SECTION: Section A; Page 1, Column 2; Cultural Desk
HEADLINE: TOY-BASED TV: EFFECTS ON CHILDREN DEBATED
BYLINE: By PETER J. BOYER

Television programs that feature heroes and villains drawn from the toy-store shelf or developed in conjunction with the marketing of toys, once banned by Federal regulations, are booming in the free-market era of the current Federal Communications Commission.

But while the programs have achieved both ratings success and huge merchandising profits, they have also prompted warnings from the American Academy of Pediatrics, a Congressional committee chairman and a consumer group that children are being unfairly exploited.

Four years ago, only one such television show was on the air; currently, six of the seven animated shows broadcast in New York each weekday between 3 and 5 P.M., a prime viewing time for children, are based on toys, among them "Transformers," "G.I. Joe" and "He-Man and Masters of the Universe." And at a television trade convention in New Orleans last month, 30 toy-based shows were offered by producers.

The profits for such animated series can be large. Mattel's "He-Man" line of toys, for example, featured in its own television series, brought in an estimated $350 million in sales last year. The producers of the show shared in the toy profits, and the toy company shared in the program's revenues.

A toy featured in its own show gains not only publicity, but also a valuable sales gimmick: a story line that can enhance the toy's appeal.

"An American child really needs that story line to help it play, and one of the ways to do that is with a TV program," said Cherie Stawasz, spokesman for Tonka Toys. Tonka makes "GoBots," a line of robot toys that star in their own animated series.

But, according to critics, toy-based shows pose a problem for the young audience that the shows attract.

"They sell a product while claiming to be entertainment, and I think that's unconscionable," said Dr. William H. Dietz, chairman of the American Academy of Pediatrics' task force on children and television. The academy has cautioned against such programs. "If there were a show for adults based on vacuum cleaners, Hoover vacuum cleaners, it would be boycotted," Dr. Dietz said.

"What the shows do is hook kids on these program-length commercials that in fact offer an engaging story but are designed to sell the product," he said. "And kids don't know the difference. It is unfair and deceptive advertising. It is unethical to do that, in my opinion."

Most stations do not run paid commercials for a toy within the program that features that toy as the main characters; Mattel's G.I. Joe dolls, for example, usually are not advertised within the "G.I. Joe" program.

Critics maintain that such separation is lost on children, and that the programs themselves constitute a sales pitch.

Dr. Jerome Singer, director of Yale's Family Television Research and Consultation Center, noted: "Children do not have the elaborate knowledge that adults have about the nature of the commercial world, the nature of advertising, the nature of product appeals. All they know is they see something lively or exciting and it's natural that they think a toy is something special because they've seen it on a TV show."

The Tremendous Power of TV

Producers argue that their shows do not deceive young consumers. "I don't think it unfairly exploits kids," said Peter Temple, vice president of the newly merged Lorimar-Telepictures, which produces the popular show "Thundercats" and licenses the characters as toys.

"Anytime TV mentions anything on the air, good or bad, you are promoting or commercializing it," he said. "The power of TV is tremendous. It says, 'This is big, it's neat, it's important, it's fun.' I don't see what's wrong when people exploit properties that have value. I don't know why there is all this fuss over these kids' shows."

Mr. Temple, and other producers, maintain that the producers' incentive is to create popular programming whether it is based on toys or not. "The lousy shows," he said, "don't get watched."

The current F.C.C. generally has agreed with that view, ruling last year that commercial tie-ins on children's programs are acceptable.

The F.C.C.'s position is in line with its philosophy of deregulating broadcasting, which has included a call for the elimination of the Fairness Doctrine and the relaxation of license renewals and regulation of commercials. The posture toward children's television directly opposes earlier F.C.C. positions.

In 1969, in a case involving an ABC show based on the Mattel toy tricycle "Hot Wheels," the F.C.C. found that the program was "designed primarily to promote the sale of a sponsor's product, rather than to serve the public by either entertaining or informing it."

The commission banned product-based programs, saying such shows subordinate "programming in the interest of the public to programming in the interest of its salability"

The current F.C.C., however, holds that the marketplace, not government regulations, is the broadcaster's proper guide as to what constitutes the public interest. "The public's interest," Mark Fowler, chairman of the F.C.C. has said, "determines the public interest."

Congress Looks at Regulation

There is a move in Congress to force the F.C.C. back into the regulation of children's programs.

