UNITED STATES: NETWORKS

Networks are organizations that produce or acquire the rights to programs, distribute these on systems of interconnection, and secure uniform scheduled broadcast on a dispersed group of local outlets. In commercial broadcasting, "networking" was recognized at an early date as the clearest path to profitability, because the costs of program production were--and are--fixed, and revenue turned on securing the maximum degree of efficient distribution and exposure to mass audiences.

In the United States, the number of broadcast networks existing at a particular time, and the prospects for entry by new networks, have always been the combined result of the current state of technology, in tension with an extensive role for government regulation. Television broadcasting, tentatively begun prior to the American entry to World War II in 1941, was suspended for the duration of the war, and did not resume until the first wave of station activations in 1946 through 1948. In radio, as was to be the case in television, industry leadership was exercised by a charismatic executive and/or founder: David Sarnoff at NBC, William S. Paley at CBS, Allen B. DuMont, and a few others.

Beginning in 1920, radio entrepreneurs had developed an array of informational and entertainment fare, originated in live performances at local stations, and increasingly at network studios in New York City, from which feeds to stations could be disseminated in real time over telephone lines. Commercials, like other copy, were read and performed live. Strong local stations prospered in this system, but the highest return was enjoyed by two major networks, Columbia Broadcasting System, and the National Broadcasting Company unit of a premier radio equipment manufacturer, Radio Corporation of America (RCA). RCA operated dual networks, the Red and Blue. In radio, as was to be the case in television, industry leadership was exercised by a charismatic executive and founder, Robert Sarnoff at NBC, William S. Paley at CBS, Allen B. DuMont and a few others.

The first comprehensive radio law, the Radio Act of 1927, did not confer on government any express power to regulate networks directly, but empowered it to regulate stations engaged in "chain broadcasting." This served to consolidate industry control by the network organizations already underway. The law mandated that radio broadcasting stations be allotted in a manner that equitably served the various states and localities, but withheld actual station ownership of broadcast channels, in favor of renewable licenses for limited times. It also prohibited the licensing of a person or entity that had been convicted of unfair competition or monopolization. These precepts carried over with the Communications Act of 1934, and shaped the relationship among stations, networks and the government throughout the emergence of television.

At the eve of American entry to the War the Federal Communications Commission (FCC), acting under its powers to investigate and regulate stations, concluded a probe of "chain broadcasting" and announced a series of prohibited practices in radio. These included contracts that permitted networks to command and resell advertising time for their own account, or to option time. The rulings also prohibited the specific ownership of dual networks by a single entity, NBC being the singular example. The Supreme Court's decision upholding these actions in 1943 prompted the divestiture of NBC Blue, acquired that year by Lifesaver magnate Edward J. Noble, and renamed the American Broadcasting Companies. (National Broadcasting Co. v. U.S., 319 U.S. 190 (1943).

After 1945, as Americans turned to peace time pursuits, including the realization of television, commercial radio already was settled into a pattern with program fare dominated by two or, generously, perhaps three networks, each of them fortified against hard times by the ownership of a handful of highly-profitable local stations in the largest trading areas. The critical determinant of the number of networks that could be supported was--as it is today--the number of local outlets that could be assured for network audience, by ownership or by contract.

By 1945 the FCC preliminarily had allotted some 19 VHF Channels, 1 through 19, for television broadcasting. Almost immediately Channels 14 through 19 were reallocated to the military, and Channel 1 was put aside for two-way radio. By the end of 1946, seven stations were broadcasting (all on Channels 2 through 6), and approximately 5,000 household receivers were in use. From that point, and even in the absence of detailed technical standards to guard against mutual interference, or other standards, applications for new stations poured in. The FCC imposed a freeze on new applications on 30 September 1948. Virtually all pre-freeze filers actually built broadcasting facilities, so that by the time the freeze was lifted on 13 April 1952, some 107 VHF stations had been activated in 63 markets, and receivers in use had grown to 15.5 million. Denver led the list of many important markets that had no television at all. During the freeze, NBC moved aggressively to apply for and activate stations in the top markets. CBS got a late start, and proceeded to acquire its first stations by purchase. ABC and a fourth network, DuMont Laboratories, participated actively in the FCC proceedings, but were unable or unwilling to initiate major station investment, pending resolution of the knotty regulatory issues.

