INDUSTRY DYNAMICS MADE TV AFFILIATE DISPUTE INEVITABLE—WRIGHT

Despite that, Wright said he received good reception from affiliates’ board last month at network’s upfront presentation to advertisers: “We had a good discussion… I just said we have to be pulling together. I think we really don’t look smart when we're fighting with each other at a time of some severe economic issues and with so much other competition and rising program costs.”

When old cap of 7 TV stations was adopted by FCC in 1960s -- new cap in Telecom Act is coverage of no more than 35% of U.S. TV households -- it was antitrust issue. But now, said Wright, “it’s a political problem, not an antitrust problem, and I've explained this situation to people and they said ‘my God, we never thought of it that way.'” NBC is making pitch in Washington that any remaining cap should be based on actual (read that Nielsen ratings) audience rather than potential viewers (CD May 21 p2).

Said Wright: “If I owned every single NBC affiliate, all 213 different affiliates, then my total national audience would be 16%… And when you say we can only own 35% of the geography, that’s 35% of 16%… I've [explained situation] to members of Congress. And I've done it with people at the FCC. I did it with the last chairman [William Kennard], who got it in a second. But he just said ‘listen, your problem is political’… The political issue really is the affiliate issue.”

If cap is repealed, Wright was asked whether NBC already had lined up stations to buy. “We'll certainly be looking around,” he said. “The cap is just part of historical limitations that really don’t work as well today… There’s no other business [except TV] that’s operating under 50-year-old restrictions.”

“They probably haven’t gone up,” Wright responded when asked whether networks’ chances of getting cap relaxed by Congress had lessened with power shift in Senate that returned Sen. Hollings (D-S.C.) -- who has been critic of many deregulatory efforts in past -- to chairmanship of Commerce Committee. Wright predicted Hollings’ “first impression would be not to change anything, but I certainly wouldn’t say that regulatory changes are out of the question… He’s a pretty sensible guy and he’s been around a long time.”

Before lifting of national station ownership cap, radio industry had same situation as that now faced by TV, Wright said. Radio owners were content with cap “for many years… until the business got to be lousy and all of a sudden everybody wanted the caps off. I hope we don’t arrive at the same situation in television… waiting for a financial disaster before everybody decides to re-look at the rules.”

Wright defended his actions in NBC’s effort to buy affiliate KRON-TV San Francisco, during which he wrote controversial letter to station and its banker that critics charged was attempt to hold down price and threat to take away affiliation if NBC weren’t successful. “I never said that,” Wright told us. “I wrote a letter… saying that you cannot sell the affiliation. If you want to have a smooth transaction then you should have the buyers [Young Bcstg.] meet with us.” Young waited until after it had agreed to buy station to approach NBC “and they didn’t like the terms of the affiliation agreement that we proposed. And, that’s just about as simple as it is… You cannot sell the affiliation.”

NBC’s insistence on renegotiating contracts when affiliate is sold is one of major issues raised by Network Affiliated Stations Alliance (NASA) in its petition asking FCC to investigate network practices (CD March 9 p2). According to NASA, Fox and ABC engage in same practice while CBS was cheered by its affiliates at recent conference in Las Vegas when network said affiliation contracts as is could go along with station sales (CD June 1 p4).

In return for payment of reverse compensation to NBC, San Francisco affiliation will switch to Granite Bcstg. Jan. 1 in deal widely criticized by others. Wright said other reverse compensation deals were in works by NBC and “they're confidential, but we have a number actually.” Most other new NBC affiliation contracts (generally for 5-6 years) “have compensation going to zero at the end of the term,” Wright said. “They go down [each year], depending on the positions of different people and depending on the economic positions of people.” (Note: NBC affiliate in medium-sized market told us he recently signed new contract with reduced compensation at start and with rest going down 20% each year.)

On question of preemptions (another subject of NASA complaint), Wright responded “sure” when asked whether affiliate should have right to preempt NBC programs. But, he said, stations that preempt “have to recognize… that they have to compensate us in some way for the programming that they've elected for whatever reason not to air.” Preemption for breaking news isn’t issue, he said, but most preemptions “are for the insertion of rerun movies… to get some extra money for the station.” Also, he said, “if an affiliate elects to eliminate whole nights of [NBC] programming… that’s a problem… It’s when an affiliate enters into a contract for money [such as sports] with somebody else and [to] not run our programming, that’s where the issue comes in.”

Network may be about to offer olive branch to affiliates. NBC’s 75th birthday occurs in May 2002 and Wright told us: “We certainly can’t have a 75th anniversary celebration without including the TV affiliates in some meaningful way.” Wright put emphasis on “meaningful,” but didn’t give any indication of NBC plan, except we were told there would be special on-air programming.

Partly because of high programming costs, Wright was asked if NBC was considering following Fox’s lead and returning 10-11 p.m. to affiliates. “I don’t think the affiliates would like that,” he said, although CEOs of 2 large groups told us that’s exactly what they would like. “It doesn’t really work for affiliates because they would have to supply the programming” for time period, Wright said. “And I don’t think many of them want to drop back and do their late news at 10 [p.m.]… So I don’t think there’s any real support to do that from the affiliate side.”

Wright said he received some “very heated, thoughtful viewpoints about what we can and can’t do on the air” in response to his memo to NBC executives and outside programmers on possibility of airing cleaned-up version of HBO’s Sopranos on NBC. He sent memo, he said, because “we have a lot of people that work for us that are heavily involved in programming [but] they don’t get to vote on the schedule.” He said that in its current form, Sopranos couldn’t be put out over air and that “if you took out the language and the sex and the violence it probably wouldn’t get any ratings.” But, he said, over-air standards have changed “and we have to be mindful of that and we have to spend a lot of time… understanding what audiences like and don’t like.”

In response to analyst suggestions that NBC must grow or be taken over by someone else (with Viacom’s Mel Karmazin expressing interest), Wright said NBC spent “a lot of time looking for opportunities to grow and… we can’t just accept the status quo, especially in poor markets like this. We have to look for ways to spread our cost base and ways to reach more viewers.” On outside efforts to take over NBC Wright said only: “We have conversations with various people. There’s certainly an interest today that’s very strong to consolidate in media properties.”

New Pres. Andrew Lack was announced recently as taking over that title from Wright, who moved to chmn.-CEO -- partly because of increased demands on his time by parent GE, where he is vice chmn. and member of Executive Committee. Wright’s duties have been increased at GE, with result being “I have a lot more meetings to go to today than I did a year ago,” he said. “There’s a lot of other responsibilities [at GE] that I've got myself involved in and [also] being fulltime here at NBC was putting a bit of a strain on the system.” He said about 70% of his time still was on NBC.

Despite XFL Football fiasco, Wright was quick with response to question of his biggest mistake in his 16 years as NBC CEO. “Not taking advantage of the rules change to get back into radio” station ownership, he told us. NBC sold its radio stations early in Wright’s stewardship.