管理咨询公共电视运营模式课件

DevelopingaSustainableEconomicModelforPublicTelevisionMay29,2003CONFIDENTIALDevelopingaSustainableEcono1PROJECTASPIRATIONSANDKEYQUESTIONSIdentifyanddrivemajorchangesthatwillputpublictelevisiononamoresoundeconomicfootingandensureitsfuturesuccessHowsevereandlonglastingarethefinancialpressuresonthesystem?Howshouldwelaunchtheseinitiativesandeffectlastingchange?Whichperformanceimprovementopportunitiesofferthemostpromise?1PROJECTASPIRATIONSANDKEYQ2CHALLENGES:BOTHSTATIONECONOMIESANDPROGRAMDEVELOPMENTAREAT-RISK *Ecludescapitalfundingfordigitalupgrade.Revenuesnotadjustedforinflation** Growthratefrom94-2001Source: CPBAuditedFinancialReports(AFR),PBSanalysis(dues),AppendiQfromPBSSGwhitepaper(“FundingforPBSNPSProgrammingbyFunderCategory”)$1.93Billion$450Million2001LocalStationEconomy2001NationalProgramFundingProspectsforfuturerevenuegrowth3.5%peryear*3.1%peryear**Historicalgrowth

inrevenues(90-2001)Current

sizeDeclineinrealtermsduetofallingnetmemberrevenuesAsystemdecision5.4%peryearFlattoveryslowlygrowing(1%aboveinflation)2001StationAssessment$107M2CHALLENGES:BOTHSTATIONECON3273.3374.0249.4328.5230.5330.5205.6347.6128.6259.6104.2145.662.994.5TotalPTVsystemrevenue,*90and2001$MillionsUniversityIn-kindCorporateandfoundationgivingUnrelatedbusinessStateandlocal

fundingFederalfunding**Membergiving * Ecludescapitalfundingfordigitalupgrade,additionalcapitalfundraising,endowment,andinterest ** Federalagencygrantsfor2001areestimated(assumed5%growthover2000)Source: AFR;federalreports;PBSannualreports$1.25billion$1.88billionCHALLENGES:ONLYGROWTHAREASAREUNRELATEDBUSINESSANDUNDERWRITING90200AnnualGrowth%90-20012.5Driversofgrowth3273.3374.0249.4328.5230.5330.4CHALLENGES:HISTORICALLY,THESYSTEMHASGROWNTHROUGHDIVERSIFICATION–NOWALLREVENUESOURCESARETHREATENED

Source: AFRs;TeamperspectiveFutureOutlook4CHALLENGES:HISTORICALLY,THE5CHALLENGES:NETSTATIONMEMBERSHIPREVENUEHASDECLINEDINREALTERMSSINCE90 *Allgrowthratesarepoundannualgrowthrates.Source: AFRs;BureauofLaborStatisticsFundraisingcosts:1.0%Netmembershiprevenues:-0.9%$millionlostine$Millions,Adjustedforinflationtoconstant2001$Grossrevenues:0.1%*5CHALLENGES:NETSTATIONMEMBE6CHALLENGES:DECLINESWILLCONTINUEINNETMEMBERSUPPORTPledge,whichistheengineofnewmemberacquisition,hasseenrisingcostsrelativetonewmemberyieldinlinewithdecliningproductivitytrendsoutsidePTVNetrenewalrevenuewillnotoffsetdecliningacquisitionStationsalreadyhaveamongthenonprofitsector’shighestrenewalratesRenewalmail’sproductivityisflattodecliningDecliningratingsincreasestations’challengeFallingratingslikelycontributetothelongtermmembershipdecline,bothbecausetheprospectpoolwithaconnectiontoPTVshrinksandbecausemembershiprenewalishighlycorrelatedwithaudienceWiththenumberofnonprofitsgrowingtwiceasfastasrealhouseholdcharitablegiving,stationswillbehardpressedtogrowtheirshareofmembers’wallets Source: “DonorCentricsparisonReportforPublicTelevision,December2000;”DMAFactbook2001;GivingUSA2002AudienceSizeNewMemberRenewingMemberPhilanthropicEnvironmentMembershipRevenueDriversOutlook6CHALLENGES:DECLINESWILLCON7CHALLENGES:STATIONHAVEMETTHESECHALLENGESINTHEPASTBYCONTROLLINGCOSTSACROSSTHEBOARD90UnderwritingPrograminformationFundraisingManagementand

