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,*,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,Unit of measure,*Footnote,Source:Source,Developing a Sustainable Economic Model for Public Television,May 29, 2003,CONFIDENTIAL,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 pressures on the system?,How should we launch these initiatives and effect lasting change?,Which performance improvement opportunities offer the most promise?,1,CHALLENGES: BOTH STATION ECONOMIES AND PROGRAM DEVELOPMENT ARE AT-RISK,* Excludes capital funding for digital upgrade. Revenues not adjusted for inflation,*Growth rate from 1994-2001,Source: 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 revenue 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,$107 M,2,273.3,374.0,249.4,328.5,230.5,330.5,205.6,347.6,128.6,259.6,104.2,145.6,62.9,94.5,Total PTV system revenue,* 1990 and 2001,$ 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, 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 of growth,3,CHALLENGES: HISTORICALLY, THE SYSTEM HAS GROWN THROUGH DIVERSIFICATION NOW ALL REVENUE SOURCES ARE THREATENED,Source:AFRs; Team perspective,Future Outlook,4,CHALLENGES: NET STATION MEMBERSHIP REVENUE HAS DECLINED IN REAL TERMS SINCE 1990,* All growth rates are compound annual growth rates.,Source: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%*,5,CHALLENGES: DECLINES WILL CONTINUE IN NET MEMBER SUPPORT,Pledge, which is the engine of new member acquisition, has seen rising costs relative to new member yield in line with declining productivity trends outside PTV,Net renewal revenue will not offset declining acquisition,Stations already have among the nonprofit sectors highest renewal rates,Renewal mails productivity is flat to declining,Declining ratings increase 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 charitable 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,6,CHALLENGES: 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 provided nonstation grants,Source:AFR; PBS annual report, 2001,Annual Growth Rate,1990-2001,Stations expense, 1990 and 2001,Percent,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,7,2001 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,Underwriting,Website,76,Reduce headcount by 26%, from 80 to 59,Cut local production budget by 40%, reducing annual locally produced hours from 109 to 65,Eliminate the Program Guide,Maintain or slightly decrease investment in website and education,76,$9.1 million,Illustrative expense budget for an average medium/large community station,100%=,8,CHALLENGES: CAPITAL INVESTMENTS MAY FURTHER REDUCE AVAILABLE FUNDING,Only $800 million of the estimated $1.7 billion goal has been raised,Digital Conversion,Plans are to replace current infrastructure by 2006 using CPBs $177 million appropriation request,Source:CPB; APTS Digital Clearinghouse; PBS estimates,Next,Generation Interconnect,Digital,Media,New,Services,Planned capital investments,Potential strategic investments,Bringing the best of public television into a digital media world through the use of digital cable, VOD, PVRs and High Definition programming,Innovating and launching new services such as distance learning or new media services that may not generate income, at least in the near term,9,CHALLENGES: NATIONAL PROGRAMMING, LIKEWISE, FACES UNPRECENTED PRESSURES,Unprecedented changes in audience demographics and viewing environment,Increasing investment in programming and promotion from cable competitors,External Pressures,Internal Pressures,Little or no growth in traditional sources of revenue,Rising costs and new costs (such as HD production),Responses,Introducing new/limited series and specials to slow ratings decline,Increasing funding from CPB and PBS to cover rising per hour costs,Greater reliance on fully-funded programs,Periodic cost reduction,National,Programming,10,CHALLENGES: NO RELIEF FROM TRADITIONAL PROGRAMMING FUNDING SOURCES,*Includes government agencies such as NSF and NEH, but not CPB appropriation,Source:PBS SGs,Environmental Scan of the PBS Sponsorship Sales Model August 2002;,2002 figures are estimates as of 12/12/02,Growth in total programming investment -,NPS / Plus / SIP / Select (1991-2001),$ 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 funding growth,Source,1991-2001,Growth Rate,Percent,Future outlook,PBS /,stations,4,-,Station,financial challenges make it,impossible to increase assessments,absent very compelling case,Corporate,underwriters,5,Ability to join in recovery of TV ad market threatened by turnover of key,underwriters and commercial competition,CPB,3,Federal deficits, 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 deficits,Other,10,Too small to make a difference,432,11,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 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,8:1,2.5:1,12,CHALLENGES: INDEPENDENT COMMERCIAL BROADCAST STATIONS FACE SIMILAR PRESSURE AND ARE RESPONDING WITH SIMILAR SOLUTIONS INCREASE SCALE AND IMPROVE PRACTICES,Pressure on local news the cash cow from:,Audience fragmentation,Greater competition,Ratings for syndicated programming down while costs are up,Decreases/elimination of network compensation,Difficult ad market,DTV mandates,Threat from more O&Os,Industry Pressures,Acquisition/consolidation to achieve scale,Program acquisition,Technology 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,13,OPTIONS: WE BEGAN THE PROCESS BY DEFINING 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 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,14,OPTIONS: A BROAD RANGE OF IDEAS WERE COLLECTED THAT WE BELIEVED MIGHT MEET THE CRITERIA,Traditional Revenue Sources,A. Membership,Retention,Major Gifts,Costs of Membership,B. Underwriting,National Sales,Unwired Network Sales,Local,C. Foundations,D. Local Partnerships,E. Federal Dollars,Dept. of Education, NEA,Spectrum Auction,Tax on Internet,Ancillary Sources,A. Other Platforms,Cable,VOD,Tivo,Online,B. Rights Mgt.,Video/DVD,Licensing,Domestic Syndication,International Sales,Digital