DISNEY/ABC LEAVES NAB, BECOMING THE LAST NETWORK TO WALK

NAB-supported filings at the FCC on the network cap that said -- contrary to network assertions -- that independent affiliates produced more and higher quality news than O&Os were anathema to Disney, Padden said. “There are a small number of affiliate leaders who have been putting out this lie that the local stations owned by the networks are not good stations, they don’t do a good job of serving their local community, they don’t do good local news. And anybody who knows anything about the business knows that’s just not true,” Padden said, saying O&Os were “among the finest in the industry.”

An NAB spokesman said that, while the it regretted ABC’s decision, it still represented more than 7,400 local radio and TV stations and that Disney/ABC’s departure would have no impact on the NAB’s effectiveness as a trade association. Asked whether the flight of the last of the networks would change the NAB’s mission, the spokesman said the group always had and would continue to be focused on the preservation of free, over-the-air TV. NAB Pres. Edward Fritts wasn’t commenting. The NAB spokesman said the group hoped the networks eventually would rejoin it and “unite under the NAB tent.”

NAB Joint Board Chmn. Jim Yager, CEO of Barrington Bcstg., said he was “very disappointed” with Disney’s decision, but the NAB couldn’t be expected to “represent the private interests of any entity on an ongoing basis.” The NAB has long advocated for local broadcasters and local interests, so its stance on the cap shouldn’t have come as a surprise to Disney, Yager said. “I think the NAB represents the industry extremely well… It’s unfortunate. We would much rather have everybody under the same umbrella.” Asked about the networks’ possibly forming their own group, Yager said: “They certainly have the right to do what they think is best for their interests.” But he also said he believed that, on some issues, there would continue to be coordination by the networks and NAB on lobbying efforts.

Disney’s decision wasn’t meant as a slap at Fritts or the NAB staff, Padden said, and he believed Fritts had to act at the direction of his board. However, he said, “I think the complete hypocrisy of the position they've been forced to advocate will catch up with them.” Padden said he thought Disney/ABC paid about $1 million in dues annually, but NAB said the figure was a little over $500,000. In any case, Padden said the network’s dues were “not a make-or-break item either for us or the NAB” -- a statement with which NAB agreed. According to NAB’s 2001 IRS Form 990, the latest available, the group had $8.1 million in annual dues revenue, but that was a small portion of its $56 million total annual revenue -- most of which came from its annual TV and radio trade shows. NAB had a surplus of almost $5.8 million for the year.

The beginning of the end came at an NAB board meeting last week in which Padden put a sign on an easel that said: “11th Commandment: Thou Shalt Not Use the NAB to Regulate Thy Fellow Broadcaster.” Padden said he sought a resolution to that effect but was voted down. He had argued over the course of the 2-day meeting that the NAB had changed direction from the old days when all broadcasters would park their business disputes at the door and work for the good of all broadcasters. The tension between affiliates and networks played a large role in the FCC’s recent consideration of new media ownership rules. Several of the commissioners had said it was important for network affiliates to have a certain amount of leverage in bargaining with the networks, although they disagreed on the extent of leverage. That leverage typically plays into retransmission consent negotiations, as well as local decisions to forgo network programming in favor of more local fare.

Asked why Disney/ABC decided to leave now, given that the network had had the same conflict with NAB and the larger affiliate groups for some time, Padden said Disney had hoped that, once the FCC passed its new ownership rules on June 2, voting to increase the national cap to 45%, “we'd be able to pull the industry back together.” But he said he felt it became hopeless when, at the board meeting, an executive who runs 34 TV stations “from a central office” argued that ABC, with 10 TV stations, couldn’t be deemed truly local. “It was such hypocrisy that at the end of the 2-day meeting, we just decided that it wasn’t all over on June 2 and that these folks were intent on using the NAB as a weapon in their business disputes with the networks and they have all the votes [on the board], so it was pointless to stay,” he said.

Padden didn’t identify the affiliates but Sinclair, which isn’t an NAB member, owns 63 stations, Paxson 61, Hearst 34, Tribune 27, Gannett 22 and Belo 19. Padden said he hoped ABC’s decision would have a “cathartic effect” on the NAB that would lead to all the networks’ eventually finding a more welcoming atmosphere there. Disney/ABC stayed this long in an attempt to turn the NAB around, he said: “It’s a sad day. I've been banging around that building [NAB’s Washington hq] for 30 years.” NAB stayed even after GE/NBC, Viacom/CBS and News Corp./Fox walked out 2 years ago. ABC had a lot less to lose by staying at NAB, however, owning only 10 TV stations (and 68 radio stations) compared with Viacom’s 39 TV stations, Fox’s 35 and NBC’s 29.

The networks already have what Padden described as one brief, preliminary discussion on forming their own lobbying association. The working title, he said, was America’s Greatest Local Broadcasters (AGLB). The idea would be to form an alliance of local stations that happened to be owned by networks, but some affiliates might be invited to join, he said. He described it more as an alliance than a formal association with a building and staff. One goal would be to have the people who run the stations come to Washington for a day to meet with members of Congress, he said.

Disney/ABC’s dispute within the NAB is much different from criticism the company is getting from some members of NCTA who carry the company’s ESPN programming network, Padden said. ESPN, with substantial increase in carriage fees in recent years, has become a lightning rod for cable MSOs in explaining why rates continue to increase. The difference, Padden said, is that the NCTA has insisted that those kinds of disputes be resolved between the companies, not by NCTA. In fact, Padden held NCTA as an example of how a trade association should operate, having “closed ranks around the principle that we don’t bring our business disputes to Washington.”

Reacting to the FCC’s 45% decision, the Senate Commerce Committee is set to vote Thurs. on a proposal to roll the cap back to 35% -- a proposal Padden believes will succeed in committee. What the senators don’t understand, he said, is that the cap focuses on audience reach rather than on the number of stations. The cap misses what he called “enormous” station groups that own many more stations than the networks, but in midsize markets across the country. The networks could try to lobby for a limit on the number of stations their affiliates could own, but “that would as wrong as what they have done to us,” Padden said.

Padden insisted this wasn’t only about the 35% cap, pointing out that Disney was at 24% in national audience reach and that it would take spending billions to even come close to the 35% cap, let alone 45%. What’s more, Disney doesn’t own any duopolies. Nevertheless, the company supported the affiliates in their bid to loosen FCC duopoly rules. “We took a position of broad, principled deregulation,” Padden said, and by giving the issue the Disney name behind it, the company had hoped to unite the whole industry behind the issue.

The NAB spokesman declined to comment on the networks’ possibly forming their own group. “Our effectiveness as an association is based on having radio and TV stations in every congressional district and every city and hamlet in America,” he said: “Our door is always open if the networks are willing to reconsider.”