generalBroadcastingProgrammingand

production100%=$1.80billion3.14.03.8 *EpensesdonotincludeCPBorPBSoverheadorCPBprovidednonstationgrantsSource: AFR;PBSannualreport,2001AnnualGrowthRate90-2001Stationsepense,90and2001Percent100%=$1.billion2001NPSduesandservices4.0Nearly1/3ofstationprogrammingandproductioncostsareconcentratedinproducingstationsfornationalprogramming7CHALLENGES:STATIONHAVEMET82001Actual2010IllustrativeBroadcastopsMembershipEduc./outreachOtherCHALLENGES:REVENUEDECREASESWILLPROMPTREPEATEDPAINFULCOSTREDUCTIONSSource: SABS;interviewsStationcost-cuttingscenario:15%revenuelossAcquisition&schedulingPductionGeneral&administrative$10.7millionUnderwritingWebsite76Reduceheadcountby26%,from80to59Cutlocalproductionbudgetby40%,reducingannuallocallyproducedhoursfrom109to65EliminatetheProgramGuideMaintainorslightlydecreaseinvestmentinwebsiteandeducation76$9.1millionIllustrativeepensebudgetforanaveragemedium/largemunitystation100%=82001Actual2010IllustrativeB9CHALLENGES:CAPITALINVESTMENTSMAYFURTHERREDUCEAVAILABLEFUNDINGOnly$800millionoftheestimated$1.7billiongoalhasbeenraisedDigitalConversionPlansaretoreplacecurrentinfrastructureby2006usingCPB’s$7millionappropriationrequest Source: CPB;APTSDigitalClearinghouse;PBSestimatesNetGenerationInterconnectDigitalMediaNewServicesPlannedcapitalinvestmentsPotentialstrategicinvestmentsBringingthebestofpublictelevisionintoadigitalmediaworldthroughtheuseofdigitalcable,VOD,PVRsandHighDefinitionprogrammingInnovatingandlaunchingnewservicessuchasdistancelearningornewmediaservicesthatmaynotgenerateine,atleastinthenearterm9CHALLENGES:CAPITALINVESTMEN10CHALLENGES:NATIONALPROGRAMMING,LIKEWISE,FACESUNPRECENTEDPRESSURESUnprecedentedchangesinaudiencedemographicsandviewingenvironmentIncreasinginvestmentinprogrammingandpromotionfromcablepetitorsEternalPressuresInternalPressuresLittleornogrowthintraditionalsourcesofrevenueRisingcostsandnewcosts(suchasHDproduction)ResponsesIntroducingnew/limitedseriesandspecialstoslowratingsdeclineIncreasingfundingfromCPBandPBStocoverrisingperhourcostsGreaterrelianceonfully-fundedprogramsPeriodiccostreductionNationalProgramming10CHALLENGES:NATIONALPROGRAM11CHALLENGES:NORELIEFFROMTRADITIONALPROGRAMMINGFUNDINGSOURCES * IncludesgovernmentagenciessuchasNSFandNEH,butnotCPBappropriation Source: PBSSG’sEnvironmentalScanofthePBSSponsorshipSalesModelAugust2002;2002figuresareestimatesasof12/12/02Growthintotalprogramminginvestment-NPS/Plus/SIP/Select(91-2001)$MillionsCorporate,Foundation,privateproducer,other*Station,PBS,andCPB91-2001GrowthRate7.1%5.4%2.6%266301338267291327370311326379450ProspectsforfuturefundinggrowthSource

91-2001GrowthRatePercent

Futureoutlook

PBS/stations

4

-Stationfinancialchallengesmakeitimpossibletoincreaseassessmentsabsentverypellingcase

Corporateunderwriters5

AbilitytojoininrecoveryofTVadmarketthreatenedbyturnoverofkeyunderwritersandmercialpetitionCPB

3

Federaldeficits,fiscalenvironmentthreatenrequestedincreases

Foundations

9

Slowergrowthlikelyasfoundationsstabilizegivinglevelsafterrapidincreasesinthelate90sandshrinkingendowmentssince2000

Independentproducers

8

Continuedgrowthuncertain

Governmentagencies

9

Threatenedbygovernmentdeficits

Other

10

Toosmalltomakeadifference

43211CHALLENGES:NORELIEFFROMT12CHALLENGES:INCREASINGLY,NATIONALPROGRAMMINGDOLLARSHAVELESSLEVERAGERELATIVETOPETITIONGrowthRate

