Time Warner-Turner Talks : Goodby Regulators, Hello Mergers

Federal law has long shaped the landscape of the entertainment industry. Antitrust regulators cut ties between movie studios and theater chains in the 1940s and forced MCA to dump its talent agency business in 1962 because it was producing television shows. In 1970, the Federal Communications Commission forbade networks to have a financial interest in the programs they aired or from profiting from reruns in syndication. Those “fin/syn” rules, as they are known, kept networks and studios apart for a quarter of a century. Until now, that is. Here’s a look at how the current wave of deregulation is making entertainment mergers possible:

* Network lobbyists persuaded the FCC not to renew the fin/syn laws once they expire Nov. 1, and the agency may even abolish the rules before then. That clears the way for networks to own the shows they air, thus allowing them to merge with companies that create content. This factor was instrumental in Walt Disney Co.’s decision to buy Capital Cities/ABC Inc.

* Federal telecommunications reform is expected to allow broadcasting companies to get bigger. Current rules limit a single company to owning television stations that reach no more than 25% of the nationwide viewing audience. The House proposes to lift that threshold to 30%; the Senate would raise it to 35%. If Congress fails to act, the FCC is poised to raise the limit to 30% as well. That change would benefit Westinghouse Electric Corp., which will own 15 stations reaching just under a third of potential viewers when it completes its purchase of CBS Inc.

* Telecommunications reform is also widely expected to abolish regulation of the prices cable companies charge their subscribers. Once that happens, profits of cable companies are expected to soar, making them attractive merger partners and giving them the cash to make acquisitions of their own.

* Cross-ownership restrictions from the 1950s would also be relaxed under telecom reform proposals. Under some versions, a single company could own two television stations, unlimited radio stations and a newspaper in the same market.