but most indies didn't care about that; they just wanted their MCR!

The rule was established in 1982, and provided that cable companies had to carry all local television stations. In 1987, it was eliminated, and many independent stations were dumped. This put them at a disadvantage because without cable carriage, and since most of them had poor signals, their coverage areas were significantly reduced. If cable co's kept them on, they were usually moved up the dial to higher or harder to access channels.

In 1992, the act was reinstated with the Cable Communication Act. Congress was concerned that Cable companies had been unfairly taking advantage of consumers and their power in the marketplace.

The act provided for TWO OPTIONS:

Must carry. If the station opted for must carry, then they could not charge the cable company retransmission fees for carrying their signal. (Stations had said cable co's made $$ from re-transmitting their signal, and in effect, used their product free of charge.)

Retransmission Fee: If the station wanted to negotiate payment for the transmission of their signal, the cable company had to have the option to bargain or NOT pay. If that was the case, they wouldn't have to carry the channel.

RESULT: Most stations weren't that interested in retransmission. But powerful network affiliates were. Most of them decided they did not want money, but some negotiated a cable channel. That meant in addition to their broadcast station, they had another channel on the cable system to program as they wished. That created another revenue stream, but also programming problems--What do you put ON it?

Networks came back with the answer:

• MSNBC
• CBS EYE ON PEOPLE (which has since given up the ghost....)
• FNS
• ABC just withdrew its plans for a news channel, but has ESPN 2
• NBC's AMERICA's TALKING
• Fox's fX
• Court TV
• Tribune/providence journal's FOOD CHANNEL

Meanwhile, cable was unsuccessful trying to get the whole Must Carry issue thrown out by the Supreme Court.

TURNER BROADCASTING v. FCC was be the first case the Supreme Court heard in its 1996-7 session. If the decision had gone against must carry, some smaller broadcasters could have gone dark. "Must Carry has breathed life into some of these UHF stations." But others argue the rule didn't effect the status of the industry as a whole.

Cable operators have limited number of channels and they would like to carry channels which interest their viewers more: "You can see three channels of Barney, But you can't watch the U.S. Senate or the House."

Nobody had a real handle on what the court will do, according to Broadcasting in September of 1996 ( p. 18.) The court upheld Must Carry.

A new must-carry issue is at stake now: Will cable companies be required to carry all local signals when they go digital and require additional bandwidth? Which current cable channels will be bumped if that's the case? What financial repercussions will exist for broadcasters if they spend all the money to go digital, but their access to audiences is reduced?

Independents were helped after the initial elimination of must-carry

Development of first-run syndication. Began with PTAR, but that was mostly game shows and 1/2 hr. sitcoms which didn't do very well. Then, STAR TREK: TNG hit the air in 1987, and proved that a weekly first-run syndicated dramatic program could make it (and make it big!) Others followed.

Development of FOX Network in 1986. While success came slowly, it has come definitely, and with the beginning of 7 day per week programming and the acquisition of NFC football, the network is firmly established. Former independents are now affiliates. In addition, FOX's success has spawned the launch of WARNER Brothers Network and PARAMOUNT's Star Trek anchored' network (which was tried in the mid 70's but failed to get off the ground at that a time).

As a result, Independent stations may not be independent at all any more and are doing much better than ever before! But the new fledgling networks are also dependent on cable carriage for their stations in order for them to have desirable advertising/viewer base. WATCH THIS because it has serious ramifications for several aspects of the industry.

Must Carry is not a big issue for DBS.  While DBS providers wanted to carry SOME local stations so they could be competitive with cable companies, because of limited transponder space, they don't want to carry ALL local stations which MUST CARRY rules would require.   

MUST CARRY and digital television:  Right now, the focus on must carry is directed at whether or not cable stations will be required to carry both the analogue and DTV signal of local television stations.  In some markets, where there are a dozen or more television stations, that would mean that a cable franchise would have to clear not only 12 channels but 24.  It might very mean that some cable channels currently carried, such as The Food Channel, Home and Garden Network or ESPN-2, for example, might have to be dropped to make room for the new DTV signals.  A worse scenario might be that fullblown HDTV would require that cable system relinquish more than one channel per DTV signal to accommodate the increased bandwidth.

