TV's time of trouble (Fortune, 1951)April 7, 2013: 9:00 AM ET
Editor's note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, we turn to an August 1951 feature on the concerning economic prospects of network television and the pitfalls of relying on advertising alone to generate revenue.
"The big story about TV today is no longer one of irresistible power. It lies rather in the unexpectedly strong bargaining position of TV's competitors, heretofore given up for lost, and in the equally unexpected weaknesses of the new medium." Those are the conclusions of this article, a report on …
TV's time of trouble
FORTUNE -- Many and terrible have been the things prophesied of that electronic monster, television. Radio was expected to shrivel away under the baleful glare of the video screen. Movies would follow their own victim, vaudeville, into limbo. National culture was to be displaced by national stupor, whose hallmarks were the phosphorescent ash tray, mechanical noise, and human silence. At worst, we were in for what one melancholy wit described as an interplanetary plague, a malady once supposed to have swept over Mars and reduced all life there to a kind of green moss. At best, we would have to endure the most painful commercial and cultural revolution of the century.
The fact is that none of these catastrophes are likely to occur in the near future. But it is equally certain that some of them will happen within the decade unless radio, Hollywood, and education adjust to TV where they must and dominate it where they can. The big story about TV today is no longer one of irresistible power. It lies rather in the unexpectedly strong bargaining position of TV's competitors, heretofore given up for lost, and in the equally unexpected weaknesses of the new medium. For television in 1951 is an amorphous mass, given over to fantastic complications, and vulnerable as only the very young (of whatever size) can be.
Ice Age economics
The most crippling of TV's present infirmities is a frostbitten market, the result of a three-year-old freeze on station building by the Federal Communications Commission. Until that agency solves some basic traffic problems -- and lifts the ban -- television can offer only 107 stations as opposed to 2,300 on the national AM radio system. This number might not be so miserably insufficient (TV does serve sixty-three market areas) were it not for the added complication that some stations cannot be readily interconnected for network hookups. Networks have rarely delivered all of the sixty-three market areas to one sponsor. Only forty-seven of the markets are linked by coaxial cable or microwave relay; the remaining sixteen cannot broadcast network programs except on receipt of a film or a kinescope recording, a watery movie made by the network of a "live" show as it comes over a television screen. And of the forty-seven interconnected markets, twenty-nine are served by only one station, which means, of course, that when one network is using them the number of marketing areas available to the others has automatically been cut 61 per cent.
Thus the presentation of even top comics to a maximum audience is a monumental event, the culmination of months, even years, of effort. Individual stations have to be persuaded to take one program in preference to those offered by other networks, and every thirteen weeks all the networks have to sit down together for a horse-trading session, each giving up use of the cable at some time in order to get it at another. With the exception of the singular Kate Smith, only such hardy perennials as Martin Kane, Private Eye, One Man's Family, and the implacable Milton Berle have come close to reaching the maximum market available to television; the ordinary sponsor, particularly the newcomer, must content himself with even less of little enough.
The limited access to the available television market areas might not be so serious were it possible to expand the television audience. In this way, the increased number of viewers per station might substantially offset the inability to increase the number of stations. But unfortunately for TV, any curative increase in set ownership is more a dogma than a probability. Soon after Korea, the manufacturing end of the industry put on its longest face and solemnly advised the American public to buy at once if it wanted to beat a coming materials shortage. Taking for fact what turned out to be mere sophistry, the public did buy, copiously.
Somehow the shortages so insistently forecast in 1950 never materialized in 1951. First-quarter set production totaled 2,200,000. But the public had had enough; by April, unsold sets totaled two million. Then, in June, buying resistance stiffened even more with the Supreme Court's decision upholding the CBS (CBS) color system for commercial broadcasts. Set production fell off to 65 per cent of the June 1950 figure. Many would-be purchasers decided to wait until CBS's manufacturing subsidiary, CBS-Columbia, put out a color set rather than buy one of the overstocked black-and-white receivers and eventually fit it up with a color converter and an ultra-high-frequency converter.
