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1、Developing a Sustainable Economic Model for Public Television,May 29,2003,CONFIDENTIAL,1,PROJECT ASPIRATIONS AND KEY QUESTIONS,Identify and drive major changes that will put public television on a more sound economic footing and ensure its future success,How severe and long lasting are the financial
2、 pressures on the system?,How should we launch these initiatives and effect lasting change?,Which performance improvement opportunities offer the most promise?,2,CHALLENGES:BOTH STATION ECONOMIES AND PROGRAM DEVELOPMENT ARE AT-RISK,*Excludes capital funding for digital upgrade.Revenues not adjusted
3、for inflation*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 Million,2001 Local Station Economy,2001 National Program Funding,Prospects for future reven
4、ue growth,3.5%per year*,3.1%per year*,Historical growthin revenues(1990-2001),Currentsize,Decline in real terms due to falling net member revenues,A system decision,5.4%per year,Flat to very slowly growing(1%above inflation),2001 Station Assessment,$107 M,3,273.3,374.0,249.4,328.5,230.5,330.5,205.6,
5、347.6,128.6,259.6,104.2,145.6,62.9,94.5,Total PTV system revenue,*1990 and 2001$Millions,University,In-kind,Corporate and foundation giving,Unrelated business,State and local funding,Federal funding*,Member giving,*Excludes capital funding for digital upgrade,additional capital fundraising,endowment
6、,and interest*Federal agency grants for 2001 are estimated(assumed 5%growth over 2000)Source:AFR;federal reports;PBS annual reports,$1.25 billion,$1.88 billion,CHALLENGES:ONLY GROWTH AREAS ARE UNRELATED BUSINESS AND UNDERWRITING,1990,2001,3.8,3.1,6.6,4.9,3.3,2.9,Annual Growth%1990-2001,2.5,Drivers o
7、f growth,4,CHALLENGES:HISTORICALLY,THE SYSTEM HAS GROWN THROUGH DIVERSIFICATION NOW ALL REVENUE SOURCES ARE THREATENED,Source:AFRs;Team perspective,Future Outlook,5,CHALLENGES:NET STATION MEMBERSHIP REVENUE HAS DECLINED IN REAL TERMS SINCE 1990,*All growth rates are compound annual growth rates.Sour
8、ce:AFRs;Bureau of Labor Statistics,Fundraising costs:1.0%,Net membership revenues:-0.9%,$17 million lost income,$Millions,Adjusted for inflation to constant 2001$,Gross revenues:0.1%*,6,CHALLENGES:DECLINES WILL CONTINUE IN NET MEMBER SUPPORT,Pledge,which is the engine of new member acquisition,has s
9、een rising costs relative to new member yield in line with declining productivity trends outside PTV,Net renewal revenue will not offset declining acquisitionStations already have among the nonprofit sectors highest renewal ratesRenewal mails productivity is flat to decliningDeclining ratings increa
10、se stations challenge,Falling 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 audience,With the number of nonprofits growing twice as fast as real household charitab
11、le giving,stations will be hard pressed to grow their share of members wallets,Source:“Donor Centrics Comparison Report for Public Television,December 2000;”DMA Factbook 2001;Giving USA 2002,Audience Size,New Member,Renewing Member,Philanthropic Environment,Membership Revenue Drivers,Outlook,7,CHALL
12、ENGES:STATION HAVE MET THESE CHALLENGES IN THE PAST BY CONTROLLING COSTS ACROSS THE BOARD,1990,Underwriting,Program information,Fundraising,Management and general,Broadcasting,Programming and production,100%=,$1.80 billion,7.9,3.3,3.8,3.1,4.0,3.8,*Expenses do not include CPB or PBS overhead or CPB p
13、rovided nonstation grantsSource:AFR;PBS annual report,2001,Annual Growth Rate1990-2001,Stations expense,1990 and 2001Percent,100%=,$1.19 billion,2001,NPS dues and services,4.0,Nearly 1/3 of station programming and production costs are concentrated in producing stations for national programming,8,200
14、1 Actual,2010 Illustrative,Broadcast ops,Membership,Educ./outreach,Other,CHALLENGES:REVENUE DECREASES WILL PROMPT REPEATED PAINFUL COST REDUCTIONS,Source:SABS;interviews,Station cost-cutting scenario:,15%revenue loss,Acquisition&scheduling,Prog.production,General&administrative,$10.7 million,Underwr
15、iting,Website,76,Reduce headcount by 26%,from 80 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 education,76,$9.1 million,Illustrative expense budget for an average medium
16、/large community station,100%=,9,CHALLENGES:CAPITAL INVESTMENTS MAY FURTHER REDUCE AVAILABLE FUNDING,Only$800 million of the estimated$1.7 billion goal has been raised,Plans are to replace current infrastructure by 2006 using CPBs$177 million appropriation request,Source:CPB;APTS Digital Clearinghou
17、se;PBS estimates,Next Generation Interconnect,New Services,Planned capital investments,Potential strategic investments,Bringing the best of public television into a digital media world through the use of digital cable,VOD,PVRs and High Definition programming,Innovating and launching new services suc
