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COLUMN ONE : Tangled TV Webs Begin to Unravel : The Big Three networks are battered by higher program costs and ever more competition, feeding fears that one will be dismantled. Viewers are already feeling the effects.

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TIMES STAFF WRITER

It seemed as if NBC--the world’s wealthiest, most powerful television network and home to “The Cosby Show” and “Cheers”--was being dismantled.

Network President Robert C. Wright was peddling the plan to Hollywood studio chiefs, corporate advertisers and rivals in cable television: Movie studio X or cable outfit Y might want an evening time slot on NBC, make programming for it and go find its own advertising; advertiser Z might want to take over a morning slot and line up its own TV show.

NBC could not afford to be a full-blown network any more, Wright told them, so its program schedule was up for grabs. Who wanted a piece?

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No one, it turns out. But, then again, no one doubts that such a fate--or something worse--lies ahead for one of the Big Three television networks. “I tuned into the Home Shopping Network last night and saw my desk and sofa,” Johnny Carson quipped last week.

Independent producer and former NBC Chairman Grant Tinker predicts: “Dismantling or dissolving a network is not that far down the road . . . . One of those guys in its present form will be missing.”

Whether it is NBC, CBS or ABC that goes--or more than one, or even if each survives somehow--the future for all looks bleak:

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* Viewers are viewing something else. A dozen years ago, 91% of the television audience watched network shows. Even with the spread of cable television, network executives predicted their slice of the audience would never drop below 65%. Today, their share is 63%--and, CBS research chief David Poltrack says: “It’s hard to predict where it will level off.”

* Money is going out the door faster than it is coming in. The cost of producing a comedy is going up 8.2% a year, the cost of a drama 5.1%. But, for the last five years, advertiser spending on network television has grown 3.5% annually--and this year it will shrink.

* Big events are costing big bucks. Recent sports-rights contracts average 85% higher than previous ones.

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* You can watch what you want when you want and zap the rest. If a home has a TV, odds are 7 out of 10 that it also has a VCR. And 80% of all VCRs are now sold with remote-control devices that allow fast-forwarding through commercials.

* Network channels can get lost in the crowd. The average home today receives 27 channels, compared to nine in 1981; cable operators are developing systems with hundreds of channels. Sixty percent of America’s households now get cable.

“I used to believe that, when cable approached a practical level of saturation, then the deterioration of network shares (of the audience) would stop,” said Daniel B. Burke, chief executive of Capital Cities/ABC Inc. “I’m not as convinced of that as I was a year ago.”

What does all this mean for the television viewer?

Television programs may seem bad now, but they could get worse. The Federal Communications Commission, which regulates TV, recently issued a 180-page report predicting that eroding network audiences will lead to “lower-cost and lower-quality programming.”

Some of the networks’ cost-cutting moves are scarcely noticeable by viewers, such as more frequent use of free-lance news crews or replacing studio cameramen with robots. Others are easy to spot: greater dependence on low-budget “reality” programs such as “Rescue 911” and “Unsolved Mysteries,” the disappearance of costly miniseries and the migration of big-ticket sports events to cable.

And that points up one of the biggest concerns. Increasingly, viewers will end up paying to watch what they used to get for free. Monthly cable fees could be just the beginning.

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Program Cuts Foreseen

All but a half-dozen boxing matches are pay-per-view and cable events, and many local baseball and basketball games are now available only on regional pay-cable sports networks such as Prime Ticket and SportsChannel. Baseball games once seen on NBC and ABC are now seen on ESPN.

The networks traditionally have been video supermarkets. The audience switched on for global news, lavish dramas, slickly produced comedies and marquee sports. In the ‘90s, each of those offerings is likely to come in for pruning, if not elimination. Networks will stock fewer of their own brand-name programs, relinquishing empty air time to affiliates to put on whatever they would like.

Local stations, once totally dependent on network programming, can fill in with shows bought directly from major Hollywood studios or independent producers.

Paramount has already persuaded several CBS affiliates to drop the network’s low-rated late-night programming in favor of “The Arsenio Hall Show.” NBC, with its dismal ratings, has returned one hour of the daytime schedule to affiliates, which are filling it with syndicated programs.

Unprofitable sports events and Saturday morning cartoons could disappear. So could network news, casting aside a grand history with the likes of Walter Cronkite and Edward R. Murrow.

News divisions, which are heavy on personnel and one of the few areas where networks can directly control costs, are prime candidates for the scalpel--or ax. “It’s very expensive, and I’m not sure what kind of stomach these places have any more for network news long-term,” said Neil Derrough, president of KNSD, an NBC affiliate in San Diego, and former president of the CBS-owned TV stations.

