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Report on Chain Broadcasting, U. S. Federal Communications Commission, May, 1941, pages 103-110:



    The regional network field has been in a state of more rapid change than the national network field. Since the time of the Committee hearings, some regional networks have become defunct, and new ones have sprung up. Among the latter, for example, are the Carolina Broadcasting System, associated with Mutual; the Intermountain Network, associated with Mutual; the Minnesota Radio Network, associated with NBC; the Southern Network, associated with Mutual; and many others.1 The summary which follows, accordingly, is not an exhaustive survey of regional networks, but rather a résumé of information concerning regional networks as developed in the record of this proceeding.

A.  California  Radio  System

    The California Radio System was formed November 21, 1936, to engage in network operations. It was originally operated by a partnership composed of McClatchy Broadcasting Co., wholly owned by McClatchy Newspapers, on the one hand, and Hearst Radio, Inc., and the Evening Herald Publishing Co., both controlled by William Randolph Hearst, on the other. The following stations composed the original network:
Los Angeles.
San Francisco.
Evening Herald Publishing Co.
Hearst Radio, Inc.
McClatchy Broadcasting Co.

    The Hearst interests withdrew from the partnership in November 1937, and the McClatchy Broadcasting Co. acquired sole control of the network and operated it as one of its departments. Station KYA remained on the network under a contract of affiliation and the other Hearst station, KEHE, was replaced by KFWB in Hollywood. Subsequently, stations KFOX in Long Beach, KTMS in Santa Barbara, and KOH in Reno, Nev., were added to the network. Station KOH is owned by The Bee, Inc., a wholly owned subsidiary of McClatchy Newspapers.
    The typical affiliation contract of the California Radio System, as of the time of the committee hearings, provided that the network should have free use of the affiliate's facilities for network commercial programs for 159 hours per year (not more than the equivalent of 3½ nighttime hours per week) and that the network should pay the station 50 percent of its rate for hours used in excess of the free time. The outlet placed all its time at the disposal of the network subject to 15 days' notice, except that the station could retain three daytime hours per day, which, however, were not specified. The station could freely reject any network sustaining program, but it was required by contract to accept network commercial programs subject only to the optional-time provisions. The contract had no date of termination, but either party could cancel on 6 months' notice.
    California Radio System was not a contract outlet for any other network; but as of the time of the Committee hearings the four stations owned by McClatchy Broadcasting Co. and station KTMS served, individually, as contract outlets for NBC, and KOH was affiliated on an individual basis with CBS.
    The net time sales of the network for 1938, after agency commissions, amounted to $109,848, of which $88,027 was paid to its four owned stations and $21,821 to the other five stations on the network.

B.  Yankee and  Colonial  Networks

The Yankee Network, Inc., was incorporated on April 12, 1930, as The Shepard Broadcasting Service, Inc.; its present name was adopted in December 1936. It is owned by John Shepard, Jr., through a holding company, the Winterstreet Corporation.
    Colonial Network, Inc., was organized August 5, 1936. Its stock is divided equally between John Shepard III, president of Yankee, and his brother, Robert F. Shepard. At the end of 1938, 13 stations were affiliated with both Yankee and Colonial, 4 others were affiliated with Yankee only and 1 other with Colonial only. The reason for forming Colonial was to make full use of the 16-hour telephone circuit for which Yankee had contracted but which it was using only part of the time. Colonial was permitted to use the Yankee circuits whenever they were not being used by Yankee and was not charged for their use except when connection was made with an outlet station affiliated with Colonial but not with Yankee. The circuits were used by Yankee approximately 5 of the 16 hours per day and by Colonial the remaining 11.
    At the end of 1938 the following stations, all but three independently owned, comprised the Yankee Network:
WNAC, Boston.*
WEAN, Providence.*
WICC, Bridgeport.*
WLBZ, Bangor.
WNBH, New Bedford.
WFEA, Manchester.
WLLH, Lowell-Lawrence, Mass.
WSAR, Fall River.
WRDO, Augusta, Maine.
WTIC, Hartford.
WTAG, Worcester.
WCSH, Portland, Maine.
WLNH, Laconia, N. H.
WNLC, New London.
WHAI, Greenfield.
WCOU, Lewiston-Auburn, Maine.
WATR, Waterbury.
    *Owned by Yankee.

