Hollywood on (Re)Trial: The American Broadcasting-United Paramount Merger Hearing

Society for Cinema & Media Studies

Hollywood on (Re)Trial: The American Broadcasting-United Paramount Merger HearingAuthor(s): Timothy R. WhiteSource: Cinema Journal, Vol. 31, No. 3 (Spring, 1992), pp. 19-36Published by: University of Texas Press on behalf of the Society for Cinema & Media StudiesStable URL: http://www.jstor.org/stable/1225506 .

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Hollywood on (Re)Trial: The American Broadcasting-United Paramount Merger Hearing by Timothy R. White

Recent television scholarship has replaced the assumption that the Hollywood film industry "ignored" television until it was too late to exploit the new medium with a new supposition-that the studios sought to enter television but were unsuccessful. Despite a number of excellent studies seeking to explain the economic, political, and managerial factors involved in this failure, the impact of the studios' antitrust battles on their efforts to enter television broadcasting has been largely neglected. In fact, the failure of the American motion picture industry to enter the television broadcasting business in the 1940s and 1950s

may be traced, at least in part, to the results of its antitrust history. After the

Supreme Court's 1948 decision in the Paramount Case, little did the studios know that they would soon be once more "on trial" for the antitrust crimes. When Hollywood sought to make a major move into television (this move itself stimulated by divorce, as the resulting companies searched for new markets to

exploit), the antitrust issue returned with a vengeance as the Federal Commu- nications Commission and powerful members of the television industry fought to keep the offending studios out.

NBC and CBS, who dominated radio, also operated the most successful television networks during the 1950s. This success was due to more than their financial resources: the FCC played a major role in protecting the industry from outsiders, providing regulatory barriers to entry. The FCC decision in the merger of ABC and United Paramount Theatres in 1953 offers an interesting example of this protection, especially in regard to the effects of past antitrust violations on attempts by the film industry to enter television, and will serve as the focus of my discussion. The participants in this hearing represent an intersection of some of the more important interested factions in the development of the early television broadcasting industry: Paramount Pictures and United Paramount Theatres, created as a result of the Supreme Court decision in the Paramount Case, sought to enter television in response to a shrinking market in motion

pictures; ABC (the result of NBC's divestiture of its Blue radio network) and the Du Mont Television Network, a relative newcomer to broadcasting, each

sought to gain an advantage over the other in the race for third place in a market that, due at least in part to FCC decisions, seemed unable to support more than three networks; and CBS, one of the two (with NBC) major radio

Timothy R. White is an assistant professor of Communication at Auburn University. ? 1992 Board of Trustees of the University of Illinois

Cinema Journal 31, No. 3, Spring 1992 1 9



and television networks, sought to solidify this position by gaining an additional owned-and-operated television station.

The FCC and the Broadcasting Industry: Some Shared Assumptions. Before an examination of this particular case, some explanation is in order. If the FCC protected the television broadcasting industry for the radio interests, how may we account for such a relationship between an industry and the body created to regulate it? Some critics of the FCC have adopted the "captive thesis," in which any regulatory commission more-or-less automatically becomes the willing servant of the industry it regulates.' This thesis, however, is far too general, telling us nothing specific about the FCC and the broadcasting industry; a more detailed account of the reasons for this state of affairs is needed.

Foremost among the causes for a close relationship between the FCC and the broadcasting industry is the fact that the two groups shared a number of basic assumptions concerning the nature of both the medium and the industry of broadcasting. Indeed, the Federal Radio Commission (the forerunner of the FCC) was formed largely due to the demand for regulation from the radio industry itself.2 Thus, there was general agreement from the beginning between the radio industry and the FRC that some sort of supervision was required, and that this regulation, to a great degree, should be designed to control entry into broadcasting in order to bring stability and order to the industry and the airwaves.

Radio broadcasting was already established as a commercial enterprise by the time the FRC came into existence; when it began its duties, the Commission took no steps to alter this situation.3 The Commission's acceptance of a particular structure of the medium had an important impact on the stability of the networks and the failed efforts of outsiders (in particular, the film industry) to enter broadcasting. Advertiser-supported broadcasting was not just condoned by the FRC and FCC, it was seen as serving the public interest;4 when the film companies sought to enter the television industry, the Commission feared that they planned to alter the shape of the new medium.

The understanding between the Commission (and Congress) and the radio industry extended beyond a general agreement on the need for, and the shape of, regulation. More than most other regulatory agencies, the FRC was called upon to manage the industry in ways that would serve the "public interest," and to a great extent the industry and the agency shared a certain concept of what constituted this public interest. According to Marver Bernstein, this situation is common among such agencies, especially when Congress proves unable or unwilling to provide specific guidelines: "Left largely to its own resources, which are apt to be weak relative to the strengths of the organized parties, a commission will probably be guided by dominant interests in the regulated industry in its formulation of the public interest."5 The Commission's definition of the public interest, just as its idea of what constitutes a "proper" structure of the industry, although not dictated by the networks, certainly worked in the favor of the radio broadcasters. In the area of programming, live broadcasts, especially those

20 Cinema Journal 31, No. 3, Spring 1992



that dealt with public issues, took on special importance;6 this sort of programming was the domain of the broadcasters, who had used it for years in radio, and continued to use it in the early days of television (largely to differentiate their product from motion pictures). The motion picture industry, with its emphasis on filmed product, was seen by the FCC as a group that had no history of, or interest in, the production and presentation of live programming.

A more consequential aspect of the Commission's concept of public interest was the use of the criterion of experience as an indication of an applicant's ability to serve the public. In the granting of television licenses, the FCC often placed more importance on background in radio broadcasting than on the potential for diversification of ownership. According to a 1958 House investigation of regulatory commissions, in the 1950s the FCC tended to diminish criteria such as "diversification of control of the media of mass communications... and magnify the weight given to the criterion of broadcast experience (which tends to favor the large established company, with extensive existing broadcast interests). In a number of recent cases, indeed, the experience factor has tended to be all but conclusive. The result has been a growing number of decisions which increase the already pronounced tendency toward concentration of ownership in the broadcast field."7 And, as we will see, the backgrounds of all of the major studios in antitrust activities did little to enhance their images as parties likely to serve the public interest.

