Well, this committee is not party to such a bargain, but I suppose we might take note of it.

Mr. BRESNAN. The rules that we were hoping to get out of the FCC we did not get. And I recall such powerful words-I think they were attributed to Peter Flanigan-"There will be a blood bath for cable television."

Mr. KASTENMEIER. Well, that has not happened either, has it?

Mr. BRESNAN. We seem to have gotten everything.

Mr. KASTENMEIER. The Chair yields to the gentleman from Illinois, Mr. Railsback.

Mr. RAILSBACK. The blood bath was earlier, wasn't it? [Laughter.] Do you think we could have copy of your annual report that is referred to in your earlier testimony, would that be possible? Mr. BRESNAN. Yes, sir.

[The material referred to is in the files of the subcommittee.] Mr. RAILSBACK. Do you recall the reason for what appears to be an extraordinary loss to your company in 1973?

Mr. BRESNAN. Yes. Teleprompter Corp. was expanding into several of the top markets. Teleprompter, I guess, was probably attempting to do more to prosecute the intention of the FCC rules than any other company. It was not getting subscribers as fast as it was building plant. It stopped construction in a number of systems, and slowed down construction in others. It changed its whole mode of operations, if you will, from that of a construction company to that of an operating company.

There were significant operating costs and losses, and there was some write down of assets due to this change.

Mr. RAILSBACK. So, it really was, or could be characterized as an extraordinary loss, or a nonrecurring loss.

Mr. BRESNAN. Well, of part of it you could say that. However, in 1974 the industry also had a loss.

Mr. RAILSBACK. You went from $29 million down to about $7 million?

Mr. BRESNAN. Yes. And the interesting thing, Mr. Railsback, we picked up a bit of information this morning from a very well-respected cable analyst, and he tells us that of the 15 publicly held companies which represent 4.2 million of the 10 million cable subscribers; that those systems combined showed a net loss in 1974 of $31 million.

Now, we don't know how much profit or loss privately held companies would have because we don't have access to that information. But we estimate that the entire industry last year did not operate at a profit.

Mr. RAILSBACK. Let me just mention, the exhibit attached to your testimony reflects that the nine largest public CATV companies, there was a 1974 loss of $16.3 million; but 17.2 percent of that total figure was Telecommunications; and in the year 1973 there was a loss, a net income loss of $27.9. There is a figure that you had that year, and this is part of the total figure, that your company had a 29.7. Two companies have a rather severe impact on the total figure in both years, your Telecommunications and Teleprompter.

Mr. BRESNAN. No question about that, sir. However, the fact remains that in 1974, at which time Teleprompter did not have a real large loss, as we had in 1973, the top 15 publicly held companies I referred to just a moment ago, had a net result of a $31 million loss.

Mr. RAILSBACK. Which year was that?

Mr. BRESNAN. 1974.

Mr. RAILSBACK. Well, in 1974 Telecommunications had contributed toward that 17.2 percent of the 15 companies.

Mr. BRESNAN. Yes.

Mr. RAILSBACK. I think that is all I have.

Mr. KASTENMEIER. The gentleman from California, Mr. Danielson. Mr. DANIELSON. Thank you, Mr. Chairman.

After this consent agreement which I think we all have heard a lot about recently, do you know whether the cable industry had any part in drafting it, preparing it? That is the Consensus Agreement. Mr. BRESNAN. I don't know, sir.

Mr. DANIELSON. You are not saying that the cable industry did not participate in the preparation, you are saying you don't know whether they did.

Mr. BRESNAN. I am saying I don't know.

Mr. DANIELSON. Do you know of anybody who does know?

Mr. BRESNAN. We believe it was drafted by OTP. There were meetings conducted, where the participants included representatives of the NCTA and the broadcasting industry, and I believe the copyright industry. I don't know whether they were actual drafting sessions. We could find out.

Mr. DANIELSON. But your opinion is that, at least subsequent to those meetings, the agreement was drafted by, in your opinion, OTP. Mr. BRESNAN. Yes, sir.

Mr. DANIELSON. Which is Office of Telecommunications policy, I believe.

Mr. BRESNAN. That's correct.

Mr. DANIELSON. Were you present at the meeting where you were told, you get this, or you get nothing?