    The Colonial Network was composed of the above stations (except WNAC, WTIC, WTAG, and WCSH) and in addition Station WAAB in Boston, owned by Yankee. Station WNAC was the key station of the Yankee Network and Station WAAB was the key station of the Colonial Network.
    Yankee as a network did not carry the programs of any national network, but nine of its outlets (WNAC, WEAN, WICC, WCSH, WTIC, WTAG, WFEA, WLBZ, and WRDO) were individually affiliated with NBC in 1938. Colonial, on the other hand, was associated with Mutual on a network basis as a "participating member."2
    The network-outlet contracts used by Yankee and Colonial were, as a general practice, in the form of three-party agreements between the station licensees and both networks. They followed a more or less standard form which was varied in individual cases, particularly with respect to the amount of time under option to the networks, the compensation of the stations, the payment of telephone wire charges, and the amount of free time given to the networks.
    The affiliation was not for a fixed term, but could be terminated by either station or network on 12 months' notice.
    Yankee and Colonial took options on a substantial number of specified hours of most of their outlets; for seven stations, at the end of 1938, the option covered the entire broadcast day. The outlets agreed to broadcast, upon 28 days' notice, all network commercial programs offered during the time included within the option except those which, in the opinion of the station, were against public interest, convenience, or necessity.
    Yankee and Colonial compensated their outlets for broadcasting commercial programs at a specified rate, generally 30 percent of the network rate for the station. In some instances, stations gave the networks a certain amount of free time, varying from 1 to 3 hours per week. Stations were permitted to broadcast all available network sustaining programs without additional charge.
    Most of the stations were bound by an exclusivity clause which read:
    "The station agrees not to accept programs directly from any other network other than Yankee or Colonial without permission in writing from Yankee or Colonial, but will accept programs originating with other networks if fed to them by Yankee or Colonial."3
    Yankee and Colonial granted territorial exclusivity to their outlets as a matter of practice, but not as a matter of contractual right.
    The Yankee Network maintained a news service which gathered and edited news, an artists' bureau, and a weather service department in connection with weather forecasting for New England, New York, and Long Island. The network net time sales of Yankee for 1938 amounted to $564,225, of which Yankee retained $428,434 (76 percent) and paid $136,791 (24 percent) to 13 contract outlets.
    Colonial had network net time sales for 1938 of $190,758, of which it retained $114,764 (60 percent) and paid $53,680 (28 percent) to 3 Yankee-owned stations (WAAB, WEAN, and WICC) and $22,314 (12 percent) to its other outlets. Of those net time sales, $49,422 (26 percent) was derived from Colonial programs and $141,336 (74 percent) from Mutual programs.

