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National Regulation

CEOs Fret Indecency Regulations

4/06/2005 3:39 AM Eastern

San Francisco -- The CEOs of some of the nation’s largest media conglomerates Tuesday expressed their concern about the looming threat of regulation of cable programming over indecency issues.

“Any of us who don’t think that indecency is a big hot-button issue out there, I think that you’re being naïve, and it’s got tremendous political momentum,” said Peter Chernin, president and chief operating officer of News Corp.

Chernin was part of the high-powered National Show closing panel here that also included Jeff Bewkes, chairman of Time Warner Inc.’s entertainment and network groups; Bob Wright, chairman of NBC Universal; and Robert Iger, president and COO of The Walt Disney Co.

During the session, moderated by CNBC anchor Maria Bartiromo, the executives weighed in on topics ranging from indecency issues; to the profitability of DVDs to their companies; to the detrimental impact of technology like personal video recorders and digital-video recorders in their existing revenue streams.

The panel voiced its concern about the noise in Washington about cracking down on alleged indecency in cable.

“There’s a potential disaster here of litigation,” Wright said. “There’s a lot of legislation banging around, much of which will be challenged for years to come … It’s sort of like Congress replacing parents, and that’s all going to not lead to a pretty picture over time.”

But Wright said new Federal Communications Commission chairman Kevin Martin has “a lot of sensitivities” and will figure out a way for the industry not to end up in that kind of situation.

Chernin pointed out that FX runs “unbelievable numbers of disclaimers” and public-service announcements about parental blocking devices and V-chips for its edgier fare, which it runs later at night.

“Parents and people who are concerned also need to take responsibility,” he said. “They need to monitor their children. They need to use blocking devices. They need to use V-chips. There is a vast array of things available to them, including what our president said is the off switch on the television set. ”

Iger said Disney believes the cable industry should self-regulate its content. But he then outlined what he said he knew was an unpopular position with the cable crowd -- if there is going to be any regulation, Disney believes there should not be a distinction between the standards for cable and broadcast.

“We’re just asking for some logic to be applied,” Iger said. “We believe that if there are going to be rules -- which we do oppose, by the way -- they should be applied basically across the board to broadcast and to cable.”

He added that the other indecency solution he’s heard -- that racier networks be moved onto tiers -- “is a big problem and likely to be unconstitutional, by the way,” and “very consumer-unfriendly.”

And while video-on-demand has been the subject of several panels at the show, the final group of top-level executives kind of threw a wet blanket on the hype surrounding the technology.

The audience for the panel, using voting devices supplied at the session, gave VOD the top vote, 39%, as the new-business line that entertainment companies would benefit most from. Yet the panelists across the board said DVDs -- especially of TV series, the fastest-growing part of the market -- were their hot new revenue-generators.

“That’s where our companies make the most money,” Bewkes said, adding that Warner Bros. was one of the biggest DVD sellers in the world. And Bewkes’ counterparts agreed.

“You can’t put any food on the table today from VOD, so it’s DVDs clearly today,” Wright said. “Five years from now, I think that it probably will be VOD, but we’ve got a long way to go to get there.”

Iger joked that Disney’s highly profitable DVD business was probably one of the reasons why Comcast Corp. tried to buy his company. “I think we have a DVD business that makes more money than Comcast does, actually,” he added.

Chernin cited DVD sales, as well, as of the most benefit to entertainment companies.

“You talk about the next year, which, I think, is what the question was, and virtually everything else is a negative,” he said. “High-definition is a cost. Video-on-demand we don’t get paid for, so it’s a neutral. Launching new networks is a cost … We will sell $700 million of DVDs for television shows this year.”

The executives all agreed that DVRs and PVRs -- which News Corp.’s DirecTV Inc. direct-broadcast satellite unit is deploying -- will cannibalize viewing to their core TV networks and possibly hurt advertising. “DVRs are going to have some impact on our ad business,” Chernin said.

But to counteract that impact, he said, News Corp. expects ad rates on live programming like sports and news to grow; it will work harder to get consumers to pay it directly for products like DVDs or VOD; and it will work with ad partners to come up with nontraditional advertising options.

For example, Chernin described the commercial-free launch of the new season of Fox’s 24 last year. Ford Motor Co. sponsored the segment, with one long-form two-minute spot and product placements. That ad was the most-recalled ad Ford ever had, according to Chernin.

September