18、h as distance learning or new media services that may not generate income,at least in the near term,10,CHALLENGES:NATIONAL PROGRAMMING,LIKEWISE,FACES UNPRECENTED PRESSURES,Unprecedented changes in audience demographics and viewing environmentIncreasing investment in programming and promotion from ca
19、ble competitors,External Pressures,Internal Pressures,Little or no growth in traditional sources of revenueRising costs and new costs(such as HD production),Responses,Introducing new/limited series and specials to slow ratings declineIncreasing funding from CPB and PBS to cover rising per hour costs
20、Greater reliance on fully-funded programsPeriodic cost reduction,NationalProgramming,11,CHALLENGES:NO RELIEF FROM TRADITIONAL PROGRAMMING FUNDING SOURCES,*Includes government agencies such as NSF and NEH,but not CPB appropriationSource:PBS SGs Environmental Scan of the PBS Sponsorship Sales Model Au
21、gust 2002;2002 figures are estimates as of 12/12/02,Growth in total programming investment-NPS/Plus/SIP/Select(1991-2001)$Millions,Corporate,Foundation,private producer,other*,Station,PBS,and CPB,1991-2001 Growth Rate,7.1%,5.4%,2.6%,266,301,338,267,291,327,370,311,326,379,450,Prospects for future fu
22、nding growth,Source,1991-2001Growth RatePercent,Future outlook,PBS/,stations,4,-,impossible to increase assessments,absent very compelling case,Corporate,underwriters,5,Ability to join in recovery of TV ad market threatened by turnover of keyunderwriters and commercial competition,CPB,3,Federal defi
23、cits,fiscal environment,threaten requested increases,Foundations,9,Slower growth likely as foundations,stabilize giving levels after rapid,increases in the late 1990s and,shrinking endowments since 2000,Independent,producers,8,Continued growth uncertain,Government,agencies,9,Threatened by government
24、 deficits,Other,10,Too small to make a difference,432,12,CHALLENGES:INCREASINGLY,NATIONAL PROGRAMMING DOLLARS HAVE LESS LEVERAGE RELATIVE TO COMPETITION,Growth Rate19.9%,Programming investment of 4comparable cable nets,Annual programming investment,1993-2001$Millions,Source:Kagans Economics of Basic
25、 Cable Networks 2002;TV Program Investor;PBS,NPS original broadcast and re-up spending,Growth Rate4.7%,Average investment$41M/year,PTVinvestment$334M/year,PTV investment$450M/year,Average=$183M/year,8:1,2.5:1,13,CHALLENGES:INDEPENDENT COMMERCIAL BROADCAST STATIONS FACE SIMILAR PRESSURE AND ARE RESPO
26、NDING WITH SIMILAR SOLUTIONS INCREASE SCALE AND IMPROVE PRACTICES,Pressure 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
27、&Os,Industry Pressures,Acquisition/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 Responses,14,OPTIONS:WE BEGAN THE PROCESS BY DEFINING
28、 A SET OF CRITERIA,Criterion 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 benchmarks,Criterion 2:Under PTV control:Achieving the opportunity did not rely solely on a“happy accident”outside
29、of the systems control,Criterion 3:No major strategic issues:pursuing this would not require major consultation to reassess/reaffirm the strategy,mission,positioning of PTV,15,OPTIONS:A BROAD RANGE OF IDEAS WERE COLLECTED THAT WE BELIEVED MIGHT MEET THE CRITERIA,Traditional Revenue Sources,C.Foundat
30、ions,D.Local Partnerships,Ancillary Sources,Digital Television,B.Federal Support,B.Collaboration,Master ControlCommercial PartnersMembership/Underwriting Sales,B.Change Programming Mix,System Efficiencies,Programming,A.Improve Lower Performing Stations,16,OPTIONS:WE ANALYZED THE IDEAS AGAINST EACH C
31、RITERION,Criterion 3-No major strategic issues,Criterion 2:Under PTV control,Criterion 1:Likely,large,near term:,Major giftsMember retentionMembership costNational underwritingLocal underwritingFoundation fundraisingCable ChannelDomestic windowingVOD/TIVONew digital servicesIncreased federal support
32、 for DTVRights managementSystem efficiencies,Need a strategic plan to pursue,Cable ChannelDomestic windowing,Prepare for but avoid over-investment,VOD/TIVOIncreased federal support for DTV,Good ideas but insufficient to secure financial health,New digital servicesMember retentionMembership costLocal
33、 underwriting,Major giftsMember retentionMembership costNational underwritingLocal underwritingFoundation fundraisingVOD/TIVONew digital servicesIncreased federal support for DTVRights managementSystem efficiencies,Major giftsMember retentionMembership costNational underwritingLocal underwritingFoun
34、dation fundraisingNew digital servicesRights managementSystem efficiencies,Major giftsNational underwritingFoundation fundraisingRights managementSystem efficiencies,17,OPTIONS:THREE POTENTIAL SOLUTIONS PASSED EACH SCREEN,Expand major and planned giving effortsPursue cost savings through station and