Television,A. New Services,Distance Education,Datacasting,Homeland Security,ISP,Workforce Training,Government Services,Nonprofit Services,Member Subscriptions,TV Multicast,B. Federal Support,B. Collaboration,Master Control,Commercial Partners,Membership/Underwriting Sales,C. Technology,Interconnection,Asset Management,Master Control,A. Third Party Funds,National Programming Fund,Co-Production,B. Change Programming Mix,C. Individual Programs,Lower Per-Hour Cost,Increase Repeats,System Efficiencies,Programming,A. Improve Lower Performing Stations,15,OPTIONS: WE ANALYZED THE IDEAS AGAINST EACH CRITERION,Criterion 3 - No major strategic issues,Criterion 2: Under PTV control,Criterion 1: Likely, large, near term:,Major gifts,Member retention,Membership cost,National underwriting,Local underwriting,Foundation fundraising,Cable Channel,Domestic windowing,VOD/TIVO,New digital services,Increased federal support for DTV,Rights management,System efficiencies,Need a strategic plan to pursue,Cable Channel,Domestic windowing,Prepare for but avoid over- investment,VOD/TIVO,Increased federal support for DTV,Good ideas but insufficient to secure financial health,New digital services,Member retention,Membership cost,Local underwriting,Major gifts,Member retention,Membership cost,National underwriting,Local underwriting,Foundation fundraising,VOD/TIVO,New digital services,Increased federal support for DTV,Rights management,System efficiencies,Major gifts,Member retention,Membership cost,National underwriting,Local underwriting,Foundation fundraising,New digital services,Rights management,System efficiencies,Major gifts,National underwriting,Foundation fundraising,Rights management,System efficiencies,16,OPTIONS: THREE POTENTIAL SOLUTIONS PASSED EACH SCREEN,Expand major and planned giving efforts,Pursue cost savings through station and system efficiencies,Improve model for National Programming,17,*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,launching 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 $20-35 million net revenue,18,SOLUTIONS: CASE STUDIES OFFER USEFUL ROLE MODELS FOR STATIONS LAUNCHING HIGH TOUCH DEVELOPMENT EFFORTS,Source: Station data (KLRU, KNPB, Oregon PTV, and KUED),6.5,1.6,1.6,Cost per dollar raised,Percent,4.7,6.0,2.0,-17.2,.9,KNPBs major giving effort was successful because they aggressively targeted high net worth individuals for large gifts,$ Thousands,KLRUs major giving effort 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,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*,1,420,2,174,3,054,3,790,4,519,7,853,8,495,Growth Rate,28.9,Growth Rate,14.0,19,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 for 6-13% of total member revenue,*Defined as stations where major giving revenues account for +14% of total member revenue,Source: 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 effort*,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 revenue,Continue efforts to achieve full potential,Total unknown,$20-35M+,20,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,21,SOLUTIONS: KEY ELEMENTS OF OUR PLAN 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 improvement,Communication Campaign to Ensure Buy-in,Clear understanding of our past,Identify change agents and early adopters,Identify station success factors,Toolkits 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 networks,Launch national campaign,Addtl financial incentives,Identify economies of scale in membership to free up resources,22,McKinsey Study,SOLUTIONS: SYSTEMWIDE OPERATIONAL EFFICIENCIES HAS THE POTENTIAL FOR $40 - $200 MILLION,Centralized Master Control,Regional,National,Consolidated transmission facilities,Fully automated traffic management & scheduling,Centralized Ingest,Producing centers,Interconnection POP,Consolidated archiving,Centralized/national purchasing,Consolidated IT/Telcom functionality,Administrative/Back office consolidation,=,Opportunity Cost Savings,$,Booz Allen Study,Accenture Study,23,SOLUTIONS: BROADCAST OPERATIONS WORK FLOWS PROJECT,DECISION,IMPLEMENTATION,ANALYSIS & PLAN,DEVELOPMENT,COMMUNICATIONS,LAUNCH,Tech Conf presentation,CPB round tables,TDC Review,Station memos,Expand working team,Communicate value to stations,2-3 common cause projects,Track booked cost savings,12-18 months,Review projects quarterly,Full PTV implementation?,CPB SABs data,Previous studies,Review past OE projects,McKinsey assumptions & analysis,Develop implementation plan,24,SG sells additional sponsorship,Inventory,SOLUTIONS: NATIONAL PROGRAMMINGS OBJECTIVE IDENTIFY IMPROVEMENTS IN VALUE CHAIN (NEW PROCESSES, DIFFERENT ROLES),Research,Commissioning/rights acquisition/ funding,Sponsorship sales/ intl post sales,Promotion/ station outreach,Back end rights exploitation,Set priorities/ agenda,Commission projects/ 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” assembled,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,Review external project proposals,Fall/Spring schedules set in May,Not done and/or no clear leader today,PBS leads today,Stations lead today,Potential connections,International post sales,Strategy/ schedule planning,25,NEXT STEPS: TIMELINE AND DELIVERABLES,Steering Committee meeting,Annual meeting,May,June,Review of suggestions and concerns from Round Robin meetings,Refinements of analysis and plans,Commitment from key stakeholders confirmed (e.g., GMs for Major giving, technology community),Project vision and progress shared with full station community,Launch programming research effort,First wave of efforts developed (e.g., early major giving adopters),Development Conference,September,Major giving internal campaign launched for first set of stations,Build Capacity for Launches,Build major giving project capacity,Develop structure for station efficiencies effort,Design initial programming needs and evaluation research,Develop content and approach for local boards,July/August,26,DISCUSSION QUESTIONS,Do 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,
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