C.  Don  Lee  Broadcasting  System

    The Don Lee network was founded in December 1928 by Don Lee, Inc., a corporation engaged principally in selling automobiles, when it connected its two owned stations (KFRC in San Francisco and KHJ in Los Angeles) by a telephone circuit for chain broadcasting. During that month the three stations owned by McClatchy newspapers (KMJ in Fresno, KWG in Stockton, and KFBK in Sacramento) joined the Don Lee Network, and after November 14, 1930, when McClatchy newspapers acquired Station KERN at Bakersfleld, that station became affiliated with Don Lee. In 1933 Station KOH, at Reno, also owned by McClatchy newspapers, joined Don Lee.
    In September 1929 Don Lee, Inc., became the CBS representative on the Pacific coast and furnished its outlets with CBS programs. Don Lee, Inc., expanded its network coverage of the Pacific coast in 1932 by adding Stations KOIN in Portland, KOL in Seattle, KVI in Tacoma, and KFPY in Spokane as contract outlets. In May 1931, Don Lee, Inc., acquired control of Station KDB in Santa Barbara and the ownership of Station KGB in San Diego and both of those stations became Don Lee, Inc., operated stations, serving also as outlets for CBS.
    Don Lee's relationships with McClatchy newspapers and CBS continued until December 1936, when the five stations owned by the McClatchy interests left Don Lee to become associated with NBC and California Radio. CBS at the same time terminated its affiliation with Don Lee and established its own operations on the Pacific coast, taking over directly the contracts with four stations previously associated with Don Lee (KOIN, KOL, KVI, and KFPY). Don Lee thereupon became a "participating member" of Mutual and transmitted Mutual programs to its outlets.4
    Since June 1932, network operations and the ownership of Stations KFRC, KHJ, and KGB have been vested in the Don Lee Broadcasting System, a wholly-owned subsidiary of Don Lee Holding Co., which in turn is wholly owned by the estate of Don Lee (deceased). The estate also controlled Station KDB in Santa Barbara through ownership of all the stock of its licensee.
    Don Lee System expanded beyond California into the Pacific Northwest in the fall of 1937 through a contract with Pacific Broadcasting Co. During 1938 the Don Lee System was composed of 28 outlets. Fourteen of these, located in Washington and Oregon, received Don Lee network service through Pacific. Of the other 14, all located in California, 11 served the Don Lee System under direct contracts and the other 3 were owned by the system. One of the stations under direct contract (KDB), moreover, was under common ownership with the Don Lee System.
    Don Lee System furnished its outlets with 16 hours of commercial and sustaining programs daily. From 16 to 20 percent of the Don Lee commercial programs were received from Mutual and the balance were furnished by Don Lee.
    The outlet stations of the Don Lee System had no direct contractual relations with Mutual; they received Mutual programs only through the facilities of Don Lee. Indeed, Mutual offered service to Pacific coast stations only through Don Lee.
    The typical Don Lee affiliation contract, as of the time of the committee hearings, was for a specified term, with three additional terms of 1 year each, provided both parties gave notice to extend 90 days prior to expiration. The contract with Pacific Broadcasting Co., however, was for 5 years, but either party could terminate at the end of any year if the net income of Pacific from network business did not equal the cost of telephone lines.
    The stations optioned all their time to Don Lee for network commercial programs. They were not required, however, to take any network programs which would interfere with any local program of major public interest, convenience, and necessity.
    Don Lee was generally entitled to free time over its outlet stations not exceeding 2 hours per week. For commercial time in excess of the free time, Don Lee paid the California stations with which it had individual affiliation contracts specified percentages of their network rates. The arrangement with Pacific was different. The latter network paid telephone-circuit expenses north of San Francisco and received all revenue collected by Don Lee from advertisers for the use of Pacific facilities until these expenses were covered. Thereafter it received from Don Lee 85 percent of such net revenue. Don Lee supplied sustaining programs to its outlets at no additional charge.
    The affiliates agreed not to permit the use of their facilities by any other broadcasting company, system, or network, and, in turn, Don Lee agreed not to send its programs to other stations located in the same city as any of its outlets, or to any stations in Oregon or Washington other than the outlets of the Pacific Broadcasting Co.
    The net time sales, after agency commissions, of Don Lee System and its 4 controlled stations for 1938 were $853,333, of which $417,324 was derived from Don Lee network time, $129,753 from Mutual network time, and $306,256 from nonnetwork sales of the 4 stations. The 28 stations composing the network during 1938 received $651,352 from networks, of which $547,077 (84 percent) went to the 4 Don Lee owned stations and $104,275 (16 percent) to the 24 independently owned outlets.

D.  Pacific  Broadcasting  Co.

    The Pacific Broadcasting Co. was incorporated in October 1937, after the Don Lee System became an outlet for Mutual, for the purpose of establishing further outlets for Mutual and Don Lee programs among a group of stations in Oregon and Washington.
    The three shareholders of Pacific had interests in six stations in Washington and Oregon,5 four of these (KMO, KIT, KOL, and KGY) became Pacific network outlets. The other two, KHQ and KGA 6 in Spokane, remained outlets for NBC.
    During 1938 Pacific had 14 outlets: 9 in Washington and 5 in Oregon.
    Pacific had no studio or other program production facilities. It relied in the main upon Mutual and Don Lee and to a lesser extent upon its contract outlets for network programs.
    By contract with Don Lee, Pacific had the exclusive right to transmit Mutual and Don Lee programs in Oregon and Washington, and it agreed not to carry the programs of any network other than Don Lee and Mutual. By using the programs made available to it by Don Lee, Mutual, or its outlets, Pacific supplied its network with 16 hours of programs daily. The typical affiliation contract between Pacific and its outlets, as of the time of the committee hearings, required the station, upon 10 days' notice, to accept network commercial programs during any period of the broadcast day, except that the station was not required to take any program which would interfere with any locally originated program of major public interest or public necessity. The term of the contract was for 1 year, but Pacific had an option to extend for 4 additional terms.
    Pacific contracted for and paid the telephone circuit expenses of its main line, including the line to the Don Lee System at San Francisco. The stations paid the telephone wire charges for circuits connecting them with Pacific main circuits. The outlets agreed to give Pacific 7 nighttime hours of free time per week (or their equivalent) for network commercial programs and 2 additional free hours at any time for network promotional programs. For all time used for commercial programs, in excess of the free time, Pacific paid its outlets specified rates. Sustaining programs were available to outlet stations at no additional charge.
    The stations agreed not to permit any other broadcasting company, system, or network to use its facilities; and Pacific agreed not to send its programs to any other station in the same city.
    The total net time sales, after agency commissions, of the 14 outlets of Pacific for 1938 amounted to $580,602, of which $36,468 (6 percent) was received from Pacific, the remainder being nonnetwork net time sales.

