Public Television Program Financing

This detailed paper was published in the October 1972 issue of Educational Broadcasting Review, the journal of the National Association of Educational Broadcasters. The paper — by Hartford Gunn, the first president of PBS — led to PBS’s creation of an annual program market called the Station Program Cooperative, which became, for nearly two decades, PBS’s main method of aggregating station funds to produce ongoing series.

Introduction

Section I: A Concept: The Station Program Finance Plan

Section II: A Possible Model for the Distribution of Funds to Stations

Section III: A Possible Model for the Delivery of Services by a Program Cooperative

Introduction

“The Corporation for Public Television will provide for Public Television leadership, standards of excellence, and an instrument by which the hundreds of local stations can act from time to time in concert. It will itself be led by men and women of eminence and achievement, drawn from television, from allied fields, and from public life. The Corporation will serve the stations. It will exist primarily to make it possible for those stations, one by one, to provide the greatest possible service to their communities.

“Educational television is to be constructed on the firm foundation of strong and energetic local stations. The heart of the system is to be the community. Initiative will lie there . . .

“Public television . . . is to be provided with such abundant programming as to offer each local station both diversity and choice . . . Like a good metropolitan newspaper, the local station will reflect the entire nation and the world, while maintaining a firm grasp upon the nature of the people it serves.

“The mechanism” (of funding public television) “will permit Federal funds to flow to public television outside the ordinary budgeting and appropriation procedures, and thus insulate the system from direct governmental overseeing of its day-to-day operations and from the dangers of political interference with the substance of programming.

“Funds are to be provided without impinging upon the freedom of the stations, and without relieving the community of its obligation to support its station. Federal funds used to support the production of programs will be disbursed in a fashion that minimizes any risk that the substance of those programs will be affected by political or governmental involvement. The stations themselves will produce most of the programs, and will have at all times freedom in deciding whether any program is to be broadcast. That freedom is made real because funds will be adequate to provide alternatives, for freedom is scarcely present when the choice lies between the program that is supplied or nothing at all.”[1]

The Carnegie Commission also said that it is what the public sees and hears that counts—”programs are the measure of what the system accomplishes.” Quality in local and national programming is a function of good creative people with the time and freedom to think, to plan and to produce, which factors are in turn related to the availability of adequate long-term funding. Such funding is essential to provide a significant degree of protection both from the danger of political interference, and from unpredictable budget levels.

The present situation is essentially one of last-minute annual federal appropriations. (Although already more than three months into a new program production year, the Public Broadcasting Service still doesn’t know what program budget or community service grants will be for the year in progress.) Such an arrangement is so totally at odds with the creation of original quality programming that public television may be irreparably damaged if it cannot break out of this cycle.

Related to and interacting with the problem of adequate long-term financing are a number of other problems. These include the substantial time and involvement that have been required of the Corporation for Public Broadcasting in program operations, which the author believes have been a costly competitor with the attention and energy necessary for the development of adequate financing; the internal system dissension over program priorities, program decision and grant making; the balance between so- called “local” needs versus so-called “national” needs with consequent waste of time, overlapping of decision making, and confusion; external criticism from Congress and the Administration regarding “centralized” decision making, program control and priorities—or of the “who” makes “what” program decisions.

The result of all the dissension, criticism, and debate at the present time is to bring public television to almost a dead stop. No administrator in the system now has the time to attack the major problems of quality programming—local and national—nor to develop the kind and amount of funding that is required.

Public television as a profession—stations, the Corporation, the Public Broadcasting Service, the National Association of Educational Broadcasters—must come forward with solutions to these problems—not Congress and not the Administration. The problems are largely of our own making, and only we can take the initial steps to their solution, even though Congress and the Administration will ultimately decide whether public television will reach its potential of service or will be a political football and be reduced to insignificance.

It is not the purpose of this article to deal with specific program objectives. That is a matter of the utmost importance and will also have to be re-examined. This paper proceeds from an assumption that public and instructional programming of high quality is a continuing national need—helping to fulfill citizens’ requirements for education, information, and culture through the greatest system of communication now available: broadcast television. It assumes that the reader is well informed as to the substantial progress of public television both locally and nationally in the last several years.

This article takes as its point of departure that public television has reached a plateau of performance and service that, while widely recognized and often applauded, is short of what was envisioned by everyone involved and that it fails to meet fully the promise to and expectations of the American people. The article suggests that alternative means of financing public television programming should be considered, and offers one plan.

The single most important attribute of the approach suggested is that it would maximize financial and program decision making at the point closest to the individual communities and their citizens—namely, the local public television station—while retaining essential leadership, system direction, planning, review, and arbitration functions at the Corporation.

Those members of the profession who developed the concept presented here believe that it is capable of easy understanding and articulation to the public, government, and the system, even though it may seem complex in operation and is not fully developed. It reduces greatly the appearance, as well as the potential, of anyone’s being a “central all-powerful decision maker” whose capacity for mischief as well as good would appear equally effective. If, as some believe likely, “permanent insulated funding” is an impossibility or an illusion, this approach would offer an alternative to such insulation in the area of greatest sensitivity, nationally distributed programming. It would help to reduce some of the current dissension over institutional roles, grantsmanship, and the like, by more clearly defining those roles and responsibilities.

The plan here described, called the Station Program Finance Plan, assigns to the stations the decision as to how to spend the monies for local as well as other-than-local programs, through the mechanism of a common market or program cooperative owned and funded by the stations, and through which the necessary national programming is assembled, funded, purchased and distributed. The day-to-day program funding and distribution operations are directly controlled and operated by the stations, leaving the Corporation free to concentrate its attention on those major system needs which are critical to the survival of public television and which only the Corporation can successfully address.

This concept is offered in the hope that it will stimulate other and better ideas, and that it will evoke comment and discussion. The plan it embodies is not fully developed nor fully thought through. Realization could come only with the interest of the profession, and then only with its most critical attention. Station representatives and station managements would have to discuss it at length (as indeed they should any suggestion relating to long-term financing or system structure). There are many questions concerning the operation of a program cooperative which would require careful review before such an approach could be implemented. But it is hoped that it will help to advance mutual planning by bringing another idea into the present discussion.

Section I: A Concept: The Station Program Finance Plan

The single most critical problem facing public television today is the lack of adequate, long-term insulated financing. Many, if not most, of our other problems in public television can be traced back to this key problem, which obviously must be met and solved. It is the purpose of this article to examine a few of the difficulties that stand in the way and to suggest a possible solution.

Within the overall public television system there are two major functions: that of system planning and evaluation, and that of system operation (essentially, program production, distribution, scheduling, and broadcast). All of us in public television management have failed to some degree in each area. We started the present system under great pressures, and we have not found the time to articulate a clear-cut statement concerning our goals, to develop an internal and public consensus for those goals, nor to provide a credible process of evaluation to help achieve and refine those goals.

We need to develop a decision-making process which is both clearly responsive to diverse community interest and needs, and understood to be such by all concerned. We have not been very persuasive in overcoming a public and governmental image of our system as being centralist and non-responsive. In the few instances where we have succeeded to a degree in overcoming this damaging perception by our critics, we have met the further complaint that our responsiveness is not institutionally assured: that is, if the management personnel were to change, the system could well become non-responsive.

For public television to be successful in achieving the financing it needs to fulfill its promise, it is vital that both planning/evaluation and system/program operations be of a high order, and that the system be understandable and creditable to those whose support we ask. Our present situation is such that we tend to undermine our credibility; we fall short of achieving the necessary understanding and the required quality of planning/evaluation and operations.