.9%

Programming

investmentof4

parablecablenetsAnnualprogramminginvestment,93-2001$MillionsSource: Kagan'sEconomicsofBasicCableNetworks2002;TVProgramInvestor;PBSNPSoriginalbroadcastandre-upspendingGrowthRate

4.7%Averageinvestment$41M/yearPTV

investment$334M/yearPTVinvestment$450M/yearAverage=$3M/year8:12.5:112CHALLENGES:INCREASINGLY,NA13CHALLENGES:INDEPENDENTMERCIALBROADCASTSTATIONSFACESIMILARPRESSUREANDARERESPONDINGWITHSIMILARSOLUTIONS–INCREASESCALEANDIMPROVEPRACTICESPressureonlocalnews–thecashcowfrom:AudiencefragmentationGreaterpetitionRatingsforsyndicatedprogrammingdownwhilecostsareupDecreases/eliminationofnetworkpensationDifficultadmarketDTVmandatesThreatfrommoreO&OsIndustryPressuresAcquisition/consolidationtoachievescaleProgramacquisitionTechnologyinvestment(e.g.trafficoperations,salessystems,graphics)Sharedservices(e.g.accounting,HR)Upgradeofsalespracticesandsystems(e.g.pricing)IndustryResponses13CHALLENGES:INDEPENDENTMER14OPTIONS:WEBEGANTHEPROCESSBYDEFININGASETOFCRITERIACriterion1:Likely,large,andnear-term:represents>$10Mnetperyearwithin5years,basedonclearbusinesscasefrompellinginternaleamplesorrelevanteternalbenchmarksCriterion2:UnderPTVcontrol:Achievingtheopportunitydidnotrelysolelyona“happyaccident”outsideofthesystem’scontrolCriterion3:Nomajorstrategicissues:pursuingthiswouldnotrequiremajorconsultationtoreassess/reaffirmthestrategy,mission,positioningofPTV14OPTIONS:WEBEGANTHEPROCES15OPTIONS:ABROADRANGEOFIDEASWERECOLLECTEDTHATWEBELIEVEDMIGHTMEETTHECRITERIATraditionalRevenueSourcesA.MembershipRetentionMajorGiftsCostsofMembershipB.UnderwritingNationalSalesUnwiredNetworkSalesLocalC.FoundationsD.LocalPartnershipsE.FederalDollarsDept.ofEducation,NEASpectrumAuctionTaonInternetAncillarySourcesA.OtherPlatformsCableVODTivoOnlineB.RightsMgt.Video/DVDLicensingDomesticSyndicationInternationalSalesDigitalTelevisionA.NewServicesDistanceEducationDatacastingHomelandSecurityISPWorkforceTrainingGovernmentServicesNonprofitServicesMemberSubscriptionsTVMulticastB.FederalSupportB.CollaborationMasterControlmercialPartnersMembership/UnderwritingSalesC.TechnologyInterconnectionAssetManagementMasterControlA.ThirdPartyFundsNationalProgrammingFundCo-ProductionB.ChangeProgrammingMiC.IndividualProgramsLowerPer-HourCostIncreaseRepeatsSystemEfficienciesProgrammingA.ImproveLowerPerformingStations15OPTIONS:ABROADRANGEOFID16OPTIONS:WEANALYZEDTHEIDEASAGAINSTEACHCRITERIONCriterion3-NomajorstrategicissuesCriterion2:UnderPTVcontrolCriterion1:Likely,large,nearterm:MajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingCableChannelDomesticwindowingVOD/TIVONewdigitalservicesIncreasedfederalsupportforDTVRightsmanagementSystemefficienciesNeedastrategicplantopursueCableChannelDomesticwindowingPrepareforbutavoidover-investmentVOD/TIVOIncreasedfederalsupportforDTVGoodideasbutinsufficienttosecurefinancialhealthNewdigitalservicesMemberretentionMembershipcostLocalunderwritingMajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingVOD/TIVONewdigitalservicesIncreasedfederalsupportforDTVRightsmanagementSystemefficienciesMajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingNewdigitalservicesRightsmanagementSystemefficienciesMajorgiftsNationalunderwritingFoundationfundraisingRightsmanagementSystemefficiencies16OPTIONS:WEANALYZEDTHEIDE

