Exploiting Hollywood 1980.

Chapter 1532 I Love Antitrust Law
"Nowadays, there are two main types of national television stations. One is the traditional wireless stations, such as CBS, NBC, ABC, and the youngest Fox. The other is the national cable television network that developed after the passage of the Cable Communications Policy Act in 1984, such as CNN, MTV, ESPN, etc."

Ed Bastian, CEO of DDH, who came to Los Angeles specifically to discuss with Ronald possible acquisition targets of Eisner, gave Ronald a table.

"Which one is he most likely to take over?" Ronald looked at the names of the four wireless stations above. The first three were well-established TV networks with deep roots, while Fox was owned by Australian tycoon Rupert. It seemed that none of them could be easily bought by Eisner.

Among the cable TV networks, only news stations like CNN can provide Disney with the resources it needs, but his boss Ted Turner, Jane Fonda's new husband, is not someone who is willing to sell the company he founded.

"I don't think any of them can..." Ed Bastian was much more familiar with the situation of these TV networks. He told Ronald about the holding situation of these TV stations.

NBC is controlled by General Electric. Their CEO, Jack Welch, is also a flamboyant person. He was named the best CEO in the United States and he would never give up his controlling stake.

If CBS and ABC were acquired, it would be a sky-high acquisition comparable to Paramount. Disney would have to use financial leverage like Redstone to make acquisition decisions, which is not an easy task at any time. Moreover, Disney's shareholder situation is much more complicated than Redstone's Viacom. If Eisner wants to make such a move, he must guard against sneak attacks from behind.

"I think it would be more reasonable to acquire Warner Bros. Television Network, which is smaller than the other major networks, but with Disney's money, it can quickly expand to catch up with Fox.

Or negotiate with Redstone and take advantage of the cash crisis of Viacom to buy Paramount Network, which happens to have a large audience of teenagers, which is consistent with Disney's positioning..."

"Um……"

Ronald nodded, then shook his head. He understood that Bastian was considering Disney's possible acquisition targets through rational business logic. But Eisner's biggest concern was not this...

After Disney lost its most capable COO Katzenberg in the past few years, the stock valuation has been greatly affected. After all, everyone has seen that both animation and live-action movies have been able to restore their box office capabilities under his leadership.

What Eisner feared most was not such a small matter as an acquisition being uneconomical, but that shareholders would unite against him and drive him off the chairman's position.

Launching a large acquisition can not only satisfy the performance requirements of some shareholders who support him (such as the Bass family), but also suppress opponents (such as Disney's nephew). The larger and more thrilling the acquisition, the more it can be used to please the former and suppress the latter.

As for centrists like Ronald, they were pinned down, and dared not make any alliances, or support or oppose in a group. They could only vote for Eisner obediently at the shareholders' meeting, the only occasion where they had a sense of presence.

"Eisner will face things on another battlefield. I think he is likely to take action against ABC or CBS, but NBC is unlikely." Ronald's opinion makes sense. Jack Welch, Redstone and Eisner are of the same type. They cannot coexist in the same company.

The scale of Warner Network was too small to achieve the goal of using external enemies to suppress internal forces. As for Paramount Network, it was not that Redstone did not see the benefits of the network. He would never let go of it to Eisner until he had used up his last bullet.

"Well, your judgment of them is often more reliable. I fully understand this from the previous Viacom incident." Ed Bastian pushed his glasses. "What benefits we can get from it is the most important thing. Just like in the Viacom acquisition case."

"At most, I will sell the shares when Disney's stock price rises. But speaking of the benefits, is it possible for DDH to acquire a national TV network?" Speaking of recognizing the importance of TV networks, Ronald also saw it. However, the national TV networks were all big ones, and his strength was still not enough to reach the three major wireless TV stations, plus any of Fox and CNN.

"Warner Network?" Ed Bastian did a quick calculation. With DDH's strength, it could only acquire the last two small-scale companies. Paramount was a youth network and did not meet the requirements. Warner was the only interstate TV network on the market.

"Warner? Impossible. They hate me so much now. Even if they didn't have the huge financial support from the merger with the Times Group, they wouldn't come to me if they wanted to sell."

Ronald himself understood that regardless of what had happened before, after he had snatched the filming rights for Forrest Gump from Warner Bros., their top executives and the Tisch family in New York were now extremely angry with Ronald. An opportunity to go down in history and win the golden statue was snatched away right under his nose by him and others including Shirley Lansing.

"Then there is no suitable cross-regional TV network on the market now. What remains are various local TV stations scattered across the 50 states of the United States..." Ed Bastian closed the folder and put his hands on it, as if there were some treasures in it, and at the same time looked at Ronald with his bright eyes.

"It's still too little money. I got rich too late. If Dirty Dancing could have been filmed five years earlier, no, three years earlier, my current assets might have doubled." Ronald also smacked his lips, feeling very sorry.

