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On the other hand, the Johnstown station's physical coverage over Pittsburgh is “wasted” in the sense that advertisers buying the Johnstown/Altoona market also buy the Pittsburgh market separately; they buy by DMA or ADI and not by total coverage of the station.
The local merchant doing business in Johnstown or Altoona has no desire to pay more advertising dollars to reach viewers in Pittsburgh; his store is in Johnstown or in Altoona, and he'll not pay more for a signal that competes with the signals used by Pittsburgh merchants—who are “local" merchants for Pittsburgh area residents.
Where and how does cable help the Johnstown/Altoona television stations? The answer is that cable doesn't help them; it hurts. There has been no ABCTV affiliate in either Johnstown or Altoona. Cable brings in to both cities the signal of WTAE-TV in Pittsburgh, a station that is 75 to 100 miles away from Altoona and the area served by its station. The Pittsburgh station can't sell this coverage, but the viewers watching the programs, obviously are not watching the signals of the Altoona or Johnstown stations. Consequently, these audiences for the Altoona and Johnstown stations are diminished rather than increased. In short, cable has fractionalized the local viewing audience.
Or, look at Binghamton, New York, and audience survey records going back to November 1963. The share of audience viewing signals other than those in the market has risen from 2% in November of 1963, to 25% in May of 1975, and it has gone as high as 30%. The total number of homes attributed to the Binghamton market has gone from 43,000 in November of 1963, to 51,000 in November of 1966 but sharply down to 38,000 in May of 1975. In a time when the number of television homes was increased and the population was increasing, the Binghamton stations have had to run at full speed in order to remain in approximately the same place. The reason? The growth of cable systems in the area, systems that import three signals from New York City 200 miles away and additional signals from Syracuse and from Wilkes Barre-Scranton.
The total homes here cited is from 9 AM to midnight, 7 days a week. The prime-time situation is even more revealing. In 1963-1965, the number of homes viewing the three Binghamton network stations ranged around 90,000. At the height of the last television season, 1974–1975, the number had dropped to as low as 69,000.
On the purchase of syndication copyrighted product for use on television stations, the distributor prices each market according to its size. From that point on, the price the station pays is negotiated.
Prices for copyrighted programs are negotiated on the basis of competition be. tween sellers, on what a station operator feels he can afford, on the going price in the market for similar programs, on the quality of the product under consideration, on the number of stations in a market, on the length of time that the program has been available. These are among the more important factors that are the determinants of price for program material; not the size of the station's audience. Thus, the DMA or ADI is seldom, if ever, a measure of price paid and the total service area is of even less significance in such price discussions.
The syndicator may sell the same product in adjacent markets—the Pittsburgh/Johnstown/Altoona situation again. If he sells the same program in the two markets and the Pittsburgh station is carried by cable in Altoona and Johns. town, one may find that the Pittsburgh station is taking away audience with the same program for which the Altoona station has paid good dollars. At the same time, the Johnstown/Altoona audience is an audience that the Pittsburgh station cannot sell in formulating its rates. Meanwhile, the Altoona station is forced to sell at a lower rate because the program coming into the market via cable has eroded part of the Altoona station's audience.
Cable's claim that its enhancement of local signals and its extension of those signals in additional homes should make it exempt from copyright payment is not based on the facts and is not deserving of serious consideration, in my judg. ment. Sincerely,
GEORGE A. KOEHLER.
GOLDEN WEST BROADCASTERS,
Los Angeles, Calif., July 14, 1975. Hon. ROBERT W. KASTEN MEIER, Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of
Justice, U.S. House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: I have been asked as General Manager of KTLA. an independently owned television station in Los Angeles, California, to comment on whether or not we consider the number of cable subscribers to whom our programs are carried in determining the price we will pay for programs which we acquire from other parties.
In my experience, the question of the number of cable subscribers has never been an element in determining the price paid for such programs, nor is it an element in determining the prices we charge our advertisers for advertising on our station. This is so for primarily two reasons. The cable television audience is so negligible in comparison to the total available audience that it is not measured in considering prices charged or prices paid.
