A Los Angeles judge has handed the Big Three networks an early Christmas present by snapping Hollywood’s lock on the TV production and syndication business.
The historic ruling from federal Judge Manuel Real lifts 15-year-old fin-syn-related antitrust consent decrees that barred the webs from participating in the domestic syndication business or taking a financial stake in non-network shows.
Real’s decision means the watered-down FCC fin-syn rules adopted in April are now the only barrier preventing the networks’ unfettered entry into TV program ownership and syndication.
Those regs allow the webs to obtain a financial interest in all of their programs. Networks may also acquire domestic and foreign syndication rights to those programs; however, for the next two years, programs sold into the domestic syndication market must be brokered off through an unaffiliated third party.
The syndication restriction may limit immediate prospects for the long-rumored network-studio merger, since it’s unlikely a studio such as the Walt Disney Co. would be willing to shed its syndie arm just to join forces with a network.
CBS lobbyist Marty Franks hailed Real’s decision, saying, “We’re glad to have it.” However, Franks said the FCC syndication restraints, designed to stay in place for another two years, mean the networks are “not free yet.”
The L.A. decision was issued last Monday, but parties to the case were not notified until late Friday. Real’s ruling represents a setback for Hollywood, whose backers are battling desperately to preserve the community’s grip on the $ 5 billion TV syndication business.
At issue were U.S. Dept. of Justice lawsuits filed against ABC, CBS and NBC in the late 1970s accusing the webs of anti-competitive acts to drive independent producers out of busi-ness. The networks settled the suits by signing consent decrees in which they agreed to abide by rules then enforced by the Federal Communications Commission that limited network participation in the TV biz.
The FCC has revised its fin-syn regs twice since 1991, most recently in April , when the agency settled on outright elimination of the rules two years after the L.A. consent decrees were removed.
Real’s rationale for overturning the decrees centered on the competitive nature of today’s TV market. He wrote, “Even if a network controlled all of the syndication of its network programming — an assumption not at all that clear in light of the entry of the Fox network and the increase in cable television, the increased competition of independent TV stations and tremendous source of program production — it appears that not a single network would control a sufficient share of the market to exercise monopoly power.”
Further, Real wrote he was not about to “unfairly penalize NBC, ABC and CBS in financing and syndication of off-network programming” given the entry into the market of the Fox weblet, the “substantial rise” in program producers, the explosion in cable TV and the impact of the videocassette recorder.
The ruling by the judge, who had taken the matter under advisement after a brief Oct. 18 hearing, was issued so late on Friday that few on either side had the opportunity to see it. Of those who did, network personnel were clearly pleased by the outcome.
NBC general counsel Rick Cotton said the decision “completely vindicates what we’ve been saying for years about the changes taking place in the TV marketplace.”
Diane Killory, a lawyer with Hollywood’s Coalition to Preserve the Financial Interest and Syndication Rules, claimed Real’s decision is “obviously bad news, not only for producers but for TV diversity in general. We object not only to the decision, but also to the fact that we never had our day in court. They didn’t want to hear opposing viewpoints.”
Real refused to allow Hollywood or the state of California to present arguments in favor of retaining the consent decrees. Thus, fin-syn backers will be prevented from appealing the decision since they weren’t parties to the case.
Though Killory said, “You haven’t heard the last from us,” it appears that Hollywood’s legal options are severely limited.
Whether the FCC’s April fin-syn rules withstand court scrutiny remains to be seen. Both Hollywood and the networks are challenging the regs in Chicago’s U.S. 7th Circuit Court of Appeals, where Judge Richard Posner and two other jurists will decide sometime next year whether the FCC rules are justified.
It was Posner who in 1991 tossed out an earlier set of revised FCC fin-syn rules on grounds they were “unreasoned and unreasonable.”