What this indicates is a further serious limitation on the market, already curtailed by the station freeze. Outwardly at least, the industry has high hopes of moving its mountain of surplus sets in 1951. That may very well be, but it will require heroic price cuts and probably an extravagant loosening of federal credit restrictions. But even with these inducements, there is a strong likelihood that not enough sets will be sold beyond the 13 million now in use to increase materially the television audience this year. Ownership figures reveal that an important percentage of the major TV market areas are already close to saturation. New York, Chicago, and Los Angeles, which among them lay claim to 35 per cent of the television audience, now reach between 55 and 60 per cent of their populations. Syracuse, with 114,000 sets, has only 49,000 to go before reaching parity with radio. Getting these last hold-outs to succumb to TV's blandishments is going to be a harder job than making the earlier sales. They are concentrated substantially in the lowest seventh of U.S. income groups, and in that resolute band of skeptics who have the cash but not the inclination. Only far lower prices will reach one group, only far better programing the other.
Ordinarily, fledgling industries endure early market limitations as a matter of course. Indeed, their costs, if wisely conceived, are adjusted to that probability. But television, say its propagandists, was never a fledgling; its initial size was more that of Sinbad's rukh (which had wings 10,000 fathoms long) and costs were soon of the same heroic proportions.
Part of the responsibility for these heavy charges lies with TV's biggest union, an agency that carries the plainspoken title Television Authority.* Patient and cooperative during the first year or so of TV, the union decided in 1950 to line its own pockets with some of the millions the networks were receiving from a 35 per cent increase in time rates. The minimum pay for chorus dancers on ninety-minute shows was boosted to $150 a week, double the going chorus scale in such Broadway hits as Guys and Dolls. An announcer for a half-hour program had his weekly check upped 400 per cent. Even for the smallest network, DuMont, the new union scales boosted the payroll by $2 million.
But in even larger measure, the giddy rise in production costs is a consequence of the freeze -- and of the networks' headlong reaction to its strictures. During the period when station building is proscribed by the FCC, any network may sell to any station regardless of whether the station is its normal affiliate. To all networks this was a clear incentive to corner available program talent as the best means of preserving their station affiliations during the freeze and expanding them thereafter. There began almost at once an intra-television war whose object was to pulverize the programs of rival nets through direct competition. First each network recruited as many as possible of the limited number of available performers, then these were deployed in programs across the small front of TV's prime viewing periods (8:00 to 11:00 P.M.). NBC's Robert Montgomery Presents Your Lucky Strike Theatre, for example, was pitted against CBS's Studio One and Four Star Review against Arthur Godfrey for a battle to the death.
Once started, of course, it could not be readily stopped, for each gain by one telecaster operated to the insupportable disadvantage of the others. Under the pressure of bids, talent, and production, in the Texaco show, priced at $8,000 a week in 1948, rose to $38,000 in 1951. The result has been to build entertainment costs up to $45,000 to $50,000 for good one-hour shows, pushing the total charge (time, talent) for a sixty-minute program to around $100,000. Spread over thirty-nine weeks, with a special discount for the thirteen weeks of summer, the total annual budget for such a show amounts to $4 million. Such splendor brought a sharp observation from J.H.S. Ellis, president of the Kudner Agency and knee-deep in television since he first put on the Berle show. "TV," he commented, "is getting too rich for the average advertiser's purse, no matter how good it is."
Mr. Ellis had of course put his finger on what may well be the fatal weakness of present-day television. Can it indeed support itself during the freeze and afterward by advertising revenues alone? Certainly, television has made a spectacular showing. In the face of doubled costs, the four networks (including their fourteen owned-and-operated stations) cut their losses from $12 million in 1949 to $9 million in 1950; thanks to its station earnings, CBS TV was supposed to have gone into the black in the first half of 1951. Forty independent stations had an $8,500,000 deficit in 1948; eighty-four had one of $13,200,000 in 1949; ninety-three were actually $1,100,000 in the black last year. And broadcasting revenues of $105,800,000 for 1950 were three times those of 1949. But, even so, the industry as a whole was still well in the red. The current deficit, a drop from 1949's $25,300,000, is $7,900,000. Fifty-two of the nation's TV stations reported median losses of $100,000 last year as against fifty-four with median profits of $131,000. Twenty-six had lost up to $100,000 each; twenty between $100,000 and $400,000; and six were over the $400,000 mark. One obvious solution for the network deficit, much of which represented program costs too fabulous for any advertiser to bear by himself, is to raise the time charges again. (This NBC did as of July 1.)