The Corporation for Public Broadcasting (CPB) has as one of its basic responsibilities under the Public Broadcasting Act to facilitate development and distribution of public television programs of high quality from diverse sources. Under the present system, CPB has undertaken to perform that responsibility in part directly, by making decisions as to the scope and quantity of the national program service which it will finance; and in part indirectly, by making a grant to the Public Broadcasting System [sic] (PBS) to finance the distribution of CPB financed program projects. The Corporation solicits the views of the stations (through the station-elected PBS Board) as to their preferences and priorities for national program services, but the Corporation itself makes the final determinations of which program projects will be funded and where they will be produced, and what proportion of the system’s total resources will be applied to the production of programs for national distribution.

The basic decision to finance program production directly involves the Corporation inexorably in the program decision-making process. The fact that the Corporation has decided that it should finance the production of a particular program or series necessarily implies that there has been a determination that such a program is of higher priority than other choices which might have been made, and once the program is completed, that the finished product satisfactorily meets the Corporation’s expectations for it. The stations, and indeed the Corporation’s Board, have concluded that the Corporation should not be involved in program operations and individual pro gram decisions; but the Corporation’s exercise of direct responsibility for the funding of program projects (and, consequently, for the administration of its grants) makes such “non-intervention” a standard which is at best exceedingly difficult to adhere to in practice. The CPB Board and staff are caught between pressure on the one hand to intervene in the regular program decision-making process whenever necessary to correct deficiencies, and pressure on the other hand to maintain the maximum degree of insulation by leaving the process entirely in the hands of the stations and their agencies, regardless of the result.

Intervention in the program process creates immediate frustrations and tensions; it may also have injurious con sequences in the long run. The danger is that the time and energy which the direct responsibility for programming demands of a board and staff make it impossible for them to perform well the absolutely essential task of planning and evaluation. If the evaluator also becomes the operator, then evaluation suffers from the conflict inherent in evaluating one’s own performance. In this confusing environment, system planning suffers from the Corporation’s constant need to respond to “today’s crisis” in programming.

The result of weakness in, and con fusion of, responsibility for system planning and evaluation to date has been a failure to develop the clear-cut plan necessary to generate support for adequate long-range funding. This failure could result in less effective utilization of scarce manpower and resources. There is even a real possibility of mismanagement within the system. The failure in planning could possibly generate a strong temptation on the part of individuals, groups, or agencies both in and out of government or public television to perform the planning and evaluation roles, even though they lack the expertise and the legislative authority to do so effectively. Obviously this intervention could be very undesirable, because such groups are not likely to match CPB’s knowledge of the system and sense of responsibility to it, nor have its ability to devote primary attention to system development.

On the other hand, the exercise of direct responsibility for program decision-making may have consequences which are equally unintentional but no less injurious in the short run, whenever a problem arises with a specific program, series, or producer. The old American adage that “he who pays the piper calls the tune” is an article of faith for the press, for the public, and for their elected representatives, as we have seen so clearly. ^[2] Because CPB is indirectly responsible for the funding of the programs, it is almost impossible to overcome the belief, however erroneous, that CPB is, indeed, “calling the tune”—or that it should be—in every case of a program problem.

When the public, Congress and the executive branch hold CPB accountable and responsible for the grant that sup ported the problem program or employed the producer or talent, CPB has only two choices, and they pose an impossible dilemma. CPB can act to curb or control the program or producer, but such action is likely to be regarded as “political” in nature because of the method of appointing the CPB Board and because of its bipartisan composition. The perception would persist regardless of the individual motivations of the board members. If CPB chooses not to intervene, however, the charge is made that CPB has failed in its responsibility, or that its lack of intervention is the result of a conscious decision which also is seen to be politically motivated.

Thus, so long as CPB has the means to act directly to control a program or a producer, any of its decisions—whether it chooses to intervene or not, and regardless of the merits of the case—can leave the impression that the decision was politically inspired. If a controversial program is produced or transmitted, it is because CPB wants “to get the Administration.” If the production or distribution is stopped, it is because CPB wants “to mollify the Administration.”

Unfortunately, the more active CPB becomes in the program process, the more its activity is taken by segments of the public, the press, and others as reinforcement of their suspicion that CPB is (or could become) an instrument for political action. Because of the complex nature of the system, and because of the tendency to confuse objectives and overlap responsibility, then the greater the degree of intervention, the more likely it is that the existing problems will be aggravated and new problems created. The total effect of intervention in the program process—though intended to ameliorate problems—is, as often as not, to escalate the problems and to create an apparent need for further intervention. It follows as a natural conclusion that there would be increased centralization and a reduction in station control. The ultimate consequence could well be lost esteem with public televisions s sup porters and, most importantly, the public. The hidden danger is that such a centralized system could provide the opportunity in the future for real manipulation of programming if someone were to come to political power in this country who would want to pursue such a course.

Given the process of selection and the bipartisan nature of the CPB board, the actualities of federal funding, and the risks of program selection and production, the present program grant arrangement is frustrating to CPB, PBS, and the producers. It obstructs the progress of public television funding by creating controversy and undermining public confidence, and by inviting outside manipulation of the system.

In sum: confusion of the planning! evaluation and program operating roles risks both the loss of adequate system planning and evaluation and a cycle of deepening, frustrating, and unrewarding involvement in program operations by the Corporation. Either result tends to diminish effective station/community participation in the program process, and makes it more difficult, if not indeed impossible, for the system to operate so as to persuade the public and its representatives that adequate, long-term financing is warranted.

If the problem is, indeed, grounded in the present arrangements for the financing of ongoing program production, a possible solution may lie in a reordering of those arrangements.

Essentially, what is needed is a strengthening of public television’s primary functions of system leadership/planning/evaluation and programming operations by establishing more clearcut and easily recognizable divisions of responsibility for these functions. The suggestion made in this article is to initiate a Station Program Finance Plan (SPFP) in which the Corporation for Public Broadcasting would be responsible for system leadership, planning, and evaluation; and the stations for program decision making and operations.

The Role of the Corporation for Public Broadcasting

The Corporation would exercise its leadership and responsibility for the system in four interrelated ways. First, it would realize its broadest function of providing a policy overview to the directions of public television in America. In doing so it would develop a strong planning and evaluation capability to consider the key variables which will most significantly affect public television: changes and developments in communications technology; significant related industry developments and innovations; direction of regulatory decisions on the future options of public television; and changes in public needs and interests, including the public’s perceptions and expectations of public television.

From these projections, both long and short range, would come specific, rational determination of appropriate goals for public television and interim objectives and plans to achieve those goals. How, for example, can public television have sound system growth which serves stated public needs while maintaining fiscal responsibility? How can public television develop a national inventory of community needs as a basis for program planning and for financial support at all levels?

From the planning and evaluation and the objectives which will be their product, the Corporation can develop a rational and clear plan of “advocacy” for the system. Such “advocacy” would include attention to the permanent future financing of public television, given technological and other variables and a clear proposed direction for the industry, from both federal and non-federal sources.

Second, the Corporation would provide special services to the system and its members toward the goal of improving their on-going capability to identify and serve community needs. The Corporation would address specific management, professional, and technical problems related to day-to-day station business and ongoing practical decision making: How can the cost of station operation be controlled through new management techniques, better systems and equipment design, mass purchasing, etc.? What are the program needs of my community and how better can I ascertain them? How can I assemble the professional staff and the community financial support that I will need to do the job? What steps, locally and in concert with my fellow UHF stations can I take to achieve signal and coverage parity with the VHF stations?[3]

Third, the Corporation would play a new and crucial role in programming. While it is fundamental to the finance plan that the stations individually would determine basic balance and regular program needs, the Corporation must focus its attention on long-range needs of the system. The Corporation must respond to the need for truly experimental and innovative programming, testing new programming philosophies and possibly examining the prospects of programming five or ten years from now. Additionally this programming function would “fill the gaps” in the program plan the stations devised and would provide an extra opportunity to be certain that the station-operated system offers a balanced schedule which responds to all public interests. Because this grant activity is a selective process rather than a comprehensive one, the Corporation should be spared the time-consuming and volatile process which now affects program decisions. The result would be that the Corporation could be more effective in providing leadership and ensuring balance than it can be at present when it is burdened with comprehensive responsibility for program operations. In sum, the Corporation’s role in programming is that of innovator, philosopher, catalyst, and conscience, rather than that of operator.