E.  Michigan  Radio  Network

    Michigan Radio Network was established on January 1, 1933, as an operating department of King-Trendle Broadcasting Corporation.7 King-Trendle had been incorporated on April 25, 1930, by John H. King and George W. Trendle, who had previously been engaged in the operation of motion picture and vaudeville theaters. On May 7, 1930, King-Trendle purchased station WXYZ in Detroit; on March 24, 1931, it leased station WOOD at Grand Rapids; and on December 21, 1931, it leased station WASH at Grand Rapids, which had been sharing time with WOOD. Thereafter, King-Trendle operated the two stations in Grand Rapids as one station, WOOD-WASH.
    Michigan Radio Network furnished programs from station WXYZ in Detroit to its contract outlets within the State of Michigan. From 1933 to the date of the Committee hearings the following stations were affiliated with the network:
WXYZ, Detroit.
WOOD-WASH, Grand Rapids.
WIBM, Jackson.
WFDF, Flint.
WELL, Battle Creek.
WKZO, Kalamazoo.
WBCM, Bay City.
WJIM*, Lansing.
    *Joined network July 1, 1934.

    On September 29, 1934, station WXYZ became one of the original four "member" stations of Mutual; but the station withdrew from Mutual on September 29, 1935, to join NBC's basic Blue Network. The NBC affiliation contract provided that King-Trendle might furnish to the stations on the Michigan network NBC's commercial programs sent to WXYZ, and also the sustaining programs, except the "Music Appreciation Hour" conducted by Walter Darnrosch, the program on Sundays at noon, and all speeches but those by the President of the United States. At the same time, station WOOD-WASH became affiliated with NBC as an optional station.
    The standard affiliation contract between Michigan Network and its outlets, as of the time of the committee hearings, was for a term of 1 year, but it could be canceled if a majority of all stations on the network and the network agreed.
    The contract provided that the outlet, upon 2 weeks' notice, must accept any network commercial program offered during any hour of the broadcast day, except programs the broadcasting of which would not be in the public interest, convenience, and necessity. The station was permitted to reserve for itself not more than one and one-half hours each evening between 6 p m. and 10 p m. for local broadcasting, provided that such periods did not conflict with network commercial programs offered.
    The outlet granted the network 1 hour per day before 6 p m. and 1 hour after 6 p m. which the network could sell commercially and for which the outlets did not receive compensation. For time used commercially by the network in excess of the 2 free hours per day, the station was paid a specified rate. Michigan Network paid telephone circuit expenses and supplied sustaining programs without additional charge.
    The contract provided that the station would not permit the use of its facilities by any other broadcasting chain or network; and the station also agreed not to sell time to third persons at a rate less than that specified in its contract with Michigan Network.
    The hours of commercial programs sent to its outlets by Michigan Network did not, as a rule, exceed the number of free hours given to the network. More than one-half of all programs sent to its outlets by Michigan radio were those received from NBC.
    The network time sales of Michigan Network for 1938 amounted to $133,314, of which $83,853 (62.5 percent) was paid to its three controlled stations and $49,461 (37.5 percent) was paid to its six contract outlets, whose total net time sales amounted to $288,238. The net time sales of the three stations operated by Michigan Network amounted to $651,645 for 1938, of which $113,203 was received from NBC.
    In 1938 King-Trendle entered into an agreement with NBC's transcription bureau whereby NBC transcribed Michigan's Lone Ranger program, and leased the transcriptions to stations throughout the world except specified major trade markets in which Michigan Network reserved the right to lease the transcriptions.

