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 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 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 3 273.3 374.0 249.4 328.5 230.5 330.5 205.6 347.6 128.6 259.6 104.2 145.6 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 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. 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%*