Both Sides in TV Rule Fight Give FCC Star Treatment


When Sherrie P. Marshall headed off to a Massachusetts tennis camp last summer, her companions were two lobbyists--one for the Fox network, the other for CBS.

The Federal Communications Commission member insists that the agenda called for “lobbing, not lobbying.” But the lobbyists had reason to stay close. Marshall is their key opponent on the powerful government agency in the networks’ multibillion-dollar battle with Hollywood over ownership of television programs and selling of reruns.

And if the Fox and CBS representatives did practice a bit of persuasion with their forehands, it would have been right in character for the television networks and Hollywood studios that have embarked on intense, star-studded campaigns to influence the FCC.

The FCC will hear formal arguments on the issue Friday, and a final decision is expected by March. But the battle has been fought for months behind the scenes.


In typical fashion, chief executives of the networks and most major studios have trooped through the FCC offices here. In turn, FCC commissioners have visited the sets of prime-time shows and toured studio lots.

While attending a convention in Los Angeles last January, Marshall and fellow commissioner James H. Quello played tennis at Dinah Shore’s house as guests of Hollywood’s man in Washington, Jack Valenti. Commissioner Andrew C. Barrett toured the Fox lot with its chairman, Barry Diller, and FCC Chairman Alfred C. Sikes checked out the Disney studios.

The commissioners have been wooed with prized invitations to such galas as the Emmy awards and CBS-sponsored Kennedy Center honors ceremony. Time Warner invited top FCC staffers to a private screening last Monday night of “Bonfire of the Vanities.”

Such screenings, often coupled with lavish dinners, have been a staple of Hollywood’s Washington lobby for years. They are probably second in popularity only to the dollars that the industry pumps into campaigns.

The Motion Picture Assn. of America, the industry’s Washington lobby and the organization that Valenti heads, usually hosts these affairs at its private theater, routinely attracting top government officials, key congressional and agency staffers and the press.

Last month, Valenti showed “Reversal of Fortune” at a birthday party he hosted for Debbie Dingell, a General Motors lobbyist and wife of Rep. John D. Dingell (D-Mich.), chairman of the House committee with jurisdiction over FCC issues.

“Policy is important and politics is important but, more than anything else, this is a town that runs on friendships,” said Martin D. Franks, who worked on congressional staffs for 16 years before joining CBS as vice president in Washington two years ago.

The hiring of Franks coincided with an effort at all three major networks and Fox to bolster lobbying in preparation for a showdown with Hollywood studios on the ownership and syndication rules. At issue is a collection of FCC regulations known as the Financial Interest and Syndication Rules, “fin-syn” for short. They were passed in 1970 when the networks dominated television and produced their own shows, freezing out Hollywood. The rules prevent the networks from having a financial interest in almost all of the prime-time programs they broadcast and from sharing in the revenue generated by selling reruns to domestic independent stations and abroad.


The rerun syndication market can be enormously lucrative. For example, “The Cosby Show” producers sold off-network rerun rights for an estimated $800 million. Yet the rules prohibit NBC, which broadcast the original episodes, from sharing in those earnings.

The movie industry argues that the rules are essential to restrain the near-monopoly power of ABC, CBS and NBC and that they have resulted in the proliferation of 200 or so independent production houses that contribute to the diversity of television fare.

The industry is unusually united, with the independent producers, actors, directors and writers joining six studios in a coalition fighting to retain the rules. Such public-interest groups as the Media Access Project and the Consumer Federation of America also joined the coalition.

The networks contend that the rules leave them at the mercy of the big Hollywood studios for programs since they cannot own a piece of most of what they broadcast. They also complain that cutting them out of the $2-billion-a-year market for reruns threatens their financial health at a time when their market is eroding.


When the Washington Redskins football team played the Dallas Cowboys here a year ago, CBS set up a tent on Capitol Hill and invited congressmen and staffers to meet with its announcers, John Madden and Pat Summerall. The networks also mimic the studios by previewing pilots and movies of the week for Washington power brokers.

“We don’t have movie stars to bring to town, but we’re trying to capitalize on what glamour we have,” said Franks of CBS.

In turn, Hollywood frets that the networks have something they don’t.

“You can’t put a politician in a movie, but you can get him on the nightly news,” said Pete Teeley, who was George Bush’s press secretary when Bush was vice president and now operates a lobbying firm hired by Hollywood.


