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These persons, in affidavits and letters to the Subcommittee, refute completely the charge that so-called “double-billing” takes place, i.e., that television stations obtain additional advertising revenues as a result of cable retransmission of their signals, or that correspondingly copyright owners demand or are paid additional license fees by such TV stations for their product because of the cable retransmissions.
The persons who have submitted the statements that follow are Jim Terrell, vice president and general manager of Station KTVT-TV in Dallas-Fort Worth, "Texas; Sheldon Cooper, Vice President and General Manager of Television for Station WGN-TV, Chicago, Ill. ; George Koehler, President of Gateway Communications, Inc., Cherry Hill, N.J., owner and operator of WBNG-TV in Bing. hamton, N.Y., WTAJ-TV in Altoona, Pa., and WLYH-TV in Lebanon, Pa., WOWK-TV in Huntington, W. Va.; John T. Reynolds, President TV Division of KTLA, Los Angeles, California ; Crawford P. Rice, Vice President and General Manager of KSTW-TV in Tacoma, Washington; R. Kent Replogle, President of Metromedia Television, New York, N.Y.; A. Frank Reel, President of Metromedia Producers Corporation (a distributor of tape and film programing) New York, N.Y.; James R. Terrell, Chairman of Independent Television Stations, Inc. (the national organization representing independent television stations) New York, N.Y.; Richard Woolen, vice president in charge of programing for Metromedia Television network, New York, N.Y. ; Erwin Ezzes, Chairman of the Board of United Artists Television, Inc., New York, N.Y.; H. Keith Godfrey, Executive Vice President of MCA-TV, New York, N.Y.
JUNE 27, 1975. Hon. CHARLES E. WIGGINS, Subcommittee on Courts, Civil Liberties and the Administration of Justice, U.S.
House of Representatives, Washington, D.C. DEAR CONGRESSMAN WIGGINS: Mr. John Mercer of your office has contacted me for additional details concerning out-of-market homes reached by television stations via CATÝ. He was particularly interested in the relationship of advertising rates to film program costs because of the out-of-market coverage.
As previously stated advertisers will not pay for these out-of-market homes. Local advertisers have no interest in people located far from their retail area. National advertiser's buying concept is based on those homes located in the home market of the station (ADI). Additionally there is no accurate way to credit a station the viewing it may receive on a cable system. For example, last year KTVT carried the World l'ootball League Games. Our signal was blacked out by the cable system in Monahans, Texas, because the local station was also carrying the telecasts. This may have happened on other cable systems of which we are not aware. Because of this local station protection, we cannnot be sure which of our programs are being carried on cable. This uncertainty further precludes advertisers from paying additional money for cable coverage. Therefore, our advertising rates have not increased because of cable coverage. And, in fact, if cable coverage were eliminated the rates would remain the same since this coverage in no way affects our pricing which is based on the home market viewing audience (ADI).
Nor does cable figure in the price we pay for film program costs. Film distrib. utors base the price they charge for their product on the market rank. The market price for film in Dallas-Ft. Worth, the eleventh television market, will be less than the price in Washington, D.C. ... the 9th market, but greater than the price in Houston, the 14th market.
I hope this additional information will be of help in your deliberations.
JAMES R. ' TERRELL,
JUNE 30, 1975. Hon. ROBERT W. KASTEN MEIER, Chairman, Subcommittee on Courts, Civil Libertics and the Administration of
Justice, U.S. House of Representatives, Washington, D.C. DEAR CHAIRMAN KASTEN MEIER: As reported in the trade press, it appears that cable television witnesses who testified before your Subcommittee on June 11th may have generated some erroneous impressions relative to the value which a station derives from extension of its signal to cable subscribers residing beyond
the station's normal over-the-air coverage area. I hope this letter will serve to correct those impressions.
To the best of our knowledge, WGN-TV is currently carried on 170 cable television systems whose subscribers total 576,000. Approximately 142 of these systems, with a total of 490,700 subscribers, are located beyond the Chicago Area of Dominant Influence. This area, known as the ADI, represents those counties wherein the Chicago television stations have a preponderance of television viewing.
Without going into detail regarding the methods used in the buying and selling of television commercials, I would like to advise you that the price of advertising purchased on our station reflects only the homes we reach within the Chicago ADI. We do not receive extra consideration by virtue of those homes beyond the ADI which are reached via cable television.
I will be pleased to discuss this further with any members of the Subcommittee or their staffs. Sincerely,
GATEWAY COMMUNICATIONS, INC.,
Cherry Hill, N.J., July 9, 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 MR. CHAIRMAN: My attention has been called to certain testimony made by spokesmen for the cable systems during the hearings on copyright legislation before your Subcommittee.
Cable protagonists have stated, unequivocally, that cable so enhances the quality of local signals and so extends local signals beyond normal coverage areas that local stations benefit from the added coverage, and therefore cable systems ought not to pay copyright fees, but on the contrary, they should collect fees from local stations to compensate the cable systems for improving and extending television signals.
That claim is preposterous.
In certain locations it is possible that local signals have been "enhanced" but when it happens it is an improvement less apparent to the eye and mind than to the meter of the measuring device. In my area of operations, the television signal may be extended for the cable viewer in Williamsport, or in similar physically shaded areas where normal station signals cannot be received. This is the classic cable situation.
But the argument is wholly fallacious that this "service" by the cable systems permits the station to charge more for its advertising and thus enables the syndicator to charge more for his copyrighted program.
Virtually all television advertising buying is done on the basis of station reception in what Nielsen calls the Designated Market Area, and the American Research Bureau calls the Area of Dominant Influence. These are the areas in which the stations in a market command the attention of a majority of the viewers (county-by-county) and is, as a practical matter, well within the coverage area of the station's unassisted signal.
Each DMA (ADI) is defined by viewer response to television stations in a market. From an advertising selling viewpoint, much of a station's unassisted signal is “wasted” because it is broadcast over areas where a majority of television sets are tuned to stations operating in an adjacent market.
The Johnstown/Altoona area offers an excellent case in point, when one considers the degree of cable saturation—nearly 55%--and the number of cable connections about 150,000. In combination, the Johnstown/Altoona market becomes the biggest and toughest cable market in America.
"Television Fact Book” shows that the Johnstown television station, WJACTV, has a net weekly circulation approaching 600,000 television homes. The Altoona station has a net weekly circulation of under 300,000 homes. But, "Broadcast Advertiser Reports" (the authoritative source on TV advertising), shows that most national business is placed on the Altoona station, WTAJ-TV, despite the fact that Johnstown has a two to one total coverage over the Altoona station.
Superior selling may account for some of the difference, but the simple fact is that most buying is done on DMA or ADI figures and in the DMA or ADI, the Altoona station, WTAJ-TV, in a majority of time periods, has the audiences equal to or larger than the Johnstown station.
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. KASTENMEIER, Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of
Justice, 0.8. 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 particular station has within its area of dominant influence in order to afford comparisons with other stations, do not include in their calculations or statistical research a 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 andience, 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. KASTEN MEIER, 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 bad 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 estab. lishes 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 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 hearing of the bill H.R. 2223.
The question to which I address myself is whether a television station pars 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