FINANCIAL PRESSURES:

INCREASED PROGRAM COSTS: These have impacted network and independent profits and operation. We will discuss these more in the programming unit. (Just remember those huge salaries per episode for E.R.....)

CABLE TELEVISION:

Top 25 Cable Operators 2002: 

Source:  
John M. Higgins. "The Top 25 Has a New Leader Coming the the Economy Kept Buyers Away." Broadcasting and Cable. 4/29/02  (find it in the archives of TVInsite.com )

See your text book for basic structures of cable television.

Organization is similar to TV

• sales: instead of time, sell subscriptions and some advertising
• sales and marketing division has additional responsibility of keeping customers from disconnecting turnover called "CHURN")
• Customer service is a big issue, one which lead to the CABLE COM ACT of 1992 which re-regulated the industry.

CSR: a customer service rep. They must be on the phone 24hrs. /day (obviously not the same person....)

SIZE is not necessarily important to profit. Some smaller systems make more $$$ (Especially if they have been around for a while and their systems are paid for....) than large systems with BIG overhead.

MSO: Multiple Systems Operator: own more than one system. They must make a big capital investment. Cost runs between $100,000 and $300,000 per mile to install cable. It may take up to 10 years to recoup investment. Many are replacing coax with fibre optic cable and that's additional but necessary expense.

In the late 80's there were about 350 MSO's in the U.S. Now there are about 100. Big companies are buying up little ones and a lot of consolidation has taken place in the last few years. See your text for more info.

• Know what is required of cable companies by CABLE ACT of 1992:
• Basic service tier -- at minimum cost to include local stations, all public access, educational and government channels.
• Cable programming service = all video programming provided over a cable system except that provided on the basic tier. Included cable networks (U.S.A., LIFETIME, ESPN, MTV, etc.) Some of these may be on expanded basic tier. All are ADVERTISER SUPPORTED. Fees are collected on a -- cents/subscriber basis. Local ads are also sold by the Cable Co. to supplement costs.

SUPERSTATIONS: hybrid of broadcast and cable networks. Turner's WTBS -- know history.

SYNDICATED EXCLUSIVITY RULE (SYNDEX) : re-imposed in 1990.

Requires that each cable system not duplicate syndicated programs with in a market in which the program is syndicated, if the local station which carries the program so requests.

In the 1989-90 season, Channel 26 here in Florence bought "TEENAGE MUTANT NINJA TURTLES," because nobody else did, and it was cheap that first year. Nobody knew it would be a runaway hit with the 4-8 year old set and be merchandising bonanza. We were living in Huntsville at the time, and my boys couldn't see the show because FOX 54 couldn't get it because of SYNDEX rules.    

Who will control broadband and interactive television is also a significant issue in cable.  In 2001, the broadcast networks went to battle with the cable industry over the right to have two-way services on their programming.  What is at stake?  NBC, CBS and their parent companies, Disney and Viacom, want to offer two way services such as polls, sports stats, online quizzes, etc. in their programming.  However, the cable operators want to charge more for that or have the right to block it all together, limiting two way services to their own channels.  But Viacom and Disney realize that most of their channels are not broadcast channels; they rely heavily on cable for distribution.   If cable is allowed to do that, they will control interactive television services via broadband.  AOL-Time Warner came under fire earlier with the FTC on a similar issue, but the FCC has not yet made any ruling, saying it is too early.  Watch this one.  

McConnell, Bill.  ITV Delivery Battle Heats Up."  Broadcasting and Cable.  3/26/01 p. 42

Know what they are, history, and how they work.

Cable services report subscribers and are supposed to pay 50/50 of what they collect. Note: 1991 case where ARK operator cheated services out of more that 1.5 MILL $$$!

PPV: -- know what it is/how it works.

MULTIPLEXING: offering programs on several channels at various times during the day. (this where the advantage of 500 cable channels lies!)

VERTICAL INTEGRATION: Company owns production, distribution, merchandising, etc. Controls as much of the process as possible.

Examples: With the approval of the deal in October 96, TW/TURNER will own the following:

• TIME WARNER
• TURNER COMMUNICATIONS:
• WTBS
• CNN
• Cartoon Channel
• MGM LIBRARY
• production companies
• cable companies
• merchandising companies

TCI is another such example.