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News bureaus are being continuously closed, with ever more journalists and crew members laid off. The possibility that at least one network will drop its nightly newscast is practically a given in industry circles.

With advances in satellite technology and rising costs of gathering video, networks are packaging news footage supplied by outside agencies and free-lance producers.

At the same time, networks are stocking prime-time schedules with hybrids between news and entertainment, the so-called reality-based programs such as “Real Life With Jane Pauley” and “Expose” on NBC or “Verdict” on CBS.

Jeff Sagansky, president of CBS Entertainment, predicts that such shows will shortly make up 25% of a network’s prime-time schedule because they are cheap to produce and potentially lucrative if audiences take to them.

“To see what’s happening in network news, all you’ve got to do is look at radio,” Lawrence K. Grossman, former president of NBC News, complained. “It’s a mile wide and an inch deep. Lots of cheap programs, lots of cheap talk.”

Grossman argues against news cutbacks by pointing out that ABC News--the only network organization that has stuck to the fundamentals of reporting and analyzing news events by grooming a stable of top journalists--is also now the healthiest of the three network news divisions.

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“You’ll get CNN supplying instantaneous wire-service headlines, ABC providing a certain quality of journalism with major reporters, particularly in prime time, and the role of public TV becoming much more important in providing the thoughtful, serious issue analysis and taking over the educational side of TV,” Grossman said.

News has taken among the hardest hits, but the networks are seeking cuts across the board. Thousands of employees have been fired over the last five years and dozens of departments closed. Limousines, which used to be a network executive’s birthright, have been idled. Sky-high network anchor and correspondent salaries also have hit a ceiling. Connie Chung and Bill Plante at CBS News had to take salary cuts in their new jobs, and run-of-the-mill network correspondents, who used to earn $250,000, are settling for $150,000 or less.

Layers of Staff Pared

Gone are layers of staff who screened the content of programs and commercials, in addition to armies of mid-level bureaucrats. “They have pretty much pared themselves back to the bone,” said Dennis Liebowitz, senior vice president at Donaldson, Lufkin & Jenrette, a New York investment firm.

Perhaps. Dan Rather still makes somewhere between $3 million and $4 million a year, and Ted Koppel recently signed a contract for an estimated $5 million.

And the networks are still shelling out lots of dough to others. Although payrolls have been cut by as much as 25%, the networks still have been unable to control spiraling entertainment program costs--which account for 70 cents of every dollar they spend.

Each network annually spends $500 million to $600 million just for new prime-time series. That does not include what they pay for movies, miniseries, specials, news programs or sports. When those are added, the annual tab exceeds $2 billion per network.

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The bidding wars for top producers and writers have driven up the average cost of licensing a half-hour comedy to $415,000 per episode, 93% higher than a decade ago, and have pushed the cost of a one-hour drama to $880,000 per episode, 68% higher.

Spending Sprees

All three networks in the last two years went on spending sprees that led CBS to pony up $3.6 billion for long-term sports contracts, NBC to make unprofitable renewals of hit shows such as “Cheers” and “Golden Girls,” and ABC to “lock up” top Hollywood producers such as James Brooks and Stephen Bochco, even though such deals may never field enough hits to justify the investment.

“We got ourselves into this trouble,” Howard Stringer, president of the CBS Broadcast Group, admitted. “In the three-network competition, we were unwilling to suffer short-term unpopularity by saying no.”

One analysis projects that the three networks may eke out a profit margin of only 1% to 2% this year on combined revenues of $8 billion. “We could have our profits wiped out in the next 12 months. It’s a distinct possibility,” Burke of Capital Cities/ABC warned.

Unlike cable TV networks, which have two sources of income--advertising and subscription fees--commercial broadcast networks are fully dependent on advertising. And network advertising growth is barely keeping pace with inflation.

That is because of a long-term trend away from mass marketing. Advertisers are spending more money on narrowly targeted cable networks such as CNN, ESPN and MTV and less on broad-appeal network television.

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“The days of one brand, one household and one easy sale are as over as the days of the one-TV-set household,” said Erica Gruen, senior vice president at Saatchi & Saatchi, a New York ad agency.

Fox Offers Blueprint

One model for surviving in the new era is Fox Television, which gets a far smaller share of the television audience.

Once derided as a “weblet”--a takeoff on the show-biz jargon of calling a network a “web”--Fox has succeeded not only because it has targeted a narrow audience of young adults with irreverent programs but because it gets by with a staff of only 218, contrasted with the thousands employed by each of the major networks.

“We are not weighed down with all that history and infrastructure,” said Fox Inc. Chairman Barry Diller. Also, Fox is not encumbered with costly news and sports divisions.