In addition, the rating services which report the number of viewers a par. ticular station has within its area of dominant influence in order to afford compa risons with other stations, do not include in their calculations or statistical research à separate number for cable viewers. The advertising rates we charge are based on the reports of such statistical surveys. Since the number of cable viewers is not included in the statistics, it is not an element in the determination of advertising rates.
I can remember no instance in which the number of cable viewers ever became a subject of a pricing discussion with a motion picture product supplier, or in any discussion of our advertising charges with a potential advertiser. Yours very truly,
JOHN T. REYNOLDS.
KSTW TELEVISION CHANNEL 11,
Tacoma, Wash., June 19, 1975. Hon. ROBERT KASTENMEIER, Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of
Justice, U.S. House of Representatives, Washington, D.C. DEAR CHAIRMAN KASTENMEIER: I have followed with interest press accounts of hearings by your subcommittee on the question of copyright liability by cable television. A major contention put forward by cable interests is inaccurate, and should be corrected before your committee begins its deliberations.
The cable people have attempted to create the impression that, by carrying television signals beyond the area a TV station would normally cover itself, cable expands the station's effective market. This, they say, enables the station to charge higher advertising rates, which in turn results in higher copyright payments. I do not deny that most station operators wish this were the case. Many of us have even labored to achieve that very goal. But the fact of the matter is that it doesn't work that way, nor is it likely to in the foreseeable future.
Television advertising rates are determined by the size and composition of the station's audience. There are only two generally accepted means of measuring that audience, and those are the regular audience surveys, or ratings, issued by the A. C. Nielsen Company and the American Research Bureau. Both those companies will admit that they cannot accurately credit to each station the viewing it may receive on every cable system far from the station's home market.
Even if the rating services could, and did, fully and accurately credit such "outside" viewing, the station's advertising rates would not automatically rise in a commensurate amount. About half of an average station's revenues comes from local advertisers, retailers in the station's home community. Additional viewers hundreds of miles away are not a market for them, and they will not pay higher rates for the privilege of exposing their messages to these far-away people. The other part of station advertising revenues come from national advertisers, whose products presumably are available almost everywhere. But even they won't pay higher rates for that possible extra audience, because their buying concepts and criteria are based on the audience delivered in the so-called "Area of Dominant Influence," or that area close in to the station's home market.
I realize that this is a highly detailed and technical concept, but it is necessary to understand it in order to refute the cable interests simple assertion that because of their additional coverage, broadcasters are charging higher rates and paying additional copyright fees. That just isn't so.
I hope you will call this to the attention of the committee's membership and staff, so that complete inforination can be elicited. Thank you very much for your time and consideration, Sincerely,
CRAWFORD P. RICE,
New York, N.Y., June 26, 1975. Hon. ROBERT W. KASTENMEIER, Chairman, Subcommittee on Courts, Civil Liberties and the Administration of
Justice, U.S. House of Representatives, Washington, D.C. DEAR CHAIRMAN KASTENMEIER: During your recent hearings on CATV Copyright before your Subcommittee, witnesses representing Cable Television have presented testimony concerning the sales value of out-of-market homes reached by television stations via cable. Our experience, which does not confirm the cable viewpoint presented, may be helpful to you in your consideration of this matter.,
Metromedia Television operates six television stations, five of which are independent--that is not affiliated with any major network.
Both local and national spot advertisers in the past have not had any significant interest in reaching any distant home outside of the market which may be receiving their message via cable. If indeed they were interested, they have not been willing in the past to pay higher rates for any additional viewing homes.
In fact most local advertisers are interested only in reaching viewers in the metropolitan area in which they conduct their business recognizing that customer potential from distant homes is minimal at best.
National and regional advertisers plan their advertising expenditures in spot television based on the ADI (Area of Dominant Influence). Therefore, cable homes falling outside the ADI simply are not a factor in the price they are willing to pay.
