Tv Gold Rush

by TRUDIE OSBORNE

I

THERE is a new bonanza, and it is television. An accidental monopoly is about to end. New “layers of air" have been proved workable for television’s use. An enterprise that until a year ago was a sure money-loser is minting huge gross profits. Television is entering its second, or Bronze, age. In the first, a few stations served a limited number of cities. The age we are now entering will see an enormous number of stations eventually serving the entire country. The battle for ownership of these new stations has been joined, and the combatants are exhibiting the same vigor that sent men westward in the gold rush of '49 and during the land grants.

The battle is intense because there are substantially more applicants in the choice major market areas than there are possible stations. The outcome is uncertain because in each case the decision rests with a few fallible men in Washington. Only the Federal Communications Commission can decide which cities shall have stations, how many, and, after careful study and hearings if necessary, who gets them. The battle is zestful because the rewards are great.

For three and a half years the right to build new television stations has been suspended. There are and can be, until the Commission lifts its “ freeze,” only 108 television stations in the country. The suspension invested their owners with an accidental but not undeserved monopoly. These original owners took a risk. Television is an expensive business. Without exception the pioneers lost money. But at the end of 1951 all but a handful of them were in the black. The few stations still in the red are there because they are still amortizing heavy initial investments and losses; they have no difficulty selling advertising time. When the financial turning point in television came, it came with certainty.

The industry’s profit-and-loss figures are closely guarded. Recently, however, Milwaukee’s WTMJTV revealed its estimated 1951 profit before taxes as $1,105,000. On the authority of Television Digest, the bible of the industry, the station operating today with gross revenues much under $1,000,000 is the exception, and several are reliably reported to be pushing $5,000,000 — one $8,000,000.

A further index to the value of America’s fastestgrowing industry is provided by sales of television stations to investors who preferred to pay high prices for existing stations rather than take their chances in the free-for-all after the freeze was lifted. Nearly every existing station has had offers to buy. The average price of those sold is $1,500,000; and in recent months asking prices have skyrocketed. Pending is a deal of $6,000,000 for Chicago’s WBKB.

These dazzling figures do not mean that a television station is an automatic money-making machine. The kind of management a station gets can make or break it, and those in smaller population areas can expect lesser grosses than their metropolitan brothers. The lowest advertising rate asked by any station for its most favorable time is $195 an hour, or $20 for a one-minute commercial on KOB-TV in Albuquerque, New Mexico. There were 13,000 sets in use in that area as of January 1, 1952. The highest rate is $4500 an hour on WNBT in New York City, where 2,800,000 sets were in use as of the same date.

But profit is not the only factor spurring on applicants. Those who are already in the communications field feel their flanks pricked bloody by the threat television makes to their established media. A particular urgency is felt by applicants from the field of radio. All of them realize the power of television. “Of all its potentials,” says John Crosby, broadcast expert of the New York HeraldTribune, “television’s potency as a political force, its ability to stir and challenge the people on public issues is perhaps the most important.”

There are two outstanding examples of the way television fashioned public opinion, which in turn fashioned public events. 1) Dean Acheson’s televised performance at the Japanese Peace Treaty conference in San Francisco changed the Secretary of State from a man under continuous fire, and thus a Democratic Party liability, into an official armed with public esteem. His stock rose literally overnight. 2) Senator Estes Kefauver, as a result of his appearance at his committee’s crime hearings, became a national figure and threw his coonskin cap into the Presidential candidates’ ring.

Last November, after local elections across the nation, Elmer Davis declared, “The real winner in this week’s election was TV.” Those who won with it ranged from Kefauvor Committee Counsel Rudolph Halley, who ran as a third-party candidate and was elected president of the New York City Council, to handsome, telegenic Joseph S. Clark, Jr., elected mayor of Philadelphia on a “throw the rascals out" platform, albeit, his opponent was a noted Baptist minister. Clark was the first Democratic mayor elected in the city in sixty-seven years. Congressman Jacob Javits of New York has already suggested that Congress, like the United Nations, be televised. However that may be, both the Republican and Democratic Parties intend to have television as an ally in the forthcoming Presidential elections. This year both parties will hold their conventions in Chicago’s International Amphitheater, which affords exceptionally good network telecasting facilities.