Mr. BRESNAN. The meeting with Mr. Flanigan?

Mr. DANIELSON. Well, you referred to a meeting

Mr. BRESNAN. I was present at a meeting of the NCTA board, where the remarks of the meeting with Mr. Flanigan were reported to the board.

Mr. DANIELSON. In other words, someone reported to you that had been said.

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Who reported that to you?

Mr. BRESNAN. The person I remember specifically who gave quite a bit of reporting at that time was Gary Christensen, who at that time was general counsel to NCTA.

Mr. DANIELSON. And he made that report to a group of National Cable Television Association people, which included yourself; is that correct?

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Do you know whether there were any changes made in the so-called consensus agreement after that time, before it was signed?

Mr. BRESNAN. I can't recall, sir.

Mr. DANIELSON. You recall no changes, but you do not recall that there were no changes, also; is that correct?

Mr. BRESNAN. That is correct.

Mr. DANIELSON. You do not recall any changes, but you also do not know if there were no changes.

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Were you an officer of Teleprompter at the time the agreement was signed?

Mr. BRESNAN. Yes, I was.

Mr. DANIELSON. Were you at a policymaking level at Teleprompter at that time?

Mr. BRESNAN. No, sir.

Mr. DANIELSON. Do you have any knowledge as to whether or not Teleprompter would have agreed to the so-called consent agreement, but for the threat that you reported, that you would get this, or you would get nothing?

Mr. BRESNAN. To my knowledge neither Teleprompter nor anyone else at NCTA would have accepted that agreement, were it not for the threat; that was the feeling I got.

Mr. DANIELSON. Were you at the meeting of the NCTA people when it was reported?

Mr. BRESNAN. Yes, I was.

Mr. DANIELSON. And can you tell me whether your feeling, which I am going to describe as a negative feeling for point of reference; can you tell me whether that was shared, as far as you can tell, by others?

Mr. BRESNAN. As far as I can tell, sir, it was. It was a very, very gloomy meeting at which we were told we would have to accept something which we all knew was bad for our industry.

Mr. DANIELSON. Directing your attention, now, to the two charts on the side wall which your colleague pointed out a while ago, I note that the upper one depicts what I am going to call New England, Pennsylvania, New Jersey, New York, and up through to Maine. Portions of the map are in a dark gray, and portions in white.

It is my understanding that in the white area, the area that is circumscribed by a heavy dark, black line, is the primary viewing area of the New York City television broadcasting stations; am I right on that?

Mr. BRESNAN. Yes, sir.

Mr. DANIELSON. And beyond that heavy line there continue to be, in irregular formation, other white areas, reaching from upper New York back all the way, I guess, to the St. Lawrence River to Canada; down through New York, one leg going out to a lake-I can't name it. Mr. PATTISON. Atlantic. [Laughter.]

Mr. DANIELSON. Another leg going down to the Pennsylvania southern end, again western boundary. Do I understand your testimony to be that those white areas are included within the potential viewing audience of the New York City television stations, in conjunction with their advertising rate schedule. Am I right, or wrong on that? Mr. BRESNAN. You are right.

Mr. DANIELSON. I would like to ask a question, and I think it's really for Miss Da Costa. I understand Miss Da Costa is a professional advertising agency person; am I correct?

Miss DA COSTA. Yes, sir.

Mr. DANIELSON. How long have you been so employed?

Miss DA COSTA. More than I care to admit, about 30 years.
Mr. DANIELSON. Well, you started as a child, then. [Laughter.]

Miss DA COSTA. Thank you.

Mr. DANIELSON. Anyway, does your work include the contracting for advertising through television stations by the clients of your advertising agency?

Miss DA COSTA. Not directly, sir. I advise our buyers and planners of all media available to them to buy. I am not directly involved in buying.

Mr. DANIELSON. But that includes advice as to television audiences? Miss DA COSTA. Yes, that is my area of expertise, I am charged with media research at Ted Bates.

Mr. DANIELSON. The Ted Bates Co., I'm pretty ignorant in that field; are they a pretty well-established firm?

Miss DA COSTA. Yes, they are the fifth largest agency in the country. Mr. DANIELSON. Do they handle major clients, major industries, businesses?

Miss DA COSTA. Yes, sir, many of them.