Note the differences between

Broadcasting

• AM, FM, UHF, VHF, LPT and what the issues are.

Cable:

• up-front costs
• upgrade costs: (10,000 to 15,000 / mile for coax to fibre optics)

Satellite Services:

• transponder leases -- $15 - 30 mill per year by each network
• backhaul -- bring out of town game to home audience ($200/hr)
• EARTH STATION- uplink
• TVRO's - downlink only

Know impact of VCR on broadcast and cable services:

• ZIPPING (fast forwarding through the commercials)
• ZAPPING (pausing recording during the recording so commercials are not saved)
• FLIPPING (flipping around during the commercials)

OWNERSHIP LIMITS:

FCC used to have very specific ownership limits for both radio and TV. For decades the limits were:

• (1953) 7-7-7 = 7 FM's, 7 AM's and 7 TV
• Then caps were updated to (1984):12-12-12 =12 FM's, 12 AM's and 12 TV
• Then to (1992)...:18-18-12 =18 FM's, 18 AM's and 12 TV
• Then to ...(1994) 20-20-12 = 20 FM's, 20 AM's and 12 TV

The maximum "reach" a station could have (the % of the national audience it could reach) was 25%. Minority owners were allowed two extra stations in each category and reach was extended to 30%. UHF stations were counted as 1/2 station and their reach % was also divided by half.

Because of the reach limits, sometimes groups would have to sell off a station when the reach was exceeded. When Cap Cities bought ABC in 1985, they didn't exceed the numerical limit, but did exceed the reach (28.5%) and had to sell a TV station and a number of radio stations.

In 1996, with the Telecommunications Act of 1996, numerical limits were eliminated, and reach for radio and television groups was increased to 35%:

Radio: Numerical caps were set for specific markets based on market size:

Markets with # of stations

• 14 or fewer stations -- 5 stations maximum per owners
• 15 to 29 -- 6 stations max
• 30-44-- 7 stations max.
• 45+ -- 8 stations maximum.
• No group may own more than half the stations in a given market.

However, because there are no reach limits within a market, there are real concerns that a single owner could dominate 3/4 of the market's listeners and billing or control a particular format within a market. The FCC and the FEDERAL TRADE COMMISSION are examining these issues. THIS is an area to WATCH!

In January, 1996, the buying frenzy started. As of August 27, 1998, Chancellor Radio had 479 stations, CBS had 162, and Jacor Communcations owned 205. (Higgins and Albinaik, 8/31/98)

That's a big change from 7-7-7!

Television ownership:

No numerical limits. Reach is 35%. No owner may own more than one TV station in the same market EXCEPT that FCC has been allowing LMA's (LMA=Licensed Market Agreement which means one company leases and programs the station of another) on a case by case basis.

They will allow UHF LMA's, UHF-VHF combinations, but NOT VHF-VHF combinations. It is expected that the FCC may allow duopolies (that's OWNING two stations in the same market) in the same combinations, but many broadcasters (especially smaller ones) are opposed to that. 

In 2002 the courts supported the FCC in its decision to count an LMA against a broadcaster's ownership limits.  Sinclair Broadcasting was lost in its attempt to get around local ownership limits. (There were fewer than 8 stations in the market, but that limit holds until the FCC rewrites the rules.) (McConnell, 2002)

In August, 1999, the FCC issued NEW DUOPOLY RULES: A company can now own TWO TV stations in the same market IF:

• the second station is not one of the top four ratings holders and there are more than eight separately owned stations in the market.
• the second station has been "dark" for months or is in a state of bankruptcy 
• the second station has an audience share of 4% or less and nobody from out of the market wants to buy it
• a construction permit has been issued, but the holder hasn't been able to get the station built

Under the new rules these additional new regulations apply to ownership:

• existing LMAs (those established before 11/5/96) which don't meet the new rules will be grand-fathered until 2004 at which time the FCC will look at them on a case by case basis. Those established after that date must be sold within two years.
• RADIO-TV CROSS-OWNERSHIP : An owner with two TV stations can own up to 6 radio stations in a market if there are at least 20 separately owned media outlets (cable, broadcast, newspaper).
• There are some opportunities for waivers for grand-fathered stations if certain conditions have been met
• Ownership attribution: passive owners up to 20% are not counted toward a companies national ownership cap (McConnell, 8/13/99)

A number of broadcasters, including Bud Paxon, are objecting to the new ownership rules. They want all media outlets, including cable and newspapers, included in the count to permit duopoly. The current limits will limit duopolies in many markets where broadcasters have already set up TV LMAs in hopes that they could do a duop there. Now some of those seem questionable. (McConnell, 10/25/99)

One of the reasons that affiliates and nets are upset with each other is over this issue.  Networks want increased ownership limits and duopolies allowed in major markets.  The affiliates are threatened by that and oppose it.  Fox purchased Chris-Craft in 2001 for the purpose of creating television duopolies.

There are currently no restrictions on MSO's ownership of cable systems.

If you want to own a station, since most all channels are spoken for, you must buy existing stations. Usually start small, build up the station, then sell it and TRADE UP-- buy a bigger station. Look for stations which will increase your profit margin. TV stations make the most money, FM's make the next. AM's make the least (unless major market talker)

Market size and market popularity is big factor. Check the back of Broadcasting for summary of sales and selling prices of stations. These numbers are available every week.

Prices are determined by MULTIPLE:

• Cash flow: Multiple x gross revenue = station value
• AM/FM combo multiple = 2.5
• AM multiple = 1.5
• TV multiple = 2.5
• AM's are generally devalued over the last few years.
• Check "Changing Hands" column in broadcasting for current examples and pricing of recent sales.

TIME BROKERAGE: Stations sell time to brokers who resell it. Good for filling large blocks of time.

LMA's: local marketing agreements: take over all of station programming. Original licensee still owns station and is responsible, but LMA-er programs it and sells advertising.

DUOPOLY: prohibited until 1992 -- Now may have two AM stations in same market and and 2 FM's as well. Formerly could have only one of each. Duopolies reduce overhead. Many AM-AM duops exist in major markets. Many AMs are struggling to survive.

Contrast those figures with Network Sales: BILLIONS OF DOLLARS: 

The big news in 2002 is the FCC's investigation and review of all of the ownership rules and regs.  This was court ordered the FCC to review the rules because there was not enough reasons given to justify the rules as they currently exist.  In other words, if you have a 35% cap on ownership rather than 40 or 50% cap, why is one better than the others? How do you know that 36% will will be detrimental to the market? (Loven, 4/3/022)  Seven of the key rules are to be addressed in the revision which began in September, 2002.

• 30% cap on one network's "reach"
• TV duopoly rules
• newpaper/tv crossownership in local markets
• local radio ownership caps
• multiple networks ownership
• local cable/broadcast crossownership

Results from the review are expected some time in the spring of 2003.  (McConnell, 6/18/02

Know networks turnover history:

• 1926: NBC founded by RCA. Blue network follows shortly thereafter.
• 1927: William Paley founds CBS.
• 1953: ABC Purchased by Paramount
• 1084: Rupert Murdoch purchases half of 20th Century FOX
• 1985: Murdoch purchases six television stations launches the FOX network.
• 1988: ABC purchased by CAPITAL CITIES for $3.5 BILLION! Cap Cities is large TV group. Deal was a leveraged buy-out/ most of the money was borrowed combined radio-tv ownership of 90 stations. The company then owned or programmed 200 ABC TV affiliates; 10 daily papers several magazines; BUT -- combined REACH of Cap Cities and ABC O & O's was 29% of national market. They had to divest of some properties and sold all of its cable systems.
• 1989: CBS resisted a 5 billion dollar takeover attempt by TED TURNER. They allowed Laurence Tische of LOWES CORP. to attain 25% of stock and controlling interest.
• 1989: NBC bought by GE when they purchased RCA for 6.28 BILLION $$$

These are all examples of levered buy-outs of the 1980's which ultimately resulted in a depressed market in the early 90's. See BSTG 2/10/92. -- Special Report. (Not required)

1994:

• Westinghouse purchased CBS
• Disney Purchased ABC/Capcities
• Time Warner and Turner Merged
• Two new networks launched: Paramount and the WB
  

1999:

NBC purchases 32% of PAX TV for $415 million and the option to take control in 2002. This is a good deal for PAX, because the capital infusion will allow the channel to continue its family friendly format for a while longer and will provide programming resources. NBC gets a place to repurpose some of its programming and the 72 station network. (McClellan, 9/20/99 p. 6)

CBS purchased Kingworld Productions (syndicators of the Oprah Winfrey Show and Wheel of Fortune). As of October, 1999, the deal was on hold waitng for the results of analysis of the Viacom deal.