For better or worse, the Big Three are cutting loose from the old chains. CBS has sold off its non-broadcasting divisions and has focused on rebuilding its core network and TV stations business. NBC has used enormous profits accumulated during the 1980s to invest in an array of new ventures, such as buying the beleaguered Financial News Network for $155 million and investing in overseas TV stations. ABC is moving away from the big-event programming that fueled it through much of the 1980s and is now relying more on long-term series commitments.

All are looking for new ways to make money. Last spring, after years of lobbying, the networks won a partial repeal of 20-year-old federal regulations that prevented them from earning profits from the reruns of old series sold to local stations and cable networks.

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The networks may now own and syndicate up to 40% of their prime-time schedules. Although the new rules are being challenged in court, networks viewed the Federal Communications Commission decision as setting the stage to allow them finally to produce--and control--more of their own programs.

“The future is on the production side of our business,” said Stephen A. Weisswasser, senior vice president of Capital Cities/ABC. The network will use “our strengths to develop program material and distribute it primarily through our network, but also other pipelines.”

The betting in the industry now is that at least one network will seek to go beyond the limit on producing 40% of its prime-time schedule. By cutting back its prime-time schedule by one-third, a network would be free to do that.

Risks Remain High

Program rights can be extremely valuable assets because reruns of series such as “MASH” and “The Cosby Show” can generate revenues for years, long after a show has been dropped by the network.

Still, risks are high. Most shows do not last long enough to accumulate 100 episodes, the benchmark for syndication. And hourlong drama and action-adventure shows, which the networks need for balanced schedules, have little so-called afterlife.

So the networks are angling for permission to enter businesses from which they have been barred.

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The Big Three want to overturn decades-old regulations that ban broadcast networks from owning cable TV systems, more than one broadcast station in a city or a second broadcast network.

Last month, the FCC voted to conduct a top-to-bottom review of broadcast regulations. “In the last six months, there finally appears to be some recognition of the threat to free over-the-air broadcasting,” said Richard C. Cotton, executive vice president of NBC.

Meantime, there are some faint signs of progress on controlling program costs.

CBS, which last year was forced to hike its annual cost for the hit series “Murder, She Wrote” to $40 million from $25 million, was able to negotiate a substantial rollback this year because the program had slipped in the ratings. NBC is paying less for new episodes of “The Cosby Show” after paying $48 million last year, then a record.

“All of the concerns about the future of the networks presuppose that there will be no reversal of cost trends,” Stringer observed. “That is unrealistic.”

Many network executives are confidently predicting that the next round of negotiations will see a decrease from the hefty fees paid in 1988-90 for sports contracts such as major league baseball, the National Football League and the Olympics, which are causing the networks to lose hundreds of millions of dollars annually.

Weighed down by these fees--80% of sports costs are program contracts--the networks are allowing independent producers and packagers to cover events, sell the advertising and then buy the time period from a network.

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“The network won’t have a huge loss, but it won’t make enormous profits either,” explained Barry Frank, senior vice president at International Management Group, which negotiates rights on behalf of the International Olympic Committee.

Frank thinks it is possible that the 1996 Olympics will not be produced by a network but by an independent sports packager or group of major sponsors. The network would simply air the games.

Regardless of how the networks do in their campaign to control costs, they still must toss aside outdated ways of doing business.

The networks historically have been distribution systems for programming that they buy, or “license,” from Hollywood studios and independent producers. Until recently, the only programming the networks produced themselves were news and sports shows.

Now, because of regulatory changes, the networks are stepping up their efforts to produce shows in-house or co-produce with outside suppliers. This fall, new series such as the crime dramas “The Commish” on ABC and “P.S. I Luv U” on CBS, and the comedy “Man of the People” on NBC, are all network co-productions.

And, in July, the cable network Nickelodeon began airing the new sitcom “Hi Honey, I’m Home.” The series, produced by Nickelodeon, is airing concurrently on ABC. That network, in turn, is producing TV movies for CBS and the cable network Lifetime (in which ABC holds a one-third interest).

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No matter what they do, the glory days of the networks, cornerstone of the country’s broadcasting system, have passed.

As local cable systems begin to offer hundreds of channels, the role of the three major broadcast networks is likely to dwindle further. Entertainment and information sources will multiply: video laser discs, pay-per-view systems that offer hundreds of movies, “video on demand” networks that allow subscribers to watch any program they want whenever they wish.

As for the once high-flying networks, their circumstances can best be understood in NBC’s new, humbling executive travel policy: no more rides on the small air force of corporate jets owned by its parent, General Electric Co. Instead, executives must now book economy class and sit cheek-to-jowl with regular TV viewers.

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