The framework adopted by the FCC in 1952 allotted television channels to specific communities throughout the United States, roughly in proportion to market size. VHF Channels 2 through 13 and UHF channels 14 to 83 were utilized, but as of 1952, virtually all TV sets were capable of VHF reception only. The first UHF set-top converter was introduced in March 1952. The decision also sacrificed efficiency, and reduced the potential number of stations, by grandfathering the existing 107 outlets, helter-skelter wherever they had started. Practically speaking, the FCC's allocations provided only enough VHF outlets to provide two-channel service to about 90% of the population, and third-channel service to substantially less. NBC and CBS, each emerging with five powerful owned-and-operated stations, and program offerings spun off from their popular radio fare, quickly expanded affiliations.

The Emmy Awards, first presented on 25 January 1949, were an accurate barometer of network emergence. A local station, KTLA in Los Angeles, dominated the awards for year 1948, with the most popular program (Pantomime Quiz Time), most outstanding personality (Shirley Dinsdale and her puppet, Judy Splinters), and the station award. By the second year, with KTLA still prominent, NBC cracked the line-up, jointly with its New York flagship KNBH, winning best kinescope show (Texaco Star Theatre) and personality (Milton Berle). A network spot for Lucky Strike won best commercial. In the third presentation, for 1950, Alan Young and Gertrude Berg were best actor and actress, for CBS jointly with Los Angeles independent KTTV, and their co-produced Alan Young Show was recognized for best variety show. Outstanding personality was NBC/KNBH's Groucho Marx. By the end of the FCC's freeze these networks had unqualified leadership of program origination.

In the complex fight over regulation DuMont Laboratories had advocated a plan with a minimum of four VHF's allotted to each of the 140 largest trading areas. Rebuffed at the FCC DuMont never achieved more than 10 primary or full schedule network affiliates. As the few UHF operators incurred mounting losses, DuMont folded its network in 1955. These by-products of the freeze and subsequent FCC decision to grandfather incumbent stations and intermix VHF and UHF channels have been harshly criticized.

Throughout this period, ABC was barely operating, and Noble stated that he had never declared a dividend nor taken a salary through 1952. In 1953, however, ABC received FCC approval to merge with United Paramount Theaters. The chain had been spun off from Paramount Pictures Corp., under court decree that followed the Supreme Court's antitrust decision of 1948, upholding divestment of theatrical production from exhibition. The significance of government involvement could not be more clear, with ABC's very existence jeopardized by one government action, and resolved favorably by another. ABC used its Hollywood connections adroitly, teaming with a studio to co-venture a break-through program, to that date the most expensively produced in history, Disneyland.

Collectively the networks could have only so many affiliates as there were stations on the air. Commercial VHF stations grew from 233 in 1954 to 458 in 1962. Commercial UHF stations stood at 121 in 1954, and struggled against the lack of UHF receivers. Many UHFs went dark and returned their licenses for cancellation, and by 1962 their numbers had shrunk to 83. In total, the commercial station universe as it grew roughly from 350 to 550 was adequate to support approximately two-and-a-half national networks. Local stations, in the enviable position of having multiple suitors, frequently left ABC with no local outlet. Congress enacted a law in 1962 mandating that all receivers be capable of UHF tuning, but it was only by the mid-seventies that local stations were plentiful enough for ABC to achieve full comparability.

As the networks consolidated their control of station time during the l950s, a broad shift occurred in their relationship with the sponsor, enhancing their control even further. In the early part of the decade, shows typically were produced by the sponsor live, or contracted for by the sponsor and delivered to the network on expensive film or kinescope. Production centered in New York. With the introduction by Ampex of quadruplex videotape recording in 1956, it became possible for programs to be produced and recorded anywhere, and the new orders for entertainment fare shifted to the concentration of expertise in Hollywood studios. Increasingly, the network replaced the sponsor in development, acquisition, and revision to final programming form. From the 1950s can be charted the realization of core concepts in prime time programming, including the ensemble situation comedy, cop shows, westerns, and regularly scheduled newscasts. The interval often is referred to as the Golden Age of television, perhaps precisely because of its experimental flavor. But while major -market stations achieved immediate and impressive profitability, networking was still a gamble, the program performance remained uneven, and in 1961 critic-for-a-day Newton N. Minow derided the totality as a "vast wasteland."

The true golden age of three-network hegemony probably traces from 1963, when each network inaugurated a half-hour prime time newscast, and network television drew the entire nation together in grief after the assassination of President Kennedy. From 1963 until the late 1970s, the networks created a refracted version of the significant events of the day that was shared by all. This cohesion intensified with expanding use of color transmissions and color set sales during the 1960s. One nation resonated with the networks' triune voice, in a manner unparalleled in the past, and likely never again to be seen in the future. ABC, gradually shoring up its group of strong affiliates, and hiring a visionary programmer in Fred Silverman, finally took the Summer Olympics to its first full-season ratings victory in 1976-77. The "third network's" potential had been clear for years, but several attempts to acquire ABC during the 1960s were rebuffed, and an attempted buyout by IT and T foundered in 1968, after criticisms were vetted during two years of FCC proceedings.