CBS also merged with VIACOM in a $36 Billion sale which transpired in early August, right after the FCC indicated it would relax duopoly rules. Mel Karmazon of CBS wanted to buy Viacom, but Sumner Redstone came back with an offer for CBS that was finally agreed upon. (Higgins, 9/10/99) That gives the two a combined audience reach of 41%. The FCC has made it clear that it will not grant waivers, so the company will need to divest some of its station. (McConnell 9/10/99). Also a problem is the Viacom-owned UPN network, which has consistently lost money. Advertisers are concerned that the CBS and PAX stations would control 20% of all ad revenue in the six markets where they coexist. (Tedesco, 9/20/99) Some CBS affiliates may lose their CBS affiliation if the deal goes through. Viacom may strip the CBS affiliation from existing stations if it owns stations in the market. Viacom owns 17 stations and CBS owns 14. CBS spokes people say that would be the equivalent to declaring war on their own affiliates, but industry experts believe it will happen in some markets.

The Senate planned hearings in October 28, 1999 on the deal and there are several anti-trust concerns. It is possible that the whole deal could go "south".... (In Brief, 10/25/99)  It still has not been completely approved.

AT&T merged with MediaOne creating an enormous broadband company...telephone and cable. Anti-Trust and cable ownership regs are an issue, and the deal must still be approved by the Justice Department and the FTC.

Check the Columbia Journalism Review cite for a great site called "Who Owns What".  It's a current compilation of who owns what programs and it's kept current: http://www.cjr.org/ 

As a result of all of this, we need to look at who the major MEDIA COMPANIES are instead of just who the TV and Radio Group owners are:

Top 25 Media Groups:

(Source: Broadcasting and Cable 10/27/99  -- This is the newest such listing, but obviously, AOL-Time Warner will top the list at the present time.)

http://www.broadcastingcable.com/policy/policy_article.asp?articleID=69223974
More information is presented about the media groups. You need to recognize these companies and the men who run them. I won't list CEOs for all 20, but I will list some of the more significant names.

Rank	Media Group	CEO or Chairman	Revenue in Billions
1.	Time Warner (merging with AOL)	Gerald Levin	$36.2
2.	Disney	Michael Eisner	$25.4
3.	Vivendi-Universal	Jean-Marie Messier	$24.3
4.	Viacom-CBS	Mel Karmazin; Summer Redstone	$20
5.	News Corp	Rupert Murdoch	$13.8
6.	AT&T Broadband and Internet	C. Michael Armstrong	$9.6
7.	Sony	Norio Ohga	$9
8.	Comcast Corp	Ralph Roberts	$8.2
9.	NBC	Bob Wright; Jack Welch	$6.8
10.	Gannett Co.	John Curley	$6.2
11.	Clear Channel
12.	Cox Enterprises
13.	Hughes
14.	Tribune
15.	USA Networks	Barry Diller
16.	McGraw Hill
17.	Cablevision
18.	Hearst
19.	Charter
20.	New York Times
	Source: "Top 25 Media Companies" Broadcasting and Cable 8/27/01 available at http://www.tvinsite.com

Required Reading on Media Ownership: 

•  " Who Owns What:" Columbia Journalism Review  at http://www.cjr.org/owners.index.asp for most up-to-date information concerning media concentration.
• "Bestriding the World" at Media.Channel.org.  at http://ww.mediachannel.org/ownership/grannville.shtml for list and info on holding of major media giants  Be sure to see the graphic at http://www.mediachannel.org/ownership/chart.shtml . It is excellent, but set your printer page to landscape for best results.
• "Why Ownership Rules Matter: And What You can Do" at http://www.mediachannel.org/news/indepth/fee/front.shtml 
• "Monopoly Money" by Dan Kennedy of The Phoenix.com at http://www.bostonphoenix.com/boston/news_features/documents (This may be partial url, so this one is optional reading.) 
• For the FCC's page on the ownership rules reexamination, see http://www.fcc.gov/ownership/  While you don't have to read every link on the page, browse through some of it and you'll have a better feel for what's going on.