OPTIONS:THREEPOTENTIALSOLUTIONSPASSEDEACHSCREENEpandmajorandplannedgivingeffortsPursuecostsavingsthroughstationandsystemefficienciesImprovemodelforNationalProgrammingOPTIONS:THREEPOTENTIALSOLU

* Basedoncasestudystations,includingKUED,OPTV,KNPB,andWGBHSource: Stationinterviews;McKinseyNonprofitPracticeGivingpyramidfortypicalstationbeforelaunchingmajorgifteffort*GivingpyramidfortypicalstationafterlaunchingmajorgivingeffortMajorgivingrevenue6%94%13%87%SOLUTIONS:MAJORGIVINGHASAPOTENTIALIMPACT–$20-$35MILLIONNETREVENUEIfallstationscouldseeparableimprovements,systemcouldraise$20-35millionnetrevenue * Basedoncasestudystatio

SOLUTIONS:CASESTUDIESOFFERUSEFULROLEMODELSFORSTATIONSLAUNCHINGHIGHTOUCHDEVELOPMENTEFFORTS Source: Stationdata(KLRU,KNPB,OregonPTV,andKUED)CostperdollarraisedPercent4.76.02.0-.2.9KNPB’smajorgivingeffortwassuccessfulbecausetheyaggressivelytargetedhighnetworthindividualsforlargegifts$ThousandsKLRU’smajorgivingeffortgrew~3timesasfastastheirregularmembershipefforts$ThousandsOregonhasbeensuccessfulbecausetheyepandedafullrangeofhightouchdevelopmentefforts,includingmajorgiving,plannedgiving,andanendowmentfund$Thousands7590113Numberofmajordonors27477110625.6MidlevelgivingMajorgivingPlannedgivingEndowment348082122112Numberofmajordonors76385N/A9512733.6**1,701787460615697Costperdonor$0814575N/A960632-10.4***KUED’slong-terminvestmentinmajorgivinghasledtoaten-foldincreaseinthisrevenue$ThousandsGrowthRate25.5**1,4202,43,0543,7904,57,8538,495GrowthRate28.9GrowthRate14.0SOLUTIONS:CASESTUDIESOFFER20SOLUTIONS:SUCCESSREQUIRESSIGNIFICANTACTION*Definedasstationswithnoorlimitedmajorgivingeffortsorreporting,lessthan6%oftotalmemberrevenuesfrommajorgifts)**Definedasstationswheremajorgivingrevenuesaccountfor6-13%oftotalmemberrevenue***Definedasstationswheremajorgivingrevenuesaccountfor+14%oftotalmemberrevenueSource: SABSStationssegmentedbymajorgifteffortsTotal=6$374MNumberofstationsTotalmemberrevenueStrongmajorgifteffort***Limitedmajorgifteffort*Somemajorgifteffort**Establishfullrangeofhightouchdevelopmentefforts(i.e.,majorgiving,plannedgiving,endowmentdevelopment)OpportunityPotential$10-20MnetrevenueRaisecurrenteffortsuptobestpractice(e.g.,improveeistingmajorgiving,epandmenuofhightouchdevelopmentofferings)$8-15MnetrevenueContinueeffortstoachievefullpotentialTotalunknown$20-35M+20SOLUTIONS:SUCCESSREQUIRES21SOLUTIONS:MEMBERSHIPSTAFFOUTNUMBERSMAJORGIVINGSTAFFOVER6:1Source: SABSServeover1.5millionmembersandover$120millioninrevenueServe8500majorgiversandover$40millioninrevenue21SOLUTIONS:MEMBERSHIPSTAFF22SOLUTIONS:KEYELEMENTSOFOURPLANWILLINCLUDEDEVELOPINGCAPACITYATSTATIONS–WITHGMsANDBOARDS,ASWELLASWITHINDEVELOPMENTDEPARTMENTSBenchmarkstoFocusOurEffortsIDmajorgivingcohortsSetkeystationbenchmarksTrackimprovementmunicationCampaigntoEnsureBuy-inClearunderstandingofourpastIdentifychangeagentsandearlyadoptersIdentifystationsuccessfactorsToolkitstoSupportImplementationDesignandimplementnewprogramsforGMsandBoardMembersCreateaninventoryof“whatweknow”Createcopypoints,jobdescriptions,etc.CreationofaNationalEnvironmentforSuccessPeer-to-peerGMnetworksLaunchnationalcampaignAddt’lfinancialincentivesIdentifyeconomiesofscaleinmembershiptofreeupresources22SOLUTIONS:KEYELEMENTSOFO232324SOLUTIONS:BROADCASTOPERATIONSWORKFLOWSPROJECTDECISIONIMPLEMENTATIONANALYSIS&PLANDEVELOPMENTMUNICATIONSLAUNCHTechConfpresentationCPBroundtablesTDCReviewStationmemosEpandworkingteammunicatevaluetostations2-3moncauseprojectsTrackbookedcostsavings12-monthsReviewprojectsquarterlyFullPTVimplementation?CPBSABsdataPreviousstudiesReviewpastOEprojectsMcKinseyassumptions&analysisDevelopimplementationplan24SOLUTIONS:BROADCASTOPERATI25SGsellsadditionalsponsorshipInventorySOLUTIONS:NATIONALPROGRAMMING’SOBJECTIVE–IDENTIFYIMPROVEMENTSINVALUECHAIN(NEWPROCESSES,DIFFERENTROLES)Researchmissioning/rightsacquisition/fundingSponsorshipsales/int’lpostsalesPromotion/stationoutreachBackendrightseploitationSetpriorities/agendamissionprojects/analyzeresultsSynthesizeallfindingsShare/distributefindingsSetstrategyDefinefuturescheduleplan/goalsDevisemetricstomeasuresuccessLocalunderwritingspotssoldDistributionagreementsmadeInventory/manufacturedstockedSalesScheduleandpopoutsannounced(Jun)Station“toolkits”assembledmissionprojectGreenlightfornationalscheduleNegotiatecontractw/producersNegotiatecontract:CPB/PBS/producingstationFund-raisingGreenlightCPB/PBSfinancialcontributionGreenlightproducingstationfinancialcontributionDomesticprogramsalesResearch/developprojectsRevieweternalprojectproposalsFall/SpringschedulessetinMayNotdoneand/ornoclearleadertodayPBSleadstodayStationsleadtodayPotentialconnectionsInternationalpostsalesStrategy/scheduleplanning25SGsellsadditionalsponsors26NETSTEPS:TIMELINEANDDELIVERABLESSteeringmitteemeetingAnnualmeetingMayJuneReviewofsuggestionsandconcernsfromRoundRobinmeetingsRefinementsofanalysisandplansmitmentfromkeystakeholdersconfirmed(e.g.,GMsforMajorgiving,technologymunity)ProjectvisionandprogresssharedwithfullstationmunityLaunchprogrammingresearcheffortFirstwaveofeffortsdeveloped(e.g.,earlymajorgivingadopters)DevelopmentConferenceSeptemberMajorgivinginternalcampaignlaunchedforfirstsetofstationsBuildCapacityforLaunchesBuildmajorgivingprojectcapacityDevelopstructureforstationefficiencieseffortDesigninitialprogrammingneedsandevaluationresearchDevelopcontentandapproachforlocalboardsJuly/August26NETSTEPS:TIMELINEANDDEL27DISCUSSIONQUESTIONSDoyouagreewiththefinancialfindings?Whatquestionsdoyouhaveabouttheanalysis?Whatwillberequiredforsuccessinmajorgiving?Stationefficiencies?Whatrolecanyourfunctionalareasplayinensuringsuccess?27DISCUSSIONQUESTIONSDoyouaDevelopingaSustainableEconomicModelforPublicTelevisionMay29,2003CONFIDENTIALDevelopingaSustainableEcono1PROJECTASPIRATIONSANDKEYQUESTIONSIdentifyanddrivemajorchangesthatwillputpublictelevisiononamoresoundeconomicfootingandensureitsfuturesuccessHowsevereandlonglastingarethefinancialpressuresonthesystem?Howshouldwelaunchtheseinitiativesandeffectlastingchange?Whichperformanceimprovementopportunitiesofferthemostpromise?1PROJECTASPIRATIONSANDKEYQ2CHALLENGES:BOTHSTATIONECONOMIESANDPROGRAMDEVELOPMENTAREAT-RISK *Ecludescapitalfundingfordigitalupgrade.Revenuesnotadjustedforinflation** Growthratefrom94-2001Source: CPBAuditedFinancialReports(AFR),PBSanalysis(dues),AppendiQfromPBSSGwhitepaper(“FundingforPBSNPSProgrammingbyFunderCategory”)$1.93Billion$450Million2001LocalStationEconomy2001NationalProgramFundingProspectsforfuturerevenuegrowth3.5%peryear*3.1%peryear**Historicalgrowth