"It's outrageous that the potential of children's television as an educational medium has been supplanted by purely commercial considerations," said Representative Timothy E. Wirth, chairman of the House telecommunications subcommittee. Mr. Wirth, Democrat from Colorado, has sponsored a bill in the House that would, among other things, force broadcasters to televise a minimum of seven hours of educational programming every week.

Senator Frank Lautenberg, Democrat of New Jersey, has sponsored a similar bill in the Senate.

"There is, after all, a precious resource being used, the airwaves,' ' Mr. Lautenberg said. "I have no problems with there being commercially viable opportunities, but there's a responsibility to at least let the public have its share of free programming and not to let them crowd the child's mind with commercials exclusively.

"I, for one, would like broadcasters to understand that if they don't do it, there is likely to be oversight. Based on what we see right now, it doesn't look like they are responding to their freedom."

However, aides to both lawmakers admit that children's television is not considered an urgent issue in Congress just now, and that the bills may never move through the legislative pipeline.

When it approved toy-based programming last year, the F.C.C. noted that even the respected educational series "Sesame Street" has been a merchandising wellspring.

But Peggy Charren, president of the Massachussetts-based lobbying group, Action for Children's Television, argues that there is an important difference.

"Sesame Street" was developed first as a program, with original characters and story lines, and the products were drawn from the programs. But in the disputed programs, the shows are designed to fit the products - limiting, Mrs. Charren contends, the creative possibilities of children's programming to the merchandising needs of toy manufacturers.

'Creativity Goes Out the Window'

Joseph Barbera, a pioneer in children's animation on television, developed a number of original characters such as "Yogi Bear." But last year the marketplace drew his Hanna-Barbera Productions into toy-based programming with "Challenge of the GoBots," based on a toy robot.

"Your own creativity starts going out the window," Mr. Barbera said in an interview. "It's weird. Toy companies have discovered that there's a market out there. If they have a toy and a budget, they can move into the television world."

The profit potential is great. Gaylord Productions, for example, is spending $21 million to develop "Galaxy Rangers," its first animated series, based on a group of space cowboys. A "Galaxy Rangers" toy line will be introduced simultaneously by Tonka.

"If the show is tremendously successful, from all areas of revenue we could double our money," said Alan Courtney, president of Gaylord. "We could end up with revenue of $40 million to $60 million."

As the F.C.C. has withdrawn from the spectrum, the number of independent television stations has burgeoned, more than tripling since 1972. That has created a demand for syndicated programs - shows sold directly to stations rather than to a network.

Where networks, with their relatively cautious broadcast standards departments, were once the only real outlet for animated children's shows, syndication has now provided a whole new market for television producers. Producers essentially "create" their own networks, selling their shows to a string of independent stations that are bound together by a variety of exotic deals.

Opportunities to Make Money

In 1980, virtually all new children's animation was on one of the three networks on Saturday morning. Now, a much larger market exists off the networks, where new children's shows play every weekday.

"There have never been so many opportunities for making money in the animation business," wrote Margaret Loesch, president of Marvel Productions, in a recent trade magazine article.

The entry of the toy companies into the programming business has helped spread the risk. Typically, a toy company will share the costs of making an animated series (the average cost is $12 million to $15 million for 65 programs, which run daily for 13 weeks and then are repeated).

The producer makes a deal with a syndicator, who in turn, sells the show to stations, often on a barter basis. The station gets the show for no cash, or little cash, and relinquishes time to the syndicator for sale to advertisers. The syndicator returns some of that money to the producer, to cover production costs.

For the stations, the incentive is low-cost programming, and sometimes something more. One producer-syndicator, Lorimar-Telepictures, has offered stations a piece of the toy profits, an incentive to air its program "Thundercats." The practice is loudly criticized by Mrs. Charren, and even by others in the business.

"It's been offered," said Robert H. Friedman, program director of Channel 5 in New York, "but we feel it's not in the public interest to share in the revenues from products featured in programs."

The practice was approved last year by the F.C.C., a fact that Peter Temple of Lorimar-Telepictures points out to critics. "I have to remind them that the practice is done with the F.C.C.'s blessing," Mr. Temple said. "It brings more product into the marketplace. It's in the public interest to do it."

In January, Action for Children's Television filed another petition with the F.C.C., requesting that product-based programs be identified as commercials. "We want station managers, as well as the F.C.C., to take a hard look at their public-interest responsibilities and at the program-length ads now masquerading as children's TV programs," said Mrs. Charren of Action for Children's Television. "A commercial by any other name is still a commercial."