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1、Developing a Sustainable Economic Model for Public TelevisionMay 29, 2003CONFIDENTIALPROJECT ASPIRATIONS AND KEY QUESTIONSIdentify and drive major changes that will put public television on a more sound economic footing and ensure its future successHow severe and long lasting are the financial press
2、ures on the system?How should we launch these initiatives and effect lasting change?Which performance improvement opportunities offer the most promise?1CHALLENGES: BOTH STATION ECONOMIES AND PROGRAM DEVELOPMENT ARE AT-RISK * Excludes capital funding for digital upgrade. Revenues not adjusted for inf
3、lation*Growth rate from 1994-2001Source: CPB Audited Financial Reports (AFR), PBS analysis (dues), Appendix Q from PBS SG white paper (“Funding for PBS NPS Programming by Funder Category”)$1.93 Billion$450 Million2001 Local Station Economy2001 National Program FundingProspects for future revenue gro
4、wth3.5 % per year*3.1 % per year*Historical growthin revenues (1990-2001)CurrentsizeDecline in real terms due to falling net member revenuesA system decision5.4 % per yearFlat to very slowly growing (1% above inflation)2001 Station Assessment$107 M2273.3374.0249.4328.5230.5330.5205.6347.6128.6259.61
5、04.2145.662.994.5Total PTV system revenue,* 1990 and 2001$ MillionsUniversity In-kindCorporate and foundation givingUnrelated businessState and local funding Federal funding* Member giving* Excludes capital funding for digital upgrade, additional capital fundraising, endowment, and interest * Federa
6、l agency grants for 2001 are estimated (assumed 5% growth over 2000)Source: AFR; federal reports; PBS annual reports$1.25 billion$1.88 billionCHALLENGES: ONLY GROWTH AREAS ARE UNRELATED BUSINESS AND UNDERWRITING199020013.83.16.64.93.32.9Annual Growth %1990-20012.5Drivers of growth3CHALLENGES: HISTOR
7、ICALLY, THE SYSTEM HAS GROWN THROUGH DIVERSIFICATION NOW ALL REVENUE SOURCES ARE THREATENED Source:AFRs; Team perspectiveFuture Outlook4CHALLENGES: NET STATION MEMBERSHIP REVENUE HAS DECLINED IN REAL TERMS SINCE 1990* All growth rates are compound annual growth rates.Source:AFRs; Bureau of Labor Sta
8、tisticsFundraising costs: 1.0%Net membership revenues: -0.9%$17 million lost income$ Millions, Adjusted for inflation to constant 2001 $Gross revenues: 0.1%*5CHALLENGES: DECLINES WILL CONTINUE IN NET MEMBER SUPPORTPledge, which is the engine of new member acquisition, has seen rising costs relative
9、to new member yield in line with declining productivity trends outside PTVNet renewal revenue will not offset declining acquisitionStations already have among the nonprofit sectors highest renewal ratesRenewal mails productivity is flat to decliningDeclining ratings increase stations challengeFallin
10、g ratings likely contribute to the long term membership decline, both because the prospect pool with a connection to PTV shrinks and because membership renewal is highly correlated with audienceWith the number of nonprofits growing twice as fast as real household charitable giving, stations will be
11、hard pressed to grow their share of members wallets Source:“Donor Centrics Comparison Report for Public Television, December 2000;” DMA Factbook 2001; Giving USA 2002Audience SizeNew MemberRenewing MemberPhilanthropic EnvironmentMembership Revenue DriversOutlook6CHALLENGES: STATION HAVE MET THESE CH
12、ALLENGES IN THE PAST BY CONTROLLING COSTS ACROSS THE BOARD1990UnderwritingProgram informationFundraisingManagement and generalBroadcasting Programming and production100% =$1.80 billion7.93.33.83.14.03.8 * Expenses do not include CPB or PBS overhead or CPB provided nonstation grantsSource:AFR; PBS an
13、nual report, 2001 Annual Growth Rate1990-2001Stations expense, 1990 and 2001Percent100% = $1.19 billion2001NPS dues and services4.0Nearly 1/3 of station programming and production costs are concentrated in producing stations for national programming72001 Actual2010 IllustrativeBroadcast ops Membersh
14、ipEduc. / outreachOtherCHALLENGES: REVENUE DECREASES WILL PROMPT REPEATED PAINFUL COST REDUCTIONSSource:SABS; interviewsStation cost-cutting scenario:15% revenue lossAcquisition & schedulingProg. productionGeneral & administrative$10.7 millionUnderwriting Website 76 Reduce headcount by 26%, from 80