inrevenues(90-2001)Current

sizeDeclineinrealtermsduetofallingnetmemberrevenuesAsystemdecision5.4%peryearFlattoveryslowlygrowing(1%aboveinflation)2001StationAssessment$107M2CHALLENGES:BOTHSTATIONECON3273.3374.0249.4328.5230.5330.5205.6347.6128.6259.6104.2145.662.994.5TotalPTVsystemrevenue,*90and2001$MillionsUniversityIn-kindCorporateandfoundationgivingUnrelatedbusinessStateandlocal

fundingFederalfunding**Membergiving * Ecludescapitalfundingfordigitalupgrade,additionalcapitalfundraising,endowment,andinterest ** Federalagencygrantsfor2001areestimated(assumed5%growthover2000)Source: AFR;federalreports;PBSannualreports$1.25billion$1.88billionCHALLENGES:ONLYGROWTHAREASAREUNRELATEDBUSINESSANDUNDERWRITING90200AnnualGrowth%90-20012.5Driversofgrowth3273.3374.0249.4328.5230.5330.4CHALLENGES:HISTORICALLY,THESYSTEMHASGROWNTHROUGHDIVERSIFICATION–NOWALLREVENUESOURCESARETHREATENED

Source: AFRs;TeamperspectiveFutureOutlook4CHALLENGES:HISTORICALLY,THE5CHALLENGES:NETSTATIONMEMBERSHIPREVENUEHASDECLINEDINREALTERMSSINCE90 *Allgrowthratesarepoundannualgrowthrates.Source: AFRs;BureauofLaborStatisticsFundraisingcosts:1.0%Netmembershiprevenues:-0.9%$millionlostine$Millions,Adjustedforinflationtoconstant2001$Grossrevenues:0.1%*5CHALLENGES:NETSTATIONMEMBE6CHALLENGES:DECLINESWILLCONTINUEINNETMEMBERSUPPORTPledge,whichistheengineofnewmemberacquisition,hasseenrisingcostsrelativetonewmemberyieldinlinewithdecliningproductivitytrendsoutsidePTVNetrenewalrevenuewillnotoffsetdecliningacquisitionStationsalreadyhaveamongthenonprofitsector’shighestrenewalratesRenewalmail’sproductivityisflattodecliningDecliningratingsincreasestations’challengeFallingratingslikelycontributetothelongtermmembershipdecline,bothbecausetheprospectpoolwithaconnectiontoPTVshrinksandbecausemembershiprenewalishighlycorrelatedwithaudienceWiththenumberofnonprofitsgrowingtwiceasfastasrealhouseholdcharitablegiving,stationswillbehardpressedtogrowtheirshareofmembers’wallets Source: “DonorCentricsparisonReportforPublicTelevision,December2000;”DMAFactbook2001;GivingUSA2002AudienceSizeNewMemberRenewingMemberPhilanthropicEnvironmentMembershipRevenueDriversOutlook6CHALLENGES:DECLINESWILLCON7CHALLENGES:STATIONHAVEMETTHESECHALLENGESINTHEPASTBYCONTROLLINGCOSTSACROSSTHEBOARD90UnderwritingPrograminformationFundraisingManagementand

