DevelopingaSustainableEconomicModelforPublicTelevisionMay29,2003CONFIDENTIALPROJECTASPIRATIONSANDKEYQUESTIONSIdentifyanddrivemajorchangesthatwillputpublictelevisiononamoresoundeconomicfootingandensureitsfuturesuccessHowsevereandlonglastingarethefinancialpressuresonthesystem?Howshouldwelaunchtheseinitiativesandeffectlastingchange?Whichperformanceimprovementopportunitiesofferthemostpromise?1CHALLENGES:BOTHSTATIONECONOMIESANDPROGRAMDEVELOPMENTAREAT-RISK *Excludescapitalfundingfordigitalupgrade.Revenuesnotadjustedforinflation** Growthratefrom1994-2001Source: CPBAuditedFinancialReports(AFR),PBSanalysis(dues),AppendixQfromPBSSGwhitepaper(“FundingforPBSNPSProgrammingbyFunderCategory”)$1.93Billion$450Million2001LocalStationEconomy2001NationalProgramFundingProspectsforfuturerevenuegrowth3.5%peryear*3.1%peryear**Historicalgrowth

inrevenues(1990-2001)Current

sizeDeclineinrealtermsduetofallingnetmemberrevenuesAsystemdecision5.4%peryearFlattoveryslowlygrowing(1%aboveinflation)2001StationAssessment$107M2273.3374.0249.4328.5230.5330.5205.6347.6128.6259.6104.2145.662.994.5TotalPTVsystemrevenue,*1990and2001$MillionsUniversityIn-kindCorporateandfoundationgivingUnrelatedbusinessStateandlocal

fundingFederalfunding**Membergiving * Excludescapitalfundingfordigitalupgrade,additionalcapitalfundraising,endowment,andinterest ** Federalagencygrantsfor2001areestimated(assumed5%growthover2000)Source: AFR;federalreports;PBSannualreports$1.25billion$1.88billionCHALLENGES:ONLYGROWTHAREASAREUNRELATEDBUSINESSANDUNDERWRITING1990200AnnualGrowth%1990-20012.5Driversofgrowth3CHALLENGES:HISTORICALLY,THESYSTEMHASGROWNTHROUGHDIVERSIFICATION–NOWALLREVENUESOURCESARETHREATENED

Source: AFRs;TeamperspectiveFutureOutlook4CHALLENGES:NETSTATIONMEMBERSHIPREVENUEHASDECLINEDINREALTERMSSINCE1990 *Allgrowthratesarecompoundannualgrowthrates.Source: AFRs;BureauofLaborStatisticsFundraisingcosts:1.0%Netmembershiprevenues:-0.9%$17millionlostincome$Millions,Adjustedforinflationtoconstant2001$Grossrevenues:0.1%*5CHALLENGES:DECLINESWILLCONTINUEINNETMEMBERSUPPORTPledge,whichistheengineofnewmemberacquisition,hasseenrisingcostsrelativetonewmemberyieldinlinewithdecliningproductivitytrendsoutsidePTVNetrenewalrevenuewillnotoffsetdecliningacquisitionStationsalreadyhaveamongthenonprofitsector’shighestrenewalratesRenewalmail’sproductivityisflattodecliningDecliningratingsincreasestations’challengeFallingratingslikelycontributetothelongtermmembershipdecline,bothbecausetheprospectpoolwithaconnectiontoPTVshrinksandbecausemembershiprenewalishighlycorrelatedwithaudienceWiththenumberofnonprofitsgrowingtwiceasfastasrealhouseholdcharitablegiving,stationswillbehardpressedtogrowtheirshareofmembers’wallets Source: “DonorCentricsComparisonReportforPublicTelevision,December2000;”DMAFactbook2001;GivingUSA2002AudienceSizeNewMemberRenewingMemberPhilanthropicEnvironmentMembershipRevenueDriversOutlook6CHALLENGES:STATIONHAVEMETTHESECHALLENGESINTHEPASTBYCONTROLLINGCOSTSACROSSTHEBOARD1990UnderwritingPrograminformationFundraisingManagementand