The Commission also came to depend on the broadcasting industry, especially the networks, for information concerning not just technological change, but also the potential impact of any changes in the industry, including station ownership by outsiders. After all, the industry could be relied upon for information and opinions that were presented in ways that were more understanding of the FCC's problems than were the opinions of either the public or outside interests; the industry also tended to use language more familiar to the FCC, and appealed to values that were more consistent with those of the Commission itself.8 Decisions that favored the networks also usually presented the least possibility for disruption of a television service that, in the eyes of the industry and the FCC, seemed satisfactory to the American public. The Commission probably felt it had little to gain, but much to lose, from favoring outside interests in such cases.

Finally, it is important to recognize the interference of Congress on the FCC, usually on behalf of the broadcasting industry. Although some critics have blamed this bias on the financial interests some Congressmen had in the industry,9 these investments were not, in fact, extensive; a more important reason than pecuniary concerns was the understandable desire on the part of legislators to satisfy the needs of constituents (broadcasters) who were important, wealthy, and very useful in giving these politicians public exposure.10 And, of course, Congress was just as (if not more) sensitive as was the FCC to the public's apparent satisfaction with "free," network television, and was just as unwilling to disrupt this service in any way.

It was in this regulatory environment that the studios, especially Paramount,

Cinema Journal 31, No. 3, Spring 1992 21



sought to enter the television industry. The product of this new industry was not completely unfamiliar to the studios, but the "rules of the game" were. The radio interests' influence on the FCC and Congress, and the willingness of these bodies to protect the networks' competitive position by erecting regulatory barriers to entry, will be seen in the following pages.

The ABC-UPT Merger Hearing. In May 1951, Leonard H. Goldenson, president of United Paramount Theatres (UPT, the theater company that resulted from Paramount's divorce) and Edward J. Noble, chair of the board of the American Broadcasting Company (ABC), announced plans to merge the two companies. Although they did not need the FCC's approval for the merger, they did need approval to transfer ownership of ABC's five television stations to the new corporation; without this approval, they would decline to merge. As part of the deal, CBS would-purchase UPT's Chicago television station WBKB (which UPT received as part of Paramount's consent decree), as ABC already owned a station in that city. ABC and UPT filed an application for transfer of the stations in July 1951, and requested approval by October in order to plan operations for the fall season. When stockholders approved the merger in July 1951, they were assured by management that approval would come by September." However, they did not mention which year; the merger was not approved by the FCC until 1953.

The proposed deal drew attention from the FCC, Congress, and the broadcasting and film industries for three reasons: it was the biggest deal in broadcasting to that point; it involved the merger of motion picture and television interests; and each of the two major companies involved had been created to remedy restraints of trade-UPT was the result of Paramount Inc.'s divorce of exhibition from production and distribution, and ABC was the former Blue network, sold by RCA in response to the FCC's 1941 Report on Chain Broadcasting. The merger hearing was seen as a major test of the FCC's policy toward antitrust violators in general, and members of the film industry in particular; it was widely regarded as a pilot case that would determine future action in such cases.'2

The Commission's policy on such applicants was vague; in fact, there was no specific policy. In 1951, the FCC declared that it would establish no blanket policy covering antitrust violators, but would consider them on a case-by-case basis. However, it is clear that antitrust violations could be an effective means of preventing the film industry from obtaining television licenses; according to the Commission, "[I]t is important that only those persons should be licensed who can be relied upon to create in the public interest, and not engage in monopolistic practices.... It is obvious ... that violation of the antitrust laws by the motion picture companies is a matter that the Commission must consider carefully in determining the qualifications of these companies to operate in the public interest."13 In the same report, the Commission declared that in cases in which the offending party had engaged in illegal activities over a long period




of time, as had the film companies, eligibility would be difficult to establish, as "a strong presumption of ineligibility is raised and a heavy burden of proof is imposed on the applicant to show he is qualified to operate a broadcast station in the public interest."'4

The FCC's antitrust policy was purposely left vague;15 after all, a firm stand against all antitrust offenders would have eliminated many of the most important broadcasters. However, the FCC's antitrust policy, because it was so ambiguous, had already proved helpful in preventing motion picture interests from entering the television industry. For example, Warner Bros., which in 1945 purchased a seventeen-acre site in Los Angeles for television production, abandoned plans to buy radio and television properties (KLAC-TV in Los Angeles) in 1949 when the FCC postponed action on the transfer application for over a year, unable or unwilling to make a decision."6 In July 1948, Tri-States Meredith Broadcasting, 25 percent owned by Paramount, sought to purchase radio station KSO in Des Moines. The FCC declined to authorize the transfer without an investigation of the antitrust status of Paramount, but seemed to be in no hurry to undertake such an investigation."7

The issue had first arisen for Paramount in 1946, when the studio applied for a television license for KTLA in Los Angeles. The FCC gave its approval on a temporary basis, warning that such approval did not imply that Paramount was qualified to be a licensee.'8 The Supreme Court's decision in the Paramount Case renewed the FCC's close scrutiny of film companies,'9 and in 1949, granting an extension of Paramount's temporary authorization, the FCC stated that the "grant was made subject to the express condition that it is without prejudice to any action that the Commission may take with respect to any authorizations or applications of the grantee in the light of the decision of the Supreme Court in United States v. Paramount Pictures, Inc., et al.... This action should not be considered as constituting a determination by the Commission as to the qualifications of the grantee."20

This decision, or lack of decision, came despite Paramount's arguments to the contrary, including its assertion that the Commission "may not lawfully revoke or fail to renew the license of an otherwise qualified applicant because of allegedly monopolistic practices in a non-communications field.... and may not even take into account such violations unless and except to the extent that they bear a proximate and proved relationship to the qualifications of the applicant or licensee for station management and control."2'

The studio claimed that "the business establishments in the U.S. which have been unsuccessful litigants in antitrust proceedings constitute a blue-ribbon list of American industries"22 (an observation that says less about Paramount's qualifications than it does about the state of American industry). Paramount also pointed out that there were many losers of antitrust actions holding television licenses, including such important broadcasters as RCA, CBS, and Westinghouse.23 Finally, Paramount challenged anyone "to point to a more resourceful and intelligent competitor of the dominant networks than Paramount has proven




itself to be,"24 and charged that the Commission had been stalling on the studio's license application since 1947.25

After the Supreme Court's decision in the Paramount Case and Paramount's consent decree of 1949, both Paramount Pictures and the newly created United Paramount Theatres sought expansion into television broadcasting with increased interest. If the ABC-UPT hearing could establish a precedent regarding the qualifications of antitrust litigants as television station license holders, Paramount and the rest of the film industry at least would know where it stood in future attempts to enter the television industry.