The cable coverage also has no bearing on the price that stations pay for its programming. Just like the national advertiser, the program syndicator establishes his price based on the size of the market not on the individual coverage of one station or another due to the number of cable systems on which that station is carried. If I can be of further assistance, please do not hesitate to call on me. Very truly yours,
R. KENT REPLOGLE, President.
A. Frank Reel, being duly sworn, deposes and says:
I am the President of Metromedia Producers Corporation, subsidiary of Metromedia, Inc. My Company distributes tape and film programming to television stations.
Among other activities, Metromedia, Inc. is engaged in the operation of six television stations in major United States television markets. Five of these operate as "independents"-i.e.: without network affiliation. The signals of these stations are widely retransmitted by CATV to both local and distant cable audiences.
I make this afidavit so that it may be submitted to the Subcommittee on Courts, Civil Liberties and the Administration of Justice of the Committee on the Judiciary of the House of Representatives in connection with its hearing of the bill H.R. 2223.
The question to which I address myself is whether a television station pays a higher fee to the copyright owner for the licensing of a television program because of the fact that the signals of the licensed station are retransmitted by cable systems operating in the local market of the television station or are carried into markets distant from that of the television station in order to be distributed to the cable system's subscribers in that distant market.
Based on my knowledge of the industry as it has operated for years and operates today, I can state that no such higher payments are made to the copyright owners and that the license fee paid by the television station does not reflect in any manner the extended audience provided by distant cable systems.
My experience in this field goes back to 1954 when I became associated with a company then known as ZIV Television Programs, Incorporated. That company was acquired later on by United Artists Corporation, and after going through several changes of names ultimately was called United Artists Television, Inc. The business of ZIV and United Artists Television, Inc. was the production and distribution of television programming. I was basically in charge of overseeing all contracts on the talent side, the production side, and on the distribution side. I stayed with that company until July 1968, at which time I joined my present company, Metromedia Producers Corporation. I first became Vice President for Business Affairs with duties similar to those I exercised for ZIV Television Programs, Inc. and for United Artists Television, Inc. I then became Executive Vice President and then President of Metromedia Producers Corporation.
My major concern today is supervision of licensing to television stations. The programs that my Company licenses to stations are either owned by my Company as copyright owner or it has received the rights from the copyright owner to distribute or to license programming produced by others.
When a station acquires a license, it is important for that station that it be the only one in the market to exhibit that program and that the same program cannot be seen—with different commercials over another station or imported from another station by a cable system in the licensee station's market. The station demands exclusivity. For that reason we never license the same program (or even different programs of the same series) to run on two or more stations in the same city at the same time. This concept is applicable to cable importations. The obvious reason is that when a cable system imports a distant signal carrying the program that we want to license to a local station, the audience of the local station will be reduced by the number of viewers who see the program on the cable.
The syndicator must sell the big markets irst to recoup his costs and then he must turn to the small markets to make a profit. If the cable system carries the program from the bigger markets to the smaller markets, syndication therein becomes difficult because cable importation reduces the value of the program to the buying station. As a result of this harmful effect, a television station may refuse to license a syndicated program or may license it only by paying a lower price than otherwise because its potential audience has been or will be exposed to the program albeit with different commercials.
I have been informed that cable interests have contended that the loss which the copyright owner suffers in the local markets may be counterbal. anced by increased license fees which he might receive from the television stations whose signals are carried into the distant markets by CATV. I understand that it has been asserted that the dollars lost for a program in the local market will be made up by those paid to the copyright owner by the station whose signals are carried into the distant market, because the license is bought on a "dollars per thousand viewers' basis. In the first place, the "viewers" are those measured by a rating service within the area dominated by the station—not some distant location. In the second place, a distant audience is not valuable to sponsors, such as local and regional advertisers or even to national advertisers to whom partial duplication of coverage in a market does not justify increased costs. Advertisers are value conscious and will not pay for wasted coverage or for coverage that is not measured by audience ratings within the immediate market area.