15、to 59Cut local production budget by 40%, reducing annual locally produced hours from 109 to 65Eliminate the Program GuideMaintain or slightly decrease investment in website and education76 $9.1 millionIllustrative expense budget for an average medium/large community station100%=8CHALLENGES: CAPITAL
16、INVESTMENTS MAY FURTHER REDUCE AVAILABLE FUNDINGOnly $800 million of the estimated $1.7 billion goal has been raisedDigital ConversionPlans are to replace current infrastructure by 2006 using CPBs $177 million appropriation requestSource:CPB; APTS Digital Clearinghouse; PBS estimatesNext Generation
17、InterconnectDigital MediaNew ServicesPlanned capital investmentsPotential strategic investmentsBringing the best of public television into a digital media world through the use of digital cable, VOD, PVRs and High Definition programmingInnovating and launching new services such as distance learning
18、or new media services that may not generate income, at least in the near term9CHALLENGES: NATIONAL PROGRAMMING, LIKEWISE, FACES UNPRECENTED PRESSURESUnprecedented changes in audience demographics and viewing environmentIncreasing investment in programming and promotion from cable competitorsExternal
19、 PressuresInternal PressuresLittle or no growth in traditional sources of revenueRising costs and new costs (such as HD production)ResponsesIntroducing new/limited series and specials to slow ratings declineIncreasing funding from CPB and PBS to cover rising per hour costsGreater reliance on fully-f
20、unded programsPeriodic cost reductionNationalProgramming10CHALLENGES: NO RELIEF FROM TRADITIONAL PROGRAMMING FUNDING SOURCES* Includes government agencies such as NSF and NEH, but not CPB appropriationSource:PBS SGs Environmental Scan of the PBS Sponsorship Sales Model August 2002; 2002 figures are
21、estimates as of 12/12/02Growth in total programming investment - NPS / Plus / SIP / Select (1991-2001)$ MillionsCorporate, Foundation, private producer, other*Station, PBS, and CPB1991-2001 Growth Rate7.1%5.4%2.6%266301338267291327370311326379450Prospects for future funding growthSource 1991-2001Gro
22、wth RatePercent Future outlook PBS / stations 4 -Station financial challenges make itimpossible to increase assessmentsabsent very compelling case Corporate underwriters5 Ability to join in recovery of TV ad market threatened by turnover of keyunderwriters and commercial competitionCPB 3 Federal def
23、icits, fiscal environment threaten requested increases Foundations 9 Slower growth likely as foundations stabilize giving levels after rapid increases in the late 1990s andshrinking endowments since 2000 Independent producers 8 Continued growth uncertain Government agencies 9 Threatened by governmen
24、t deficits Other 10 Too small to make a difference 43211CHALLENGES: INCREASINGLY, NATIONAL PROGRAMMING DOLLARS HAVE LESS LEVERAGE RELATIVE TO COMPETITIONGrowth Rate19.9% Programming investment of 4comparable cable netsAnnual programming investment, 1993-2001$ MillionsSource:Kagans Economics of Basic
25、 Cable Networks 2002; TV Program Investor; PBSNPS original broadcast and re-up spendingGrowth Rate4.7%Average investment$41M/yearPTVinvestment$334M/ yearPTV investment$450M/yearAverage = $183M/year8:12.5:112CHALLENGES: INDEPENDENT COMMERCIAL BROADCAST STATIONS FACE SIMILAR PRESSURE AND ARE RESPONDIN
26、G WITH SIMILAR SOLUTIONS INCREASE SCALE AND IMPROVE PRACTICESPressure on local news the cash cow from:Audience fragmentationGreater competitionRatings for syndicated programming down while costs are upDecreases/elimination of network compensationDifficult ad marketDTV mandatesThreat from more O&OsIn
27、dustry PressuresAcquisition/consolidation to achieve scaleProgram acquisitionTechnology investment (e.g. traffic operations, sales systems, graphics)Shared services (e.g. accounting, HR)Upgrade of sales practices and systems (e.g. pricing)Industry Responses13OPTIONS: WE BEGAN THE PROCESS BY DEFINING
28、 A SET OF CRITERIACriterion 1: Likely, large, and near-term: represents $10M net per year within 5 years, based on clear business case from compelling internal examples or relevant external benchmarksCriterion 2: Under PTV control: Achieving the opportunity did not rely solely on a “happy accident”