However, the case proved to be more complicated than it had seemed, as the FCC found that it could not rule on the merger without taking care of some unfinished business. When Paramount Inc. divorced in 1949, KTLA went to Paramount Pictures and WBKB became the property of UPT. Because Paramount considered the divorce involuntary, it had not requested permission from the FCC to transfer ownership of the stations to the new companies; therefore, the FCC had not recognized the transfer.26 Ownership of the stations had to be established before the ABC-UPT merger could be decided.

But before the ownership issue could be resolved, the FCC had to decide if, because of their past violations of antitrust laws, Paramount Pictures and UPT, "their officers, stockholders and directors, are qualified from the standpoint of character and conduct to be licensees."27 In January 1949, the FCC had placed the licenses of KTLA and WBKB on temporary status, pending a decision on the qualifications of their owners. Because the FCC considered Paramount's minority interest in Du Mont Laboratories a controlling interest, it had placed the licenses of Du Mont's three television stations on temporary status as well, and limited Paramount and Du Mont to a total of five stations.28 However, in 1951, when Du Mont Labs had applications on file for licenses in Cleveland and Cincinnati, the company had asked the Commission to reconsider its decision that Paramount controlled the television company. The FCC decided to hold these applications until a decision had been made in the pending ABC-UPT merger hearing, a decision that also would establish the extent of Paramount's control.

Because these issues had become so inextricably bound, in August 1951 the FCC consolidated the issues into one hearing.29 Thus the participants in this hearing, all of whom had important stakes in the outcome, included ABC, UPT, CBS, Paramount Pictures, and Du Mont Laboratories.

The representatives of these companies did not constitute a group of people who got along well; the antagonism among the parties guaranteed that the road ahead would be rocky. Paramount and UPT had become increasingly estranged since their divorce. Paramount's Barney Balaban and UPT's Leonard Goldenson, once close friends, had become bitter adversaries; in August 1951, a feud erupted between the two over what Goldenson felt were unreasonable rental terms for Paramount's films, and what Balaban felt was a preference on the part of UPT for the products of other distributors.30 CBS regarded Paramount as an outsider




trying to force its way into the television industry; the two companies had become especially hostile to one another during the so-called "color war," as Paramount, promoting its own color system, took every opportunity to criticize the CBS system.31

There had been bad blood between CBS and Du Mont Labs, rivals in the television network business, since the 1940 hearing on television standards when Dr. Du Mont had sided with RCA against CBS on some key issues.32 This conflict continued throughout the forties and fifties, with fights over the function of the Television Broadcasters Association, color television, and patent infringement.3 ABC and the Du Mont Network were in a bitter struggle for third place in a market that seemed able to support no more than three, and perhaps only two, major networks; executives of both companies knew that the outcome of the merger hearing could, and probably would, eliminate one of them.34

Dr. Du Mont and Paramount's Balaban and Paul Raibourn no longer even pretended to cooperate.5 Unlike his strategy in earlier hearings, Dr. Du Mont decided to attack the studio openly, hoping for a ruling forcing Paramount to divest itself of its interest in the network. Paramount had angered Dr. Du Mont by its refusal to provide financial or programming support, and Dr. Du Mont felt that Paramount was unnecessarily holding on to its interest in the network. This interest had precipitated not only the temporary status of Du Mont Labs' licenses (causing the network to lose customers),36 but more importantly, the limitation of Du Mont's owned-and-operated stations to three. Dr. Du Mont was also eager to disassociate his company from Paramount because of the studio's stigma as an antitrust violator; Dr. Du Mont felt that his network was beginning to be damaged by what he referred to as "the antitrust taint imputed to Du Mont by reason of the so-called Paramount control."37

For their part, Balaban and Raibourn felt that Dr. Du Mont was ungrateful for the prestige afforded by association with a major Hollywood studio, disloyal, incompetent, and a general nuisance. Paramount was especially angered by Dr. Du Mont's attempt to persuade the FCC to influence the Justice Department during the studio's consent decree negotiations. In a letter to the Commission, Du Mont Labs' counsel William Roberts had argued that the FCC and the Justice Department should cooperate to include an amendment to Paramount's consent decree that would "insure the holding of the Du Mont stock in such manner that there will be no question as to the exercise of either negative or affirmative control by another television licensee."38 In fact, the relationship between the two companies had reached such a low point that, during his testimony at the hearing, Paramount's head of production, Y. Frank Freeman, explained that he watched few television programs because "I've got a bad set. It's a Du Mont set."39

The FCC had nothing against ABC or CBS, but had a long history of conflict with both Dr. Du Mont and Paramount, which had begun during the 1940 hearing on television standards, when Du Mont, a newcomer to the industry, challenged the standards offered by RCA. The fact that Du Mont, with the




backing of a major Hollywood studio, was making a move into television was not overlooked by RCA, who suggested that Dr. Du Mont's proposed standards were inadequate and that Du Mont, under orders from Paramount, was purposely trying to keep television inferior to motion pictures. The implication that the film industry wished to usurp television for crass commercial gains, as opposed to the radio networks, who were concerned only with the "public interest," stuck with the FCC for decades.40

Dr. Du Mont further irritated the FCC throughout the forties and fifties, especially during the allocation hearings of 1948, when he pushed for a plan that would not intermix VHF and UHF stations in the same markets; this plan would have helped the Du Mont Television Network, but would have threatened the control of NBC and CBS over the industry.4' Dr. Du Mont went so far as to accuse the FCC of both incompetence and fostering a monopoly in the industry.42 Dr. Du Mont also made few friends on the Commission or in the government during hearings on color standards; he publicly referred to Sen. Edwin C. Johnson and FCC Commissioner Robert F. Jones as "laymen" who had put a stranglehold on the growth of television, and said that neither had sufficient knowledge of electronics or engineering to make a decision regarding color television. According to Dr. Du Mont, "Here is a lusty new industry which can bring employment to hundreds of thousands and enjoyment to millions being stifled by the arbitrary and uninformed opinion of two men."43

