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Fin-Syn: the new world order for int'l producers, ignored outside the U.S.

What keeps the studios from owning the networks.

The FCC's re-evaluation of the Syndication and Financial Interest Rules, as they are called officially (MM Docket No. 90-162 for the trivia buff) seems to be leaving everyone outside the U.S. quite cold though -- logically -- the changes should be of vital interest to them.

One might even wonder if this is another CNN plot to gain viewers. The fact remains that, even without Jack Lang's help, Fin-Syn could possibly change the world order of non-U.S. production companies trying to enter the U.S. TV market.

In brief, years ago, the FCC prohibited networks to distribute TV programs in syndication (sales market-by-market for a total of 220 U.S. TV markets). The networks were also prevented from having a financial interest in the programs that they licensed, and to market overseas U.S.-acquired shows. The networks were allowed to produce a limited number of shows on their own (in addition to news), and sell them internationally, as well as to U.S. cable TV services (USA, A&E, HBO, etc.).

With increasing domestic competition, decreased ratings and reduced profits, the networks petitioned the FCC for the removal of the Fin-Syn rules. The networks' arguments were the following:

1. The three major networks were no longer the only game in town.

2. Foreign companies were favored in buying American studios.

3. Independent stations were successfully competing with shows, which, in effect, were financed by the networks.

These were considered valid points, but the reality is that most of the shows produced by U.S. studios and independent production companies are still being commissioned by the three major networks. By eliminating the Fin-Syn rules, the networks could favor only those producers who would agree to share financial interest in the shows that the networks pay to air.

Also significant is the obvious split in the Hollywood ranks. A number of independent producers have now spoken out, opposing the rigid position taken by the MPAA on behalf of the major studios.

The independents, whose harsh treatment by the networks sparked the Fin-Syn Rules in the first place back in 1970, are now having second thoughts about network restrictions, which would continue to deprive them of network financing. This would also make them wholly dependent on the major studios.

Little wonder that, when the networks proposed renewed talks with Hollywood, the studios insisted that negotiations be carried on only between the networks and the studios (as representing the movie industry) and that the networks cease having separate talks with the independents.

In effect, the substantial license fees that the networks offer for the broadcast rights, could also be used to acquire part ownership of the same shows.

Currently, the networks pay up to 75 per cent of the cash costs for the shows they commission for two run/four-year rights.

The producers will recoup the cost-difference (deficit) and make profits on the international and syndication TV markets.

This is in addition to other sales, such as cable, pay TV, home video and merchandising.

The elimination of the Fin-Syn rules could increase the license fees of U.S. product overseas. However, during the FCC preliminary revisions, it appeared that the networks could:

1. Produce as much as they want on their own, and

2. Choose between getting the rights for the shows they commission for a period of two years with financial interest, or for the duration of four years without any financial interest.

The networks could also syndicate their own product. At press time, the FCC language isn't too clear about what constitutes "the networks' own production."

One can assume that the networks couldn't use freelance or outside talent to meet the 100 per cent networks' program ownership requirement.

However, none of these rules seem to apply for shows commissioned or produced with foreign entities.

In theory, it looks as if the U.S. networks could be commissioning or producing part of the 1992-'93 TV season outside the U.S.

In any case with the changes of Fin-Syn, the U.S.-owned studios are expected to buy the networks, thus setting up one of the world's most formidable operations. That is, if the Justice Department will allow it.

Whatever the final outcome of the Fin-Syn Rules conflict -- be it FCC ruling or intra-industry compromise -- the TV landscape isn't going to be the same again.
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Title Annotation:Syndication and Financial Interest Rules of the United States Federal Communications Commission
Publication:Video Age International
Date:Apr 1, 1991
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