But the law of diminishing returns has begun to operate at even the present levels. Some advertisers, despite Technicolored visions of the rewards awaiting the faithful once the freeze ends, are beginning to show grave concern about the muddled economics of the new marvel. When material shortages hit Chevrolet (one of the biggest TV advertisers) and the company cut back its general ad budget by a third, it substituted local spot programs for its expensive regular show and put main reliance on an old faithful, the billboard. Sponsors of weekly shows are experimenting with fortnightly schedules or multiple sponsorship in an effort to get more out of a heavy investment. (Ross Reports, widely circulated television-program-research service, predicts that production costs will keep a multitude of soap dramas off the air until they can be done more cheaply.)
Even the Nielsen popularity ratings, previously accepted as unimpeachable evidence of how many people are watching a television show, are being taken at a discount. Nielsen ratings are based on the audiometering of 466 of the nation's 13 million TV sets, which means that every time the owner of a metered set turns it on or off he is representing the attendance of 27,800 other set owners. TV's novelty is no longer glittering enough to mesmerize just any advertiser into continuing a $100,000 program, the size of whose audience is so much a matter of conjecture.
Who's to pay?
Many network executives believe the creeping paralysis of cost is only a temporary malady and that, once the freeze is over, "a vastly expanded" market will give advertisers enough for their money and overcome their present hesitancies. Maybe. But at least one economist is certain that the networks cannot survive on the sale of advertising alone.
Millard C. Faught, whose thesis made him a controversial figure within the industry (and later got him an important berth with Zenith's E. F. McDonald Jr.), set up a hypothetical 1,000-station national television system, divided into four networks and broadcasting seventy hours a week. Faught breaks down the system's costs into five categories:
Interest on investment . . . . . . . . . . . . . $ 44,100,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 61,250,000
Operating costs (non-program) . . . . . 435,000,000
Programing . . . . . . . . . . . . . . . . . . . . . . . . . 941,200,000
Line charges . . . . . . . . . . . . . . . . . . . . . . . . . 31,800,000
Total cost for one year . . . . . . . . . . . $1,513,350,000
Profits, figured at 15 per cent, would add $227 million. The grand total for the system would thus come to more than $1.7 billion, or roughly three times what a national radio system cost the economy in 1948. In that year, Faught noted, the U.S. spent $4,831,000,000 on all forms of advertising to sell the goods and services of a $230-billion gross national product or, more succinctly, we spent 2.1 cents in advertising for each dollar's worth of business done. Thus, using the 2.1-cent national average figure, he estimated that television would have to sell at least $80 billion worth of additional goods and services to pay its $1.7-billion annual cost.
Critics have pointed out (1) that the programing charge of $941 million is higher than might be necessary; (2) that TV would not have to sell an additional $80 billion in goods to pay its costs if it could sell goods previously sold by competing media; (3) that a similar prophesy might have been made of AM radio in the twenties. Yet, whether or not Faught's analysis makes sense, there has been no public rebuttal of his suggestion that the economic foundation of TV is both inadequate and unsound.
Cap & gown vs. cloak & dagger
It should be obvious, from the very urgency of TV's economic problems, that telecasters could not long tolerate the continuance of low-paying or non-paying programs. Under the pressure of costs, many public-service and educational features have been squeezed from the scheduling and replaced by a panoply of mayhem, homicide, arson, and malignant disease. In between the blood baths -- which totaled forty murders one week -- the audience was given a workout on non-participation sports: Beowulf de-arming the Wildman of Wrestling, and Mother MacManus, aged seventy, giving son John the elbow treatment in a "jam" of the Roller Derby. United Nations programs, whose daily presentation during the Soviet Summer of 1950 had earned telecasters well-deserved applause, were dropped from regular scheduling and used at unpublicized times to fill a hole.