The FCC Broadcast Bureau, representing the FCC in the ABC-UPT hearing, saw its job as that of prosecutor and took the position that Paramount was guilty of antitrust violations, that it sought to stifle the development of television, and that it had violated FCC regulations in the transfer of stations to UPT and Paramount Pictures. It was determined to convince the hearing examiner, Leo Resnick, that neither Paramount Pictures, UPT, nor Du Mont Labs were qualified to hold broadcasting licenses, and the merger of ABC and UPT should not be allowed. According to the Bureau, the merger was just the first step in the takeover of television by the film industry; this opinion was shared by many others, both inside and outside the film and television industries.44

But despite the fears of the Broadcast Bureau and others, the proposed merger did not represent a joining of the Hollywood studios with the new medium of television. In 1951, the Motion Picture Herald pointed this out, warning against both optimism in the film industry and pessimism in the television industry: "While the [motion picture] industry took from the bold move the comfort that exhibition can meet the competition by using its economic might, others saw the merger as yet another foot-in-the-door and insurance against future television inroads. Newspaper writers tended to overlook the fact that, under the Paramount consent decree, production and distribution function ... [as]... completely separate units from exhibition, and editorial conclu- sions suffered from that inaccuracy."45

Therefore, it did not occur to some that a decision in the hearing denying the merger was not entirely in the interests of the established networks; although




the elimination of Paramount and the Du Mont Network would further the dominance of NBC and CBS, a decision against the merger of ABC and UPT would mean that CBS would not get the Chicago owned-and-operated station it so badly needed. And the merger of ABC with a film exhibitor was not nearly as dangerous as the threat from a film producer; UPT could provide funds, but Paramount Pictures could supply product-a gold mine of popular movies sat in the studio's library. And, with the addition of ABC as a strong third television network with roots in the radio industry, there would be little room for more competition. However, when the hearing began, it seemed likely that the blame for Paramount Inc.'s past antitrust sins would fall on Paramount Pictures, not UPT, and that the merger would be approved.

Barney Balaban, as president of Paramount Pictures and former president of Paramount Inc., provided the first target for the Broadcast Bureau. Balaban was not an ideal witness for his company; perhaps unaware of the prejudice against pay television among the Commissioners (and the networks), he proudly described Paramount's subscription and theater television plans. Even worse, he stubbornly insisted that there was nothing wrong with Paramount's past practices, despite what the Supreme Court had decided, and he claimed that 99 percent of the exhibitors agreed with him.46

However, efforts to pin serious charges on him failed. The charge by a Chicago theater owner that his contract with Paramount required him to listen to, but not necessarily follow, the advice of Balaban was about the worst evidence the Bureau could find.47 More damaging, however, was the testimony of Paramount's general counsel, Austin Keough, who revealed that 531 antitrust suits had been filed against Paramount between 1920 and 1950, and, at the end of 1951, 141 antitrust cases, involving damage claims of $293 million, were pending against the studio.48

But as the hearing progressed, evidence implicated Leonard Goldenson and Arthur Blank, UPT executives formerly in charge of Paramount's theater operations, in far more serious antitrust violations. The FCC presented many of the same witnesses who had testified in the Justice Department's suit against Paramount, with the same horror stories; but the stories, even though old news by this time, were still incriminating. Typical was the testimony of David K. Edwards, manager of the Lawrence chain of theaters in Utah, who testified that Goldenson threatened to do to his theaters what Hitler had done to Europe; according to Edwards, Goldenson said that Paramount "had learned a lot from this guy Hitler. We will send the bombers over.... You fellows opened up a closed situation that we paid a lot of money to get and we are not going to idly stand by and take it."49 Goldenson denied that the reason he had made these threats was to obtain control of the theaters, but he did not deny that he had made them. Du Mont Labs' counsel capitalized on this by pointing out how many of the offending individuals in the Paramount Case would be on the ABC- UPT board of directors; ABC's Robert Kintner protested that only six of the eighteen directors had been involved in antitrust violations.50




Dr. Du Mont, wishing to rid his company of Paramount's interest and the damage it was causing the network, hoped to convince the Commission to force the sale of the Du Mont Labs stock held by the studio. In an effort to accomplish this, Du Mont Labs counsel Morton Galane, questioning Paramount's Austin Keough, claimed that television stations were simply another outlet for film exhibition, and the granting of licenses to Paramount would violate the Supreme Court's decision in the Paramount Case. However, as Paramount counsel Paul Porter (himself a former chair of the FCC; Paramount, like the members of the broadcasting industry, was well aware of the value of hiring commissioners after their tenures at the FCC) pointed out, Paramount's consent decree did not prohibit the studio from acquiring theaters.51

Having failed in this attempt, Du Mont Labs counsel William Roberts then tried to establish that Paramount was operating what amounted to a television network, and pointed out that the studio itself referred to its kinescope distribution operations as a network. He submitted advertisements for the "Paramount Television Network" that appeared in Broadcasting in 1951, as well as Paramount Television Production's affiliation contract, in which it clearly identified itself as a network. Roberts also revealed that Paramount was distributing five shows weekly, with forty-two affiliates at the end of 1950. Although Du Mont denied that Paramount controlled Du Mont, the FCC had already established that it did; therefore, Roberts reasoned, as in the case of NBC Red and Blue, Paramount should be obliged to divest itself of its interest in one of the networks.52

FCC counsel Ford enthusiastically agreed with Roberts's line of reasoning. CBS counsel Richard Salant, who obviously was tired of the entire proceeding and seemed to have an undisguised dislike for Dr. Du Mont and Roberts, added that the logical thing to do was to revoke immediately the licenses of Paramount's and Du Mont's television stations. The argument became hopelessly complicated, no one seemed certain how to proceed safely, and the subject was dropped. In his decision, Examiner Resnick ignored the episode.53

By July 1952, the hearing had taken more than ninety days, the transcript had reached thirteen thousand pages of testimony, and over nine hundred exhibits had been submitted.54 The FCC became concerned about the length of the hearing, the nature of the testimony, and the results of the delay. It was the health of ABC that caused alarm among some of the Commissioners; the network had borrowed $2.5 million since November 1951, was losing personnel, and was faced with panic among its affiliates.55

