Indie TV producers gulp as 'fin-syn' rules topple.

They foresee pain as networks make their own shows

With the formal legal lifting of the broadcast financial interest and syndication rules, many in the entertainment business are predicting the demise of the independent television producer.

The ruling of a federal judge in Los Angeles announced on Nov. 12 frees the three television networks to enter the lucrative syndication, or "fin-syn," market in two years. They must wait two years from entering the lucrative rerun business but can begin immediately to take a financial interest in shows produced by outsiders.

The movie studios that produce some of this programming will feel the financial impact less than the independent producers, executives say.

The fin-syn fight between studios and the networks has been waged since 1974 when the federal government restricted the networks from the syndication market and prevented them from producing more than 40 percent of the prime-time programming on their networks.

"I don't believe the judge who made this ruling has any idea how this industry works and how the game is played. We are going to see the networks buying from themselves (and not from the independents and studios) and I'm trying to figure out a way to still be able to play my shows on network TV," said Stephen J. Cannell, one of the industry's most successful independent television producers over the last three decades.

Cannell currently has "The Commish" on ABC and his credits include "The Rockford Files" and "21 Jump Street." He said the cable industry is not a viable alternative for his type of shows, which cost as much as $1 million an episode.

In April, the Federal Communications Commission ruled that it would allow the three major television networks -- Capital Cities/ABC Inc., CBS Inc. and the National Broadcasting Co. (NBC). -- to have a financial stake in shows provided by independents and the studios and fully share in rerun sales, a $5 billion syndication market.

The networks had been prohibited from sharing those revenues as part of the 1974 federally mandated financial interest and syndication rules that were designed to harness a potential monopoly by the networks.

The FCC is now also allowing networks to produce and own as many of their prime-time shows as they wish, ending a 40 percent cap on in-house productions.

Those FCC rule changes had to have legal sanction and U.S. District Court Judge Manuel Real gave his stamp earlier this month, saying increased competition from the Fox network -- a fourth TV network -- and cable television diminished the networks' monopoly threat. The networks' share of the TV viewing market has dropped to 64 percent because of the growing importance of cable television.

Despite the ruling, Hollywood's studios pledged to continue the fight in the courts but haven't outlined what the next legal step will be. Real, the federal judge, refused to allow Hollywood to present arguments in favor of retaining the fin-syn rules and the industry's attorneys feel they never had their day in court and were preparing to file an appeal late last week or this week in the federal appeals court, according to Diane Killory, an attorney for Hollywood's Coalition to Preserve the Financial Interest and Syndication Rules.

The studios acknowledge the greatest impact will be on smaller production companies.

"Our biggest fear is that this latest ruling will spell disaster for independent producers, especially those that are making movies and mini-series. The networks are already on the record saying they are setting up entire staffs to concentrate on in-house productions," said Barbara Brogliatti, a Warner Bros. spokeswoman who also speaks for a coalition of studios and production houses trying to preserve the fin-syn rules.

To circumvent the rulings and assure themselves shelf space on TV, the studios are forming their own networks and seeking strategic alliances in the cable industry.

Paramount Communications Inc. and Time Warner Inc. are in a race to get a fifth network up and running. Both giants are wooing independent stations to carry their in-house productions but Paramount has moved quicker, signing more affiliate stations so far with 80 percent of the country covered. Warner Bros. has just 41 percent signed so far. There is increasing speculation in Hollywood that the loser in the fifth network race will turnaround and attempt an acquisition of NBC.

"I expect to see a merger between a network and a studio and either one could be acquiring the other," said Peter Dekom, a veteran entertainment industry attorney. "If you're Disney and you're not creating your own network, you might try to buy NBC. It's a viable alternative to creating your own network. The reality is that media companies are getting bigger and the ability to put a studio and a network together is very real." Some analysts such as David Londoner of brokerage firm Wertheim Schroder predicts that all three networks will be sold or merged in the next few years and become parts of the mega-media conglomerates. Walt Disney Co. and Paramount have long been mentioned as obvious potential buyers of one of three networks.

While these media machinations play out, the independent television producers are afraid they are going to be left on the sidelines. They say their productions are being seen in a different light now and a double standard is emerging.

The networks will air their own in-house shows, even if they're subpar, but independents will have to field first-rate shows if they stand a chance of making deals, according to Cannell.

"Conceivably, our creative hands will be tied," Cannell said. "I would have preferred a situation where everyone could compete, not just the giants. Now we have to scramble and figure out a way to stay alive between the colliding colossuses."