Be sure you know the following terms from your book:

• EEO
• EEO RULES
• AFTRA
• WGA
• AGVA
• SAG
• IBEW
• NABET

Know the role of unions in broadcasting. Note that about 10 years ago IBEW went on strike and the fall season premier was delayed several weeks until the strike was resolved.

I know this is a lot, but all of this is significant and has very practical use in your field. Learn it well. Good luck.

Additional Resources:

• Albiniak, Paige. "New Media Moguls" Broadcasting and Cable, September 20, 1999. P. 32.
• Albiniak, Paige and Bill McConnel. "Strange Bedfellows" Broadcasting and Cable. August 18, 1999 p. 6
• Albiniak, Paige, Steve McClellan and Dan Trigoboff. "A Season of Seeing Double." Broadcasting and Cable. 9/30/02 p. 7
• AP. "Viacom Buying CBS." USA TODAY.  September 7, 1999.
• Aversa, Jeannine. "FCC Scrutinizing AT&T-MediaOne Deal." AOL News. May 7, 1999.
• Cabletelevision Advertising Bureau. "Long-term Total TV Household Share Trends" Broadcasting and Cable, March 2, 1998, p. 31.
• Business Wire. "56 Billion Merger Between, Clear Channel Communications and AMFM Inc. to Create the World's Largest Out-of-Home Media Company. AOL News. October 4, 1999.
• Cabletelevision Advertising Bureau. Annual Report, 1998.
• "Coming Together" Broadcasting and Cable. September 10, 1999.
• Fost, Dan.  "KRON Embarks on Road to Independence." San Francisco Chronicle. 6/27/2000. 
• Fraser, Jill Andreasky. "Show them the Money!" TV GUIDE 10/14/02 retrieved at http://www.tvguide.com/magazine/issues/021014/magfrtr.asp 
• Higgins, John and Paige Albiniak. "CBS Radio Becomes Infinity" Broadcasting and Cable. August 31, 1998, p. 12.
• Higgins, John M. "Viacom Leaves UPN Fate to FCC." Broadcasting and Cable. September 10, 1999.
• Higgins, John M. and Gerard Flynn. "Cable SLows, DBS Sprints." Broadcasting and Cable. June 4, 2001 p. 30
• Higgins, John M. "Top 25 Media Companies." Broadcasting and Cable.  8/26/01.
• "Make Mine a Double." Broadcasting and Cable. August 31, 1999.
• Higgins, John. "Frustration puts Cable in Equation." Broadcasting and Cable. January 18, 1999, p. 24.
• Higgins, John and Allison Romano.  "The New Economics of Terror." Broadcasting and Cable.  9/24/01 p. 4
• Iorio, Paul.  "TV Turnaround: San Jose's KNTV Prepares to Become Bay Area's NBC Affiliate and the First to Pay for Network Programs." San Francisco Chronicle.  7/22/2000. 
• Jessell, "Don't Cut Off Your Nose..." Broadcasting and Cable. April 16, 2001 p. 18.
• Kerschbaumer, Ken. "Bigger than Ever." Broadcasting and Cable. 9/3/01 
• Kerschbaumer, Ken. "Battle Brews for Spectrum." Broadcasting and Cable.  4/3/00 p. p. 6
• Levin, Gary. "Big Events Still Draw Americans to Bask in TV's Glow." USA TODAY 2/26/02.
• Loven, Jennifer. "FCC Ordered to Rewrite Media Ownership Rules."  Broadcasting and Cable. 4/1/02 
• McAdams, Deborah and Steve McLellan. "Some CBS Affils at Risk?" Broadcasting and Cable, September 10, 1999.
• McClellan, Steve. " TV Mobilizes for 'Global War'.  Broadcasting and Cable.  9/24/01 p. 8
• McClellan, Steve. "Attacks Cost Viacom $200 Million." Broadcasting and Cable. 10/3/01.