29、outside of the systems controlCriterion 3: No major strategic issues: pursuing this would not require major consultation to reassess/reaffirm the strategy, mission, positioning of PTV14OPTIONS: A BROAD RANGE OF IDEAS WERE COLLECTED THAT WE BELIEVED MIGHT MEET THE CRITERIA Traditional Revenue Sources
30、A. Membership-Retention-Major Gifts-Costs of MembershipB. Underwriting-National Sales-Unwired Network Sales-LocalC. FoundationsD. Local PartnershipsE. Federal Dollars-Dept. of Education, NEA-Spectrum Auction-Tax on InternetAncillary SourcesA. Other Platforms-Cable-VOD-Tivo-OnlineB. Rights Mgt.-Video
31、/DVD-Licensing-Domestic Syndication-International Sales Digital TelevisionA. New Services-Distance Education-Datacasting-Homeland Security-ISP-Workforce Training-Government Services-Nonprofit Services-Member Subscriptions-TV MulticastB. Federal SupportB. Collaboration-Master Control-Commercial Partn
32、ers-Membership/Underwriting Sales C. Technology-Interconnection-Asset Management -Master Control A. Third Party Funds-National Programming Fund-Co-ProductionB. Change Programming MixC. Individual Programs-Lower Per-Hour Cost-Increase RepeatsSystem EfficienciesProgrammingA. Improve Lower Performing S
33、tations15OPTIONS: WE ANALYZED THE IDEAS AGAINST EACH CRITERION Criterion 3 - No major strategic issues Criterion 2: Under PTV controlCriterion 1: Likely, large, near term:Major giftsMember retentionMembership costNational underwritingLocal underwritingFoundation fundraisingCable ChannelDomestic wind
34、owingVOD/TIVONew digital servicesIncreased federal support for DTVRights managementSystem efficienciesNeed a strategic plan to pursueCable ChannelDomestic windowingPrepare for but avoid over- investmentVOD/TIVOIncreased federal support for DTVGood ideas but insufficient to secure financial healthNew
35、 digital servicesMember retentionMembership costLocal underwritingMajor giftsMember retentionMembership costNational underwritingLocal underwritingFoundation fundraisingVOD/TIVONew digital servicesIncreased federal support for DTVRights managementSystem efficienciesMajor giftsMember retentionMembers
36、hip costNational underwritingLocal underwritingFoundation fundraisingNew digital servicesRights managementSystem efficienciesMajor giftsNational underwritingFoundation fundraisingRights managementSystem efficiencies16OPTIONS: THREE POTENTIAL SOLUTIONS PASSED EACH SCREEN 1.Expand major and planned gi
37、ving efforts2.Pursue cost savings through station and system efficiencies3.Improve model for National Programming17* Based on case study stations, including KUED, OPTV, KNPB, and WGBH Source:Station interviews; McKinsey Nonprofit PracticeGiving pyramid for typical station before launching major gift
38、 effort*Giving pyramid for typical station after launching major giving effortMajor giving revenue6%94%13%87%SOLUTIONS: MAJOR GIVING HAS A POTENTIAL IMPACT $20-$35 MILLION NET REVENUEIf all stations could see comparable improvements, system could raise $20-35 million net revenue18SOLUTIONS: CASE STU
39、DIES OFFER USEFUL ROLE MODELS FOR STATIONS LAUNCHING HIGH TOUCH DEVELOPMENT EFFORTSSource: Station data (KLRU, KNPB, Oregon PTV, and KUED)6.51.61.6Cost per dollar raisedPercent4.76.02.0-17.2.9KNPBs major giving effort was successful because they aggressively targeted high net worth individuals for l
40、arge gifts$ ThousandsKLRUs major giving effort grew 3 times as fast as their regular membership efforts$ Thousands Oregon has been successful because they expanded a full range of high touch development efforts, including major giving, planned giving, and an endowment fund$ Thousands7590113Number of
41、 major donors27477110625.6Midlevel givingMajor givingPlanned givingEndowment348082122112Number of major donors76385N/A9512733.6*1,701787460615697Cost per donor$0814575N/A960632-10.4*KUEDs long-term investment in major giving has led to a ten-fold increase in this revenue$ ThousandsGrowth Rate25.5*1,
42、4202,1743,0543,7904,5197,8538,495Growth Rate28.9Growth Rate14.019SOLUTIONS: SUCCESS REQUIRES SIGNIFICANT ACTION * Defined as stations with no or limited major giving efforts or reporting, less than 6% of total member revenues from major gifts) * Defined as stations where major giving revenues accoun