Finally, given the diverse interests which will always affect public television and the real need to serve several “publics,” it will be necessary for the Corporation to act as a judge/arbiter when system needs and interests collide or when the system’s operators lose sight of the public interest in any respect. This role can only be adequately performed when the organization has the time, the detachment, the professional interest, and the dedication to earn and keep the respect of the system and of the public.

The Role of the Public Television Licensee

CPB having been defined in terms of its role in system design and leadership, the ongoing program decision-making function would accrue to the stations. The public television stations would become the system operators in every respect, working individually and through their designated agencies. All program decisions, good or bad, from the decision to fund to the decision to broadcast, would be their responsibility alone.

Under such an arrangement, programming would be, and would be perceived to be, the result of station and community needs rather than political expediencies. CPB would be seen to be facilitating those station decisions, rather than be suspected of controlling programming for its own purposes. Whatever is produced nationally would be the result of a consensus of the 140 or more licensees, their managements, boards, institutions, and communities, rather than of a small group of program planners at the national agencies. Whatever is broadcast locally, and what constitutes proper balance between local and national programming, would be locally determined and understood to be so. Additionally, program decisions can be stated in terms of specific objectives of licensees, offering a positive rationale—in effect a “clear” decision-making process—which can be evaluated openly on the basis of local requirements. The Corporation would be free to perform the critical leadership role which it alone can perform and to exercise effectively its particular skills in strengthening public television.

Once the spectre of centralist programming is removed and a clear-cut delineation of responsibilities is articulated, it is quite probable that the prospects for adequate, long-term financial support would be greatly enhanced.

However, the principle of total station/licensee programming responsibility, laudable though it may be, cannot achieve the objectives the Congress set forth in the Public Broadcasting Act, unless the means of implementing the principle are also practical and realistic. The basic elements of a Station Program Finance Plan would include:

1. Federal funding through the Corporation of public television stations (licensees) by means of an agreed-upon formula for distribution and criteria for eligibility.
2. 2) This funding to cover support (a) for general station activities, including local program production, and (b) for the purchase and distribution of programs from non-local sources. The decision as to which and how many of these activities are to be undertaken and supported is to be the licensees’.
3. An interest of sufficient stations to support a program cooperative of their choosing for the purchase and distribution of programming from any appropriate source. This programming must be of a quality and quantity to meet the needs of
   the stations and their communities in all their diversity.
4. A set of safeguards and incentives that ensure as far as possible that the funds are used to benefit the stations and the public in the broadest and best possible way. Attention needs to be given to providing safeguards and incentives for the following concerns: that the monies be used to enhance the offerings of public television, not to replace existing support; that additional local financial support be encouraged; that a reasonable balance be struck between local and other-than-local originations; that innovation, divergent views and opinions, and attention to minority interests be encouraged, and certainly not discouraged; that the funding and program expenditures bear a relationship to the number of people that a station is called upon to serve and the effort the station expends in that service;and that the program cooperative be organized so as to permit participation by all licensees according to their circumstances and the needs of their communities.
5. Sufficient initial funding for the system, for a sufficient period, with annual escalation for inflation and system growth, such that stations are permitted effective options and the SPFP concept can be thoroughly evaluated.
6. An initial capital fund for the pro gram cooperative and producing organizations to initiate the system.
7. The means and the authority in the Corporation to supplement and complement the operation of the basic program system, through the independent financing of special and innovative program projects for potential station use.
8. The stations, in turn, if they decide to participate, should commit themselves to the program cooperative for a period of two to three years to assist in the transition and to help stabilize the production and exchange mechanism. If such a commitment could not be obtained from a sufficient number of stations to provide the “critical mass” required the plan should not be begun.

As one begins to think of a specific and detailed model incorporating these elements, it is important to bear in mind that the plan must (1) be effective in producing a balanced program offering which meets a variety of audience needs in concert with the stations’ own local production; (2) be flexible enough to adapt to new and changing program needs; (3) be efficient, economical, and equitable in its operation; and (4) enjoy widespread system support.

The next sections of this article de scribe in some detail one possible model with its constituent parts. The model should be taken as just that: a theoretical model, not a concrete proposal. Substantial study and refinement would be necessary before this or any other model could be put into practice. Nonetheless, from the work done in constructing this model, it is apparent that a design for the operation of the system by the stations can be achieved and that this approach is practical.

The idea of a station-financed program process is not novel; it has been suggested before as an option for national public television and has in fact been put into operation at the regional level. In previous discussion, several characteristics have been cited as sources of concern about the feasibility of such a system on a national scale. On reflection it seems the risks have been overestimated and are surmountable.

A principal concern has been that the number of stations electing to participate in a cooperative service might not be sufficient to provide the dollars necessary for a “critical mass” because local demands would “drain away” a large part of the available funds. The stations, however, have always shown that they want and need an other-than-local service to a substantial degree. In the early days of educational broadcasting, when money was much harder to get even than now and the stations had to pay to get other-than-local programs, they did so. The economics of scale demand a pooling of resources and interests, and the stations have recognized this, for example, in their advice to CPB and PBS regarding the funding of pro grams for national distribution. The stations are managed by dedicated professionals, who, while varying widely in their resources and their access to the kind of management information that they need, seriously consider the interests of their communities. We believe that, given an opportunity to exercise real responsibility for all aspects of their programming, they would be able to substantially improve their service to those communities.

To be sure, a large proportion of the funds that would flow to the stations would be reserved for local program projects and not invested in the cooperative. But to characterize such local service as a “drain” on the system’s resources is to miss the point; it implies that the stations exist for the benefit of the national program service, rather than the other way around.

Another stated concern is that a system that depended on the concurrence of 140 or more managements might stunt creativity and innovation if an insufficient number of stations were willing to sup port any particular innovative program project. Public television stations have been far more willing to try new programming than any other broadcast group, and certainly more willing than their critics give them credit for. How ever, the answer should not rest on past performance alone; it is essential that there be a major use of pilot production as an integral part of any cooperative plan. This would minimize to a great extent the risk to the producer and the distributor and, most importantly, the risk to the stations in spending money on a poorly conceived or executed new pro gram idea. Of course, even with a proven and tested idea there may still not be enough total interest to support a really innovative undertaking. Here it is important to recognize that there is a variety of sources—CPB, foundations, government agencies, corporations, individual stations on their own, as well as the cooperative itself—which are able to finance programs for offering to the stations. It is worth noting, though, that the stations would no longer be dependent on non-station controlled sources for programming.

Unless steps were taken to avoid it, the infusion of such large sums of money into individual stations might have a “replacement effect” on a portion of their local funding. This is quite likely under the present CPB/station distribution plan as more money is directed to the stations. A new formula should be developed to provide incentives for increased commutiny/institutional support and strong disincentives to any reduction of local support. Ideally, any decrease in sup port at a local station should be isolated to that station and not be at the expense of the other stations. (Section II presents one model for such a funding arrangement.) In any case, quite apart from consideration of a program cooperative, the problem of ensuring maintenance of local effort must be solved as federal funds to stations increase substantially.

