Financial Interest and Syndication Rules (Fin-Syn Rules), or more
precisely their elimination, may ultimately alter the television
and film entertainment landscape as much as any event in the 1990s.
The Federal Communications Commission (FCC) implemented the rules
in 1970, attempting to increase programming diversity and limit
the market control of the three broadcast television networks. The
rules prohibited network participation in two related arenas: the
financial interest of the television programs they aired beyond
first-run exhibition, and the creation of in-house syndication arms,
especially in the domestic market. Consent decrees executed by the
Justice Department in 1977 solidified the rules, and limited the
amount of prime-time programming the networks could produce themselves.
rationales for Fin-Syn are numerous. The FCC was concerned that
vertical integration (control of production, distribution and exhibition)
unfairly increased the power of the networks. By taking away the
long-term monetary rights to programs created by the networks, and
severely restricting their participation in syndication, the FCC
eliminated incentives for the networks to produce programs, thus
separating production from distribution. Those in favor of Fin-Syn
hoped that the rules would benefit independent television producers
by giving them more autonomy from the networks (because financial
interest would be solely in the hands of the production company),
and allowing the producers to benefit from the lucrative syndication
market. Proponents believed that by privileging independent producers
in this way, the rules would cultivate more diverse and innovative
television content. Another potential advantage of the rules was
that independent television stations would benefit from the separation
of the networks from syndication. If the networks owned the syndication
rights to off-network programs, they might "warehouse" their programs,
or steer popular reruns to network owned and operated stations and
network affiliates to make those stations stronger in a particular
From the very beginning, however, the Fin-Syn rules were controversial
and contested. The networks felt that Fin-Syn was unfair and did
not solve the intended problems. One anti-Fin-Syn argument noted
that the expense of starting a national broadcast network--the financial
barriers to entry--much more significantly explained the networks'
control of television than their vertical integration. Others argued
that the Fin-Syn rules undermined the role of independent producers
rather than enhanced them. Small independent producers, for example,
often cannot afford to engage in the "deficit financing" required
by the networks. Deficit financing involves receiving a below-cost
payment from the networks during the first-run of a program. Large
production organizations--like the Hollywood-tied Warner Television--are
much more financially able than smaller companies to cope with the
necessary short-term losses in revenue, hoping to strike it rich
in syndication. Critics of Fin-Syn therefore noted that Hollywood
studios, rather than independents, grew stronger because of Fin-Syn,
and that the smaller independents tended to produce conventional,
but inexpensive, programs like talk shows and game shows rather
than innovative programs.
In 1983, the FCC, swayed by these anti-Fin-Syn arguments and the
general political climate favoring deregulation in many arenas,
proposed eliminating most of the rules. However, a massive lobbying
effort by Hollywood production organizations--efforts helped by
a former Hollywood-actor President, Ronald Reagan--kept the rules
the early 1990s, however, other arguments were levied against Fin-Syn.
When the rules were first implemented in the pre-cable, pre-FOX
days of the 1970s, the networks' combined share of the television
audience was around 90%. By the early 1990s, this share had dropped
to roughly 65% because of the new forms of competition. Fin-Syn
opponents also argued that the presence of vertical integration
among other media companies--including organizations with television
production arms like Time Warner-- was unfair.
In 1991, then, the FCC relaxed the Fin-Syn rules after an intense
lobbying war pitting the major television producers (for Fin-Syn)
against the major television distributors (against Fin-Syn). Appeals
courts later relaxed the rules even further, in essence eliminating
all traces of Fin-Syn by November 1995.
The elimination of the Fin-Syn rules could ultimately have several
long-term consequences for television. The first consequence is
the merging of production organizations with distribution organizations.
One example of this is increased in-house production by the big
three networks. By 1992, for example, NBC was the single largest
supplier of its own prime-time programming. Besides the distribution
firms of television becoming more involved in production, production
firms have gotten more involved in distribution. The creation of
three new broadcast networks from 1986-1995 illustrates this. FOX
Broadcasting, supported by its direct relationship with a Hollywood
studio, is an early innovator here. In fact, the spark that led
to the Fin-Syn elimination was FOX Broadcasts' 1990 request for
Fin-Syn revisions. FOX, both a major producer and a mini network,
wanted the transition to full network status to be unimpeded by
Fin-Syn. Once the rules against the production-distribution merge
were on their deathbed, Paramount and Warner Brothers soon joined
FOX in forming studio-based television networks. The mid-1990s were
likewise filled with rumors that a major studio, like Disney, might
purchase one of the big three networks instead of starting one from
scratch. And indeed, the rumors became fact when Disney purchased
Cap Cities/ABC in 1995.
future of independents--both independent producers and independent
stations--may also be significantly affected by the demise of Fin-Syn.
Independent producers worry that, at worst, the networks will no
longer require their services and, at best, the nets will demand
a share of syndication rights to programs and will privilege in-house
productions with the best time slots. Independent stations worry
that the networks will warehouse their best off-network programs,
now that they will own the syndication rights. Some charged that
the 1994 syndication of The Simpsons--sold to around 70 FOX
affiliates--is a sign of the favoritism to come.
other critics note the dangers to programming diversity and advertising
interference that may result from the deregulation. Now that the
networks may benefit from syndication, for example, will they have
an incentive to put on programs with high syndication potential,
like situation comedies? Also, during the Fin-Syn era, prime-time
network producers were at least superficially insulated from advertiser
influence because of the separation of production from distribution.
Advertisers paid the networks rather than the producers of TV content.
Because the categories of production and distribution have collapsed
together after Fin-Syn, advertisers may have more direct access
to network production because they now write checks directly to
organizations that produce as well as distribute.
in the Financial Interest and Syndication rules illustrate the significance
of communication policy in affecting the daily menu of television
choices available to the public. As much as alterations in technologies,
techniques, and personalities, changes in the Fin-Syn rules, and
their possible disappearance, have an immediate, significant effect
on the television industry and television audiences.
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