All of this presaged something considerably more serious than a temporary return of jungle ways. For the strategy of programing is an integrated one in that every advertiser insists that the network program immediately preceding be strong enough to deliver a large and docile audience to his own show. It has not been possible to achieve such strength in cultural programs; in fact, pressure from radio advertisers, who complained that symphony concerts "lost" audience for their succeeding programs, resulted in CBS's shifting the radio presentation of the New York Philharmonic from a live broadcast at three to a recorded version at one. To get back even to their former place on the schedule, education and cultural programs will have to buck the audience-hungry advertisers as well as the profit-conscious networks. The time had arrived for a showdown between selling soap and giving away culture, and the showdown was not long in coming.
The National Association of Educational Broadcasters, already alarmed that children in some areas were spending as much time on video as in school, moved into TV's best and biggest market and set up a monitoring service. What they discovered in a week of steady viewing was a little worse than anybody had suspected. Some items from their report:
- No serious music was broadcast during the week.
- Public events got only 1 per cent of TV's time, this in the period when President Truman presented his State of the Union message.
- Religious programs totaled only 1 per cent of the total broadcast time.
- News occupied 5 per cent of the weekly schedule, although virtually a third of it was nothing more than typed bulletins accompanied by unrelated music (an obituary for Sinclair Lewis was presented to the strains of a gay waltz).
- Children's programs accounted for 12 per cent. However, many of the shows, such as one on a lady wrestler, bore little relation to either their interests or needs.
- Commercial advertisements, 2,723 of them, took up fifty-five hours or 10 per cent of the program time. It was worse on weekdays, when commercials averaged almost two and a quarter minutes, occupied as much as a third of the day's telecast.
Their report duly compiled, the educators called on the Federal Communications Commission to renew their plea for a percentage of the station allocations then being tentatively assigned. Largely as the result of Commissioner Frieda Hennock's spirited importunings, the commission made one of the most courageous and important decisions in its history. Two hundred and nine stations scattered throughout the country -- 10 per cent of the total number to be allocated -- were tentatively set aside for the use of educational institutions.
The outcry from the networks and broadcasters was, as might be expected, both loud and sustained. The educators were declared unfit to take over the complicated job of running a TV station. Certainly the educators, as amateurs at telecasting, would have to come a long way to offer any competition for professionals. With a few signal exceptions, they had demonstrated no great aptitude for educational radio and their programing plans for TV were largely vague or just simple permutations of the professor at the blackboard. But there is some reason to hope that, given time, and by that is meant from five to ten years, educational broadcasters might do an effective job.
If the FCC were willing to reserve the 209 educational stations on the basis of a commercial, nonprofit license instead of the proposed purely educational one, the educators might make enough cash selling prime evening time to the networks to finance educational programs at other hours. Iowa State College is already operating WOI-TV as a combination educational and commercial station, and the formula is capable of wide application. Such a compromise would give education a respite from its tin-cup routines and put it in a commanding position to see that the greatest of all communication media had something to communicate.
What the networks' reversal means is worth totting up. Commercial television faces the loss of one in every ten of its much-needed new outlets, an economic handicap to be reckoned in millions as opposed to the few hundred thousand dollars worth of public-service programs that might have averted it. Because of this oversight, NBC or CBS may lose their chance to get a Very High Frequency outlet in Pittsburgh, DuMont and ABC may be unable to establish a truly national VHF network.
Of even more importance, the educational set-aside may mark the beginning of a general rush for a share of television's markets. Heretofore, TV had been considered as an entertainment form like the movies, and the telecasters' proprietary interest in it went largely undisputed. But TV is also a means of distributing anybody's program, undoubtedly the most efficient ever devised, and could be put to use by scores of non-network agencies. Thus, besides the educators, the networks will have to make room for some powerful interlopers: the telecasting of sports and other events for closed-circuit distribution to movie theatres; Hollywood's filming of shows for national spot advertising; and possibly the sale of local pay-as-you-see TV programs in the home. These are as certain to challenge the present supremacy of network television as they are to multiply the power and influence of the motion-picture industry.
Phonevision, best known of the pay-as-you-see devices, which now include Skiatron and Telemeter, was tested this year in Chicago with significant results. Zenith Radio, developer of the system, broadcast a scrambled evening program of movies over television during January, February, and March. For the 300 families who made up the test group special unscrambling gadgets were fitted to their own TV receivers; these were activated by a phone call to the operator and a charge was simultaneously entered in their account for the film being shown.