There are other questions that should be studied about the effect of a program cooperative on the progress of the system and about its operation. The suggestion offered is not a panacea or a pat solution, for there are no handy pretested plans to solve the problems. The basic proposition has merit, but, before it is implemented, it should bear the closest scrutiny by the stations and all others interested in the future of public television.

The principal advantage of the SPFP is that it places national as well as local program decision making where it should be: in the hands of the stations. It is the licensee who is closest to the needs of his own community. The plan allows programming and programming decisions to be evaluated and reviewed in terms of the specific objectives of the local stations: stations whose criteria of community service are as diverse as its population and as explicit as the special needs of each group. The stations themselves, in the exercise of this responsibility, would make the determination of the proper balance between national, regional, state, and local program sources in their service.

In addition, as the plan establishes the 140-plus licensees, their boards, managements, and communities as the decision makers, it has the benefit of diffusing real or potential political pressure. In the past, as programming has taken its direction from two or three sources, these sources have been inviting targets, no matter how responsible and responsive their efforts to serve station needs. This has impeded both system operation and the prospects for obtaining long- range financing. However, if programming takes its direction from the collective decision of the licensees, criticism of the results becomes criticism of the licensees’ knowledge and judgment of their own communities’ needs—a criticism that is much less reasonable from a political perspective than a critique of the “central” agencies. Establishing the licensees as the buffer between federal money and public television programming is probably the best insulation short of a permanent trust fund.

The plan also removes to a considerable degree the spectre of a government-run or government-dominated system. Al though the stations can be threatened, their numbers will help to moderate any undue pressure, whatever the source. The plan should engender support both from the stations and from the government—since it provides for the clear exercise of responsibility at the grass roots through local determination: an objective of the Carnegie Commission and the Congress, and representative of American broadcasting in its best form.

The requirements of strong planning and administration can be combined with locally responsive program decisions through a careful and thoughtful delineation of responsibilities. The SPFP would see the Corporation providing overall system leadership, planning, evaluation, program innovation, and technical operations as well as development of adequate and insulated long-term financing. The stations have long had the theoretical responsibility for ascertaining their communities’ needs and developing a program service from all sources to reflect those needs. The SPFP would, for the first time, give them authority commensurate with that responsibility.

Section II: A Possible Model for the Distribution of Funds to Stations

The mechanism for the distribution of funds to stations under a Station Program Finance Plan (SPFP) assumes paramount importance since these dollars affect to a substantial degree the ability of a station to be responsive to the needs and interests of its community. An equitable, efficient, and understandable method of distribution is essential if the SPFP is to operate effectively and enjoy widespread system support. Only then will the system provide expanded, improved, and more dependable service, an essential prerequisite to adequate long-range funding.

The present formula for the Corporation for Public Broadcasting’s “community service grants” to stations has been generally regarded as satisfactory and equitable at modest levels of support. That formula, and the discussions which have surrounded its development, should serve as the starting point in the search for that elusive formula which will fully and fairly reward each station in pro portion to the magnitude and complexity of the job it must do in its community, and in proportion to the quality and intensity of its effort to serve community needs.

In the past, station community service grants have been solely dependent on a station’s budget; e.g., in the past year, stations with budgets between $100,000 and $250,000 received $25,750, while stations in the next higher budget bracket received a larger amount. This is a usable and understandable construction, but the “step-scale” characteristic does not permit precision. Nonetheless, although it does not recognize some factors that might be involved in determining a station’s service to its community, the budget measure is a simple and recognizable indicator of a station’s at tempt at service.

Experience with the community service grant program to date does not yield sufficient information on two points crucial to any mechanism for the distribution of funds. The first is that the small size of the current grants, as a proportion of total station operating income, tends to minimize the effects and the necessity of refinements in the formula. Since total dollars are few, a quirk or inequity in the distribution of station grants has only slight effect on a station’s ability to produce local programming, and does not affect at all a station’s access to programming from other sources or from the national interconnection system. With the bulk of the system’s program funds distributed to the stations under the SPFP, however, the range of any station’s program options—including its access to the programming cooperative—would be extremely sensitive to variations in the distribution formula. Thus, although the community service grant program to date provides useful background, it does not supply precise information on how to proceed.

The second point concerns community support and involvement in the operation of the local station. While the “replacement effect” (the tendency of local sources of support to withdraw as a station’s other, primarily federal, income increases) has been negligible under the community grant program due to the small proportion of stations’ budgets represented by the grants, the much larger grants under SPFP make avoidance of the effect a major concern. A significant replacement effect could prove disastrous if, as expected, the size of the federal appropriation is linked in some way to total non-federal or local support. Further, it is important that every community have the maximum incentive for increasing its support of its local station. The ability of the stations collectively to support needed common services under SPFP is no greater than the sum of their individual abilities to do so. If the support for a dozen stations were to fall (even though support for the system as a whole increased), then those stations would be less able to maintain their proportionate support of common services, and the burden on the other stations would be increased accordingly. Hence the station’s ability to maintain and expand total service, local and national, depends indirectly on increasing financial resources at every station.

There are many possible bases for the distribution of funds to stations under the SPFP, including the budget criterion used currently in the community service grant program. Recent discussions of the service grant program by a station advisory panel have centered on three particularly appropriate factors for the distribution of funds: station potential audience, station operating budget, and non-tax income.

Distribution by Share of Audience

Distribution of funds by share of potential audience recognizes that the magnitude and complexity of the task facing a public television station is reflected in the size of the station’s potential audience. Stations serving larger areas (whether major urban centers or statewide networks) serve more diverse audiences and usually face higher operating costs. Distribution of funds solely on the basis of potential audience, how ever, would introduce inequities. If the weight assigned to a potential audience factor in the distribution formula were unfairly large, windfall funding would accrue to all stations in large markets regardless of whether a given station had developed a strong base of local support and service. Conversely, such a formula would not fairly reward those enterprising stations in smaller communities which have provided outstanding service and established substantial local operating budgets on a per capita basis. Further, as funding levels increased, the formula would not adequately reward those licensees who expand the fiscal base of the entire system through effective local fund raising.

It does seem appropriate, however, that some factor reflecting the size of the audience a station is responsible for serving should be included in the distribution formula.

Distribution by Share of Budget

A station’s operating budget is a mea sure of the effort expended in service to the community. While distributing funds according to potential audience recognizes the responsibilities facing the station, the use of share of budget to allocate funds among stations attempts to reward them for the magnitude of their effort to serve the community.

Distribution of funds solely in proportion to operating budgets would maximize the incentive for local support, but might impair the chances of a new station with a small budget relative to the size of the community it serves (or of a new state network system, for example) ever generating the “critical mass” of staff and programming needed to attract an audience and local financial support. Further, it does not account for the differences in communities’ relative abilities to support their stations.[4]

Nonetheless, it has generally been recognized that operating budgets fairly measure some aspects of effective performance by a local station. Further, using the operating budget as a factor in the formula would facilitate the passage of federal matching dollars in some proportion to those stations actually increasing their local non-federal support (and hence increasing the size of the Trust Fund for public television as proposed in recent legislation).

Distribution by Share of Non-Tax Income

The distribution of funds in proportion to share of non-tax income has the ad vantage, of encouraging and rewarding community support for the local public television service. Although it might tend to bias the distribution in favor of communities with greater per capita income, the use of share of non-tax income as a basis for the distribution of funds does strengthen the incentive for the station to serve the needs and interests of its constituents. Further, as the “community” stations have learned, the importance of non-tax income to a station is even greater than its magnitude would indicate, because it is often the station’s only (or at the very least, its principal) source of truly “discretionary” income.