In August 1952, although rejecting a request by UPT and ABC for an immediate decision and the total elimination of antitrust issues in the hearing, the FCC ruled that "in all further proceedings herein no consideration will be given to evidence relating to any of the activities of the parties to this proceeding which occurred more than three years before August 7, 1951, the date upon which the renewal licenses were originally designated for hearing."56 Because there had been no testimony in the hearing concerning antitrust violations that had occurred after 7 August 1948, the issue was eliminated from the case. This




was made a general policy for renewal of licenses. However, because the ruling applied only to those applicants who were already license holders, it was not an invitation to Hollywood to enter television broadcasting; those companies without existing broadcasting licenses were subject to antitrust investigation without the three-year limit.57

The ruling also applied only to the antitrust issue; in deciding the Paramount- Du Mont control issue, the FCC reserved the right to examine the record without time limits. This decision pleased UPT, ABC, and CBS, as it would expedite the merger and the sale of WBKB to CBS. It had a mixed reaction from Paramount as it assured the approval of a license for KTLA, but left open the Du Mont question; however, the studio decided not to fight the ruling. The real loser in the decision was Du Mont; both ABC and CBS would be strengthened and Du Mont probably would remain limited to less than five television stations. Therefore, the only participant in the ABC-UPT hearing that objected to the ruling was Du Mont. The network's arguments that the three-year limit should apply also to its relationship with Paramount, and that UPT, being a new company, should not be regarded as a previous license holder (and, therefore, was subject to full investigation), were rejected by the FCC.58

The Commission's ruling, which was made specifically to benefit ABC,59 effectively cleared the way for the merger of ABC and UPT. In November 1952, Hearing Examiner Resnick recommended approval of the merger, finding nothing in the recent antitrust record that would bar either Paramount or UPT from holding television licenses. Ironically, it was the conduct of Paramount Pictures as a television licensee that convinced Resnick that there was no harm in allowing the entry of motion picture interests into television broadcasting; Paramount had been an ideal licensee, with superior programming and an outstanding record of public service.60

Resnick also concluded that Paramount did not exercise control over Du Mont Labs.61 Resnick based his decision on the actual working control he saw exercised by Dr. Du Mont and his associates; according to the examiner, "[T]he veto power possessed by Paramount, as the Class B stockholder, has not been exercised and is applicable to a limited class of situations not likely to occur in the foreseeable future."62 This ruling was potentially the most important of the findings in the case, as both Paramount and Du Mont Labs would be free to expand to five owned-and-operated stations; the Du Mont Television Network could develop into a competitive network, and Paramount made plans to expand its television interests.63

The studio immediately made plans to apply for four more stations, and Paramount's Paul Raibourn suggested that the film company would launch a fifth network if and when allowed to expand to five owned-and-operated stations. Raibourn said that because the new stations would need large quantities of filmed programming, Paramount would begin production of films specifically for television, and that the time could be right for Paramount's library to be released to television. In December, Raibourn announced that Paramount would




begin production of a series of thirty-nine half-hour television films in England for use on its network, using funds that had been blocked by that country.6

However, the Commission was not obligated to accept the decision of the examiner. Although it had surrendered the antitrust issue as a means of preventing Paramount and Du Mont from gaining a foothold in the industry, the FCC still insisted that Paramount controlled the network through its position as a minority stockholder (even though it cited no specific evidence of the exercise of such

control). The Commission accepted virtually every other part of Resnick's decision, but ruled, in a 4-3 vote, that Paramount and Du Mont Labs were under common control, and could not exceed a total of five stations between them.5

In this way, the FCC once again ensured that television broadcasting would be controlled by the same three companies that had dominated radio broadcasting, thus fostering a lack of diversity in both station and network ownership. Although much was made of the fact that a motion picture interest, UPT, had finally become established in the television network field, UPT was a theater company, not a production company. Paramount Pictures, with its library of films and production capabilities, was prevented from becoming a major force in broadcasting. Dr. Allen B. Du Mont, who had not been involved in radio broadcasting and was a constant critic of not only the established networks but also the FCC and its acceptance of, and complicity in, the network oligopoly, was shut out of the industry. As pointed out in an editorial in Broadcasting, "In approving the ABC-United Paramount merger, the FCC found that it would achieve the stimulation of competition which that agency professes to desire. We cannot help but point out that the FCC's decision with regard to Du Mont and Paramount Pictures seems to promise the exact antithesis and indeed carries the threat of hampering the Du Mont Television Network at a time when its competition has been unleashed for new advances."66

Paramount's unsuccessful attempt to obtain a group of stations was due in large part to the FCC's use of antitrust issues to delay a decision concerning the studio's eligibility to own a television broadcasting license and its ruling that the studio controlled Du Mont Labs. Paramount's failure to build a chain of television stations is typical of the overall problem facing the studio in its efforts to enter the television industry. As Paramount sought to diversify its operations, it targeted an industry that was regulated by a government agency; this regulatory body, the FCC, had already accepted the radio interests as the most qualified parties to develop and exploit television. As a result of this intersection of events, Paramount was blocked by the FCC in its attempt to become an owner of a large chain of owned-and-operated television stations. The Hollywood studios in general, prevented from becoming broadcasters, became mere suppliers of product to the already-established networks, who reaped the bulk of the profits from this product.

This decision, along with a number of other decisions made by the FCC (including the VHF/UHF allocation plan adopted with The Sixth Report and




Order and rulings concerning theater television and subscription television),67 prevented Paramount from becoming a major force in television broadcasting, and represents an important example of the FCC's acceptance of the major radio interests as the most qualified parties to implement a national network television service in the United States. Whether or not the motion picture companies would have served the public interest any better than did the television networks is a moot point; the studios were not given the opportunity to increase the diversity of American network broadcasting. This was the result not of a conspiracy, but of a concept of a medium and an industry on the part of the FCC. The more we know about this concept, its causes, and its

consequences, the clearer will be our understanding of an important period of both film and broadcasting history.

Notes

1. See, for example, Marver H. Bernstein, Regulating Business by Independent Commission (Princeton, N.J.: Princeton University Press, 1955), 74-102; Bernard D. Nossiter, The Mythmakers: An Essay on Power and Wealth (Boston: Houghton Mifflin Co., 1964), 70, 122-28; Bernard Schwartz, The Professor and the Commissions (New York: Alfred A. Knopf, 1959), 118-19; and Bernard Schwartz, "Antitrust and the FCC: The Problem of Network Dominance," University of Pennsylvania Law Review 107, no. 6 (April 1959): 754. For criticisms of the "captive thesis," see James L. Baughman, Television's Guardians: The FCC and the Politics of Programming 1958-1967 (Knoxville: University of Tennessee Press, 1985), xiv-xv; and Thomas K. McCraw, "Regulation in America: A Review Article," Business History Review 69, no. 2 (Summer 1975): 166.