35、 system efficienciesImprove model for National Programming,18,*Based on case study stations,including KUED,OPTV,KNPB,and WGBH Source:Station interviews;McKinsey Nonprofit Practice,Giving pyramid for typical station before launching major gift effort*,Giving pyramid for typical station after launchin
36、g major giving effort,Major giving revenue,6%,94%,13%,87%,SOLUTIONS:MAJOR GIVING HAS A POTENTIAL IMPACT$20-$35 MILLION NET REVENUE,If all stations could see comparable improvements,system could raise$20-35 million net revenue,19,SOLUTIONS:CASE STUDIES OFFER USEFUL ROLE MODELS FOR STATIONS LAUNCHING
37、HIGH TOUCH DEVELOPMENT EFFORTS,Source:Station data(KLRU,KNPB,Oregon PTV,and KUED),6.5,1.6,1.6,Cost per dollar raisedPercent,4.7,6.0,2.0,-17.2,.9,KNPBs major giving effort was successful because they aggressively targeted high net worth individuals for large gifts$Thousands,KLRUs major giving effort
38、grew 3 times as fast as their regular membership efforts$Thousands,Oregon has been successful because they expanded a full range of high touch development efforts,including major giving,planned giving,and an endowment fund$Thousands,75,90,113,Number of major donors,27,47,71,106,25.6,Midlevel giving,
39、Major giving,Planned giving,Endowment,34,80,82,122,112,Number of major donors,7,63,85,N/A,95,127,33.6*,1,701,787,460,615,697,Cost per donor$,0,814,575,N/A,960,632,-10.4*,KUEDs long-term investment in major giving has led to a ten-fold increase in this revenue$Thousands,Growth Rate,25.5*,1,420,2,174,
40、3,054,3,790,4,519,7,853,8,495,Growth Rate,28.9,Growth Rate,14.0,20,SOLUTIONS: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 account fo
41、r 6-13%of total member revenue*Defined as stations where major giving revenues account for+14%of total member revenueSource:SABS,Stations segmented by major gift efforts,Total=,176,$374M,Number of stations,Total member revenue,Strong major gift effort*,Limited major gift effort*,Some major gift effo
42、rt*,Establish full range of high touch development efforts(i.e.,major giving,planned giving,endowment development),Opportunity,Potential,$10-20M net revenue,Raise current efforts up to best practice(e.g.,improve existing major giving,expand menu of high touch development offerings),$8-15M net revenu
43、e,Continue efforts to achieve full potential,Total unknown,$20-35M+,21,SOLUTIONS:MEMBERSHIP STAFF OUTNUMBERS MAJOR GIVING STAFF OVER 6:1,Source:SABS,Serve over 1.5 million members and over$120 million in revenue,Serve 8500 major givers and over$40 million in revenue,22,SOLUTIONS:KEY ELEMENTS OF OUR
44、PLAN WILL INCLUDE DEVELOPING CAPACITY AT STATIONS WITH GMs AND BOARDS,AS WELL AS WITHIN DEVELOPMENT DEPARTMENTS,23,McKinsey Study,SOLUTIONS:SYSTEMWIDE OPERATIONAL EFFICIENCIES HAS THE POTENTIAL FOR$40-$200 MILLION,Centralized Master ControlRegionalNationalConsolidated transmission facilitiesFully au
45、tomated traffic management&schedulingCentralized IngestProducing centersInterconnection POPConsolidated archivingCentralized/national purchasingConsolidated IT/Telcom functionalityAdministrative/Back office consolidation,=Opportunity Cost Savings$,Booz Allen Study,Accenture Study,24,SOLUTIONS:BROADC
46、AST OPERATIONS WORK FLOWS PROJECT,DECISION,IMPLEMENTATION,ANALYSIS&PLANDEVELOPMENT,COMMUNICATIONS,LAUNCH,25,SG sells additional sponsorshipInventory,SOLUTIONS:NATIONAL PROGRAMMINGS OBJECTIVE IDENTIFY IMPROVEMENTS IN VALUE CHAIN(NEW PROCESSES,DIFFERENT ROLES),Set priorities/agenda,Commission projects
47、/analyze results,Synthesize all findings,Share/distribute findings,Set strategy,Define future schedule plan/goals,Devise metrics to measure success,Local underwriting spots sold,Distribution agreements made,Inventory/manufactured stocked,Sales,Schedule and pop outs announced(Jun),Station“tool kits”a
48、ssembled,Commission project,Green light for national schedule,Negotiate contract w/producers,Negotiate contract:CPB/PBS/producing station,Fund-raising,Green light CPB/PBS financial contribution,Green light producing station financial contribution,Domestic program sales,Research/develop projects,Revi
49、ew external project proposals,Fall/Spring schedules set in May,International post sales,26,NEXT STEPS:TIMELINE AND DELIVERABLES,Steering Committee meeting,Annual meeting,May,June,Review of suggestions and concerns from Round Robin meetingsRefinements of analysis and plansCommitment from key stakehol
50、ders confirmed(e.g.,GMs for Major giving,technology community),Project vision and progress shared with full station communityLaunch programming research effortFirst wave of efforts developed(e.g.,early major giving adopters),Development Conference,September,Major giving internal campaign launched fo