A national television network is not something that can be built just because you want it. The few that exist today were all built by super-rich people with a lot of money, or they were started in the 1950s and have been developed over a long period of time.

The FCC has only issued a few national television licenses. You can either spend tens of billions of dollars to rebuild one, or you can spend money to acquire shares in an existing TV network.

Seeing everyone taking up their positions one by one, Ronald began to envy Eisner, a worker. When they entered the company, it was already a very large enterprise. Although it did not belong to them, they could use this platform to mobilize a huge amount of resources.

Although DDH mostly belongs to itself, it does not have a platform to leverage on.

"Hmm?" Ronald sighed and was about to give up. But as he picked up the small cup and drank the black tea, he suddenly realized the meaning of Ed's piercing eyes.

"Come here, have a cup of this black tea. I didn't know how to make it before, but Yang Yanzi taught me to use a small cup, so that only in this way can I enjoy the full flavor of Wuyi Mountain Zhengshan black tea..." There was also a Kung Fu tea set on Ronald's desk. It was given to him by Mr. Qiu of the Era Group, Ang Lee's hometown. It was perfect with the black tea sent from the mainland, but unfortunately Ronald had used it as a decoration in his office. It was Yang Yanzi who was knowledgeable and corrected his practice of wasting black tea by drinking a mug.

"Hmm..." Ed Bastian took the small cup handed to him by the boss himself and put it to his lips. The rich aroma lingered under his nose. The thick tea soup had a beautiful amber color. After drinking it in one gulp, the aroma and taste mixed and rolled in the mouth, making people feel very comfortable, as if the whole person had entered a state of "Zen".

To be honest, Ed Bastian had also tasted the Japanese tea ceremony, but he had never experienced such a refreshing and Zen-like experience.

"This is the advantage of a small cup. If you put a large cup to your lips, you won't smell those flavors." Ronald smiled and added another cup for him. The small teapot can also better control the temperature to achieve the optimal brewing temperature.

Ronald stared at Ed Bastian, his other hand still on the folder, sure that there must be good stuff and good plans inside.

"Come on, another cup..." Ronald was not in a hurry. He just served his subordinates. He brewed a cup of tea from the teapot, then quickly poured it into another large-mouthed teacup, and finally changed it to a small teacup. His movements were smooth and flowing...

"That's enough. This is really a process that inspires people's wisdom..." Ed Bastian also felt that it was about enough and opened his folder. "The wisdom of black tea is to use a small cup. We also have another option, performing magic in a small market..."

The main reason why there are so few national TV networks is that antitrust laws give the FCC the power to review all wireless TV stations. Now there are also many legislators who want to bring cable TV stations under FCC supervision because their programs contain more violence and love.

The most important provision in the FCC's regulation is the so-called anti-duopoly clause.

Under this clause, a company cannot invest in two national TV stations at the same time and become a shareholder of both. It is said that this is to allow major TV stations to have independent voices, prevent excessive concentration of media control, ensure competition, and promote diversity of views and public interests.

Under this clause, each large media group can only acquire ownership of one national television network. To some extent, this preserves competition in the industry, even excessive competition.

Many times, there is not much difference between NBC and CBS, or CNN and ABC, in their news, and there is not much difference in their flagship programs.

For example, Ronald's good friend David Letterman's Late Show on CBS and his old employer NBC's Late Show have similar audiences and programs with similar purposes.

However, national programs cannot cover all program time slots. So-called national television networks, such as NBC, also have local TV stations across the country. Except for a few key areas, such as New York, which are directly operated by NBC, most other places cooperate with local TV stations.

The flagship programs and important news are broadcast the same across the country, but local news, weather forecasts, local sports games, and other time slots are compiled and broadcast by local TV stations. These local TV stations are the most watched TV channels by American audiences.

Similarly, in order to protect media competition and ensure that local people's voices have a channel to be heard on television media, the FCC divides the country's viewing areas into 210 designated market areas (DMAs).

This is the area divided by Nielsen Ratings, and the number of viewers in each area varies, from millions in New York DMA to tens of thousands in Alaska DMA. In each DMA area, viewers watch a weather forecast program and their own local news.

In order to protect the freedom of these DMAs, to make the existence of the FCC more legitimate, to gain more federal budgets, and to gain greater regulatory power, the FCC also has a famous antitrust clause for DMAs, namely the "two-station rule."

A company can only control two TV stations in a DMA. Of the two stations, only one can be NBC, ABC, CBS or Fox, which are ranked in the top four in the US in terms of ratings. The other can be a real local TV station ranked behind.

However, when crossing DMA areas, the FCC does not prohibit you from acquiring and controlling more local TV stations.