Most of the ninety films were two years old, quite a few had been made a decade ago, and not many were of the quality that would have lured father to the neighborhood theatre on even a hot summer's night. The producers, it seems, had Hollywood's timidity about offending the exhibitors and balked at supplying any test film at all until McDonald threatened to call the Department of Justice. Yet during the ninety-day period the average test family saw 1.7 movies per week (at $1 per film), an attendance rate more than three times the .47 per week norm of movie-going for the nation. Even discounting the novelty factor, this statistic alone gives Phonevision major status as a contender against the movies and "free" television. But the test data contained other startling facts. Four out of every five Phonevision subscribers had never seen those movies before, despite their antiquity. Attendance varied from. 9 per cent to 47 per cent of the potential audience depending on the film, the weather, and the competition from regular television programs. (Sugar Ray Robinson's televised TKO of Jake LaMotta the night of February 14 also flattened Undercover Maisie's box office; only four subscribing families selected the Phonevision film at the same hour. Bills for the $6,694 worth of movies seen by the test group were 99.2 per cent paid, even though Zenith had no method of enforcing collection other than that of cutting off the service. And lastly, though it is more in the nature of a psychological than an economic commentary, a survey by the National Opinion Research Center of the University of Chicago showed that, on the average, 7,200 non-test television-set owners regularly watched the scrambled films in the evening. Considering that they could get nothing more than an idiotic mélange without an unscrambling device, it is easy to guess that most of the bootleg audience symbolized both a hunger for something better than TV now offers and the frightening "wantlessness" that characterizes many devotees of the medium.
Potentially subscription TV can open up a whole new world for movies and education, providing one with as many "theatres" as there are homes, the other with the means of financing a university of the air. For the movie producers it also creates a brand-new market for millions of dollars of residual value in old films whose book value is often no more than a dollar apiece. For network television, however, Phonevision promises little but trouble. It would compete with the big advertisers for limited prime time; the prices it could pay for sports events and first nights are beyond the purse of the average network sponsor; and assuredly it would loosen the network's hold on its affiliates by giving them more money for prime time than the nets have. "If only 25 per cent of the existing television sets in Chicago were equipped with Phonevision, and if these Phonevision homes patronized a 9:30-11:00 program in the same percentage [13 per cent] that our test audience did," Zenith President E. F. McDonald Jr. estimates that "the station broadcasting the service would get more net revenue than the gross time charges for these hours of all four existing Chicago television stations combined.... Actually, it would require the patronage of only 1 per cent of Chicago's present TV audience to net a Phonevision station more than any Chicago TV station now gets for its time."
Followed by theatrevision
Despite its spectacular potential, nobody, not even Zenith, expects subscription TV to have an easy time getting before the public. It will have to be approved by the FCC, and that involves some substantial questions of law. Federal attorneys are not quite sure whether the present Communications Act would allow the setting up of stations part of whose telecasting would be denied the general public except on payment of a fee. And the size of the fee itself is a problem; regulation of it might bring the FCC to something it very much wants to avoid: actual responsibility for the economics of television, much as the Interstate Commerce Commission has responsibility for the economics of land transportation.
But clouded or not, the future of Phonevision or other forms of subscribervision will inevitably be a decisive factor in the coming struggle for power between the local stations, the networks, and Hollywood. Used by the local stations, it would put them in the most profitable position of being able to pick and choose between the networks and Hollywood for programs as well as picking up a fast dollar from local sports events. Controlled by the nets (and the idea is not patentable, only the means of scrambling and collection), subscribervision could be the means of financing, say, the World Series when that event, already booked at $1 million a year for the next six years, can no longer sell enough razor blades to attract a sponsor. In the hands of Hollywood, it could in a sense create a kind of network for the supplying of features and variety programs, profiting by the long-time unfeasibility of connecting some markets by coaxial cable or microwave relay, and competing against free (but filmed) TV shows with no other disadvantage than a modest admission charge.