Whatever the motive to get into television, all applicants in the battle for stations feel a special pressure. The 82 television channels, accommodating 2000-odd potential stations, that the FCC is now preparing to allocate are all the channels there are going to be in the foreseeable future. This is it. Television is only one of the claimants to the layers of air in the radio spectrum. The FCC has made it clear that it does not intend to give any more spectrum space to television for a very long time.

Only four years ago these grants, now so eagerly sought, were to be had for the asking by any responsible applicant. In 1948 the PCC was begging people to come into television. To many it was equivalent, to u plea to throw money down the drain. To all it was a risk that meant staking up to $1,000,000 before any profit might be shown. To some, however, it was a risk that might become rewarding. Applications increased. More stations went on the air; and in so doing they set the stage for an unpredicted event that was to bring on the freeze. As existing stations acquired neighbors, it was discovered that their signals were invading each other’s territory. A number of the 37 already telecasting were too close together. Engineering problems affecting the proximity of one station to another had to be solved before any more could be assigned to their frequencies. For that reason on September 30, 1948, the FCC suspended the granting of construction permits until further notice. Thus began the freeze. (An ironical note today is that 16 of the 87 grantees then holding construction permits — with which they were allowed to go ahead—gave up the now precious franchises.)

2

THE radio spectrum, in which waves of electrical energy can be used for communications purposes, is a comparatively small part of the electromagnetic spectrum. Picture a ladder extending beyond sight into the sky. This ladder, like a fireman’s ladder, is put together in sections. Each section accommodates a different kind of broadcast: among others AM radio, FM radio, television, radar, safety services, aeronautics, shipping, land transportation, amateur and experimental broadcast, and common carriers.

Each section of the ladder, or the spectrum space occupied by a particular broadcast, is known as a band. Each of these bands has certain characteristics which must be taken into account in deciding which of the services can best use it. The bands are further broken down into channels, and within these channels each station operates on a designated frequency. Not all channels, however, are the same width. Television requires a channel 600 times the width needed for AM radio. The FCC decided that 12 channels were all that should be accommodated in the Very High Frequency band, within which existing television stations operate. The great new development is Ultra High Frequency, a much larger band which provides 70 new channels and makes national coverage possible.

At the beginning of the freeze UHF was little more than a good potential. Through industrywide researches it has become a proved means. For example, RCA-NBC has been operating a full-time experimental UHF station at Bridgeport, Connecticut, for over two years. Results have been excellent. Transmitters and antennae for UHF stations are in actual production and enough are in supply or in process to take care of the probable demand for 1952 and 1953. Converters for existing receivers in the home, and new dual sets to receive VHF and UHF, have been designed and tested with good performance by virtually all manufacturers. Some have started limited production. Two manufacturers have announced the price of dual sets as only $50 more than single sets. Converters will cost from $10 to $50. The FCC is solidly behind UIIF, giving it every benefit and pushing it hard.

For all this, UHF stations presently remain second-choice awards in the contest. The reasons are simple. VHF is tried and true, with 108 stations already transmitting on it. Over 16,000,000 VHF receivers are in American homes. UHF, on the other hand, requires new types of receiving apparatus. It won’t give quite the radius or coverage of VHF.

OIF faces the same problems as VHF in regard to the defense materials situation. One is under no greater handicap than the other. The more important consideration is to win the right to a station. Any delay in receiving materials will in no way lessen the value of a construction permit or the intensity of the fight to get it.