The membership quota for this elite club of three networks, however, was eventually dismantled by a technology developing quietly during these same years--cable television. The FCC's original framework of 1952 did not assure three-network or any network service, to all households, and was particularly deficient where terrain obstacles degraded reception over the air. Community antenna television (CATV) was a local self-help response, tying hilltop repeaters to wires into the home. Because cablers did not utilize the broadcast spectrum, the government was uncertain of its jurisdiction until a Supreme Court decision came down in favor of a broad authority to regulate, U.S. v Southwestern Cable Co., 392 U.S. 157 (1968). Thereafter broadcasters, well aware of the potential competition, leaned on the FCC to retard cable, specifically by forbidding the importation of distant signals that were not available in the local market over-the-air. By 1970, a regime of anti-cable regulation was firmly in place and for ten year it served to retard competition and preserve the networks' position. A newer technological device again led to significant change in this arrangement.

Domestic communications satellites were authorized in 1972, and by 1975 RCA and Western Union had space satellites launched and working. In 1975 RCA sold time on its Satcom I for Home Box Office, the first program service designed to bypass conventional delivery channels, and offer a unified program lineup directly to cable systems and thus to the home--in the true sense a network. The following year, uncertainties surrounding the re-sale of broadcast programs to cable were resolved, with passage of a new Copyright Act, requiring broadcasters to license to cablers under certain conditions, at below-market rates to be established through a bureaucratic process.

The opportunity presented by the resolution of the two knottiest issues--distribution and rights--was first recognized by Ted Turner, not a cabler but a broadcaster, operator of WGTB in Atlanta (later, WTBS), an independent UHF on Channel 17. By 1978, the FCC had been having second thoughts about the heavy hand it had placed on cable development. Turner approached the agency with a plan to offer Channel 17 to a common carrier he created for the purpose, Southern Satellite Systems. In turn, Southern would deliver the station by satellite to cable head-ends, charging five cents per household per month. Because imbedded in FCC common carrier regulation was the idea of non-discriminatory rates, for large and small customers (or cable systems) alike, Southern needed a waiver to charge by the number of local subscribers. Astonishingly, the FCC said yes. The debut of Channel 17 as the first "super station" in 1980 assured, year by year, that the three-network share of the program universe would continue to shrivel inexorably. By 1981 the FCC also was in process of a cable "deregulation," abandoning its 10-year folly of attempting to re-bottle the genie of cable program origination. The networks, barred by FCC rules from owning cable systems, began to invest in new cable program services side-by-side with cable companies, Turner, and others.

 

With President Ronald Reagan taking office in 1981, the deregulatory thrust continued. The former actor, when he thought about such matters, was willing to favor Hollywood studios in their primordial battles with the television networks, and to endorse the expansion of channels for program delivery. A cable television bill, passed in 1984, pre-empted local rate regulation, and so gave the cable industry working capital to continue its strides as program creator and distributor.

These strides were being matched with the opening of a wholly new channel into the home. Sony had introduced a practical, consumer videotape player recorder, the Beta VCR, in 1976, at suggested retail of $1,295. Recording time was one hour. Sony's Japanese rival, Matsushita, which markets under the name Panasonic, followed shortly with an incompatible format that eventually became standard, VHS. Hollywood studios, led by Universal Pictures and Disney, promptly brought a challenge in Federal Court, claiming that the device inherently was useful only for stealing copyrighted material. The issue oscillated in court until 1984, when the U.S. Supreme Court ruled that home taping for home use was not an infringement of copyright, Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984), the "Betamax case." From that date, sales of home recorders and the rental of tapes exploded. The studios have come to enjoy greater revenue from cassette sales and rentals than from theatrical exhibition, and must look back in wonder at their temporary insanity when the player-recorders first were sighted in North America. But for the networks, this technology presents long-term problems. The rating services have assumed so far that programs can be credited as viewed if they are recorded, but it may become apparent in time that the facts of actual audience behavior are otherwise. VCRs in their most typical use occupy the household's attention for non-network fare such as movies, just coming off their initial theatrical run.