• McClellan, Steve and John M. Higgins. "Battle by the Bay." Broadcasting and Cable. October 10, 1999, p. 6
• McClellan, Steve. "Fox Crowds the Plate." Broadcasting and Cable. October 2, 2000, p. 8.
• McClellan, Steve and Paige Albiniak. "It's Getting Ugly." Broadcasting and Cable. January 18, 1999, p. 11.
• McClellan, Steve. "Big Four Improve."  Broadcasting and Cable. March 6, 2000. p. 11.
• McClellan, Steve. "Nets Are Big 4's weakest link." Broadcasting and Cable. March 2, 1998 p. 4
• McClellan, Steve. "Broadcast Ads Up in '97" Broadcasting and Cable. March 2, 1998, p. 48
• McClellan, Steve.  "Fox Seeks Divestiture Delay." Broadcasting and Cable.  September 25, 2000 p. 38.
• McClellan, Steve.  "NBC: The Party's Over." Broadcasting and Cable.  February 12, 2001 p. 10
• McClellan, Steve. "Out with the Old, Says Iger." Broadcasting and Cable. April 8, 1998, p. 51
• McClellan, Steve and John M. Higgins. " The Mel-ding of Viacom, CBS" Broadcasting and Cable. September 13, 1999 p. 14.
• McClellan, Steve and Joe Schlosser. " Pax Gets Pieces of NBC." Broadcasting and Cable.  April 24, 2000. p. 4.
• McClellan, Steve. "Peacock Takes a Piece of PAX." Broadcasting and Cable. September 20,1999, p. 6.
• McClellan, Steve. "The Peacocking of Pax." Broadcasting and Cable. October 11, 1999, p. 68.
• McClellan, Steve and John M. Higgins. "GE Seeks Perfect Partner for NBC," Broadcasting and Cable. August 31, 1998, p. 12
• McClellan, Steve. "AT&T Getting its Way." Broadcasting and Cable. October 11, 1999, p. 8
• McClellan, Steve. "Big Four in the Black." Broadcasting and Cable.  5/28/01 p. 36
• McClellan, Steve. "War at NBC, ABC at Peace." Broadcasting and Cable. July 2, 1999.
• McClellan, Steve. "NBC Wants to Phase Out Comp." Broadcasting and Cable. May 14, 1998.
• McClellan, Steve. "ABC Tightens Vise" Broadcasting and Cable. June 4, 1999.
• McClellan, Steve. "ABC, Affils Near Deal." Broadcasting and Cable.  March 15, 1999. P. 6
• McClellan, Steve. "WB, UPN push Fox's Envelope." Broadcasting and Cable. April 23, 1999.
• McClellan, Steve. "FCC Hears Duop Pitch" Broadcasting and Cable, 10/25/99 p. 20.
• McClellan, Steve. "Fox Spot-Grab Riles Affils" Broadcasting and Cable. April 9, 1999.
• McClellan, Steven. "Fox to Affils: Show Me the Money" Broadcasting and Cable." January 22, 1998.
• McClellan, Steve. "Cable snares share." Broadcasting and Cable. May 22, 2002.
• McClellan, Steve. "CNN-ABC?" Broadcasting and Cable.  9/30-02 p. 10. 
• McConnell, Bill.  "AOL, TV Find Pol Pals." Broadcasting and Cable. October 2, 2000, p. 12.
• McConnell, Bill. "AT&T Faces Uphill FCC Fight." Broadcasting and Cable. August 30, 1999, p. 7.
• McConnell, Bill. "Cable's New Ground Rules." Broadcasting and Cable. October 18, 1999, p. 19.
• McConnell, Bill. "Nets Likely to Keep Cap." Broadcasting and Cable, October 18, 1999, p. 19.
• McConnell, Bill. "New Rules of the Road." Broadcasting and Cable, August, 13, 1999.
• McConnell, Bill. "No Favors, No Waivers." Broadcasting and Cable. September 10, 1999.
• McConnell, Bill. "Two TVs to a Market." Broadcasting and Cable, July 30, 1999.
• McConnell, Bill. "50 Years of Ownership Regulation." Broadcasting and Cable, November 13, 1998.