generalBroadcastingProgrammingand

production100%=$1.80billion3.14.03.8 *EpensesdonotincludeCPBorPBSoverheadorCPBprovidednonstationgrantsSource: AFR;PBSannualreport,2001AnnualGrowthRate90-2001Stationsepense,90and2001Percent100%=$1.billion2001NPSduesandservices4.0Nearly1/3ofstationprogrammingandproductioncostsareconcentratedinproducingstationsfornationalprogramming7CHALLENGES:STATIONHAVEMET82001Actual2010IllustrativeBroadcastopsMembershipEduc./outreachOtherCHALLENGES:REVENUEDECREASESWILLPROMPTREPEATEDPAINFULCOSTREDUCTIONSSource: SABS;interviewsStationcost-cuttingscenario:15%revenuelossAcquisition&schedulingPductionGeneral&administrative$10.7millionUnderwritingWebsite76Reduceheadcountby26%,from80to59Cutlocalproductionbudgetby40%,reducingannuallocallyproducedhoursfrom109to65EliminatetheProgramGuideMaintainorslightlydecreaseinvestmentinwebsiteandeducation76$9.1millionIllustrativeepensebudgetforanaveragemedium/largemunitystation100%=82001Actual2010IllustrativeB9CHALLENGES:CAPITALINVESTMENTSMAYFURTHERREDUCEAVAILABLEFUNDINGOnly$800millionoftheestimated$1.7billiongoalhasbeenraisedDigitalConversionPlansaretoreplacecurrentinfrastructureby2006usingCPB’s$7millionappropriationrequest Source: CPB;APTSDigitalClearinghouse;PBSestimatesNetGenerationInterconnectDigitalMediaNewServicesPlannedcapitalinvestmentsPotentialstrategicinvestmentsBringingthebestofpublictelevisionintoadigitalmediaworldthroughtheuseofdigitalcable,VOD,PVRsandHighDefinitionprogrammingInnovatingandlaunchingnewservicessuchasdistancelearningornewmediaservicesthatmaynotgenerateine,atleastinthenearterm9CHALLENGES:CAPITALINVESTMEN10CHALLENGES:NATIONALPROGRAMMING,LIKEWISE,FACESUNPRECENTEDPRESSURESUnprecedentedchangesinaudiencedemographicsandviewingenvironmentIncreasinginvestmentinprogrammingandpromotionfromcablepetitorsEternalPressuresInternalPressuresLittleornogrowthintraditionalsourcesofrevenueRisingcostsandnewcosts(suchasHDproduction)ResponsesIntroducingnew/limitedseriesandspecialstoslowratingsdeclineIncreasingfundingfromCPBandPBStocoverrisingperhourcostsGreaterrelianceonfully-fundedprogramsPeriodiccostreductionNationalProgramming10CHALLENGES:NATIONALPROGRAM11CHALLENGES:NORELIEFFROMTRADITIONALPROGRAMMINGFUNDINGSOURCES * IncludesgovernmentagenciessuchasNSFandNEH,butnotCPBappropriation Source: PBSSG’sEnvironmentalScanofthePBSSponsorshipSalesModelAugust2002;2002figuresareestimatesasof12/12/02Growthintotalprogramminginvestment-NPS/Plus/SIP/Select(91-2001)$MillionsCorporate,Foundation,privateproducer,other*Station,PBS,andCPB91-2001GrowthRate7.1%5.4%2.6%266301338267291327370311326379450ProspectsforfuturefundinggrowthSource

91-2001GrowthRatePercent

Futureoutlook

PBS/stations

4

-Stationfinancialchallengesmakeitimpossibletoincreaseassessmentsabsentverypellingcase

Corporateunderwriters5

AbilitytojoininrecoveryofTVadmarketthreatenedbyturnoverofkeyunderwritersandmercialpetitionCPB

3

Federaldeficits,fiscalenvironmentthreatenrequestedincreases

Foundations

9

Slowergrowthlikelyasfoundationsstabilizegivinglevelsafterrapidincreasesinthelate90sandshrinkingendowmentssince2000

Independentproducers

8

Continuedgrowthuncertain

Governmentagencies

9

Threatenedbygovernmentdeficits

Other

10

Toosmalltomakeadifference

43211CHALLENGES:NORELIEFFROMT12CHALLENGES:INCREASINGLY,NATIONALPROGRAMMINGDOLLARSHAVELESSLEVERAGERELATIVETOPETITIONGrowthRate

.9%

Programming

investmentof4

parablecablenetsAnnualprogramminginvestment,93-2001$MillionsSource: Kagan'sEconomicsofBasicCableNetworks2002;TVProgramInvestor;PBSNPSoriginalbroadcastandre-upspendingGrowthRate

4.7%Averageinvestment$41M/yearPTV

investment$334M/yearPTVinvestment$450M/yearAverage=$3M/year8:12.5:112CHALLENGES:INCREASINGLY,NA13CHALLENGES:INDEPENDENTMERCIALBROADCASTSTATIONSFACESIMILARPRESSUREANDARERESPONDINGWITHSIMILARSOLUTIONS–INCREASESCALEANDIMPROVEPRACTICESPressureonlocalnews–thecashcowfrom:AudiencefragmentationGreaterpetitionRatingsforsyndicatedprogrammingdownwhilecostsareupDecreases/eliminationofnetworkpensationDifficultadmarketDTVmandatesThreatfrommoreO&OsIndustryPressuresAcquisition/consolidationtoachievescaleProgramacquisitionTechnologyinvestment(e.g.trafficoperations,salessystems,graphics)Sharedserv