Peacock Backs Off From Fox

NBC’s decision to back off from its charges that Fox violates the FCC’s foreign ownership rules – and news that the Peacock web has just cut a programming deal with Rupert Murdoch’s Star TV in Asia – sends a clear signal that corporate principles are fine until the bottom line is impacted.

Last fall, NBC challenged Fox Broadcasting’s right to own TV stations, charging that Fox and its Australian-based parent News Corp. were in violation of the Federal Communication Commission’s foreign ownership rules. These prohibit foreign companies from owning more than a 25% stake in U.S. TV stations.

NBC argued that while Fox chairman Rupert Murdoch became a U.S. citizen and owns 76% of the voting stock, 99% of the equity to finance the purchase of the Fox TV stations came from News Corp.

While NBC has dropped its charges, the National Association for the Advancement of Colored People is still going after Fox on the same grounds. The FCC is expected to rule in that case within the next few months.

In a statement, NBC said the FCC’s recent decision to review all TV ownership rules meant that the network had made its point in its battle against Fox and could now withdraw.

But Washington and industry sources said that NBC knew it faced a long battle that it could not win and simply chose to back off. NBC was also sending conflicting signals, lobbying on the one hand for complete deregulation for the industry while battling Fox on regulatory matters.

Republicans in both the House and Senate have indicated that they favor radical deregulation of the industry that would favor Fox. Republicans have also indicated that they would rather see NBC fight its battles in the marketplace and not in Washington.

More to the point, the battle was affecting business relationships between Fox and NBC. Some say it is more than coincidence that NBC has dropped its case against Fox at the same time that News Corp. has agreed to distribute NBC’s CNBC Asia and its Super Channel Asia on Murdoch’s Hong Kong-based Star TV satcaster. NBC’s channels were to have been distributed on the Apstar 2 satellite, which blew up upon launch last month.

Fox also sells programs to NBC’s network, and the two also work together abroad.

NBC president Robert Wright conceded as much in a statement. “We believe it is now appropriate to seek withdrawal of our petitions and for us to cooperate with Fox on other matters of mutual interest,” Wright said.

In a statement, Murdoch said that News Corp. “looks forward to working together with NBC and the other networks to seek elimination of outdated broadcast regulations, and to the resumption of normal business relations with NBC.”

NBC has also dropped its battle against SF Broadcasting, the Fox and Savoy Pictures-backed broadcaster that has deals to buy three NBC affiliates and switch them to Fox. NBC had alleged that SF was also in violation of the foreign ownership rules and that Fox was also in de facto control of the stations – putting Fox in violation of rules limiting a company to owning no more than 12 TV stations or reaching 25% of the country.

SF Broadcasting chief executive and former Fox exec Tom Herwitz said SF just wants to run good stations and serve the community. He is hopeful that the deals will now proceed through the commission.

Despite the Peacock web’s public statements about getting the issues out in the open, the withdrawal – paired with news of the Star TV deal – suggests that business as usual, not NBC’s lofty principles, were at the heart of the complaint.

For months, NBC had been leading a very loud and public campaign against Fox at both the FCC and the Hill, saying the weblet was not playing fair.

But the anguished cries were not well received on the Hill.

Congressional sources say NBC general counsel Rick Cotton has received sharp criticism from both Senate

Commerce Committee chairman Larry Pressler (R-S.D.) and House telecommunications subcommittee chairman Jack Fields (R-Texas) over the Fox matter during lobbying forays in D.C.

While the FCC seemed open to hearing challenges to Fox, it did not want to hear them from NBC. The commission did not include NBC’s arguments in its Fox probe.

Many industry observers also feel that NBC has damaged its image.

An outside observer said the settlement “makes both companies look bad. Why does Fox need to pay off NBC if they’re innocent?”

NBC’s campaign was not a complete failure, since the web has succeeded in slowing Fox’s growth. Because of the FCC probe, Fox has been unable to complete several deals to purchase stations and Fox’s efforts to recruit stronger affils were hampered, as TV stations, not knowing who would win, opted to stay with their current network.

NAACP lawyer David Honig, noting that it was his organization that originally filed the complaint at the FCC, said, “We got in this alone, and we’ll fight it alone. We’ve only begun to fight.”

Nonetheless, Honig said the NAACP “appreciate(s) that NBC stayed in as long as they did. It’s rare when you see a corporation take a stand like they did. Sometimes, public companies can’t be brave forever,” he said.

Dennis Wharton contributed to this report.

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