The use of non-tax income as a major factor in the distribution formula is not without its flaws, however. Such a distribution would put stations operated by state agencies or local school districts at a serious disadvantage, since some are barred by law or policy from soliciting individual contributions. Even those not legally inhibited would initially be disadvantaged as compared to the “community owned” licensees which, as a group, account for more than 90 per cent of all individual contributions to the system. Support from the private sector is an important element, however, to stations serving most of the country—not only because it generates truly discretionary funds but also because of the significance of such activity in strengthening the direct bond between a station and its community. It is also possible that private support, and particularly individual contributions, provide one of the most significant opportunities for enlargement of station (and hence total system) support, particularly at stations which have not yet been able to embark on substantial membership campaigns. The station advisory panel on the community service grant formula has discussed inclusion of a factor for non-tax income, and that would seem to be an appropriate step.

A Format for the Distribution of Funds to the Stations

Given the limitations of any one basis for the distribution formula, a combination of factors should best determine the allocation of funds. One model for a distribution formula follows: it is one of several variants currently being discussed by the CPB staff and the station advisory panel. The author believes it meets most of the criteria discussed, and that it would encourage the growth of the local station and of the public television system as a whole. It should be emphasized, however, that this is just one possibility for the formula, and that specific weightings of factors are subject to variation. Other constructions are being investigated and, should they prove better should be adopted.

The elements of the distribution formula construction are: (1) a factor for the potential audience, to fairly recognize the task facing the station and to en courage it to undertake the challenge broadly; (2) a factor for the adjusted operating budget of the station, to recognize the efforts of the station to serve its community; and (3) a factor for the non-tax income of the station, to encourage it to continue to respond to the needs of its community and thereby to increase its support from the private sector.

Prior to the application of the formula, an equal “base grant” would be allocated to each qualified station regardless of size or situation, to assist all stations in meet ing fixed operating costs and the basic services of the program cooperative.

The station allocation might be summarized as follows:

station grant = base grant + station variable grant

base grant= base grant divided by number of licensees

variable grant = variable grant fund [constant X (adjusted operating budget) + constant X (potential audience) + constant X (non-tax income)]

The “Television Station Support” fund to which the formula would be applied would be equal to the total federal allocation for the year, less allocations for CPB direct activities and public radio activities.

Allocation for System Administration. An allowance of a proportion of the total fund would be deducted to cover the planning, evaluation, research and development, and program innovation activities of the Corporation for Public Broadcasting.

Radio-Television Allocation. From the remainder, funds for radio and television would be separated out according to a determination reflecting the cost differentials between the two media, or reflecting the relative contribution of radio and television stations to the Trust Fund. (Such an allocation does not assume the SPFP concept can or should be applied to public radio. Public radio stations have problems unique to their medium and system. This suggests a separate study for radio.)

Base Support Grants. The amount allocated for “Television Station Support” might then be divided, 20 per cent going into a “base support” fund, and 80 per cent into a “variable support” fund. The base support fund would be allocated equally among all licensees, assuring each station of a minimum contribution toward the maintenance and improvement of its local service. For example, with the total television grant fund at a level of $75 million, each of 159 licensees would receive approximately $94,000 from the $15 million available as a floor of federal “base” support.[^5] This minimum would increase with the expanding level of the Trust Fund. The “basic support grant” to each station should be at least enough larger than the present average CPB station grant to permit each station realistically to elect membership in the program cooperative and also to make a significant contribution to upgrading the local service of every station, regardless of size.^[6] Conversely, the proportion of the available funds distributed as fixed “base” support should not be so large as to blunt the incentives that can be built into the variable fund; for the growth of the total Trust Fund, and hence of both the variable and fixed distributions, depends in large part on the effectiveness of those incentives.

Variable Support Grants. The remaining funds could then be distributed to licensees according to a formula reflecting the potential viewership, the operating budgets, and the non-tax income of each individual station, as proportions of the system total. The first year of a five-year financing bill, FY 1974 for example, would become a base year against which performance of the local stations— and further grants—would then be measured.

The actual first-year allocation to each station could be based on that station’s percentage of the national potential audience (as measured by the best avail able census data on population within a measured coverage contour), and its percentages of the total national operating budget, and of total non-tax income, respectively (as determined by a system-wide audit, and a standardized account ing system) The local operating budget, as a prime measure of the station’s success in mobilizing resources for community service, and the population factor, as a measure of the station’s responsibility, might then be double weighted. Thus, 40 per cent of the variable fund would be distributed according to budget, 40 per cent according to population, and 20 per cent according to non-tax income. The formula would provide a double set of incentives to the station; expansion of its transmitter power and coverage area would increase its population as a share of the total, and hence the size of its grants. Moreover, increases in local contributions and state grants, as reflected in the station’s operating budget, would increase its share of federal funds on a doubleweighted basis.

Station Grants under One Distribution Formula. To illustrate the distribution of funds to stations under the SPFP, the following formula has been used:

base grant = (20% of total station funds) divided by number of licensees

variable grant = 80% of total station funds X [0.4 (share of total local budget) + 0.4 (share of total grade “A” contour population) + 0.2 (share of total non-tax income)]

base grant + variable grant = station grant

Table 1 with grade “A” contour population and local operating budget as the axes, shows the average grant to stations in different population and budget categories. It indicates that an average station with fewer than 200,000 potential viewers within its grade “A” contour and a local operating budget between $200,000 and $400,000 would receive a total grant of about $171,000. The base grant would be $94,340, the balance of the total grant being a variable grant of approximately $77,000.

Data for the calculations in Table 1 are the best currently available. The financial data on local operating budget and non-tax income are from the CPB fiscal year 1970 Annual Television Survey. Grade “A” population estimates were based on 1970 census data. It would of course be necessary to agree on precise standards of measurement before such a distribution formula could be implemented.

Subsequent Years: Incentives for Growth, Disincentives for Replacement Effect

If funds were distributed to stations solely on the basis of their audience potential, current operating budgets, and non-tax income using the variable station grant formula, there might be inadequate incentives for vigorous local fund raising. An individual station’s federal allocation would still increase with the growth in the total Trust Fund even if its local support fell off. Some communities might grow complacent and let others do the fund raising, and the local manager would not have an effective tool to counter that tendency. Communities which actively supported their stations, on the other hand, might slacken their efforts if their stations did not benefit directly and proportionately to that effort. This imperfect set of incentives might fail to generate sufficient motivation within the system for a rapid rate of growth in the Trust Fund. Overall system growth, under the legislation that has been suggested, requires a precise and demanding set of incentives for each community to provide its full and fair share of support for the public broadcasting system. Every effort should be made to maximize the stations’ incentives in this regard: to reward those whose extraordinary effort benefits all of their sister stations.

Conversely, there is a real danger that the availability of increased federal support might tempt present sources of station support to scale down their efforts, and thereby to dry up the stations’ local support while slowing the growth of the Trust Fund. A strong disincentive to that result should be built into the formula.

Table 1—Station Grants by Population and Budget
Grade A Population	Local Budget
	0-$200,000	$200,000-400,000	$400,000-600,000	$600,000-800,000	$800,000-$1,000,000	$1,000,000-2,000,000	Over $2,000,000
0-200,000	180,000	171,000	238,000	277,000
200,000-400,000	157,000	218,000	290,000	367,000	458,000
400,000-800,000	215,000	235,000	327,000	447,000	375,000
800,000-1,200,000	255,000	303,000	381,000	506,000	457,000
1,200,000-2,000,000	287,000	440,000	430,000	555,000	669,000		925,000
Over 2,000,000	1,251,000	722,000	759,000	726,000	1,119,000	1,084,000	2,356,000

 

One approach might be, after the first year, to reward stations with bonuses—or deductions—from their prior year’s total support grants according to their individual contributions to the growth of the Trust Fund in the preceding year. In effect, any increase in the Trust Fund from one year to the next would be allocated on the basis of the proportion of that increase directly attributable to each station’s local fund raising efforts, not on the basis of the weighted average budget/population formula used for the variable support grants.