The FCC discouraged the filing of applications until the freeze is lifted. Many petitions which were pending when it went into effect were already on record. They were joined by many more, despite official discouragement, to make a total of over 500 applications on file by the middle of March. At that time there was an average of three applicants for every VHF channel in major market cities. In some cities the ratio was seven to one, and in others there were as many as five applicants for VHF channels where none were to be allocated. Although the FCC had some 2000 stations to distribute, and anticipated only 1000 immediate applications, this abundance in no way alleviated the shortage of stations in major market areas. Obviously there will be little or no incentive to build stations in many small isolated towns where the FCC has allocated channels against any future contingency.

Competition is perhaps at its peak in Denver. It is the largest U.S. city with no television at all. A number of strong nonlocal interests have indicated they will compete against local applicants for its allotment of stations. But the fight will be no less intense in cities where television is already operating. Pittsburgh has one VHF station. In a tentative allocations chart the FCC made one other commercial station available. There were seven applicants. So keen was competition within the city that contestants began to cast their eyes beyond it, and several of them, acting individually, petitioned the FCC to give Pittsburgh one or both of the two VHF stations it had tentatively allotted to near-by Wheeling, West Virginia.

An added impetus to the fight in many cities is the fact that the FCC is reserving a portion of total station assignments for the use of educational institutions. Hungry commercial applicants feel that most of these reservations will go to waste; that most educational institutions cannot swing the stations financially. The FCC has given assurance that educational stations must be utilized in the “reasonably near future" if the reservations are to stick. At the same time it points out that state legislatures, appropriating funds for state universities, might need two sessions to accomplish the task. Meanwhile, commercial applicants in major cities are watching the reserved channels greedily.

3

PROMINENT names in applications that have been filed with the FCC are as diversified as Bing Crosby, Marshall Field, Mary Pickford Rogers, Senator William F. Knowland, and Texas oil millionaire Glenn McCarthy. Although lumber, automobiles, movies, real estate, and advertising are represented, oilmen outnumber any other group of newcomers to the broadcasting field. At least 35 producers of petroleum, who would like to see the Southwest sprout with their antennae as it does with their derricks, are listed as stockholders of companies applying to the FCC. The groups or individuals who acquired the original 108 stations, on a first come, first served basis, fell largely into four categories: radio station operators, newspaper and publishing concerns, radio manufacturers, and some theater interests. Radio interests still comprise the majority of applicants.

From whatever diverse fields they came, the applicants, during their long wait, had one thing other than their competition in common. All were up against a lack of known policy from which they might best determine their chances for grants. The Communications Act of 1934, and such precedent as could be derived from radio practices, governed their thinking. There were only four basic requirements for application: citizenship, financial stability, a good legal record, and conformance with the rules limiting the number of stations owned by any one broadcaster. All corporate applicants are required to be represented by counsel, and wherever a station assignment is contested it will be settled by hearings before an FCC examiner.

Money cannot win a television grant, but it is a prerequisite for application. Unlike radio, where an operator can start transmitting from his garage, the installation costs of television are enormous. Equipped VHF station costs range roughly from $225,000 in cities under 50,000 to $450,000 in cities over 1,000,000. For UHF cities in the same population groups, prices range from $250,000 to $475,000. The price of transmitters runs to one quarter of station costs. These round figures do not include real estate and self-supporting tower costs; engineering, consultant, or legal fees. Washington lawyers have been said to get up to $1000 a day for time they actually spend at hearings. Firstyear operating expenses range from $300,000 to $500,000. To measure the financial heights to which television programming can rise, one has only to look at the cost of a big network show. Time and talent for the hour-and-a-half Sid Caesar, Imogene CocaShow of Shows come to $6,000,000 for 39 weeks. Six advertisers split the bill. A station like Milwaukee’s WTMJ-TV lists its 1951 programming expenses at $105,000. Its telecasting, however, is heavily supplemented by network shows.

A second prerequisite for winning a station in a contested area is legal skill. it is at a premium. In the absence of specific television allocation policy, lawyers will bE able to plead each case on the individual merits and requirements of the individual clients and communities. Only a few signposts for guidance are apparent. The most important one (after basic requirements have been satisfied) is the capacity to serve the particular locality well.