Mr. DANIELSON. Not Joe's Used Car Lot.

Miss DA COSTA. All of our clients are national accounts.

Mr. DANIELSON. I like Joe's Used Car Lot-[Laughter.]
You have expertise in big ones.

Miss DA COSTA. All of our accounts are national accounts.

Mr. DANIELSON. Then, the statement which I made-I wasn't too sure if I understand you correctly. Do you know of your own personal knowledge that in computing the advertising rates which are charged to these national accounts by the TV stations for their advertising, is the audience encompassed in these white areas in the charts included?

Miss DA COSTA. Yes, sir.

Mr. DANIELSON. I don't suppose you handle the California accounts. Miss DA COSTA. No, sir.

Mr. DANIELSON. There is a similar chart there, maybe the witness can explain. Where did you obtain these charts, what is the source of the charts?

Mr. BRESNAN. The Association of Independent Television Stations. Mr. DANIELSON. And can you tell me what that is?

Mr. BRESNAN. A group of broadcasting companies that are not affiliated with network companies.

Mr. DANIELSON. And someone has simply copied these maps from their information.

Mr. BRESNAN. We have brochures that this Association of Broadcasters has put out.

Mr. DANIELSON. And they are blowups, are they?

Mr. SIMON. Exactly.

Mr. DANIELSON. I'm not going to ask you whether you copied them, you might have a copyright problem. [Laughter.]

Anyway, that's really what they represent.

Mr. BRESNAN. Yes, sir.

Mr. DANIELSON. I see that California and the Southwest are included; and do the same analogies of white areas and gray areas prevail there, as in New York?

Mr. BRESNAN. Yes. As a matter of fact, I would like to make one further point. Mr. Simon, would you find that line?

Mr. SIMON. Here is the dark line, the primary viewing line again. Mr. DANIELSON. And this is from San Francisco.

Mr. SIMON. That's correct, San Francisco stations.

Mr. BRESNAN. The white area goes all the way up to Oregon, and east into Nevada.

Miss Da Costa advises me that, not only do the broadcasters from San Francisco claim this coverage and therefore ultimately moneys filter back to the copyright area-but she says also, that the syndicators will at the same time be selling programs in the Sacramento, Reno and Redding markets, also; they are selling them again to those markets. And what they are proposing to do now in the case of CATV, is to sell them a third time in many cases.

Mr. DANIELSON. Now lastly, it's my understanding that the owner of a copyrightable item, let's say the film of Bambi, may sell the right to use it to, say, a Boston TV station for their regular broadcast.

Suppose that the same film has been sold by the copyright owner, leased, licensed, what have you, to a TV station in the city of New York for its use. And through cables they picked it up and disseminated the program within the city of Boston, let's say, a month in advance of the showing in the city of New York.

Does not this diminish the value of the Boston licensee in using the film?

Mr. BRESNAN. Sir, if the copyright owner-the owner of the product-didn't recognize when selling that product, in this case, the Bambi film to the New York station, didn't recognize that that signal would go up into the Boston area, he is a fool because the coverage area of these stations, as you will see when you examine the brochures that I am going to leave with you, is clearly depicted. This is no secret. It's no surprise-it shouldn't be a surprise because it's stated in the advertising literature how far out that station's signal goes because of CATV.

Mr. DANIELSON. OK. Are you, sir, or any of you in your group able to tell me, or do you have any expertise, how are the negotiations carried on between a copyright owner-the owner of Bambi, for example and the station?

I don't know anything about that. Do you advertising people do that kind of work?

Miss DA COSTA. Well, generally the syndicator is the one that sells programming to individual stations within markets. They negotiate and take that into account, the number of homes that are delivered to that particular station and that particular market.

Mr. DANIELSON. I think we have a word of art here. You said "syndicators," are they the people who sell the films, and so forthMiss DA COSTA. Yes, sir.

Mr. DANIELSON [continuing]. To broadcasting stations?

Miss DA COSTA. There is some company that does that, although there are some originating producers that do their own selling.

Mr. DANIELSON. But in that connection, the sale includes whatever is the copyright royalty, that is in the package.

Miss DA COSTA. That is a total package, yes.

Mr. DANIELSON. Now, some of the Teleprompter stations originate their own programs, I am sure I heard you say that.