Networks Fight Studios for Rights

WHAT has been called ``the battle of the titans'' - between Hollywood studios and the three television networks - has created a serious split within the Federal Communications Commission (FCC). Now, the verbal sparring is in its final phase, and an FCC decision is anticipated as early as next Tuesday.

The long and bitter controversy is over the Financial Interest and Syndication Rules, established in 1970 to answer concerns about the crushing powers television networks had at the time, and their sometimes arbitrary treatment of independent producers.

The rules - generally referred to as Fin-Syn - prevent the networks from owning even a partial interest in the shows which they commission from producers. Networks cannot syndicate shows domestically (though they are free to do so abroad) and they are strictly limited in the number of prime time shows they can produce on their own.

All this might be shrugged off as no more than an intra-industry tiff, were it not that the syndication business is worth $3 billion domestically plus $2 billion more internationally a year. The networks are arguing that considering their losses over the past year of both audiences and advertisers to cable, video sales, and the recession, the outcome of the Fin-Syn argument might well determine their survival.

On the other side, giving the networks permission to handle program reruns domestically would unquestionably have a devastating financial impact on many companies in the syndication business.

The effect that lifting the Fin-Syn Rules - or partially lifting them - would have on the average television viewer is difficult to determine. At first glance, the changes seem unlikely to affect program content or quality. But the changes would be felt if the loosening of the rules drastically changes business conditions in either the film or television industries.

Once before, in 1983, the FCC stood ready to make a decision on Fin-Syn. Arguing that the rules were no longer necessary, the FCC was prepared to rescind Fin-Syn, but the commission was overruled by then-President Reagan.

More recently, Alfred Sikes, the FCC chairman, backed up by the FCC staff, publicly made it clear that, times and conditions having changed, he favored rescinding of Fin-Syn.

Howls of protests came from the studios, who currently contribute some 70 percent of all filmed network programming.

A few weeks ago, it became clear that the FCC, presumed to be in favor of the networks, was actually split 3 to 2 in favor of Hollywood and only a partial lifting of Fin-Syn.

The pro-studio majority on the FCC was interested in a proposal by commissioner Andrew Barrett that would keep much of Fin-Syn intact. Hollywood smelled victory.

Then, in stepped the Justice Department which (in line with the White House deregulation policy) favors an immediate or at least a gradual lifting of the rules. The Justice Department asked to be heard on the Barrett plan before the FCC made its decision on whether or not to change Fin-Syn rules.

The Barrett plan would allow the networks to sell the reruns of ``in-house'' productions to affiliates and independent stations both domestically and abroad, but would limit such production to 40 percent of a network's prime-time schedule. Some current examples of ``in-house'' productions include: NBC's ``Saturday Night Live,'' ``Real Life with Jane Pauley,'' and CBS's ``Rescue 911.''

``In-house'' production would be defined as programs owned 100 percent by a network and, importantly, would include programs shot abroad with or without foreign financial aid.

A key point of the Barrett proposal is that a network could acquire a financial interest in a show but would hold the license for such a program for only two years. Television executives say that few networks would put money into a project for which they controlled the rights for such a short period.

THE Fin-Syn Rules carry implications that go beyond money.

For instance, should the networks win the day and succeed in having the restrictions lifted, one of the immediate results could be the acquisition of at least two of the networks by cash-rich studios like Paramount and Disney.

One network, Fox Broadcasting, already is owned by Twentieth Century-Fox, and has invested heavily in pre-production in anticipation of an FCC ruling favoring the networks.

``The word `frustration' does not adequately describe our feeling,'' said Barry Diller, the Fox chairman.

Much of the Fin-Syn argument is over the rights of the independent producers who are mostly financed by the studios and who, according to the Motion Picture Association of America (representing the big movie companies), must be protected from arbitrary network control and dominance.

Curiously, some of those ``threatened'' producers are now having their doubts about the studios' anti-network position, arguing that it deprives them of any chance to obtain network financing.

Fin-Syn, even after a compromise is found, will continue as a sore point with both the networks and Hollywood since no answer satisfies both parties, or avoids considerable economic consequences.