F.  Texas  State  Network

    Texas State Network was incorporated on August 1, 1938, to render program service to stations within the State of Texas and to provide a state-wide advertising medium. Network operation commenced September 15, 1938.
    At the time of the committee hearings, Texas State had 23 outlets, all independently owned. One (KPLT at Paris) was operated by Texas State under a management contract; the remaining 22 served as contract outlets. Four of the stations also served as outlets for NBC and one for CBS.
    Texas State was an "affiliate" of Mutual and furnished Mutual programs to its outlets.
    The standard Texas State affiliation contract was for 1 year, with an automatic extension for a period of 2 more years unless the network or the outlet gave notice to the contrary. The outlet agreed, upon 28 days' notice, to carry network commercial programs at any time during the 7 specific hours 8 optioned to the network, except that, because of "its public responsibility," it could reject a network program, the broadcasting of which would not be in the public interest, convenience, and necessity.
    The network agreed to provide the outlet with 17 hours of live talent programs per day. There was no particular charge specifically allocated to sustaining programs; but most of the outlets agreed to pay Texas State $500 per month in consideration of network affiliation; a few paid somewhat less. In addition, each station gave Texas State 5 unit hours each week free for network commercial programs. Texas State maintained network telephone lines at its own expense and paid each outlet the station card rate less agency commission of 15 percent and less a network selling commission of 15 percent, for network commercial programs, in excess of the free time.
    The contract contained a provision, similar to the provision in the standard NBC affiliation contract, which gave the network the right to reduce station compensation if the station sold time to advertisers at rates lower than those charged by the network. It also prohibited a station from altering its network station rate or station card rate without the consent of the network and its outlet stations.
    The net times sales, less agency commissions, of Texas State for the period from September 15, 1938, to January 31, 1939, amounted to $79,468, of which $47,335 (59 percent) was paid to its outlets. During this period Texas State collected $57,082 from its outlets under the arrangement whereby the stations agreed to pay the network $500 per month. That amount represented approximately 120 percent of the amount Texas State paid to the stations.

G.  Arrowhead  Network

    Arrowhead Network is a trade name given by Head of the Lakes Broadcasting Co. to its three owned stations located in northern Minnesota, a section known locally as the "Arrowhead" area. The stations were WEBC in Duluth, WHLB in Virginia, Minn., and WMFG in Hibbing.
    The three stations were under one ownership and were interconnected for mutual program-service purposes, the entire benefits of which inured to the owner. For 1938 the net time sales, after agency commissions, of the three stations were $239,276.

H.  Empire  State  Network,  Inc.

    Empire State Network, Inc., was incorporated on September 23, 1938, and ceased operations on November 7, 1938. During its 43 days of operation it sold time principally for political speeches. The stations affiliated with the network were:
WABY, Albany.
WIBX, Utica.
WSAY, Rochester.
WMBO, Auburn.
WBNY, Buffalo.
WNBF, Binghamton.
WHN, New York.

    Most of the stations granted the network 2 hours of free time per week and received from the network 30 percent of the revenue from sales over their facilities. The total revenue of the network for its 43 days of existence was $12,927.

I.  Inter-City  Broadcasting  System

    Inter-City Broadcasting System is a trade name selected in 1935 when the owners of stations WMCA in New York and WIP in Philadelphia agreed to exchange their programs by the use of telephone circuits. Subsequently, other stations joined the group, which was connected by peimanent telephone lines for the entire broadcast day of 16 hours. The stations which served as outlets for this program service were:
WMCA, New York.
WPRO, Providence.*
WMEX, Boston.
WLAW, Lawrence, Mass.
WIP, Philadelphia.
WDEL, Wilmington.
WGAL, Lancaster.
WCBM, Baltimore.
WORK, York.
WOL, Washington.†
    *Affiliated with CBS; broadcast only occasional Inter-City programs.
    †Affiliated with Mutual; broadcast only occasional Inter-City programs.

