Would MCA Deal Prompt Changes in TV Rules?

Americans are used to buying Japanese electronics, German cars and French wine. A good chunk of Madison Avenue is now owned by British advertising agencies. And many Wall Street financial service firms have aligned themselves with big European investment banks.

Now, prime-time shows such as “Murder, She Wrote,” “thirtysomething” and “Uncle Buck” could join the growing list of American-made products that Americans no longer own.

In fact, if Matsushita Electric succeeds in buying MCA Inc., and if Italian financier Giancarlo Parretti completes his purchase of MGM/UA Communications, more than one-third of the prime-time shows that Americans watch will be made by foreign-controlled companies.

The disclosure earlier this week that Matsushita is in talks to acquire the parent of Universal Studios sent a lightning bolt through Washington, where the networks and Hollywood studios face each other in an intensive lobbying campaign over the so-called financial interest and syndication rules.

Those rules, which were adopted 20 years ago by the Federal Communications Commission, prohibit the networks from owning a financial interest in shows they license from studios and independent producers and from selling lucrative reruns to local stations. The rules are designed, in part, to protect program producers from the networks extorting program syndication rights in exchange for slots on their prime-time schedules.

ABC, CBS and NBC are limited to owning shows they make themselves--such as CBS’ “60 Minutes”--but the shows are not big money earners in the international market place. Fox, the newest broadcast network, operates under a temporary waiver of the fin/syn rules.

Although American workers might be growing accustomed to Japanese workplace methods in car plants, TV viewers have not seen any changes to the pat formulas of prime-time entertainment shows as a result of foreign ownership. Already companies such as Columbia Pictures, which was bought by Sony Corp. last year, and 20th Century Fox, owned by Rupert Murdoch’s Australian-based News Corp., are in foreign hands. Independent TV producers MTM Entertainment (maker of Burt Reynolds’ new show “Evening Shade”), is owned by Television South, and Reeves (“Doctor, Doctor”) is owned by Thames Television. Both are British companies.

One of the chief assets of a movie studio are the syndication rights to hit network programs. The studios collectively gross hundreds of millions of dollars annually by selling the reruns of hit shows to local TV stations in the United States as well as to foreign broadcasters. The overseas market for American TV shows is the fastest-growing sector of the syndication business.

The networks, however, under the current fin/syn rules, are banned from negotiating for the foreign distribution rights to TV programs they do not already 100% own. A repeal or relaxation of that rule could mean significant new revenue for the networks, whose core business has come under considerable pressure due to viewer erosion.

“What this underscores is the total preposterous nature of U.S. government rules that prohibit us from being actors in the global marketplace,” said Richard Cotten, senior vice president at NBC and the network’s chief strategist in its campaign to overturn the fin/syn rules. “We are prohibited from going abroad.”

Entertainment, particularly the production of TV programs and theatrical films, is a valuable export commodity for the United States--it’s one of the few manufacturing categories, along with with the aerospace industry, where this country runs a trade surplus rather than deficit.

But with the studios increasingly coming under foreign ownership, lucrative TV syndication profits will now be reaped by non-U.S. companies. That has network executives in a dither since they are effectively barred from a business allowed their foreign competitors.

The networks insist they do not want to block the foreign invasion of Hollywood--only to be allowed to compete in overseas networks along with foreign companies--despite network lobbying tactics that some thought were in poor taste. Hollywood executives still bristle when they remember that NBC sent pizzas to members of Congress after Parretti announced that he wanted to buy MGM/UA, a gesture that to some bordered on jingoism, if not racism.