(FORTUNE Magazine) – Christmas was not very merry for television stations across the U.S. The nation's three major networks, all under frugal new management, are threatening to reduce the millions of dollars they pay affiliates to run their TV shows. The practice, called compensation, dates back to the networks' radio days in the 1920s, when CBS and NBC adopted it as a way to induce local stations to sign up. In 1986 the networks handed affiliates a staggering $450 million in compensation payments. The new bosses consider the practice an extravagance. Debate on the subject has been furious. ''This is the most complex and emotional issue we have ever dealt with,'' says Tony C. Malara, senior vice president of distribution for CBS. ABC threw the first punch in early December, when it told its board of affiliates that it would no longer pay stations to air special events such as the Academy Awards and the Olympics. When the local station chiefs objected, ABC said it would discuss the matter with them again at the end of January. But a week later it transmitted a closed-circuit televised message to the affiliates that it was going ahead with its plan. The first uncompensated broadcast: Amerika, a controversial miniseries about life in the 1990s following a Soviet takeover of the United States, set to run beginning February 15. CBS may phase out compensation for stations in the top 100 markets -- from Lansing, Michigan, on up to New York -- over three years. The rationale: Large stations depend on compensation much less than small ones. NBC, the top- ranked network, says it has no immediate plans to cut compensation; industry executives say it is merely waiting to see what the competition does. To the affiliates, the networks' plans are ill conceived. ''The networks are doing the right thing in trying to cut costs; they've just found the wrong place to do it,'' says Thomas Goodgame, president of Group W Television Stations, which owns two CBS affiliates, two NBC affiliates, and one of ABC's. Goodgame figures that once networks stop paying compensation, local stations will turn to other sources of programming, such as Grant Tinker's new studio (see below). And as networks lose their share of local audiences, they will lose advertising revenues. Says Goodgame, ''It's a downward spiral.''