    Station WMCA had contracts with each of the outlet stations and served as selling agency for the group. It made all contracts with advertisers for programs produced in its studios and did the billing for all the stations. The charges to advertisers for network services were the station rates of the individual stations from which WMCA retained, as its commission, an amount ranging between 10 and 15 percent of the billing. Each station except WPRO and WOL was required to clear unsold time for Inter-City commercial programs.

J.  Pennsylvania  Network

    Pennsylvania Network was formed during 1938 as a means of providing revenue from selling the time of a group of stations in Pennsylvania to political parties, and it ceased operations with the conclusion of the political campaign of 1938.
    Station WCAU in Philadelphia acted as selling agent for the group. There were no affiliation contracts; sales in each instance were subject to acceptance by the stations; and revenue and the expense of telephone circuits (which were provided for temporary periods) were shared pro rata by the stations.

K.  Texas  Quality  Network

    Texas Quality Network, a cooperative sales group, was formed in September 1934. The network was not a corporation and had no headquarters nor employees. The stations affiliated with the network were:
WFAA, Dallas.
WBAP, Fort Worth.
KPRC, Houston.
WOAI, San Antonio.
}share time.

    Since each station in the group was under a separate affiliation contract with NBC, Texas Quality programs were contracted for only at hours which did not conflict with NBC programs.
    The relations between the stations affiliated with Texas Quality were rather loose. Any station could terminate its membership in the network on 2 weeks' notice. Each station acted as sales agent for the group, soliciting business at a price equal to the sum of the rates of the stations plus the telephone circuit cost involved. Sales were subject to acceptance by each of the stations in the group in every instance. Contracts were made by advertisers directly with each of the stations; but the soliciting station billed the advertisers and distributed the proceeds pro rata to the other stations after deducting agency commissions, its own commission, and time charges, and telephone expenses. The network kept no books except a record of telephone line expenses, maintained at Station WFAA, which amounted to $2,690 monthly.

L.  Virginia  Broadcasting  System,  Inc.

    Virginia Broadcasting System, Inc., was incorporated on February 1, 1936. Its stock was owned in equal shares by the owners of the following five stations in the State of Virginia, which comprised the network:
WRNL, Richmond.
WCHV, Charlottesville.
WLVA, Lynchburg.
WBTM, Danville.
WGH, Newport News.

    There were no written affiliation contracts. Each station acted as sales agent for the group, soliciting business at a price equal to the sum of the rates of the stations to be used, and the sales were subject to acceptance by the individual stations in each instance. The soliciting station furnished the program service, billed the advertiser for the service furnished by the group, and distributed the proceeds to the other stations after deducting its own time charges.
    For the first 3 months of operation the group was permanently connected with a telephone circuit for 16 hours per day. That service was abandoned in May 1936 because of the expense involved, and since that time the network has existed only for the purpose of broadcasting special events.

    1 Broadcasting, 1941 Year Book, pp. 308-309.
    2 In 1940 Colonial became one of the stockholder owners of Mutual.
    3 It should be noted, however, that, as of the end of 1938, 9 Yankee outlets were affiliated also with NBC, apparently with the permission of Yankee.
    4 In 1940 Don Lee became one of the stockholder owners of Mutual.
    5 See the following table:
NameStationPercent of ownership
Carl E. Haymond.    

Louis Wasmer.

Archie Q. Taft.
KMO, Tacoma.
KIT, Yakima.
KHQ, Spokane.
KOL, Seattle.
KGY, Olympia.
KGA, Spokane.

KOL, Seattle.
KGY, Olympia.
(Lessee and licensee,
    owned by NBC.)

    6 While not a Pacific contract station, KGA acted as a Pacific network outlet for certain commercial programs.
    7 This company was originally incorporated under the name of Kunsky-Trendle Broadcasting Corporation. Its name was changed to King-Trendle Broadcasting Corporation in 1936.
    8 7:30 a. m. to 9:30 a. m.; 11:30 a. m. to 1:30 p m.; 5:30 p m. to 7:30 p m.; and 9:00 p. m. to 10:00 p m. Four outlets of Texas State were also affiliated with NBC. Since their arrangements with Texas State were subordinated to their relationship with NBC the standard Texas State affiliation contract was modified, particularly with respect to its optional-time provision, to apply to them.
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