As Appeared in the September 11, 2003 Wall Street Journal
And That's the Way It Is
By Michael K. Powell
The days of free television may be numbered. We are in the midst of change that is having a dramatic effect on how we watch television. Consider how much the television landscape has altered in the past two decades. It used to be that the "big three" networks, ABC, CBS and NBC were just about the only game in town. In those "glory days" of television, when Walter Cronkite left us each night with his famous "And that's the way it is," the big three were "the only way it was"-our only sources of television programming. If you wanted to watch sports you turned to the big three. Want to watch the movie of the week? Turn to the big three. Saturday morning cartoons? Turn to the big three. With over 80% of the viewing audience watching free TV, it was good to be a broadcaster.
Today, much of the high-quality sports (ESPN, Fox Sports), movies (HBO, Showtime, Starz, Independent Film Channel), mini-series (Hallmark Channel), documentaries (History and Discovery Channels), children's programming (Nickelodeon, Disney Channel, Cartoon Network), minority-oriented programming (BET, Univision) and breaking news (CNN, MSNBC, Fox News) can be found on pay television. The migration of top programming to pay television is demonstrated by the fact that cable, for the first time, surpassed broadcast television in all-day viewing share and this summer cable claimed an all-time high 60% of the prime-time television audience. And the quality of programming now on pay television is embodied in its unprecedented success in recent Emmy awards and nominations.
Why is this happening? For those in the business of pay television, there are two main sources of income, subscription fees and advertising. Free television has only one source-advertising. As the cost of quality programming increases ("Friends," for example, costs a reported $10 million per episode), so too does the pressure to place those shows on cable or satellite. To stem these rising programming costs, free television has turned to low-budget programming such as reality shows and daytime talk shows.
Moreover, producers and creators of television shows often are lured to the greater creative freedom of pay television. Pay television programmers enjoy greater first amendment protection against government content regulation than their broadcast counterparts. This is why a show like "The Sopranos," too risqué for the big three networks who passed on airing the series, can be enjoyed by millions each week on HBO. It also allows the possibility of running a show commercial-free. For us viewers, pay television offers programming that is tailored to our personal interests, be it 24-hour tennis, golf, news, history, food or game shows. On free television, we get television created for the masses, on a date and time of the network programmer's choosing.
To survive, free TV must improve its competitive position against pay television and find a way to innovate and offer personalized television experiences that today's viewers have come to enjoy and expect. The future of free television is, at best, uncertain and, at worst, in peril.
The shift to pay television and the value it has brought to the television viewer over the course of the last 20 years begs a question-do we even need free television? From a public policy perspective, I believe the answer is yes-we absolutely need to maintain a viable free television service for the welfare of our citizens. Free broadcast television remains an important service for those citizens that cannot afford pay television. Additionally, free television continues to play a vital role in informing the public during national and local emergencies and in serving the interests of their local communities.
That's why this past June, the FCC passed a new set of broadcast ownership limits, modernizing a regulatory regime that was made for the bygone era of the big three to reflect today's dynamic media marketplace. Those rule modifications were made, in part, to strengthen free television to give it a chance to remain viable for our citizens to enjoy for decades to come. For example, by setting a slightly revised national television ownership limit, the FCC will help the networks attract and maintain quality programming, from the World Series and Olympics to the next great TV series like "Everybody Loves Raymond" or "The West Wing." Other rule changes, such as allowing cross-ownership or the ownership of more than one local television broadcast outlet in some markets, will bring consumers more and better quality local news coverage and will help fund the transition to high definition digital television, potentially giving free television the ability to provide new innovate services to the public well into the 21st century.
These changes have been under attack from some in Congress. A rush headlong into re-regulating free television is afoot, and if successful, would prove disastrous. Bringing free television into a more hostile regulatory environment will continue to drive investment to pay television and drive more sports and creative programs to pay television. It may just drive free television to pay television altogether, as Bob Wright, CEO of NBC, once suggested that he might shut down NBC and simply move it to cable. Moreover, in its wake, this hostile regulatory climate will stymie the transition to digital broadcast television leaving broadcasters with ill-suited analog tools to work in a digital world-in turn denying the American public the use of a primary spectrum for future wireless innovation and services.
Free television will not disappear tomorrow. Many remain profitable with low budget reality shows and other programming. In the face of increasing competition from an ever expanding array of pay television programming, however, the government must be careful not to hasten its demise. Free television has been an important service to the American public for over 50 years. If our efforts do not provide free television with the ability to better compete in today's vibrant media marketplace, we risk losing its services for the next 50 years. And that's the way it is.
Mr. Powell is chairman of the Federal Communications Commission.