Increases in the Trust Fund from one year to the next would thus be distributed only among those stations which had increased their local non-federal sup port—and hence had contributed to the growth of the total Trust Fund. The loss in the Trust Fund attributable to stations whose non-federal support had fallen off—even though that loss were more than offset by other stations’ increases—would be divided proportionately among the stations in that category. Each station’s proportionate gain or loss in this regard would be added (or subtracted) from its prior year’s grant, and the new total would establish its base for the subsequent year, and so forth. Stations whose local support had increased would not suffer, even in directly, because other stations’ support had fallen off.

Illustration. Suppose that, in a given year, 20 stations lost (between them) $1,000,000 in local non-federal support, and this resulted in a loss in the Trust Fund of $500,000 (under Congressman Macdonald’s 1:2 matching formula). Five hundred thousand dollars would then be deducted from the support grants of those 20 stations, proportionately. (If Station A accounted for 10 per cent of the loss, or $100,000, it would suffer 10 per cent—or $50,000—of the deduction.)

Suppose that, at the same time, 130 other stations gained, in the aggregate, $23.6 million in new local non-federal support; and that this resulted in an increase in the Trust Fund of $11.8 million, or an increase in the Television Station Support fund of $10 million after the allowance for CPB. The year’s increase in the Television Station Support fund thus becomes an Incentive Fund: each station among the 130 would receive an allocation from this Incentive Fund in direct proportion to its share of the total increase in local funding. Thus, if Station B’s local funding had increased $236,000 (1 per cent of the total) it would receive an incentive grant of $100,000 (1 per cent of the Incentive Fund). In effect, every station would know that it would gain, or lose, almost 50 cents in federal support for each one dollar change in local funding.[7]

It may be observed that, in the preceding illustration, the total Trust Fund would not actually grow by as much as $11.8 million, because the other 20 stations’ $1 million loss in local non-federal support would result in an offset of $500,000, reducing the net increase to $11.3 million. Recall, however, that those 20 stations bore a reduction of $500,000 from their prior year’s grant level. That sum is added to the Incen tive Fund, replenishing it to the level that would have obtained had there been no losses.

To illustrate, examine the performance of several hypothetical stations (Table 2). If stations E and F had remained level, rather than losing local non-federal support, the total increase in non-federal support for these six stations would have been $425,000; the increase in the Trust Fund would have been $212,500; and the increase in support for stations A-D would have been $180,625 (after allowance of 15 per cent for CPB). In fact, the increase in the Trust Fund was only $140,000; but the addition of the $72,500 disincentive deductions from stations E and F brought the total back to $212,500. Thus, those stations which increased their local support are in the same situation that would have pertained had there been no losses; stations E and F bore the entire impact of their loss of local support.

Table 2—Relation of Non-Federal Support and Incentive Payments
Station	FY 74 Grant	Change in Non-Federal Support From FY 73 to FY 74	Incentive Payment FY 75	Discentive Deduction FY 75	Total FY 75 Grant
A	$290,000	+ $50,000	$21,250	-0-	$311,250
B	425,000	+100,000	42,500	-0-	$467,500
C	1,250,000	+200,000	85,000	-0-	$1,335,000
D	2,500,000	+75,000	31,875	-0-	$2,531,875
E	550,000	-45,000	-0-	-22,500	$527,500
F	3,000,000	-100,000	-0-	-50,000	$2,950,000
		+280,000	$180,625	-$72,500
CPB	—	—	31,875
			$212,500

In subsequent years (FY 76 in the example above) if stations E and F were to improve their non-federal contributions in FY 75 over FY 74, they could once again share in the increase in the overall amount of the Trust Fund. Thus, the incentive remains year to year for every community to increase its support of its local station, and certainly to avoid any erosion of that support.

After several years in which the station’s grant is equal to its base year (FY 74) grant plus or minus any incentive grants or disincentive deductions based on its history of local support in succeeding years, a new base year might be established (e.g., FY 77 in Table 3). In the new base year, the Trust Fund is again distributed according to allocations for CPB, radio, and television fixed and variable support, the latter determined according to a population/budget/non-tax formula. Adjustments are made in consideration of the experience of the intervening period since the first base year; and the new calculation reflects, for example, increases in a station’s share of the potential audience attributable to increased transmitter power or other capital improvements – as well as increases in its budget and in its support from the private sector.

Over a period of four years, the pattern of allocation might be as shown in Table 3, if the CPB-station, radio-television, and fixed-variable allocations were to remain the same.

Table 3—Pattern of Allocation of Funds
	(Thousands of Dollars)
	FY 74	FY 75	FY 76	FY 77*
Funding level (hypothetical)	$100,000	$125,000	$150,000	$175,000
Television (75%)	75,000	93,750	112,500	131,250
Base Support for TV	15,000	—	—	26,250
Variable Support for TV	60,000	—	—	105,000
Base level carried forward previous year	—	75,000	93,750	—
Incentive Support for year	—	18,750	18,750	—
*Base year (see text).

Other Considerations

Development Bank. In order to have the means to offset any disparities in the distribution of station grants, CPB might establish a “Public Television Station Development Bank.” The bank could make (or guarantee) loans to stations which persuaded its officers that, with such an assist, the station could make so substantial an improvement in its local support—and hence in future federal grants—that it could more than repay the loan out of those increases.

This might be true particularly of stations with a small budget base in populous communities. Many such stations have discovered that a modest additional investment, by extending and improving the service, pays disproportionate dividends in greater community awareness and support. In such circumstances, the station might reach a “take-off point” with the aid of supplemental loan funds.

Standards of Measurement. Although, as noted, the illustrations in the preceding discussion are based on the “best data available to us,” we can be almost certain that there are substantial discrepancies present, and that on examination many of the stations cited would discover and report such discrepancies. Since, in any formula approach, errors in the data have a significant impact on the size of the station’s grant and thus on its ability to serve its community, it is essential that the data be clear-cut, precise, and incontrovertible.

For measurement of potential audience, the standard might be the station’s Grade A or B coverage contour, as reported to the FCC, and official U. S. census data on population within that contour.

For measurement of financial effort, a standardized accounting system, with published rulings on inclusion or exclusion of certain items, would probably be necessary.

System Planning. Public television has made fitful efforts over the past two years to develop a coordinated plan for system growth, and criteria for eligibility for grants, for interconnection, and the like.

Commencement of grants to stations on the scale here contemplated would be disastrous without such criteria. With HEW financing up to three-quarters of the cost of equipping a new station, with the CPB providing annual grants of $100,000 and up, and with the prospect of access to a very inexpensive program cooperative, the economic inducement to construct broadcast stations becomes virtually irresistible—even where there is no semblance of community support, or where the most rudimentary cost- benefit analysis would indicate that a technology other than open circuit broad cast would provide comparable service at less cost. In the absence of restraints, the prospect of a $100 million “kitty” to be distributed to all stations would result in an accelerating proliferation of new stations and the bankruptcy of the system.

The principal impediments to the development of criteria seem to have been two: (1) concern on the part of some existing stations that they would not meet the criteria, and (2) sensitivity to the anticipated charge that the development of criteria represents an effort by the “haves” to deter the extension of public television service to the “have nots,” in order that the “haves'” share of the “kitty” might be larger.