43、t for 6-13% of total member revenue *Defined as stations where major giving revenues account for +14% of total member revenueSource: SABSStations segmented by major gift effortsTotal=176$374MNumber of stationsTotal member revenueStrong major gift effort*Limited major gift effort*Some major gift effo
44、rt*Establish full range of high touch development efforts (i.e., major giving, planned giving, endowment development)OpportunityPotential$10-20M net revenueRaise current efforts up to best practice (e.g., improve existing major giving, expand menu of high touch development offerings)$8-15M net reven
45、ueContinue efforts to achieve full potential Total unknown$20-35M+20SOLUTIONS: MEMBERSHIP STAFF OUTNUMBERS MAJOR GIVING STAFF OVER 6:1Source: SABSServe over 1.5 million members and over $120 million in revenueServe 8500 major givers and over $40 million in revenue21SOLUTIONS: KEY ELEMENTS OF OUR PLA
46、N WILL INCLUDE DEVELOPING CAPACITY AT STATIONS WITH GMs AND BOARDS, AS WELL AS WITHIN DEVELOPMENT DEPARTMENTS Benchmarks to Focus Our Efforts-ID major giving cohorts-Set key station benchmarks-Track improvementCommunication Campaign to Ensure Buy-in-Clear understanding of our past-Identify change ag
47、ents and early adopters-Identify station success factorsToolkits to Support Implementation-Design and implement new programs for GMs and Board Members-Create an inventory of “what we know”-Create copy points, job descriptions, etc.Creation of a National Environment for Success-Peer-to-peer GM networ
48、ks-Launch national campaign-Addtl financial incentives-Identify economies of scale in membership to free up resources2223SOLUTIONS: BROADCAST OPERATIONS WORK FLOWS PROJECTDECISIONDECISIONIMPLEMENTATIONIMPLEMENTATIONANALYSIS & PLANANALYSIS & PLANDEVELOPMENTDEVELOPMENTCOMMUNICATIONSCOMMUNICATIONSLAUNC
49、HLAUNCHTech Conf presentationCPB round tablesTDC ReviewStation memosExpand working teamCommunicate value to stations2-3 common cause projectsTrack booked cost savings12-18 monthsReview projects quarterlyFull PTV implementation?CPB SABs dataPrevious studiesReview past OE projectsMcKinsey assumptions
50、& analysisDevelop implementation plan24SG sells additional sponsorshipInventorySOLUTIONS: NATIONAL PROGRAMMINGS OBJECTIVE IDENTIFY IMPROVEMENTS IN VALUE CHAIN (NEW PROCESSES, DIFFERENT ROLES)ResearchCommissioning/rights acquisition/ fundingSponsorship sales/ intl post salesPromotion/ station outreac
51、hBack end rights exploitationSet priorities/ agendaCommission projects/ analyze resultsSynthesize all findingsShare/ distribute findingsSet strategyDefine future schedule plan/goalsDevise metrics to measure successLocal underwriting spots soldDistribution agreements madeInventory/ manufactured stock
52、edSalesSchedule and pop outs announced (Jun)Station “tool kits” assembledCommission projectGreen light for national scheduleNegotiate contract w/producersNegotiate contract: CPB/PBS/ producing stationFund-raisingGreen light CPB/PBS financial contributionGreen light producing station financial contri
53、butionDomestic program salesResearch/ develop projectsReview external project proposalsFall/Spring schedules set in MayNot done and/or no clear leader todayPBS leads todayStations lead todayPotential connectionsInternational post salesStrategy/ schedule planning25NEXT STEPS: TIMELINE AND DELIVERABLE
54、SSteering Committee meetingAnnual meetingMay June Review of suggestions and concerns from Round Robin meetingsRefinements of analysis and plansCommitment from key stakeholders confirmed (e.g., GMs for Major giving, technology community)Project vision and progress shared with full station communityLa
55、unch programming research effortFirst wave of efforts developed (e.g., early major giving adopters)Development ConferenceSeptember Major giving internal campaign launched for first set of stationsBuild Capacity for LaunchesBuild major giving project capacityDevelop structure for station efficiencies
56、 effortDesign initial programming needs and evaluation researchDevelop content and approach for local boardsJuly/August 26DISCUSSION QUESTIONSDo you agree with the financial findings?What questions do you have about the analysis?What will be required for success in major giving? Station efficiencies?What role can your functional areas play in ensuring success?27
