t the apex of the television structure are the network overlords, CBS, NBC,
and ABC. These three networks dominate television as General Motors, Ford, and,
Chrysler control the fortunes of the automobile industry. For the American
public, television is network television: the program it watches on the screen
typically bears a network stamp. For the owner of the local station, whether
baron or serf, the prime source of economic affluence is affiliation with a
network. Next to the FCC license, his most treasured asset is the network
contract. On the national television power game the local station is a pawn, or
at best a knight.
For example, NBC, in unity with its parent, RCA, decided in the mid-1950s to
upgrade the size of the markets in which it owned stations. This plan served
both the manufacturing interests of RCA and the broadcast interests of NBC.
Inconveniently, Westinghouse, a rival in the equipment field, owned an
NBC-affiliated station in Philadelphia, close to a central RCA complex.
Westinghouse was told that if it wished to continue its affiliations with NBC,
it must transfer its ownership of the Philadelphia station to the network and
accept in its place the NBC station in Cleveland, a $3 million cash settlement,
and a less desirable market. After an agonizing internal struggle, Westinghouse
succumbed. The FCC, which had conducted a thorough investigation disclosing the
coercive tactics, shrugged its shoulders and concluded that if Westinghouse, a
giant in its own right, "agreed," the FCC had no choice but to approve the
transfer. Subsequently the Justice Department and the federal courts
invalidated the transfer and the FCC ultimately required that NBC return to
Cleveland, and Westinghouse regained its station in Philadelphia. Westinghouse,
it should be noted, is the largest of the non-network multiple owners.
While there is now and then private grousing among affiliates, direct
confrontation on general policy by an individual or group of affiliates, when
it occurs, is kept within definite bounds. The areas in which there is
occasional dissent have to do with network compensation payments, the amount of
commercial time adjacent to or within a network program permitted the
affiliates, and sexy programs.
The national media market in which television is pre-eminent is a network
domain. The networks create a national audience for advertisers. Each network
produces or selects a program schedule for nationwide distribution; each
selects for affiliation approximately 200 local stations in as many cities,
reaching into practically every television household; each rents
interconnection facilities from the Telephone Company to transmit
simultaneously to each affiliate the programs and advertising messages which
originate largely in Hollywood and New York; each network determines the time
at which such programs will be broadcast locally; and finally, each network
contracts with national advertisers through advertising agencies to defray the
program and time costs and supply the advertising "plugs," and these monies the
network shares--unevenly--with its affiliates.
Except for news, public affairs, and sports, the overwhelming proportion of
network programs are not produced by the networks, but the networks acquire
rights from program packagers, TV film companies, and feature-film
distributors. These suppliers engage in intensive competition to persuade the
three overlords to look favorably upon their works--pilot programs and story
lines into which they have sunk tens and hundreds of thousands of dollars--and
to bless them with network acceptance. Not surprisingly, allegations of abuse
The tangible result of this complex of technical and economic arrangements is
that for a single Wednesday hour, 9 P.M. to 10 P.M., advertisers pay the
networks roughly $950,000 for a total of 18 minutes of advertising
participations (6 minutes per network). Payments by advertisers for the network
participations are not publicly disclosed, but the trade publications
occasionally disclose so-called price lists used by networks in negotiations
with advertising agencies. In addition to the network commercials, "nonprogram"
matter includes promotional announcements, credits, public service spots (for
example, the anti-cigarette ads), and commercial spots inserted locally by each
Advertisers compete for this opportunity because they are assured that over 32
million television homes (out of an industry estimate of 57.5 million TV homes)
are tuned to the network programs during the hour--and to the accompanying
The overwhelming proportion of potential viewers in the other 25 million TV
households are not using their sets because the family members are not at home,
are engaged in other activities, or are not interested in any of the programs,
televised. Only a small percentage of the public during prime time tunes to the
non-network programs beamed by unaffiliated stations (usually in the score of
major metropolises where there are more stations than networks).
The networks play a dual role in the system: they not only control network
program production or selection and network distribution, but through their
owned stations in the larger markets control network program exhibition for
some 25 to 30 percent of all TV homes. In the three most important centers--New
York, Los Angeles, and Chicago--only the networks themselves through their
owned stations broadcast network programs.
Two financial yardsticks of network dominance are their shares of industry
revenues and profits. Of the $2.275 billion television revenues recorded for
1967, 53 percent ($1.216 billion) went to the three network overlords,
including their 15 owned stations. The remainder was shared by 604 other TV
stations. Similarly, of the industry's profits, only slightly less than 40
percent ($160 million) went to the three network organizations.
Among the overlords, CBS and NBC are more equal than ABC. The Big Two lead in
ratings, fulltime affiliates, and profits. Financial figures for the industry
are published annually by the FCC, but without disclosing individual network or
station expense. However, a highly regarded and generalIy accurate trade-press
newsletter (Television Digest) has published this "secret" information. The
figures for 1967 revealed that ABC lost $17 million on its network operations,
and received only 8 percent of the combined network and owned-station profits
as contrasted with CBS's 48 percent and NBC's 44 percent.