As cable and cassette continued to splinter the market, Reagan's FCC abolished many of the rules and policies that had stood in the background of television broadcasting also. In 1984, the rule restricting each television network to the ownership of a maximum five VHF stations, and seven VHF plus UHF, was replaced with a quota of up to twelve VHF so long as the station grouping did not exceed 25% all TV households. While this liberalization was still at the discussion stage at the FCC, Thomas S. Murphy, chairman of the Capital Cities station group, approached ABC about a merger. Once the rule was finalized, Capital Cities in 1986 announced the acquisition of the much larger network, for $3.5 billion, with financing from Warren E. Buffett and Berkshire Hathaway, Inc.

By 1986, RCA was a diminished echo of the industrial giant of the post-war. It had departed the computer main-frame business in the early 1970s with massive losses, and its equipment markets had been overtaken by Japanese manufacturers. Its television network remained competitive and highly successful, but in no position to refurbish from working capital for the intensified program battles ahead. RCA and its NBC network were sold to General Electric in 1986 for $6.3 billion. General Electric had been instrumental in creating RCA in the 1920s before David Sarnoff, and now closed the circle in an era more receptive to combinations.

CBS entered this period smarting from a lengthy battle with Gen. William C. Westmoreland over the CBS Reports documentary, The Uncounted Enemy: A Vietnam Deception. The advocacy group, Accuracy in Media, and Sen. Jesse Helms in 1985 were urging their constituencies to take over CBS by stock purchase, with the ultimate goal to fire Dan Rather. Seeing an opportunity, Ted Turner announced the intention to do his own hostile take-over, to be financed with junk bonds. The network beat back this effort with a $1 billion stock repurchase, but was left with more debt, little working capital, and a reduced stock valuation. The Board and the aging founder, Paley, passed leadership, and thereafter effective control of the stock, to Loews Corp. and its proprietor, Lawrence Tisch. By a combination of ill-fated acquisitions and divestments, and under competitive pressure, CBS had to focus on cost containment. The news division, successors of Edward R. Murrow, was pruned by 230 people. In 1987 CBS dropped to third place in the season ratings for the first time.

Ever since the sputtering start for UHF in the first two decades of television, FCC commissioners had spoken longingly of the desire, first to assure three-network service to every corner of the nation, and next to somehow realize the dream of a fourth network. By the time the fourth network arrived, conditions had so changed as to raise the question, four of what? In any given household at any given time, two or three television sets could be in use, watching network fare; or independent stations; or movies, sports, original fare and reruns on cable; or first-run movies on premium, pay cable; or movies or exercise videos on cassette; or possibly computer games. Nevertheless, the fabled fourth network did indeed come in 1990, when an Australian publisher, naturalized as a U.S. citizen, Rupert Murdoch, acquired the strong major-market grouping of Metro Media stations, and placed them under the same roof with the Twentieth Century-Fox studio. Murdoch eschewed ABC's original 1950s approach--programming mostly cannon fodder against its rivals on a full seven nights--instead making a staged entry with two nights, then three, four. The FOX network finally attained a full-time run, and in less than five years from launch, FOX could be seen actually winning a time period here and there. In 1994 FOX purchased rights to the National Football Conference, building from sports, and luring affiliates in NFC territories, all exactly as dictated by the ancient scripting of ABC.

During the l990s the FCC continued to chip away at rules intended to adjust the playing field between Hollywood studios and other program suppliers on one hand, the networks on the other. Rules had evolved that imposed a quota on network self-produced fare, that forbade the networks to own rights for secondary distribution of the programs they originated (called the Fin Syn Rules), and that kept an hour of prime time out of the hands of networks, reserved for local stations to program (the Prime Time Access Rule). Because FOX combined a network with a studio, some of these rules had the perverse effect of thwarting development of a fourth network, and for a time the FCC liberally accorded waivers to FOX alone.

Other rules no longer served a purpose in the multi-channel environment. By 1994, the liberalization of ground rules emboldened three more Hollywood studios to try their hand at networking directly. Warner Brothers launched a network in its own name, and Universal, which had grown to eminence as a prime source for NBC, teamed with Paramount, proud source of the inexhaustible Star Trek, to form UPN (United Paramount Network). The aspirations of these mini-networks remain ad hoc, choosing their nights and their time periods with care. It is obvious that there are too few local television broadcast stations to support five, six or more full-time networks. The immediate impact of these entrants was to drive up the prices of television stations, as too many programs chased too few outlets. In time, a new wave of consolidations is assured.

In 1995, Westinghouse, a strong group owner, acquired CBS, in a transaction that echoed the Cap Cities take-over of ABC ten years earlier. Also in 1995, Capital Cities ABC agreed to be acquired by Walt Disney Studios for $19 billion in cash and stock. In the long view, the CBS sale is likely to appear as but one more episodic reorganization. The Disney combination with CapCities prefigures a new level of competition among few great communications trusts equipped to provide multiple channels of information, entertainment and merchandising in coordinated fashion throughout the world. Such networks are difficult to describe, because none yet exists. The largest multiple system cable operator, TCI, which has diverse program interests, is poised to be one in the future. Viacom, as owner of Paramount, impresario of UPN, owner of Blockbuster Video, and cable programmer in other capacities, may be another.

