INNOVATION : The Lost Opportunity of Fin/Syn Reform

In what passes these days for wit, one Washington wag described the regulatory firefight between Hollywood and The Networks over the future of television programming ownership as a “battle between the rich and the wealthy.”

Well, yes--but it’s also a battle between the greedy and the selfish. The only sure loser won’t be the broadcasters or the producers; it will be the public. The battle lines were drawn in ways that guaranteed we viewers would be ignored.

After a multimillion-dollar lobbying sleazefest that had even hardened Washington cynics running to the bathroom, the Federal Communications Commission issued a split 3-2 decision on the “financial interest/syndication” rules that was as convoluted as it was confused. The ruling neither promotes program or ownership diversity nor encourages innovation, as should have been the FCC’s goals. Other than that, as Gen. H. Norman Schwartzkopf would say, it’s a great example of public policy.

Some background: In 1970--when the three networks held a 90% share of the television viewing audience--ABC, CBS and NBC were effectively barred from owning most of their prime-time programs or “syndicating” the reruns of those shows to local stations, cable TV networks or foreign broadcasters. Regulators feared that the networks would unfairly exploit their oligopoly.

Today, VCRs, cable television, independent stations, the Fox fourth network and a clutch of other video choices have dropped Big Three viewership down to roughly 60%. The global market in reruns now tops $5.5 billion. The networks understandably want a piece of that action. After an abortive 1983 attempt to lift the “fin/syn” restrictions, the networks marshalled an impressive array of economic evidence and Administration allies this year to prove that the regulations were obsolete. They say they need deregulation to survive in an era of increased competition.

Hollywood and the independent producers--fueled by the prolix pyrotechnics of Motion Picture Assn. of America President Jack Valenti--argued that the networks were still too powerful to be deregulated.

Earlier this month, the FCC loosened the restrictions just enough to make both the networks and Hollywood unhappy. This wasn’t a King Solomonesque compromise; it was an outright abdication of the public trust. Instead of creating a framework to intelligently weigh the public interest, the FCC chose to make its ruling purely on monetary issues--i.e., who should own what percent of a show for how long.

“This debate is solely about economic interests. Period,” says 20th Century Fox Chief Executive Barry Diller, who, thanks to a special FCC waiver, is in the unique position of running both a studio and a network. “It has no public policy consideration; that’s a straw man and red herring. . . . The Hollywood producers have consequently played this shell game--led by the majors--of this silliness that who ‘owns’ the programs has something to do with the diversity of ideas.”

Indeed, one of the few “public interest” arguments that the networks used to support fin/syn repeal was that, in the words of one lawyer for CBS, “It would promote diversity.”

Excuse me? The belief that the television marketplace becomes more “diverse” if the rerun rights to “MASH” are held by a bunch of overpaid middle-aged white males who dine at Lutece instead of by a bunch of overpaid middle-aged white males who dine at Spago is a very peculiar concept of diversity.

Get real. The networks don’t care about program diversity, they care about return on investment. (Indeed, the diversity argument is particularly moronic given the rumors that Disney or another studio would buy CBS, or that General Electric/NBC might buy a studio if the restrictions were lifted).

Similarly, the studios and independents care far less about “diversity” than protection from network customers who would subsequently become their fiercest competitors. Please, I love stories about entrepreneurial independents as much as anyone, but it’s crazy to think that they would shrivel or vanish in the face of network competition. Yes, life would get tougher. Too bad.

Remember, the role of the FCC is not to maximize shareholder value for CBS or enable a sitcom producer to build an addition to her Malibu beach house: It is to protect the public interest. If market fairness is the goal, then the FCC shouldn’t single out the network oligopoly and ignore the cable and video oligopolies.

“There can be no appropriate communications policy in this country until the FCC deals with all of the players with minimum (fin/syn) regulations that cover everybody and are consistently applied,” says Fox’s Diller. “Whatever regulation is true for ABC should be true for Time Warner; whatever is true for NBC should be true for MCA/Matsushita.”

There’s another way the FCC could have provided leadership. Broaden the definition of public interest beyond narrow-minded deregulatory definitions. Let the networks participate in fin/syn in exchange for accelerating the introduction of, say, high-definition television or interactive television. Or for providing “public access” on local stations. Or commercial-free children’s programming. Or for paying “spectrum fees” for the right to use the scarce frequency spectrum. In effect, use fin/syn as leverage to broaden what broadcast television could do and create new markets for both the networks and program suppliers.

“If the FCC had taken that approach, it might have dispelled all the intramural fighting about whether this is all an argument about market share,” acknowledges Jerry Leider, an independent producer and co-chair of a coalition formed to preserve the fin/syn rules. “The ballgame would have changed significantly . . . perhaps for the better.”

In the 1960s, then-FCC Chairman Newton Minow created a stir by describing television as “a vast wasteland.” Today, the vast wasteland isn’t on TV; it’s the policies of the FCC.