Benedict P.Cottone, General Counsel of The FCC, names four considerations which he thinks will strongly influence the separate decisions. 1) Ability to do the best job for the locality. 2) Local residence. This is a deciding factor, and Mr. Cottone says, “As a general rule the local applicant will win over an outsider.”3) Integration of ownership and management. In the event that all applicants are local residents, Mr. Cottone finds it likely that one who intended to run his own station as his major business would win over an applicant who intended to have the station run for him. The General Counsel indicates, however, that this would be a decisive factor only if everything else was equal. 4) Diversification of ownership. The FCC is strongly opposed to any monopolistic tendencies in the communications field. Competition is the agency’s major aim and battle cry. It welcomes newcomers to the field of telecasting. Eight years ago it issued a directive to the disadvantage of newspapers applying for radio permits: “Other things being equal,”the FCC “prefers the nonnewspaper applicant.”There is a serious proposal in Congress to alter this policy, but the FCC’s own attitude is clear.

Diversification of ownership poses a number of problems. Radio, the parent of television, is also in the communications field. Some contend that motion picture companies, with their resources for programming and filming news events, are kin to communication. If radio policy applies to television, are their applications to be at the same disadvantage as those submitted by newspapers? Radiomen wonder if the bids of newcomers will be preferred over their own. They maintain that radio is not supplementary to television but in competition with it. One radioman says heatedly,

The FCC wants to incubate the baby. There is a kind of justice involved in recognizing the parent who borned it and must now compete against it.” Publishers of journals other than newspapers wonder how they will fare in view of their newspaper kinship. Newcomers, welcome as they are, wonder il their newness to communications techniques will handicap them under the point of offering best service to the locality. Attorneys for applicants will battle bitterly over these points.

On the other side of the counsel table FCC attorneys will be probing into the applicant’s corporate past. They are interested in everything from his history of court cases, his history of public service, his hiring policies, his management policies, to his reasons for wanting to enter television; why he selected a particular city; exactly where the money is coming from; the qualifications of his proposed staff; and, highly important, the nature of his proposed programs. The FCC attorneys are interested in more than just a programming philosophy. They want to know hour-by-hour programming plans.

To conduct its proceedings the FCC has a ridiculously inadequate staff of seven hearing examiners (two vacancies have not been filled because of budget cuts). No more than five of these seven may he assigned to the television hearings because of the magnitude of the FCC’s other broadcasting work. Additional engineers and attorneys are needed. In recent months the FCC not only lost its chairman to private enterprise but saw four legal staff members leave to join private law firms. Other losses are expected. This year the FCC asked Congress for funds of $2,000,000 above its present budget. Should the money bo appropriated, $200,000 of it would go for additional personnel to handle TV. Even then a certain amount of time would be necessary to familiarize the new staff with the intricate and technical nature of the FCC’s duties.

The work records of examiners show that each seems to be able to hear from 10 to 15 applications per year. If there are as many as 500 contested applications, the five presently available examiners, each handling an unlikely maximum of 15 cases per year, would require six and a half years to complete the job.

The FCC’s chairman recently said, “I am afraid that there is an expectation in some quarters that when the time for making grants comes, they will issue from the Commission in a tidal wave. . . . The hard reality is that they will come more in the nature of a trickle.”

Perhaps only the matched impatience of prospective viewers and prospective telecasters can swell that trickle into a stream. Considering the unexampled rapidity of television’s growth since its emergence from the experimental stage just after V-J Day, it is not fantastic to suppose that the slow rate of grants will in some way be speeded. It is possible that the competing applicants who posed the problem will help to solve it. In the words of one Washington attorney, “There’s only one method of getting fast grants in any contested city. That’s by locking up all applicants in a hotel room, permitting them no liquor or cigarettes, and telling them to come out with no more applications than channels — through murder or merger.”