But most important, the economics of determining the price between the copy. right owner and the licensee station is based primarily on the semi-monopolistic economy in the television market. There are only a limited number of stations in each city and (with the exception of the small number of cities that have independent VHF stations) on the average buying stations, the all-important time left for non-network programming is severely limited. Accordingly, since many programs compete for sales to such limited outlets and there is always more product than time available for syndicated programs, there exists a perpetual and structural "buyers' market" that is not and cannot be affected by increases in coverage due to CATV.
The inevitable consequence of these economic factors is that stations obtain programs at the lowest possible price and do not make any additional payments by reason of the fact that there may be some additional viewers far away in another market. In my 20 years of experience, I have never encountered any such increased price. The only time CATV audiences are discussed is when a buyer seeks to depress the price of a program because a part of his potential audience has already been exposed to the same program or series by CATV.
A. FRANK REEL. Subscribed and sworn to before me this nineteenth day of June, 1975.
ROBERT L. DROSSMAN, Notary Public.
ASSOCIATION OF INDEPENDENT TELEVISION STATIONS, INC.,
New York, N.Y., June 17, 1975. Hon. ROBERT W. KASTENMEIER, Chairman, Subcommittee on Courts, Civil Liberties and the Administration of
Justice, U.S. House of Representatives, Washington, D.C. DEAR CHAIRMAN KASTENMEIER: It is my understanding that during last week's hearings on CATV copyright before your Subcommittee, witnesses representing the cable television industry presented testimony concerning the sales value of out-of-market homes reached by television stations via CATV. Hopefully, the following information will be of assistance to you in your deliberations.
It is true that the Association of Independent Television Stations (INTV) has sought to interest advertisers in purchasing those out-of-market cable subscribers reached by independent television stations. As depicted in this week's issue of Broadcasting magazine, the cable industry actually displayed copies of the coverage'maps which INTV uses in its sales presentation.
However, it is significant that advertisers will not pay for these out-of-market homes. First, local advertisers have no interest in buying homes at such a distance. Second, national and regional advertisers are interested only in those homes located within the market (this area is known as the Area of Dominant Influence (ADI)). Homes outside the station's ADI simply do not figure in the price of the advertising. It may be that in certain cases an advertiser may select an independent station over a competing network affiliated station owing to the extension of the independent's signal via CATV. But this factor does not affect the price which the advertiser pays for the station's time, be it an affiliated or independent station, and it does not affect the price the station pays for its programming.
The foregoing information was confirmed in discussions with several other members of our association, located in both large and small markets. If I can be of further assistance, please do not hesitate to call on me or the President of our Association, Mr. Herman Land, at the above address. Very truly yours,
JIM TERRELL, Chairman, Board of Directors.
Richard Woollen, being duly sworn, deposes and says:
I make this affidavit so that it may be submitted to the Subcommittee on Courts, Civil Liberties and the Administration of Justice of the Committee on the Judiciary of the House of Representatives in connection with its hearings on the bill H.R. 2223.
I am Vice President in charge of Programming for Metromedia Television. In that capacity it is my duty to purchase syndicated and other television properties for the six television stations owned and operated by Metromedia, Inc. These stations are WNEW-TV, Channel 5 in New York; KTTV, Channel 11 in Los Angeles ; WTTG, Channel 5 in Washington, D.C.; WTCN-TV Channel 11 in Minneapolis-St. Paul; KMBC-TV Channel 9, in Kansas City; and WXIX-TV Channel 19 in Cincinnati. KMBC-TV in Kansas City is an affiliate of the ABC Television network—the others are independent stations. WXIX-TV in Cincinnati is a UHF station-the others are VHF stations. .
I have been engaged in the process of purchasing programming for the Metromedia owned and operated stations for over 9 years. During that time I have never been moved to increase the price of any programming by reason of the fact that signals of our stations are carried into distant areas and disseminated by CATV. Nor have I been party to any negotiations for the purchase of programming which were based in any way upon a consideration of the fact that our stations' audience includes coverage of distant areas by cable,
A discussion of the fact that our signals are carried on cable systems has never arisen in any negotiations for any programming—that I have conducted.
RICHARD WOOLLEN. Subscribed and sworn to before me this twenty-third day of June, 1975.
ARNOLD L. WADLER, Notary Public.