Networks Can Own TV Shows, Judge Rules

Ending a 20-year battle, a federal judge in Los Angeles has knocked down the final obstacle preventing the top three broadcast networks from entering the lucrative television program production and distribution business.

The decision, which was anticipated for more than a year, paves the way for ABC, CBS and NBC to own, produce and syndicate the reruns of their prime-time TV shows. In addition, the decision will allow the networks to enter the fast growing “first-run” syndication market for daytime talk shows such as “Donahue” and the “Oprah Winfrey Show.”

U.S. District Judge Manuel L. Real lifted the antitrust consent decrees entered into by the three major broadcast networks and the Justice Department that had prevented them from owning stakes in the programs they air and, more important, earning profits when the reruns of those shows are sold in syndication to local TV stations.

Real issued the decision in a letter received late in the week by Hollywood studio executives.

The decision is a blow to the major Hollywood studios that have been traditional suppliers of prime-time TV programs and shows sold into the $5-billion syndication market.

By lifting the consent decrees, Real reinforced new regulations adopted by the Federal Communications Commission last year. A bitterly divided FCC broke down most barriers preventing the networks from getting into the TV production business.

Major Hollywood studios such as Warner Bros., Paramount and MCA, which earn a substantial portion of their profits from the syndication of TV programming, objected to the networks invading their turf.

But the networks argued, and the FCC largely agreed, that the economic landscape of the television industry has radically changed since the “financial interest and syndication rules”--Fin-Syn--were adopted in 1974.

The judge disagreed with the major studios’ contention that the networks would be able to monopolize programming. “Even if a network controlled all of the syndication of its network programming . . . it appears that not a single network would control a sufficient share of the market to exercise monopoly power,” the ruling stated.

At the time the Fin-Syn rules were adopted, the three major broadcast networks attracted more than 90% of all TV viewers. Today, because of competition from cable, home video and emerging networks such as Fox Broadcasting Co., the networks now attract less than 65% of the audience.

Indeed, technological developments of the past two years have almost made the “Fin-Syn” rules an antiquated curiosity, many experts said.

Although the networks continue to offer a broad range of entertainment, news and sports programming, they are in danger of becoming eclipsed by the rapidly converging cable and telephone industries that are laying the foundation for a fiber-optic, 500-channel environment.

Lifting the consent decree also removes the last of the remaining regulatory impediments to a merger between a broadcast network and a major Hollywood studio.

Ironically, after spending millions of dollars in lawyer and lobbying fees to retain or to keep the barriers in place, Paramount and Warner Bros. recently announced plans to each launch a fifth TV network, hoping to duplicate the success of the fourth network launched by Fox seven years ago.

The television networks have always wanted access to the profits earned by reruns of programs such as the “Cosby Show” and “Cheers,” which together have earned more than $1 billion in rerun profits. The studios now believe it is equally important to have their own pipelines to ensure distribution of the shows they have produced.