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NEW RULES FOR A NEW BROADCASTING WORLD
The U.S. broadcasting landscape is changing fast. Fox Broadcasting Co.'s coup in pulling 12 TV affiliate stations away from CBS, NBC, and Capital Cities/ABC quickly alters the playing field for all the networks. Now, there are four "nets," but they are not all playing by the same rules. It's time for the government to reexamine the regulations that govern the broadcast industry. The marketplace has made many obsolete (page 30).
Under existing rules, networks are not allowed to own studios that sell programming to other distributors, such as cable. As a result, they can't generate revenues from syndication--reruns of popular old shows--which is a mammoth moneymaker.
But Fox can. This "nearly network" is still not officially defined as a network by the Federal Communications Commission because it offers only 15 hours of programming a day, compared with 22 from CBS, NBC, and ABC. Fox's Twentieth Century Fox studio is a major film producer (Mrs. Doubtfire and Home Alone) as well as a prodigious maker of TV shows (The Simpsons, L.A. Law, and M*A*S*H).
Rupert Murdoch, the head of Fox, also changed the broadcast playbook by not buying the stations outright. He invested $500 million in return for a 20% stake in New World Communications Group Inc., owned by Ronald O. Pearlman. As part of the deal, he received access to the television stations.
The three networks have been operating under strict government regulations over station ownership. The Fox deal essentially circumvents those limits.
Finally, there is the issue of foreign ownership. Although Murdoch is an American citizen and Fox is 70% owned by Murdoch, his overall holding company, News Corp., is Australian. Thus, the ownership remains unclear, and Fox just may be the first foreign-owned network in U.S. history.
With all these changes going on, FCC Chairman Reed E. Hundt has a lot of work cut out for him. What should he do? The explosion of technology and the expansion of distribution outlets make past restrictions archaic. New global media configurations are in the making, and the government should help, not hinder, their development.
If Fox can own a studio, certainly the other nets should be allowed to create and sell programming and receive financial benefits from syndication. If Fox can get access to as many as 12 stations by an indirect investment, so should the other networks. And if the marketplace says there is room for a fourth network, then its ownership, in this particular case, is not important. Rupert Murdoch changed the broadcast scene very quickly. The challenge is for Reed Hundt to move just as fast on the regulatory front.