NETWORK OPERATIONS: 1967
Network revenues $362 $327
(before federal income taxes)
Network profits 42 3
Owned-station revenues 95 95
Owned-station profits 35 40
(before federal income taxes)
Combined network and owned- 77 71 12
Percentage share of network 48% 44% 8%
and owned-station profits
(Television Digest, vol. 8, no. 19, May 6, 1968, p.1)
The above figures do not include revenues that networks gross from other
television activities. For example, after programs have exhausted their network
runs, high-rated series (for example, Perry Mason, The Flintstones, Gilligan's
Island, The Munsters, I Love Lucy, The Twilight Zone, Route 66) are sold
market-by-market to any station that will pay the price (affiliated or not) as
"syndicated" programs. The networks also sell their series to television
authorities in other countries, and because costs have been recovered from
domestic sales, they are competitive with lower-budgeted foreign productions.
Not only do the networks dominate the U.S. television program market, they are
also an important source of popular American TV programming on world
The network system creates rich rewards not only for the overlords but for the
constituent affiliated stations. Indeed the mutual interest of the networks and
the affiliated stations in the system explains the vitality and durability of
the network institution both economically and politically. A station can plug
into a network line and receive a daily stream of programs having broad appeal
to its public. Of course each station also includes in its daily schedule
programs which it produces or acquires from non-network sources: notably news,
weather, and sports, films produced for TV (distributed by independent
syndicators as well as by networks), and feature films.
The network pays the affiliate somewhat less than 30 percent of the gross
charges for broadcasting the program. In addition, the station is permitted by
the network to sell a prescribed amount of commercial time within and adjacent
to the network programs, the proceeds from which it does not share with the
network. In a large market a single 20-second "adjacency" will bring $1000 to
$1500, because the network program has created a mass audience for the station.
It is no wonder that when a station sells for $20 million or more, the tangible
property may be valued only at $2 million whereas the primary asset is the
network contract. Several of the media barons, including Westinghouse, Time
Inc., and Corinthian, have sought to persuade the Internal Revenue Service, the
tax courts, and the federal judiciary that the network contracts should be
eligible for amortization, thus reducing the annual tax obligations of stations
Only in the largest markets do unaffiliated stations--and usually only one such
independent station per market--reap the fullness of the television bounty.
From the early days of broadcasting, the power of the network "chains" has
troubled Congress, the FCC, and the Justice Department as well as disaffected
elements within the industry. Various network investigations and hearings have
led to restrictions: a network organization may not own or operate more than
one network; it may not option the time of its affiliates; it may not contract
for more than a two-year term; it may not control the rates charged by
affiliates for non-network times; and it may not prevent an affiliate from
contracting with more than one network. And, of course, it may not own and
operate more than seven AM radio stations, seven FM radio stations, and seven
television stations of which no more than five may be VHF stations. These and
other network rules and regulations have corrected the grosser abuses of
But network dominance persists. It persists because network service is integral
to the nation's broadcast service and has been so recognized by Congress and
the FCC. It persists because network service enjoys overwhelming public
acceptance. A network commands talent and resource immeasurably greater than
those available to any single station or groups of stations.
Networks are the source of Laugh-in, Bonanza, Mission Impossible, Mayberry RFD,
FBI, Bewitched, the Bob Hope specials; of coverage of professional and college
football, the World Series, the Olympics, political conventions, presidential
campaigns, presidential messages, the daily news, space flights, United Nations
debates, congressional hearings, and unscheduled "special events." Much of this
would not otherwise be available with anything like the immediacy and
thoroughness that network economics makes possible.
Earlier, the same three networks, CBS, NBC, and ABC, dominated radio.
Ultimately their control was undermined, not by governmental actions, but by
changing technology. Popular recordings gave stations an alternative and
competitive program service. Concurrently, the superior television medium
captured the night-time audiences, the prime target of network advertisers.
If networking in television is changed in the future, the cause will be
technology and not governmental intervention. A prevalent myth is that if
networks were licensed or directly regulated by the FCC, they would become
significantly more responsive to the public interest. The truth is that most
network practices are within the purview of existing FCC authority. This is
particularly true because each TV network owns stations which are licensed. In
some areas, the network acts "as if" it were licensed by the FCC. For example,
a complaint of unfairness lodged against a network program need not be pursued
with each of the 200 affiliated stations that may have aired the program but
with the network that originated it.
Technological changes in the offing could alter the present network system. For
example, when a satellite-to-home service becomes economically feasible,
network overlords could reach the public directly without the assistance of
local affiliates. This would undermine most of the television barons and, at
least initially, further strengthen the power and profitability of the
networks. However, if enough channels were available for satellite-to-home
broadcasting, or if by governmental decree use of the available channels were
required to be leased on a common-carrier basis (or even rationed), other
national program suppliers could compete with the networks. Conceivably, the
network could slip from being overlords to being merely greater barons than any
Alternatively, if all homes were connected by cable--as is technically feasible
and not impossible economically within the next two decades--the networks could
rent national channels and reach directly into all homes. Such a system wood
open a larger number of other communications channels to competing program
In the long run, television audiences could become as fragmented as radio
audiences, and TV network dominance would wane.
Challenges are also posed by the advent of subscription television and the
introduction of the EVR (electronic video recording). Neither is an immediate
threat to the networks. Furthermore, if subscription television should prove
popular, the networks have made explicit that nothing would prevent their entry
into that field; while the EVR, the visual counterpart of the stereo record, is
an invention of CBS.
More likely during the next five years is the appearance of a fourth network to
compete with, and share the profits with, the other three. As experience in
radio suggests, this will be a change without a difference.
Copyright © 1969 by Hyman H. Goldin. All rights reserved.