generalBroadcastingProgrammingand

production100%=$1.80billion3.14.03.8 *ExpensesdonotincludeCPBorPBSoverheadorCPBprovidednonstationgrantsSource: AFR;PBSannualreport,2001AnnualGrowthRate1990-2001Stationsexpense,1990and2001Percent100%=$1.19billion2001NPSduesandservices4.0Nearly1/3ofstationprogrammingandproductioncostsareconcentratedinproducingstationsfornationalprogramming72001Actual2010IllustrativeBroadcastopsMembershipEduc./outreachOtherCHALLENGES:REVENUEDECREASESWILLPROMPTREPEATEDPAINFULCOSTREDUCTIONSSource: SABS;interviewsStationcost-cuttingscenario:15%revenuelossAcquisition&schedulingPductionGeneral&administrative$10.7millionUnderwritingWebsite76Reduceheadcountby26%,from80to59Cutlocalproductionbudgetby40%,reducingannuallocallyproducedhoursfrom109to65EliminatetheProgramGuideMaintainorslightlydecreaseinvestmentinwebsiteandeducation76$9.1millionIllustrativeexpensebudgetforanaveragemedium/largecommunitystation100%=8CHALLENGES:CAPITALINVESTMENTSMAYFURTHERREDUCEAVAILABLEFUNDINGOnly$800millionoftheestimated$1.7billiongoalhasbeenraisedDigitalConversionPlansaretoreplacecurrentinfrastructureby2006usingCPB’s$177millionappropriationrequest Source: CPB;APTSDigitalClearinghouse;PBSestimatesNextGenerationInterconnectDigitalMediaNewServicesPlannedcapitalinvestmentsPotentialstrategicinvestmentsBringingthebestofpublictelevisionintoadigitalmediaworldthroughtheuseofdigitalcable,VOD,PVRsandHighDefinitionprogrammingInnovatingandlaunchingnewservicessuchasdistancelearningornewmediaservicesthatmaynotgenerateincome,atleastinthenearterm9CHALLENGES:NATIONALPROGRAMMING,LIKEWISE,FACESUNPRECENTEDPRESSURESUnprecedentedchangesinaudiencedemographicsandviewingenvironmentIncreasinginvestmentinprogrammingandpromotionfromcablecompetitorsExternalPressuresInternalPressuresLittleornogrowthintraditionalsourcesofrevenueRisingcostsandnewcosts(suchasHDproduction)ResponsesIntroducingnew/limitedseriesandspecialstoslowratingsdeclineIncreasingfundingfromCPBandPBStocoverrisingperhourcostsGreaterrelianceonfully-fundedprogramsPeriodiccostreductionNationalProgramming10CHALLENGES:NORELIEFFROMTRADITIONALPROGRAMMINGFUNDINGSOURCES* IncludesgovernmentagenciessuchasNSFandNEH,butnotCPBappropriationSource: PBSSG’sEnvironmentalScanofthePBSSponsorshipSalesModelAugust2002;2002figuresareestimatesasof12/12/02Growthintotalprogramminginvestment-NPS/Plus/SIP/Select(1991-2001)$MillionsCorporate,Foundation,privateproducer,other*Station,PBS,andCPB1991-2001GrowthRate7.1%5.4%2.6%266301338267291327370311326379450ProspectsforfuturefundinggrowthSource1991-2001GrowthRatePercentFutureoutlookPBS/stations4-StationfinancialchallengesmakeitimpossibletoincreaseassessmentsabsentverycompellingcaseCorporateunderwriters5AbilitytojoininrecoveryofTVadmarketthreatenedbyturnoverofkeyunderwritersandcommercialcompetitionCPB3Federaldeficits,fiscalenvironmentthreatenrequestedincreasesFoundations9Slowergrowthlikelyasfoundationsstabilizegivinglevelsafterrapidincreasesinthelate1990sandshrinkingendowmentssince2000Independentproducers8ContinuedgrowthuncertainGovernmentagencies9ThreatenedbygovernmentdeficitsOther10Toosmalltomakeadifference43211CHALLENGES:INCREASINGLY,NATIONALPROGRAMMINGDOLLARSHAVELESSLEVERAGERELATIVETOCOMPETITIONGrowthRate19.9%Programming

investmentof4

comparablecablenetsAnnualprogramminginvestment,1993-2001$MillionsSource: Kagan'sEconomicsofBasicCableNetworks2002;TVProgramInvestor;PBSNPSoriginalbroadcastandre-upspendingGrowthRate