2. Bernstein, Regulating Business, 85-86. See also Baughman, Television's Guardians, 5.

3. Bernstein, Regulating Business, 85. 4. U.S. Congress, House, Committee on Interstate and Foreign Commerce, Network

Broadcasting, House Report 1297, 85th Congress, 2d Session, 1958, 157. 5. Bernstein, Regulating Business, 154. 6. Network Broadcasting, 129-30, 160. 7. U.S. Congress, House, Subcommittee of the Committee on Interstate and Foreign

Commerce, Investigation of Regulatory Commissions and Agencies, 85th Congress, 2d Session, 1958, 211, 212; and Network Broadcasting, 105.

8. Erwin G. Krasnow, Lawrence D. Longley, and Herbert A. Terry, The Politics of Broadcast Regulation, 3d ed. (New York: St. Martin's Press, 1982), 24, 48-54; and Bernstein, Regulating Business, 83; 156. The observation concerning technological change is especially helpful when we consider, first, the advent of television brought with it a new and more complicated set of technological and economic problems than were involved with radio, and second, that the efforts of the motion picture industry to offer nonbroadcast alternatives (theater and subscription television) to the networks involved even more complicated technological innovations.

9. Krasnow, Longley, and Terry, Politics of Broadcast Regulation, 89. See also Louis M. Kohlmeier, Jr., The Regulators: Watchdog Agencies and the Public Interest (New York: Harper & Row, 1969), 64-67.

10. Krasnow, Longley, and Terry, Politics of Broadcast Regulation, 89. 11. Broadcasting, 28 May 1951, 23, 32, 34, 36, 50; Broadcasting, 4 June 1951, 26;

Broadcasting, 9 July 1951, 31; Broadcasting, 16 July 1951, 28; Broadcasting, 30




July 1951, 27, 75; Business Week, 28 May 1951, 23, 32, 34, 36; Business Week, 2 June 1951, 20; The Commercial and Financial Chronicle, 28 May 1951, 2193; Motion Picture Herald, 26 May 1951, 17; Motion Picture Herald, 4 August 1951, 13; Variety, 23 May 1951, 1, 61; Variety, 18 July 1951, 28; Variety, 1 August 1951, 7; Allan David Larson, "Integration and Attempted Integration Between the Motion Picture and Television Industries Through 1956" (Ph.D. diss., Ohio University, 1979), 124-25; and Sterling Quinlan, Inside ABC (New York: Hastings House, 1979), 29. This was not the first time a motion picture interest had sought to enter television broadcasting through the acquisition of ABC. As early as 1948, Twentieth Century- Fox sought to buy the network (Moody's Stock Survey, 29 November 1948, 147; Business Week, 4 December 1948, 96; and Larson, "Integration," 123-124), and in 1950 Paramount Pictures considered making a bid for ABC if it could arrange a sale or exchange of stock to rid itself of its Du Mont holdings (Variety, 19 July 1950, 3; and Larson, "Integration," 124).

12. Broadcasting, 28 May 1951, 32; and Broadcasting, 20 August 1951, 24. 13. Report of the Commission re Docket 9572, Federal Register (11 April 1951) 16:

3189-90. 14. Ibid., 3189. See also Broadcasting, 2 April 1951, 25; Broadcasting, 9 April 1951,

58; Motion Picture Herald, 7 April 1951, 13, 16; Variety, 1 February 1951, 29, 34; Variety, 4 April 1951, 26; and Schwartz, "Antitrust and the FCC," 754.

15. The FCC declared that it did not "believe that any rule could adequately prescribe what type of conduct may be considered of such a nature that in all cases would be contrary to the public interest to grant a license." Report of the Commission re Docket 9572, Federal Register [11 April 1951] 16: 3188.

16. Moody's Stock Survey, 11 June 1945, 345; Motion Picture Herald, 26 February 1949, 31; Motion Picture Herald, 30 July 1949, 35; Variety, 30 May 1951, 26; Variety, 17 October 1951, 34; and Larson, "Integration," 74, 122.

17. Broadcasting, 19 July 1948, 22, 63. There also was a lack of cooperation among the studios in this struggle with the FCC. For example, during hearings for the allocation of a television station in San Francisco, Paramount accused applicant Fox of being a "latecomer" in the television field who, unlike Paramount, had waited until there was a profit in the new medium before becoming involved. Fox, in return, urged the denial of Paramount's application due to its involvement with Du Mont Labs and the resulting total of five stations between the two companies (Motion Picture Herald, 9 October 1948, 40).

18. FCC Mimeo 1804, Memorandum Opinion and Order re Docket 7264, 20 December 1946; Memorandum Opinion and Order, Federal Communications Commission Reports (Washington: GPO, 1949) 11: 812-16; and Business Week, 7 June 1952, 108.

19. Broadcasting, 21 June 1948, 23. 20. FCC Public Notice 33372, Report 1460-TV Broadcast Actions, 24 March 1949,

Manuscript Division, Records of the Allen B. Du Mont Laboratories, Inc., box 112, Library of Congress, Washington, D.C.

21. Paramount memorandum quoted in Broadcasting, 13 August 1951, 76. 22. Ibid. 23. Motion Picture Herald, 26 March 1949, 34. See also Walter B. Emery, Broadcasting

and Government: Responsibilities and Regulations (E. Lansing: Michigan State University Press, 1961), 167-68.

24. Variety, 12 April 1950, 7, 25. 25. Variety, 19 January 1949, 24, 33. 26. Decision re Docket 10031, et al., Federal Communications Commission Reports

(Washington: GPO, 1966) 17: 268; Letter from the FCC to Paramount Pictures, Inc.,




Federal Communications Commission Reports (Washington: GPO, 1972) 43: 453; Broadcasting, 19 March 1951, 59; Broadcasting, 13 August 1951, 76; Business Week, 7 June 1952, 108; Variety, 30 May 1951, 26; and Variety, 5 September 1951, 4.