It might have been expected that so simple a means of turning TV's ruinous competition into profit would have been greeted with loud huzzas in the film capital. Such was decidedly not the case; many old-timers considered there was something almost indecent about showing a movie any place but in the theatre. And then there was the problem of the exhibitors. To these gentlemen, already lonely enough, subscription TV meant eternal solitude. Who, they asked themselves with desperate candor, would round up a sitter for the children, bolt dinner, rupture the law of probability to find a parking place, and finally pay a stiff admission just to sit in a stained movie palace if they could see the same feature at home for a fifth of the cost and a thousandth of the effort? The answer brought forth still sterner threats of an exhibitor boycott against the first major producer to sell feature film to TV and uncovered a possible means of delaying, if not forestalling, the day of subscribervision.
Theatre Television, the exhibitors' concession to the inevitable, was formally endorsed by the Theatre Owners of America, Inc., last year and put to the test this June. The occasion was the Joe Louis-Lee Savold heavyweight fight at Madison Square Garden. It so happened that both the promoters and the prospective sponsors were unenthusiastic about having the affair televised, the promoters because of what video's evil eye might do to gate receipts, the sponsors over paying $100,000 for something popularly known as "The Middle-Aged Championship." Into this impasse stepped the torchbearers of theatre TV: they'd guarantee the promoters $10,000 for the right to carry the bout to eight out-of-town theatres. The out-of-town proviso, which safeguarded the New York box office, had enough appeal for the International Boxing Club to overcome its distaste for the low fee.
Long before Louis fulfilled his own prediction by knocking out Savold in the sixth, it appeared that theatre TV, in its first major test, had more than lived up to the exhibitors' prophecies. Keith's in Washington crammed 2,200 into its 1,838-seat theatre, turned away a thousand more. All of the eight theatres were stiff with standees; as for the fight itself, the TV blackout brought an unexpectedly large number of fans into the Garden. The evening's gate was a handsome $95,000. So happy an outcome naturally produced an almost evangelical zeal among the exhibitors. Plans were made for equipping 100 theatres with large-screen television by early 1952. The total capacity of 200,000 seats for a single event would then enable the theatres to bid as high as $80,000 for a fight or baseball game, an amount big enough to discourage all except a handful of advertisers on network TV. Given 2,000 twelve-hundred-seat theatres with large-screen television (and the excited theatre men see nothing improbable about this), TTV could pay $500,000 for an event and charge its patrons only 75 cents a head. As if to punctuate the test results with its own exclamation points, RCA announced that it had been working on "methods and devices" for subscription TV. The battleground had broadened immeasurably; in Phonevision the beleaguered networks had a potential competitor, in theatre television an actual one.
Theatre TV, however, is not the only or the strongest weapon Hollywood has in its anti-television arsenal. In fact, TTV is more a delaying tactic than a weapon, for though it can duplicate the coverage of TV it has no defense against the home comforts of Phonevision. Estimates of theatre closings range as high as 5,000 within the next five years, some even exceed this gloomy figure. The making of television films, on the other hand, is a weapon by which Hollywood can protect itself from TV's depredations. Consider these facts favoring Hollywood in any battle for control of television:
- CBS President Frank Stanton, a shrewd and patient student of television, who has watched his network's use of film jump from 75 miles to 200 miles (167 per cent) in a year, believes that a large majority of all network telecasts will ultimately be on film.
- Even when the freeze is over, many market areas, unconnected by either coaxial cable or microwave relay, will have to be served by film for any elaborate programing or for the carriage of network shows.
- To reach 125 television markets eight hours a day would cost a network $12 million annually in line charges alone.
- The same service given on 16-mm. film would cost $23 million for just the raw stock, not including distribution. But by printing only enough film for a third of the markets and "bicycling" these around until all stations had used them this could be reduced to $7,500,000.
- In the 1935-45 period alone, Hollywood produced -- and has stashed away in its vaults -- 5,380 features, 7,636 short subjects, enough to provide 9,342 hours of entertainment.