4.7%Averageinvestment$41M/yearPTV

investment$334M/yearPTVinvestment$450M/yearAverage=$183M/year8:12.5:112CHALLENGES:INDEPENDENTCOMMERCIALBROADCASTSTATIONSFACESIMILARPRESSUREANDARERESPONDINGWITHSIMILARSOLUTIONS–INCREASESCALEANDIMPROVEPRACTICESPressureonlocalnews–thecashcowfrom:AudiencefragmentationGreatercompetitionRatingsforsyndicatedprogrammingdownwhilecostsareupDecreases/eliminationofnetworkcompensationDifficultadmarketDTVmandatesThreatfrommoreO&OsIndustryPressuresAcquisition/consolidationtoachievescaleProgramacquisitionTechnologyinvestment(e.g.trafficoperations,salessystems,graphics)Sharedservices(e.g.accounting,HR)Upgradeofsalespracticesandsystems(e.g.pricing)IndustryResponses13OPTIONS:WEBEGANTHEPROCESSBYDEFININGASETOFCRITERIACriterion1:Likely,large,andnear-term:represents>$10Mnetperyearwithin5years,basedonclearbusinesscasefromcompellinginternalexamplesorrelevantexternalbenchmarksCriterion2:UnderPTVcontrol:Achievingtheopportunitydidnotrelysolelyona““happyaccident”outsideofthesystem’scontrolCriterion3:Nomajorstrategicissues:pursuingthiswouldnotrequiremajorconsultationtoreassess/reaffirmthestrategy,mission,positioningofPTV14OPTIONS:ABROADRANGEOFIDEASWERECOLLECTEDTHATWEBELIEVEDMIGHTMEETTHECRITERIATraditionalRevenueSourcesA.MembershipRetentionMajorGiftsCostsofMembershipB.UnderwritingNationalSalesUnwiredNetworkSalesLocalC.FoundationsD.LocalPartnershipsE.FederalDollarsDept.ofEducation,NEASpectrumAuctionTaxonInternetAncillarySourcesA.OtherPlatformsCableVODTivoOnlineB.RightsMgt.Video/DVDLicensingDomesticSyndicationInternationalSalesDigitalTelevisionA.NewServicesDistanceEducationDatacastingHomelandSecurityISPWorkforceTrainingGovernmentServicesNonprofitServicesMemberSubscriptionsTVMulticastB.FederalSupportB.CollaborationMasterControlCommercialPartnersMembership/UnderwritingSalesC.TechnologyInterconnectionAssetManagementMasterControlA.ThirdPartyFundsNationalProgrammingFundCo-ProductionB.ChangeProgrammingMixC.IndividualProgramsLowerPer-HourCostIncreaseRepeatsSystemEfficienciesProgrammingA.ImproveLowerPerformingStations15OPTIONS:WEANALYZEDTHEIDEASAGAINSTEACHCRITERIONCriterion3-NomajorstrategicissuesCriterion2:UnderPTVcontrolCriterion1:Likely,large,nearterm:MajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingCableChannelDomesticwindowingVOD/TIVONewdigitalservicesIncreasedfederalsupportforDTVRightsmanagementSystemefficienciesNeedastrategicplantopursueCableChannelDomesticwindowingPrepareforbutavoidover-investmentVOD/TIVOIncreasedfederalsupportforDTVGoodideasbutinsufficienttosecurefinancialhealthNewdigitalservicesMemberretentionMembershipcostLocalunderwritingMajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingVOD/TIVONewdigitalservicesIncreasedfederalsupportforDTVRightsmanagementSystemefficienciesMajorgiftsMemberretentionMembershipcostNationalunderwritingLocalunderwritingFoundationfundraisingNewdigitalservicesRightsmanagementSystemefficienciesMajorgiftsNationalunderwritingFoundationfundraisingRightsmanagementSystemefficiencies16OPTIONS:THREEPOTENTIALSOLUTIONSPASSEDEACHSCREENExpandmajorandplannedgivingeffortsPursuecostsavingsthroughstationandsystemefficienciesImprovemodelforNationalProgramming17* Basedoncasestudystations,includingKUED,OPTV,KNPB,andWGBHSource: Stationinterviews;McKinseyNonprofitPracticeGivingpyramidfortypicalstationbeforelaunchingmajorgifteffort*GivingpyramidfortypicalstationafterlaunchingmajorgivingeffortMajorgivingrevenue6%94%13%87%SOLUTIONS:MAJORGIVINGHASAPOTENTIALIMPACT–$20-$35MILLIONNETREVENUEIfallstationscouldseecomparableimprovements,systemcouldraise$20-35millionnetrevenue18SOLUTIONS:CASESTUDIESOFFERUSEFULROLEMODELSFORSTATIONSLAUNCHINGHIGHTOUCHDEVELOPMENTEFFORTSSource: Stationdata(KLRU,KNPB,OregonPTV,andKUED)CostperdollarraisedPercent4.76.02.0-17.2.9KNPB’smajorgivingeffortwassuccessfulbecausetheyaggressivelytargetedhighnetworthindividualsforlargegifts$ThousandsKLRU’smajorgivingeffortgrew~3timesasfastastheirregularmembershipefforts$ThousandsOregonhasbeensuccessfulbecausetheyexpandedafullrangeofhightouchdevelopmentefforts,includingmajorgiving,plannedgiving,andanendowmentfund$Thousands7590113Numberofmajordonors27477110625.6MidlevelgivingMajorgivingPlannedgivingEndowment348082122112Numberofmajordonors76385N/A9512733.6**1,701787460615697Costperdonor$0814575N/A960632-10.4***KUED’slong-terminvestmentinmajorgivinghasledtoaten-foldincreaseinthisrevenue$ThousandsGrowthRate25.5**1,4202,1743,0543,7904,5197,8538,495GrowthRate28.9GrowthRate14.019SOLUTIONS:SUCCESSREQUIRESSIGNIFICANTACTION*Definedasstationswithnoorlimitedmajorgivingeffortsorreporting,lessthan6%oftotalmemberrevenuesfrommajorgifts)**Definedasstationswheremajorgivingrevenuesaccountfor6-13%oftotalmemberrevenue***Definedasstationswheremajorgivingrevenuesaccountfor+14%oftotalmemberrevenueSource: SABSStationssegmentedbymajorgifteffortsTotal=176$374MNumberofstationsTotalmemberrevenueStrongmajorgifteffort***Limitedmajorgifteffort*Somemajorgifteffort**Establishfullrangeofhightouchdevelopmentefforts(i.e.,majorgiving,plannedgiving,endowmentdevelopment)OpportunityPotential$10-20MnetrevenueRaisecurrenteffortsuptobestpractice(e.g.,improveexistingmajorgiving,expandmenuofhightouchdevelopmentofferings)$8-15MnetrevenueContinueeffortstoachievefullpotentialTotalunknown$20-35M+20SOLUTIONS:MEMBERSHIPSTAFFOUTNUMBERSMAJORGIVINGSTAFFOVER6:1Source:SABSServeover1.5millionmembersandover$120millioninrevenueServe8500majorgiversandover$40millioninrevenue21SOLUTIONS:KEYELEMENTSOFOURPLANWILLINCLUDEDEVELOPINGCAPACITYATSTATIONS––WITHGMsANDBOARDS,ASWELLASWITHINDEVELOPMENTDEPARTMENTSBenchmarkstoFocusOurEffortsIDmajorgivingcohortsSetkeystationbenchmarksTrackimprovementCommunicationCampaigntoEnsureBuy-inClearunderstandingofourpastIdentifychangeagentsandearlyadoptersIdentifystationsuccessfactorsToolkitstoSupportImplementationDesignandimplementnewprogramsforGMsandBoardMembersCreateaninventoryof“whatweknow”Createcopypoints,jobdescriptions,etc.CreationofaNationalEnvironmentforSuccessPeer-to-peerGMnetworksLaunchnationalcampaignAddt’lfinancialincentivesIdentifyeconomiesofscaleinmembershiptofreeupresources22McKinseyStudySOLUTIONS:SYSTEMWIDEOPERATIONALEFFICIENCIESHASTHEPOTENTIALFOR$40-$200MILLIONCentralizedMasterControlRegionalNationalConsolidatedtransmissionfacilitiesFullyautomatedtrafficmanagement&schedulingCentralizedIngestProducingcentersInterconnectionPOPConsolidatedarchivingCentralized/nationalpurchasingConsolidatedIT/TelcomfunctionalityAdministrative/Backofficeconsolidation=OpportunityCostSavings$$BoozAllenStudyAccentureStudy23SOLUTIONS:BROADCASTOPERATIONSWORKFLOWSPROJECTDECISIONIMPLEMENTATIONANALYSIS&PLANDEVELOPMENTCOMMUNICATIONSLAUNCHTechConfpresentationCPBroundtablesTDCReviewStationmemosExpandworkingteamCommunicatevaluetostations2-3commoncauseprojectsTrackbookedcostsavings12-18monthsReviewprojectsquarterlyFullPTVimplementation?CPBSABsdataPreviousstudiesReviewpastOEprojectsMcKinseyassumptions&analysisDevelopimplementationplan24SGsellsadditionalsponsorshipInventorySOLUTIONS:NATIONALPROGRAMMING’SOBJECTIVE––IDENTIFYIMPROVEMENTSINVALUECHAIN(NEWPROCESSES,DIFFERENTROLES)ResearchCommissioning/rightsacquisition/fundingSponsorshipsales/int’lpostsalesPromotion/stationoutreachBackendrightsexploitationSetpriorities/agendaCommissionprojects/analyzeresultsSynthesizeallfindingsShare/distributefindingsSetstrategyDefinefuturescheduleplan/goalsDevisemetricstomeasuresuccessLocalunderwritingspotssoldDistributionagreementsmadeInventory/manufacturedstockedSalesScheduleandpopoutsannounced(Jun)Station““toolkits””assembledCommissionprojectGreenlightfornationalscheduleNegotiatecontractw/producersNegotiatecontract:CPB/PBS/producingstationFund-raisingGreenlightCPB/PBSfinancialcontributionGreenlightproducingstationfinancialcontributionDomesticprogramsalesResearch/developprojectsReviewexternalprojectproposalsFall/SpringschedulessetinMayNotdoneand/ornoclearleadertodayPBSleadstodayStationsleadtodayPotentialconnectionsInternationalpostsalesStrategy/scheduleplanning25NEXTSTEPS:TIMELINEANDDELIVERABLESSteeringCommitteemeetingAnnualmeetingMayJuneReviewofsuggestionsandconcernsfromRoundRobinmeetingsRefinementsofanalysisandplansCommitmentfromkeystakeholdersconfirmed(e.g.,GMsforMajorgiving,technologycommunity)ProjectvisionandprogresssharedwithfullstationcommunityLaunchprogrammingresearcheffortFirstwaveofeffortsdeveloped(e.g.,earlymajorgivingadopters)DevelopmentConferenceSeptemberMajorgivinginternalcampaignlaunchedforfirstsetofstationsBuildCapacityforLaunchesBuildmajorgivingprojectcapacityDevelopstructureforstationefficiencieseffortDesigninitialprogrammingneedsandevaluationresearchDevelopcontentandapproachforlocalboardsJuly/August26DISCUSSIONQUESTIONSDoyouagreewiththefinancialfindings?Whatquestionsdoyouhaveabouttheanalysis?Whatwillberequiredforsuccessinmajorgiving?Stationefficiencies?Whatrolecanyourfunctionalareasplayinensuringsuccess?279、靜夜四四無(wú)鄰，，荒居舊舊業(yè)貧。。。12月-2212月-22Tuesday,December13,202210、雨雨中中黃黃葉葉樹(shù)樹(shù)，，燈燈下下白白頭頭人人。。。。23:42:3823:42:3823:4212/13/202211:42:38PM11、以我我獨(dú)沈沈久，，愧君君相見(jiàn)見(jiàn)頻。。。12月月-2223:42:3823:42Dec-2213-Dec-2212、故人江海別別，幾度隔山山川。。23:42:3823:42:3823:42Tuesday,December13,202213、乍見(jiàn)翻疑疑夢(mèng)，相悲悲各問(wèn)年。。。12月-2212月-2223:42:3823:42:38December13,202214、他他鄉(xiāng)鄉(xiāng)生生白白發(fā)發(fā)，，舊舊國(guó)國(guó)見(jiàn)見(jiàn)青青山山。。。。13十十二二月月202211:42:38下下午午23:42:3812月月-2215、比不了得得就不比，，得不到的的就不要。。。。十二月2211:42下午12月-2223:42December13,202216、行動(dòng)出出成果，，工作出