FOR YOUR INFORMATION.........................MARCH 26, 1991


                                                                 
             FTC STAFF AGAIN BACKS ALLOWING NETWORKS
             TO ENTER RERUN AND SYNDICATION BUSINESS


     A four-year phase-out of the rules barring networks from
entering the rerun and syndication business would better serve
consumers and competition than a modification of these rules to
give the networks only limited access to this market, according
to staff of the Federal Trade Commission Bureau of Economics in
comments submitted to the Federal Communications Commission
yesterday.
     The rules at issue are the Financial Interest and Syndica-
tion (Fin-Syn) Rules, which bar television networks from owning
the television programs produced for them by independent produ-
cers, and from sharing in the profits from selling reruns of
network series.  The networks are also prohibited from syndica-
ting in the United States any first-run programming under these
rules, which were adopted 21 years ago when the vast majority of
the viewing audience could watch only network broadcasts.

     Before the FCC are two proposals.  The first would modify
the Fin-Syn rules, and the second would significantly eliminate
them over a four-year period.

     The FTC staff, in its third set of comments since the FCC
issued a notice of proposed rulemaking to evaluate the Fin-Syn
rules, favors the latter option.  According to these latest FTC
staff comments, there is no new evidence to suggest a compelling
economic case for continuing a per se ban on the acquisition of
these ownership rights by television networks.

     The first proposal adopts many of the compromise options
discussed in an earlier FCC notice, along with several new
options, the FTC staff said, concluding that it "represents the
kind of compromise that might leave consumers worse off" than if
either complete elimination or complete retention were chosen.

                            - more -
Fin-Syn Rules--03/26/91)

     Among the staff's specific comments on Proposal I are the
following:

     -- Regarding an option that would allow networks to acquire
     a financial interest in prime-time programming only if their
     licensing term is limited to two years or less, the staff
     said, "a rule that limits a particular clause, yet leaves
     the source of any network power unchanged, is unlikely to
     change markedly the bargaining outcome."  Staff also noted
     that, because option clauses and financial interests both
     serve to align the risks and benefits of up-front, program-
     specific investments, "a limit on the length of the option
     period may create the same type of inefficiency as the
     existing rules create."

     -- Another option in Proposal I would bar networks from
     distributing domestically any first-run syndicated programs. 
     FTC staff said it is unlikely the networks could exercise
     market power in a market for programs that do not appear on
     the network prior to being syndicated.  In addition, staff
     said, entry of the networks is likely to increase rather
     than decrease competition in the syndication market.

     -- An option in Proposal I to limit to 40 percent the por-
     tion of any network's prime-time schedule composed of its
     own in-house productions may be "unnecessary, ineffective,
     and counterproductive," staff said.  Preventing a network
     from selling a show to more than 40 percent of its affiliate
     stations also may prevent it from taking advantage of the
     efficiencies that result from owning a national, inter-
     connected, full-time system of program distribution, the
     comments said.

     Staff suggested examining the effect of the rules on the Fox
network and other potential entrants into network broadcasting. 
"It would seem to be counterproductive to put in place a rule
which might force a recent entrant such as Fox to cut back its
plans for expanding its network schedule beyond four nights per
week," staff explained, adding that it "would seem equally
counterproductive to force Fox to divest either its network or
its syndication business," and would send a negative signal to
any other program producers thinking about starting their own
networks.

     In conclusion, the FTC staff comments said, the best course
is to eliminate the Fin-Syn Rules, and adopting Proposal II would
substantially achieve this goal.

Fin-Syn Rules--03/26/91)


NOTE:  These comments are the views of the staff of the FTC
Bureau of Economics, and are not necessarily those of the
Commission or any individual commissioner.  

     Copies of the FTC staff comments are available from the
FTC's Public Reference Branch, Room 130, 6th and Pennsylvania
Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326-
2502.

                              # # #

MEDIA CONTACT:      Bonnie Jansen, Office of Public Affairs
                    202-326-2161

STAFF CONTACT:      Bruce H. Kobayashi, Bureau of Economics
                    202-326-3363

(V910013)
(finsyn)