For example, Ronald's DDH has a TV station in Manhattan that has a broadcast agreement with NBC, but he has another TV station on Long Island that has a broadcast agreement with ABC. On Staten Island, he has another TV station that has a broadcast agreement with Fox. All three have broadcast agreements with PBS, where Helen's father is the general manager, because PBS's ratings are at the bottom, which is allowed by law.

"So your plan is to acquire these local TV stations to form a national TV network?" Ronald was puzzled. This was an ordinary plan, not a special move. Why did Ed Bastian seem to have a special move?

The prices of these TV stations are not low, after all, they have been entrenched in the local area for many years and have loyal advertising customers. But because of this, there is not much room for revenue growth. The acquisition price is also fixed. If you spend a lot of money to buy it, it may take a long time to get your money back, and the return on investment will not be very good.

“Yes, it’s almost time to legislate the regulation of cable TV stations. There is a strong call for the so-called Must-Carry Rules.”

Ed Bastian finally smiled the smile of a hunter who has caught his prey.

"Must-carry rule?" Ronald found the analysis section in Ed's file directory. This is a rule for cable TV networks in the future. This means that cable TV systems operating locally must broadcast local broadcast TV station signals to viewers for free.

Cable TV networks are all nationwide, and the content compiled by a production team is broadcast nationwide. However, like weather forecasts and local news, these contents are needed by local audiences, but TV stations like CNN cannot afford to produce them. They cannot afford to support 210 editing and reporting teams across the country.

Originally, viewers of these TV networks could tune into over-the-air TV and use an antenna to watch local programs. However, the legislation the FCC wants to promote requires local cable TV providers to include the content produced by these over-the-air TV stations in their channels and broadcast them to viewers for free in the top 30 channels.

The so-called must-broadcast rule is that it must include public welfare programs such as local news, weather forecasts, traffic conditions, etc. Free broadcasting means that it is free for viewers, but the content must be purchased from local TV stations.

This local TV station brings in two huge sources of income. The first is the licensing fee that the cable TV network pays for the program content. The second is the increase in the number of cable TV viewers, which increases the price of advertising. Now local TV programs can be seen by more cable TV viewers.

All of this is brought about by the two rules stipulated by the antitrust law and the necessary rules in the new bill if it can be successfully passed by Congress.

People don’t know much about this yet, so by comparison, the price of buying local TV stations in large quantities is very cheap.

"So we have to speed up the acquisition of local TV stations." Ronald nodded. DDH has already bought several local TV stations from Viacom and the New York-area TV stations that the Daily News Group had acquired in advance. If it now starts a large-scale acquisition, it is possible to increase the number of controlled TV stations to more than 100 before the bill is passed, and have programs broadcast in DMAs across the country.

“Not only that, we can also use the Joint Sales Agreement (JSA) and Shared Services Agreement (SSA) to circumvent the two-machine rule…”

Ed Bastian dropped another bombshell. Many of the 210 DMAs are actually garbage areas with no value. The real profit comes from the 110 or so densely populated DMAs, which are restricted by the two-station rule and cannot occupy a larger share.

But Ed Bastian discovered two ways from directly-operated television stations in the New York area that could circumvent the restrictions of the two-channel rule.

JSA is a joint bid between several local TV stations to the advertising agency. If you want to place an advertisement, you can place an advertisement among the top eight local TV stations, and two or three of them will sign an agreement. This can save advertisers a lot of trouble and increase the advertising revenue of each TV station.

SSA means that when purchasing TV programs, several TV stations jointly purchase to reduce costs. A TV series or a documentary can be purchased by several TV stations together, which often results in a lower average cost.

These two agreements can not only reduce costs and increase efficiency for TV stations, but can also be used to lock in TV stations from both ends, and in fact control their TV stations without holding a controlling stake. Your income and procurement costs are locked in by the two agreements, and you are likely to lose in the competition if you break away from them.

“So, our main point is to make large-scale acquisitions in the next two years, sign more JSAs and SSAs, and ensure that the must-bring rule is passed in Congressional legislation and becomes law, and that JSAs and SSAs are not considered de facto holdings?”

"That's it. We have a once-in-30-year opportunity to become an institution with an influence no less than that of several national television networks at a very low cost. A seemingly insignificant local wireless television station..."

Ronald laughed loudly. He also understood why Ed Bastian needed the DDH platform to realize his ambitions. And only he, the boss, had the influence in the political world to ensure the two important clauses.

"Our path is entirely provided by the antitrust laws passed by members of Congress..." Bastian commented. If it were not for the two-channel rule or the must-carry rule, this market opportunity would not have appeared because the big TV networks would have already eaten up the lucrative DMA.

"I love antitrust law..." Ronald smiled and poured Ed more tea and served him some Italian sausage snacks.

It seems that it is time to collect rewards for all the donations and favors he has received in the political circle.