- More film is being made for TV annually than for theatre projection (1,000 hours vs. 775 hours). The independents are already working at near capacity on TV film and developing some startling techniques. Using three cameras simultaneously, Hollywood's Jerry Fairbanks got a minute of film for each sixteen minutes of working time, turned out a half hour of Silver Theatre drama for $6,000. Normal costs for even the cheapest ninety-minute grade B movie are upwards of $100,000, with sixty minutes of working time necessary to produce a minute of film.
- Kinescope recordings are considered by TV unions to be only a mechanical means of bridging the time zones for network broadcasts, not a method of preserving programs. Under union rules, they must be destroyed within sixty days. Thus, the $100,000 cost to Frigidaire for each of Bob Hope's six hourly shows must be wholly amortized in one performance, repetition within so short a time being impractical. Hollywood films could be used when the occasion demands.
Many an industry would consider itself blessed if it were making the fight of its life with so many formidable advantages. Hollywood's leadership, on the contrary, is plain scared. The major-studio executives, by and large, are afraid of what will certainly be a bare-knuckle scrap. Part of their reluctance is over the risks involved; their personal fortunes are made and they have little desire to increase them at the peril of being wiped out. And some of it is the inherent antagonism toward original thought, best expressed by one of the Warner brothers' admonitions to a struggling writer: "When you want new ideas, look in the files. "
Nobody, of course, could reasonably expect that the major studios would be able to make any overnight shift into TV shorts or feature-length films even if they wanted to. James Caesar Petrillo must be placated** if "dead" films are to be released to television or new ones produced for it. The exhibitors cannot be jettisoned so long as theatre distribution is the only way of financing the $1-million average cost of a grade A film. At the same time, a real beginning could be made by producing TV movies side by side with theatre films. The crushing overhead, which at Warner's adds 47 per cent to picture costs, could thus be shifted from the present base of twenty-five films a year to the much broader one of combined TV and theatre production. Yet so far neither MGM, Warners, nor RKO have even set up television departments.
MORE: The future of TV (maybe)
Elsewhere in the film capital there is growing evidence that the majors will not have long to decide whether to assert their leadership or forfeit it. CBS is already building a $35-million "Television City" in Los Angeles; it will include film studios. Hal Roach, Jerry Fairbanks, Inc., and Bing Crosby Enterprises are well in the black with capacity production of television movies. Paramount, which owns a substantial interest in DuMont, has bought stock in International Telemeter, a company making a collection device for subscription television. Universal International has set up a subsidiary -- United World Films -- for turning out TV movies. Wall Street syndicates, on springs since Warner Brothers' dickerings with a potential buyer, have been eager to pick up control of some timorous producer, liquidate the company, and realize on the sale of the film backlog.
Moreover, if approved by the government, the merger of the big theatre chain, United Paramount, with the American Broadcasting System may produce some important developments in theatre TV. It is clear that TV's need for film will not be denied just because Hollywood's "royal families" have barred the gates. As all elemental forces do under restraint, TV will simply raise a new empire and crown its own kings.
At this time, with TV enmeshed in its own difficulties and the full strength of its competitors still unmobilized, many questions about the media's ultimate shape must remain unanswered. But enough is clear for some general conclusions:
- The potentialities of TV are so enormous that scarcely any limit on its ultimate size can be set; within a generation at the outside its coverage will approximate that of radio's.
- TV's high costs, inherent daytime weakness, and difficulty crossing time zones on national hookups will eventually bring many advertisers back to AM radio with its less expensive, around-the-clock programs.
- The theatre owners, the only group in absolute competition with TV, are marked for slaughter.
- If Hollywood is willing to risk its money, it can win substantial control of TV and that may require extensive reorganizations and the disappearance of many of the Old Guard. In any event, the surviving networks are likely to return to their radio practice of merely acting as a broker for programs prepared elsewhere (CBS currently packages 70 to 75 per cent of its TV programs, NBC 50 per cent).
The mastodon is in the mire. Now is the time to harness him.
*A consolidation of five competing performers' unions. The five: American Federation of Radio Artists, American Guild of Variety Artists, American Guild of Musical Artists, Actors Equity, Chorus Equity.
**Petrillo induced the studios not to release old films for TV without re-recording their music tracks and not to issue new ones except on agreement that 5 per cent of the film's television earnings be paid to the musicians' union.