• McConnell, Bill.  "Small Towns, Big Problems." Broadcasting and Cable. August 6, 2001 p. 20. 
• McConnell, Bill.  "We're Not Bullies." Broadcasting and Cable. July 30, 01 p. 24.
• McConnell, Bill.  ITV Delivery Battle Heats Up."  Broadcasting and Cable.  3/26/01 p. 42
• McConnell, Bill.    "Broadcast-ownership revisions due spring 2003." Broadcasting and Cable.  6/18/2002
• McConnell, Bill.    "Sinclair loses on LMA ruling." Broadcasting and Cable. 8/19/02 
• Mermingas, Dianne.  "Disney Plays it Safe with OMD" Electronic Media. 6/17/02
• "Meyers Releases Upfront's CPM Estimates." Broadcasting and Cable. 10/15/02
• Higgins, John M. "One Thing Leads to Another." Broadcasting and Cable, September 10, 1999
• Narayana, Naina. "Broadcasters Debate Their Future." NAB Daily News. 4/7/98 p. 3
• Rathbun, Elizabeth. "Count 'em: 830" Broadcasting and Cable. October 11, 1999 p. 12.
• Rathbun, Elizabeth. "Radio Control: Top 25 claim 19% of Stations." Broadcasting and Cable. August 30, 1999.
• Rathbun, Elizabeth. "Top 25 Radio Groups" Broadcasting and Cable, 9/18/00 p. 58
• Rathbun, Elizabeth. "Sly Fox Buys Big, Gets Back on Top." Broadcasting and Cable. 94/23/01 p. 59
• Ray, Kenneth. "Broadcast Watch"  Broadcasting and Cable, 10/8/01 p. 28.
• "Remaking the Market". Broadcasting and Cable. August 6, 1999.
• Reuters. "Clear Channel to Buy AMFM in $17.4 Bin Deal" AOL News. October 4, 1999.
• Reuters. "Advertisers Fear Media Merger Wave." AOL News. October 16, 1999.
• Rice, Lynette. "A Touch of Middle Class." Broadcasting and Cable, October 6, 1997, p. 47.
• Romano, Allison. "TV News' Grim Vigil." Broadcasting and Cable. October 8, 2001, p. 12.
• Schlosser, Joe. "America Stays at Home." Broadcasting and Cable. 10/1/01
• Schlosser, Joe. "Frog Jumping into Small Towns." Broadcasting and Cable. March 2, 1998, p. 24
• Schlosser, Joe. "CBS, ColTriStar in Soap Deal." Broadcasting and Cable. August 20, 1999. 
• Schlosser, Joe.  "The Sole Survivor." Broadcasting and Cable. June 5, 2001 p. 18
• Skillman, Brad. "AT&T TO Acquire MediaOne for $54B."  AOL News. May 4, 1999.
• Stroud, Michael. "UPN Goes to Five." Broadcasting and Cable. April 13, 1999 p. 65.
• Tedesco, Richard. "CBS-Viacom Draws Fire." Broadcasting and Cable. September 20, 1999. P. 54.
•  "Top 25 Cable Operators 2000," Broadcasting and Cable.  April 28/2000  www.broadcastingcable.com/policy/policy_article.asp?article1D=692233209
• Television Advertising Bureau.  "TV BASICS."  www.tvb.org/tvfacts/tvbasics/basics1.html 
• "UPN Has Added Four More Affiliates, .." Broadcasting and Cable, October 18, 1999 p. 61.
• Walsh, John. "Voyager Boldly Retakes the Airwaves." TV GEN.com, March 6, 1998
  

Copyright, 2001

Dr. Janet McMullen

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DTV Deadline pushed back?

NAB asked the FCC for a extension for small market stations for DTV.  The June, 2002 will not be met by many small market stations for a number of reasons.  Money.  Lack of crews for installation, tower construction, etc.   Big problem is that cable companies don't have to provide the digital signals of the broadcast stations, so small stations have little incentive to invest the big bucks.