Indeed, last spring Valenti accused NBC of using a news program on the power of Hollywood’s big studios in its attempt to overturn the fin-syn rules. Tom Brokaw, who anchored the special, called the suggestion “really outrageous.”

Most involved agree that the fin-syn rules survived the deregulatory zeal of the Ronald Reagan revolution largely as a result of the lobbying mastery of Valenti, who has cultivated politicians for 24 years on behalf of the studios.

In August, 1983, the FCC issued a tentative decision to repeal most of the rules, an action that caught Hollywood off-guard and prompted a lobbying blitz.

The corridors of the House and Senate office buildings that fall swarmed with such celebrities as Alan Alda, Henry Winkler, Jean Stapleton and Norman Lear. Charlton Heston invited then FCC Commissioner Mimi Dawson for cocktails. Valenti’s adept use of star power helped persuade the Senate to block the FCC’s action. But the networks were able to block a similar move in the House.


Hollywood’s real clout, however, was apparent at the White House, where an ex-actor was resident-in-chief.

Mark S. Fowler, then FCC chairman, was summoned to a secret meeting with President Reagan at the White House. Fowler later told congressional investigators that 35 minutes of the 45-minute discussion were spent on fin-syn, with Fowler explaining why he wanted to repeal the rules, a position shared by the Justice and Commerce departments. He said the President smiled, nodded and said little.

Not long after the session, Reagan announced that the FCC had agreed to a two-year moratorium on any action concerning fin-syn.

The networks had won the battle at the FCC but lost the war to the superior lobbying of the studios. The debate at the FCC and in Congress would be dormant for the remainder of the decade.


When the lid was lifted finally last January, it was one of the members of Valenti’s MPAA that played Pandora.

Fox Inc., emerging as a fourth network and part of a corporate empire that includes MPAA member 20th Century Fox Film Corp., asked the FCC to consider repealing fin-syn. In the meantime, Fox sought a waiver from the rules so it could keep providing its own programming.

The FCC approved a one-year exemption for Fox and--with the blessing of most congressional leaders--opened a full-scale review of the rules. Congress and the FCC really hoped that, faced with FCC intervention, the sides would reach an agreement that would serve as a vehicle for modifying the rules amicably.

On March 21, FCC Chairman Sikes invited the CEOs of the studios and networks to his office to urge them to settle their differences. What Sikes remembers most clearly about the meeting, however, was a sharp verbal exchange between Valenti and Robert C. Wright, president of NBC.


The source of the acrimony was a letter Rep. Jack Brooks (D-Tex.) had written warning Sikes that Congress would scrutinize any relaxation of fin-syn. The networks interpreted the message as the handiwork of Valenti, a longtime friend of Brooks. A spokeswoman for Valenti said Brooks, chairman of the House Judiciary Committee, was merely briefed on Hollywood’s concerns.

The atmosphere for the negotiations was not much friendlier or more productive than the Wright-Valenti exchange. For instance, neither the networks nor Hollywood wanted Fox in the talks.

Only at the insistence of Sikes was Fox boss Diller invited to participate near the end of the talks. When he arrived at Warner Bros. for a session, Diller had to sit at one end of the table because no one wanted him on their side of it.

Few were surprised that the talks collapsed without an agreement by the FCC-imposed deadline of June 14.


The big networks clearly expect some relief from the FCC. Since the rules were passed in 1970, their share of the prime-time audience has dropped to 64% from 90%.

Too, there is a wild card: The rising foreign ownership of Hollywood’s major studios.

NBC boss Wright, the most vocal critic of the way the rules handcuff the networks, dubs them “reverse protectionism” for allowing foreign companies that own studios to sell American reruns abroad.

Last March, after Italy’s Pathe Communications acquired MGM/UA, NBC sent pizzas to 90 congressional offices, with a note saying that “while NBC can’t yet have a piece of the pie, you can.”


Last month, when Japan’s Matsushita Corp. completed its deal to make MCA the fourth major foreign-owned studio, Rep. Dingell cautioned the FCC that its regulations “should not protect foreign-owned companies at the expense of American enterprise.”

Sikes and Quello, thought to most strongly favor altering the rules, said foreign ownership will be a consideration.