The first problem cannot be resolved to universal satisfaction. It is quite possible, if not probable, that there are al ready stations in existence in communities which do not have the base of support to maintain their viability in the absence of external subsidy. Conversely, the alternative of “grandfathering” all existing stations is difficult to defend and to reconcile philosophically with the effort to develop criteria, or minimum standards of service, in the first place. Short of “grandfathering,” however, the problem should be ameliorated by the creation of a national task force (with support from CPB, NAEB, PBS, and other stations) dedicated to an all-out effort to raise the performance of every station to the minimum level within the stated period. But the problem will only be resolved, finally, by the stations’ recognition that the consequence of in action would be an accelerating deterioration of their own service, and that the public television system cannot responsibly allow that to happen.

The charge that the “haves” seek to deny the “have nots” for their own gain cannot be ignored, but it is specious and should not deter the development of an orderly plan for the extension of public television service. The charge would seem to rest on the dubious proposition that broadcast technology is the best and only means, now and in the future, of providing public television service to the public, and that any audience not now served is entitled to a broadcast transmitter as soon as possible, without any regard for the consequences of such a principle for the quality of service to all of the audiences that are presently and hereafter to be served. One may agree that such a proposition is irresponsible, but it is not likely to be demonstrated as such in the absence of a master plan for the extension of public television service to all presently unserved audiences by the most economical means, broadcast or otherwise, and at such a rate as not to impair the quality of the service. The plan should have the concurrence as necessary of the FCC, HEW, and the appropriate state telecommunications authorities.

Administration of the Distribution Formula. During the recent legislative discussion, there was much debate as to whether the “formula” for distribution of grants to stations ought to be included in the statute, or whether it ought to be left to the administrative discretion of the CPB. The public television system has not supported the position that the formula ought to be codified, believing there is sound reason for it not to be.

It should be apparent that a distribution formula, if it is to include all of the economic incentives for the accomplishment of the desired objectives in a coordinated manner, is necessarily quite complex. It should also be apparent that the evolution of the system will be more rapid at the funding levels contemplated in this discussion. The comparatively static situation and the relatively low level of funding that have pertained for the past few years might have lent themselves to a legislated formula, but that is likely to be progressively less true in the future.

The formula for distribution will be a useful tool in the accomplishment of agreed objectives only to the extent that it can be adjusted and “fine-tuned” in response to current experience with a dynamic system. The legislative approach provides safeguards against abuse, perhaps, but it is so cumbersome that it might well impair amendment of the grant distribution formula in ways which all agreed were desirable or essential.

If the call for a legislated formula is motivated by a desire to protect against abuse, then legislative proscriptions ought to be more carefully designed to get at the hypothetical abuse. (If, for example, it were feared that the CPB might divide the entire Trust Fund among a handful of favored stations, the legislation might provide that no single grantee would receive more than a specified percentage of the Trust Fund in any year, or conversely that a minimum specified percentage of the Trust Fund would be distributed each year on an equal basis to all qualified licensees.) But writing the formula into the statute would, through an excess of caution, so rigidify the administration of the distribution that unintended and unforeseen anomalies in the result would be almost in evitable, and when discovered could not be corrected.

Variations on the Model. This paper describes one possible model for a grant distribution formula, but it is not offered as the only approach, nor even perhaps a complete approach, to the problem. (This model does not address, for example, the question of maxima or minima—whether there is a floor or a ceiling above or below which federal sup port for a station should not rise or fall as a proportion of the station’s total support. Nor does this paper address the income side of the equation: the whole question of finding equitable, and adequate, sources of federal support for the public television stations.)

This model is intended, rather, to suggest some of the factors that must be considered in any discussion of a grant distribution formula, and to illustrate how those factors might be addressed.

As a preliminary to further consideration of a distribution formula, it might be well to study the impact of a number of variations on this approach: allocation of different proportions of the Trust Fund to fixed and variable support, for example, and variations in the weighted average budget/population/non-tax approach to determination of the variable support grants.

The details of the precise mechanism ultimately adopted are probably not so important as that it be designed to meet the two principal objectives: (1) that in the first year, the formula fairly recognize and reward each station in proportion to the magnitude and complexity of the job it is trying to do in its community, and the quality and intensity of that effort, and that it be perceived as such, as nearly as possible by all parties; and (2) that in subsequent years, the formula maintain the strongest possible incentives for enlargement of local, non-federal support, and disincentives for any “replacement” effect. A formula so designed would be desirable in any case, and essential to the success of a Station Program Finance Plan.

Section III: A Possible Model for the Delivery of Services by a Program Cooperative

In the present public television system, programming intended for wider-than-local use is financed predominantly by the Corporation for Public Broadcasting and, secondarily, by the Ford Foundation. Some additional funds for national programming are generated by “underwriting” from the private sector, as well as by grants from the National Endowments for the Arts and the Humanities, and other foundations. The critical element in program funding, however, is CPB’s allocation of a portion of its annual federal appropriation for grants to stations and others specifically for the production of programming for national distribution.

Programming for local-only use is financed out of the stations’ general revenues, most of which flow from state and local governmental support and from private fund-raising; a small portion presently comes from CPB “community service grants” to stations.

In effect, CPB is financing the bulk of national programming directly, and is providing a smaller proportion of the funds that are used for local programming. In the latter case, however, CPB makes no determination as to how the funds will be employed, nor indeed whether they will be used specifically for local program projects; most stations do so, but the dollar use decision is theirs alone.

Under the Station Program Finance Plan, the bulk of federal funds for programming, national as well as local, would flow to the stations, according to the distribution formula administered by CPB. The stations themselves would determine what proportion of those funds each wished to allocate to local program ming, and what proportion to the purchase of program services from a national program cooperative. There would be no prior determination by CPB (as there is at present) of the proportion of federal funds to be allocated for cooperative pro gram production/distribution and to local activities; that determination would be the result of the aggregate of the stations’ individual decisions. Each sta tion would assess its community’s needs and the resources available to it, would consider its options for the application of those resources, and would then deter mine what proportion of its budget (including its CPB grant) to allocate to local programming and to the purchase of services from the program cooperative.

Cooperative Services

A possible model (of many) of specific services that a program cooperative might offer the stations would include several levels of membership, and offer many options for a station to tailor its purchase to the specific needs of the community it serves. The construct of such a model follows.

Basic Membership, for a fiat fee, would include the services of a communications system providing current information on program and operating options, access to a public television library service, pro gram promotion and station relations services, and voting rights for the election of the cooperative’s Board of Directors. (This basic service might be sufficient for the needs of some stations.) The fee would be realistic in proportion to the station’s basic support grant from CPB, but sufficient to defray the basic administration and program information services of the cooperative.

Basic Cooperative Program Service, for a fee based on the same factors determining the level of federal support to the licensee and sufficient, in the aggregate, to cover the cost of providing: (1) a minimum number of program hours, with or without restriction as to program cost, selected by the station for its use from a pool of programs developed jointly by the stations; (2) interconnection (or tape service to noncontiguous stations); and (3) color tape recording equipment, possibly, if funds from the Facilities Act are inadequate, on a lease-to-purchase plan, in order to maximize stations’ options for local scheduling.

Stations would not be required to use all of the basic program service, of course; but the fee would entitle them to do so and must be sufficient to provide financ ing for that minimal level of service which the preponderance of the stations deem necessary and appropriate for their use.

Additional Optional Program Services, would enable the licensee to select the additional particular program or package of programs that most effectively serves his community needs and complements his plan for local production of programming. The fees, again, would be based on the same factors that apply in the grant distribution formula and should be sufficient to defray the cost of production and distribution of additional program hours as the stations wish.

Bonus Programs would be available when the costs are underwritten, free of charge to members who buy the cooperative program service.

Cooperative Imperatives

The maintenance of this nationwide program distribution system (or of any other model) would depend on the creation of a program cooperative which had both fiscal and organizational viability.

