‘New Day’ Seen for Networks : Television: Ruling frees them to own financial shares in shows. At stake are big profits.

The major broadcast networks, forced out of the television program production business in the 1970s by government regulators, appear poised to jump back in after the decision of a federal judge in Los Angeles to lift one of the last remaining obstacles barring their entry.

U.S. District Judge Manuel L. Real last week repealed consent decrees between the networks and the Justice Department that restricted their ability to own financial stakes in the shows they air and earn profits when reruns are sold in syndication.

The decision is a significant step in a two-decade-long battle between the networks and major Hollywood studios over who controls--and profits from--the TV programs America watches.

“It’s a new day dawning,” said Richard Cotton, senior vice president of NBC. “We can now compete with the studios head-on.”

With the consent decrees now lifted, the networks can immediately begin negotiating for financial stakes in programs that will appear on their schedules next season and even enter the fast-growing syndication market for talk shows like “Donahue” and “The Oprah Winfrey Show.” The consent decrees mirrored similar regulations repealed by the Federal Communications Commission last year.

Although both the networks and Hollywood claimed that high-brow issues such as program diversity and creativity are at stake, in fact the quarrel has been over which side wins the spoils in the $5-billion-a-year syndication market.

The reruns of such hit shows as “The Cosby Show,” “Roseanne” and “Home Improvement” generate syndication profits larger than many box office hits. In addition, “first run” syndicated talk shows have become more profitable for their producers.

When the “financial interest and syndication rules” were enacted in the early 1970s, they were meant to curb the bargaining power of ABC, CBS and NBC. At the time, the three networks attracted more than 90% of the audience and could extract all kinds of financial concessions from program suppliers, regulators determined.

But over the last several years the media landscape has radically changed. Today, the networks are losing market share in the face of competition from cable, home video and emerging networks such as Fox Broadcasting Co.

More significant, analysts note, lifting the consent decrees should also make it easier for the long-anticipated merger between a network and Hollywood studio. Some analysts argue that such mergers will be necessary to fill the pipeline of 500 channels expected to come into the home in the years ahead.

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“The networks are going to be part of these mega-media-entertainment conglomerates and probably all three will be sold or merged in the next few years,” said David Londoner, an analyst at Wertheim Schroder.

“If you think about the capital needed to build out the electronic superhighway, the networks fit incredibly well. They are huge generators of free cash flow and have the best programming experience of anybody in the entertainment business.”

Network executives were generally jubilant about Real’s decision, although some noted that all the roadblocks have not yet been removed.

“It’s good news, but it only gets us halfway home,” said Martin Franks, a vice president at CBS.

Specifically, the networks argue that a two-year moratorium before they are allowed to directly participate in lucrative syndication profits is unfair.

“Two years is forever in this marketplace,” said NBC’s Cotton.

Moreover, the FCC’s decision is being challenged by a coalition of Hollywood producers in a Chicago federal court.

The last remaining legal obstacle for the networks is an appeal in a federal court in Chicago where the coalition of Hollywood producers will argue one more time that the so-called “fin-syn” rules should remain in place. The three-judge panel is expected to rule against the producers.

Diane Killory, a lawyer representing a coalition of producers who have been opposed to any change in the rules called Real’s decision “bad news . . . not only for producers, but also for TV viewers who will have less diverse programming available to them.”