27. Broadcasting, 13 August 1951, 76. 28. Du Mont Motion to Dismiss Application re File BTC-974, 14 March 1951, 3-4, 13-

14, Records of the Allen B. Du Mont Laboratories, Inc., box 24; Broadcasting, 19 March 1951, 59; Motion Picture Herald, 19 February 1949, 29; Decision re Docket 10031 et al., 279; Emery, Broadcasting, 165; and Gary Newton Hess, An Historical Study of the Du Mont Television Network (New York: Arno Press, 1979), 103.

29. Broadcasting, 3 September 1951, 25; Motion Picture Herald, 8 September 1951, 32; and Larson, "Integration," 209-10.

30. Variety, 8 August 1951, 3, 17. See also Broadcasting, 17 March 1952, 78. In his testimony at the merger hearing, Balaban described the relationship between the two companies as that of "a divorced couple who don't speak to one another" (Broadcasting, 11 February 1952, 63; and Motion Picture Herald, 9 February 1952, 21).

31. Variety, 28 March 1951, 4; Variety, 30 May 1951, 3; Scientific American, November 1951, 33-34; Broadcasting, 3 September 1951, 59; Broadcasting, 24 September 1951, 67, 101; Broadcasting, 15 October 1951, 80; and CBS Press Release dated 11 February 1947, Records of the Allen B. Du Mont Laboratories, Inc., box 110.

32. Network Broadcasting, 20. See also Lawrence P. Lessing, "The Television Freeze," Fortune, November 1949, 126.

33. Broadcasting, 29 January 1951, 66; Broadcasting, 26 February 1951, 57; Broad- casting, 8 May 1944, 62; Broadcasting, 25 September 1944, 18; Broadcasting, 30 July 1951, 52; Dr. Allen B. Du Mont, "Status and Progress of Television Industry," The Commercial and Financial Chronicle, 20 December 1951, 33-34; Tide, 2 February 1951, 50; Variety, 17 January 1951, 29, 35; Variety, 24 January 1951, 25; Variety, 27 June 1951, 27; Variety, 24 October 1951, 34, 42; Hess, An Historical Study, 55-57, 72; Joseph H. Udelson, The Great Television Race (University, Ala: University of Alabama Press, 1982), 153; Network Broadcasting, 20; and Robert H. Stern, The Federal Communications Commission and Television (New York: Arno Press, 1979), 260, 286. As an example of the sort of behavior that upset CBS, in 1951 Dr. Du Mont demonstrated to the FCC a mechanical color television receiver to illustrate the size of the disc needed for a large television screen using the CBS field sequential system. It used a nine-foot color wheel placed in front of a thirty- inch direct view television tube. Du Mont Labs' Thomas T. Goldsmith also accused CBS of deliberately holding back the progress of television by promoting its incompatible color system (Forbes, 1 January 1951, 28, 30; and Hess, An Historical Study, 72). For an excellent account of the "color war," see Brad Chisholm, The CBS Color Television Venture: A Study of Failed Innovation in the Broadcasting Industry (Ph.D. diss., University of Wisconsin-Madison, 1987).

34. Although Du Mont was far behind ABC in ratings and revenues, the network's competition did hurt the larger web. When Du Mont abandoned network operations in 1955, ABC's billings increased by 68 per cent (Cobett Steinberg, TV Facts [New York: Facts on File Publications, 1985], 398).

35. As early as 1941, Dr. Du Mont threatened to drop his pretense of cooperation between the two companies: "I have tried to... give the impression on the outside that everything was going along fine and that we and Paramount were interested in furthering and promoting television. Unless I have some backing from Paramount in this connection there is only one alternative for me to do and that is call a spade a spade" (Allen B. Du Mont to the Members of the Board of Allen B. Du Mont




Laboratories, Inc., 16 June 1941, 4, Records of the Allen B. Du Mont Laboratories, Inc., box 21).

36. Testimony of Dr. Allen B. Du Mont, FCC Docket 10031 et al., 2: 168, 16 January 1952; William A. Roberts to T. J. Slowie, Secy. FCC, 21 February 1949, FCC Docket 7293; Dr. Allen B. Du Mont to Barney Balaban, 17 October 1951, 2-3, Records of the Allen B. Du Mont Laboratories, Inc., box 118 (also submitted as Du Mont Exhibit 26, FCC Docket 10032).

37. Dr. Du Mont quoted in Variety, 21 March 1951, 36. See also testimony of Dr. Allen B. Du Mont, FCC Docket 10031 et al., 2: 170, 16 January 1952; and Dr. Allen B. Du Mont to Barney Balaban, 17 October 1951, 2-3.

38. William A. Roberts to Harry M. Plotkin, Acting Gen. Counsel, FCC, 16 March 1949, submitted as FCC Exhibit 4-A, Docket 10031 et al.

39. Freeman quoted in Variety, 20 February 1952, 4. 40. The FCC was not alone in its suspicion of the film industry, as may be seen from

the popular press of the period; see, for example, Consumer Reports, February 1949, 86; and Harvey Levin, "How Much Merger in Television," The Nation, 13 October 1951, 299. Unlike most commentators, who were concerned about the effects of film companies' involvement on the television medium, Levin argued that "One of the most important issues involved is the effect such mergers might have on the form and quality of motion pictures" (Levin, 299).

41. Network Broadcasting, 23-24; Hess, An Historical Study, 60-64; and Kohlmeier, The Regulators, 208-9.

42. Variety, 23 May 1951, 35; Variety, 22 August 1951, 22, 40; and Du Mont, "Status and Progress of Television Industry," 2441.

43. Dr. Du Mont quoted in Variety, 8 February 1950, 31. See also Stern, The Federal Communications Commission, 309.

44. John D. C. Weldon, "The Merger of ABC and Paramount," The Magazine of Wall Street, 7 March 1953, 644; and Larson, "Integration," 125. Among those voicing strong opposition to the merger was Rep. Emmanuel Celler of the House Judiciary Antitrust Subcommittee, who claimed that the Communications Act prohibited the granting of licenses not only to those convicted of radio monopoly, but also was meant "to prevent those with monopolistic taints attached from getting any license from [the] Commission" (Broadcasting, 6 August 1951, 28, 40).

45. Fred Hift, "Lady Hollywood Going to Marry That Young Upstart," Motion Picture Herald, 9 June 1951, 13.

46. Testimony of Barney Balaban, FCC Docket 10031 et al., 10: 1581-83, 5 February 1952; testimony of Barney Balaban, FCC Docket 10031 et al., 11: 1715-16, 16 February 1952; Variety, 6 February 1952, 21; and Motion Picture Herald, 9 February 1952, 21.