In 1996 Congress passed and the president signed a new telecommunications act. It reduces or eliminates historic barriers that have separated telephone long distance companies and the regional Bell operating companies from the local cable television companies. In broadcasting, it abolishes the numerical limit on television stations in common ownership, and provides a liberalized cap of 35% of national audience for any one station owner. It abolishes the "dual network" ban that divested NBC Blue in 1941, and invites the FCC to undertake proceedings, looking to the authorization of more than one local TV station in common ownership (now forbidden). Since the advent of television in 1941, there never has been a regulatory change--permitting combinations not previously allowed--that did not trigger moves by the affected parties, to the full, lawful outer limits. The turn of the century is bound to witness the additional three networks (now a college of four) dropping below that point where they own even so much as a majority of prime time viewing attention. But that development, in steady process for thirty years, will be overshadowed by the emergence of new network forms, rendering the classical shape of the three no longer recognizable.

-Michael Couzens

FURTHER READING

Auletta, Ken. Three Blind Mice: How The TV Networks Lost Their Way. New York: Random House, 1991.

Bagdikian, Ben H. The Media Monopoly. Boston, Massachusetts: Beacon, 1992.

Barnouw, Erik. The Image Empire, A History of Broadcasting in the United States, Vol. III. New York: Oxford University Press, 1970.

_______________. Tube of Plenty: The Evolution of American Television. New York: Oxford University Press, 1975; revised edition, 1990.

Bedell, Sally. Up The Tube: Prime Time TV in the Silverman Years. New York: Viking, 1981

Block, Alex Ben. Outfoxed: Marvin Davis, Barry Diller, Rupert Murdoch, Joan Rivers, and the Inside Story of America's Fourth Television Network. New York: St. Martin's, 1990.

Boddy, William. Fifties Television: The Industry and Its Critics. Urbana: University of Illinois Press, 1990.

Brown, Les. Televi$ion: The Business Behind The Box. New York: Harcourt, Brace, 1971.

Castleman, Harry and Walter J. Podrazik. The TV Schedule Book: Four Decades of Network Programming from Sign-on To Sign-off. New York: McGraw-Hill, 1984.

_______________. Watching TV: Four Decades of American Television. New York: McGraw -Hill, 1982.

Cooper, R.B., Jr. "The Infamous Television Allocation Freeze of 1948. " Community Antenna Television Journal, March 1975.

Inglis, Andrew F. Behind The Tube: A History of Broadcasting Technology and Business. Boston, Massachusetts: Focal, 1990.

Kiernan, Thomas. Citizen Murdoch. New York: Dodd Mead, 1986.

MacDonald, J. Fred. One Nation Under Television. New York: Pantheon, 1990.

Metz, Robert. CBS: Reflections in a Bloodshot Eye. Chicago: Playboy, 1975.

Paul, Michael, and James Robert Parish. The Emmy Awards: A Pictorial History. New York: Crown, 1970.

Sloan Commission on Cable Communications. On The Cable: The Television of Abundance. New York: McGraw-Hill, 1971.

Wilk, Max. The Golden Age of Television: Notes From the Survivors. New York: Delacourte Press, 1976.

Government Studies: Federal Communications Commission, Network Inquiry Special Staff. Final Report: New Television Networks: Entry, Jurisdiction, Ownership and Regulation. Volume I, Final Report; Volume I, Background Reports. Washington, D.C., October, 1980.

Federal Communications Commission. Report on Chain Broadcasting. Commission Order No. 37, Docket No. 5060, May 1941.

Federal Communications Commission. Second Interim Report of the Office of Network Study: Television Network Program Procurement, Part I. Washington, D.C., 1965.

U.S. House of Representatives (88th Congress, 1st Session). Television Network Program Procurement. House Report No. 281. Washington, D.C., 8 May 1963.

U.S. House of Representatives (85th Congress, 2nd Session). Committee on Interstate and Foreign Commerce. Network Broadcasting ("The Barrow Report"). House Report No. 281. Washington, D.C., 8 May 1963.

U.S. House of Representatives (97th Congress, 1st Session) Committee on Energy and Commerce. Telecommunications in Transition: the Status of Competition in the Telecommunications Industry. Commission Print 97-V, Report by the Majority Staff. Washington, D.C., 8 November 1981.