47. Broadcasting, 16 June 1952, 68. For other examples of testimony concerning Paramount's allegedly illegal activities, see Broadcasting, 28 April 1952, 66; Broad- casting, 26 May 1952, 28, 114; Broadcasting, 2 June 1952, 63; Motion Picture Herald, 31 May 1952, 19; Variety, 30 April 1952, 61; and Variety, 28 May 1952, 4, 16.

48. Broadcasting, 25 February 1952, 75; and Motion Picture Herald, 23 February 1952, 23.

49. Broadcasting, 9 June 1952, 70; and Variety, 4 June 1952, 20. For other examples of testimony about UPT's executives' allegedly illegal activities, see Motion Picture Herald, 7 June 1952, 14; Broadcasting, 19 May 1952, 64; and Broadcasting, 2 June 1952, 63.

50. Broadcasting, 7 April 1952, 109; and Motion Picture Herald, 7 June 1952, 14. 51. Variety, 5 March 1952, 12.




52. Paramount affiliation contract submitted to the FCC as Paramount Exhibit 17, Docket 10031 et al.; and Variety, 29 November 1950, 30. The five programs were "Dixie Showboat," "Spade Cooley," "Time for Beany," wrestling, and "Hollywood Reel." For examples of advertisements for the Paramount Television Network, see Broadcasting, 30 July 1951, 50; Broadcasting, 17 December 1951, 69; and Broad- casting, 19 May 1952, 58.

53. William Roberts during the cross-examination of Paul Raibourn, FCC Docket 10031 et al., 15: 2294-2300, 13 February 1952; Official Report of Proceedings Before the Federal Communications Commission re Docket No. 10031 et al., 15: 2293-2305; and Variety, 18 February 1952, 104. The implications of Roberts's accusations may not have been ignored by the Commissioners themselves; Commissioners Freida Hennock and Edward Webster pushed for a denial of renewal of Du Mont Labs' licenses unless and until Paramount divested itself of its Du Mont interest (Variety, 11 February 1953, 30).

54. Memorandum Opinion and Order re Docket 10031 et al., FCC Reports 43: 993; and Hess, An Historical Study, 105-6.

55. For general information on ABC's fiscal state, see Broadcasting, 24 March 1952, 61, 70.

56. Memorandum Opinion and Order re Docket 10031, et al., FCC Reports 43: 994. See also Motion Picture Herald, 9 August 1952, 28; and Emery, Broadcasting, 168.

57. Memorandum Opinion and Order re Docket 10031 et al., FCC Reports 43: 992-95; Decision re Docket 10031 et al., 269. See also Broadcasting, 14 July 1952, 29; Broadcasting, 21 July 1952, 46, 102; Broadcasting, 28 July 1952, 68; Broadcasting, 4 August 1952, 31; New York Times, 2 August 1952, 12; Variety, 9 July 1952, 1, 16; Variety, 16 July 1952, 4, 20; Variety, 6 August 1952, 3, 18, 27, 33; and Hess, An Historical Study, 105.

58. Memorandum Opinion and Order re Docket 10031, et al., FCC Reports 43: 998- 99.

59. In its ruling, the FCC explained that "We believe that the financial stringencies to which American Broadcasting Company adverts in its petitions in justification of expedition in the termination of these proceedings merit our serious attention. Limitation of the issues in the manner we have ordered should bring about a substantially earlier conclusion of the proceedings" (Memorandum Opinion and Order re Docket 10031 et al., FCC Reports 43: 994-5).

60. Business Week, 22 November 1952, 34; New York Times, 14 November 1952, 1, 20; Motion Picture Herald, 13 December 1952, 23; Variety, 19 November 1952, 63; and Quinlan, Inside ABC, 43-44. Paramount's KTLA won the Academy of Television Arts and Sciences Station Award for Outstanding Public Service in 1948, 1949, and 1950, the only three years it was awarded (Steinberg, TV Facts, 165-66). See also Broadcasting, 29 January 1951, 64; Milton MacKaye, "The Big Brawl: Hollywood vs. Television (Part Two)," Saturday Evening Post, 26 January 1952, 122; and Mark J. Williams, "Paramount's KTLA: Considering the Independent Station as a Factor in the Rise of Network Television," The USC Spectator 7, no. 2 (Spring 1987): 25-29.

61. Motion Picture Herald, 10 January 1953, 24; Motion Picture Herald, 13 December 1952, 23; and Variety, 19 November 1952, 4, 63.

62. Broadcasting, 17 November 1952, 24; and Variety, 19 November 1952, 4. See also New York Times, 14 November 1952, 20.

63. Broadcasting, 17 November 1952, 23. 64. Broadcasting, 29 December 1952; The Commercial and Financial Chronicle, 29

December 1952, 2532; Motion Picture Herald, 27 December 1952, 24; Variety, 19




November 1952, 4, 16; Variety, 26 November 1952, 3, 22; Variety, 19 November 1952, 4, 16; and Variety, 24 December 1952, 19.

65. Broadcasting, 16 February 1953, 28, 116, 121; Motion Picture Herald, 14 February 1953, 24; Decision re Docket 10031 et al., 339-43; New York Times, 2 February 1953, 1; The Wall Street Journal, 10 February 1953, 22; Variety, 11 February 1953, 30; Larson, "Integration," 213; and Quinlan, Inside ABC, 47n. No decision made by Examiner Resnick had been overturned by the FCC until the Paramount-Du Mont control issue (Variety, 11 February 1953, 30). On the role of examiners at the FCC, see U.S. Congress, House, Committee on Interstate and Foreign Commerce, Regulation of Broadcasting, 85th Congress, 2d Session, 1958, 76-77, 86-87.

66. Broadcasting, 16 February 1953, 122. 67. For a more complete discussion of Paramount's efforts to enter television and its

largely antagonistic relationship with Du Mont, see Timothy R. White, "Life After Divorce: The Corporate Strategy of Paramount Pictures Corporation in the 1950s," Film History 2, no. 2 (June-July 1988): 99-119; and Timothy R. White, "Hollywood's Attempt to Appropriate Television: The Case of Paramount Pictures" (Ph.D. diss., University of Wisconsin-Madison, 1990).




Hollywood on (Re)Trial: The American Broadcasting-United Paramount Merger Hearing

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