From a fiscal perspective, the “program cooperative” approach has worked reasonably well on the regional network level when the participating stations’ re sources have been adequate in relation to costs. In order to maintain the “critical mass” of dollars necessary to operate the basic production/distribution system on a national level, it would be essential that the stations’ resources, as supplemented substantially by their share of a larger federal appropriation, be sufficient to permit them realistically to exercise the option to participate in the cooperative. Too little money would either cripple the program cooperative and lose the economic advantages of interconnected program exchange, or would drain desperately needed funds from local program production. The present monies for local and national programming and general support are clearly inadequate for the stations’ needs and public expectations. Funding would have to be assured and predictable for a minimum three- to five-year cycle if the system were to have a chance to work and if programming quality were to be maintained; five or six years would be a reasonable period in which to make a judgment on the new system.

Decisions about the organizational design of the cooperative would ultimately rest with the stations themselves. It does seem, however, that certain elements must be provided for at start-up to give viability to the cooperative:

1) An advance commitment from the stations that wish to participate, for the first two or three years, to permit an orderly transfer from the present system. The basic plan and advance commitment must have the endorsement of the stations and their governing boards before the plan is instituted.

2) A capitalization fund for the cooperative and for the program producing stations, to permit production during the transitional year, to begin the program development cycle, and to smooth out financial fluctuations during the early years. The capitalization fund should include a discretionary fund for producing stations, based on past performance, to provide for programming innovation and diversity outside the constraints of the initial demand for the services of the program cooperative.

3) The creation of an organizational structure including a national program advisory board, with the assistance of the participating stations, to aid in the development of a coherent strategy for program offerings that reflect the stated needs of the licensees.

4) Arrangements so that major program projects which have the strong backing of the licensees can be contracted for in advance on a multiple year basis. Similarly, arrangements to insure renewal of strong current series should be developed.

5) The development of a plan for application of the program cooperative’s surpluses, if any, to (a) the participating stations; (b) replenishment of the capital fund; (c) the program producing stations, in proportion to the usage of programs, to replenish their discretionary funds.

6) Finally, because the program cooperative concept increases substan tially the options and the responsibilities of station managements, there must be increased effort to provide them with the full program and financial data they will need to make their decisions.

Cooperative Structure, Operations, and Finances

There are, of course, many questions which remain about the organization of the cooperative—some of which will have a direct outcome on its viability.

Any discussion of the cooperative will have to develop a logical structure for ongoing operations. Specific responsibilities of its board of directors, the national program advisory board, and the stations themselves must be carefully outlined. The structure must provide for effective participation of all stations in the decision-making process, yet retain the flexibility needed to take advantage of topical, timely opportunities. Development of a plan for establishing program priorities and method of allocating dol lars to innovative and timely programming must also be a first order of business.

Finally, to insure a financially sound cooperative, a thorough business analysis would be necessary in several areas. First, development of a cost/pricing structure for program production and other cooperative services that is fair to all stations, noting differences in community size and sources of revenue, and that reflects the true costs that will be incurred by the cooperative. Second, analysis of the future role of underwriting of programming and disposition of the dollars that might be freed by such action, or by surplus dollars which might accrue if, for example, a program series were over subscribed.

Some of these are difficult issues; but it should be possible to resolve all of them by careful analysis and by consideration of all points of view and interests. There are certainly no pat answers, and workable solutions can only be developed by interested and concerned stations and their managements.

To summarize: Under the present system, federal funds are allocated by the CPB for national program production and distribution, for general support of stations, and for the Corporation’s own system planning, evaluation, and research activities. Under the Station Program Finance Plan funds for programming and station support would flow to the stations without prior allocation, and each station would make its own allocation between local activities (including local programming) and the purchase of program services from the national program cooperative.

Stations electing participation in the cooperative model that is suggested would have the option to select basic membership (receipt of program information, access to a public television library, a voice in the policies of the cooperative), basic cooperative program service (interconnection, color tape record ing equipment, and a specified minimum amount of programming), and supplemental program services as desired, including free “bonus” programs when costs are underwritten. The fee schedule, financial arrangements, and organizational structure (particularly for program decisions) must be equitably determined; these elements must insure a nationwide program distribution system with great flexibility for each station in serving the needs of its community.

Section IV: A Possible Financing Model for a Program Cooperative

Present levels of funding for public broadcasting are insufficient to assure the success of a Station Program Finance Plan and its program cooperative. Possible financing models indicate, however, that the plan would be viable in a first year at a station support level of $75 million, and that its success would be even more likely in a second year at a level of $100 million. In the first year, the proportion of federal funds allocated for local program service might approach 50 per cent for the first time, but without impairment of common services and the nationwide program distribution system. In the second year, even greater progress toward improvement of local service would be possible.

The calculations that follow are not based on systematic research into the likely exercise of the stations’ options at various levels of total system support and under various fee structures; such re search would be an essential prerequisite to the actual development and operation of a program cooperative. Rather, this is an effort to assess broad probabilities, and to set forth the sort of calculation that would be required. The examples indicate, however, that a Station Program Finance Plan would be viable at approximately the financing levels that were projected for future years during the discussion of the Public Broadcasting Act of 1972.

The assumptions with regard to the amounts and the manner of grant fund distribution to the stations, on which this discussion is based, are set forth in Section II above, “A Possible Model for Distribution of Funds to Stations.” Also assumed is the organization of the pro gram cooperative as set forth in Section III, “A Possible Model for the Delivery of Services by Program Cooperative.”

Basic Membership Fee

Assume $75,000,000 distributed to public television from the Trust Fund. Assume 159 station-licensees (as per projections for FY 74 from PBS data). Assume the Television Station Fund distributed as follows: 20 per cent equally to qualifying licensees as base support; 80 per cent to qualifying licensees as variable support, in proportion to population and local support.

Then—each of 159 licensees would receive $94,340 in base support. Assume that the Basic Membership Fee were $25,000, and that 143 licensees (90 per cent of the total) elected membership. Membership fees for the cooperative would then generate $3,575,000.

(1)	$75,000,000	to public television licensees
	X 20%
	$15,000,000	to PTV licensee base fund
	divided by 159
	$94,340	PTV licensee basic support grant
(2)	$25,000	Basic Membership Fee
	X 143	estimated membership (90%)
	$3,575,000	Membership Fee income

 

Basic Cooperative Program Service

Each of 159 licensees would receive, on the average, $377,360 in variable support. An average Cooperative Program Service fee of $200,000 would return $27,200,000, if 136 licensees elected to participate (95 per cent of those electing Basic Membership) and if they represented the same mix of stations as the total, such that their average fee was the same.

(1)	$75,000,000	to public television licensees
	– 15,000,000	to licensees as base support
	$60,000,000
	divided by 159
	$377,360	average to licensees as variable support
(2)	$200,000	Basic Cooperative Program Service (average)
	X 136	estimated number participating
	$27,200,000	Basic Cooperative Program Service income

Assume twenty hours weekly potential supplementary service. Assume fourteen hours weekly average purchased by the 136 participating licensees. Assume minimum $5,160,000 retained for local sup port and programming activities (approximately the minimum FY 73 level for CPB “community service grants” to public television stations, projected to cover additional licensees. It is assumed that stations would allocate to local services in FY 74 at least the amount of their CPB grants allocated for such purposes in the previous year.) Assume, in addition, that licensees spend 3/4 of their “excess” of new dollars on other than the Supplementary Services—i.e., new local programming efforts, other suppliers, etc.

Then—at an average fee of $74 per hour, and use of fourteen hours per week by 136 licensees, the return from the supplemental service would be roughly $7,284,000. The calculation is worked out in Table 4. Tables 5, 6, and 7 show cooperative production/distribution revenues, application of all funds, and cooperative program production/distribution support, respectively.

 

Table 4—Supplementary Program Services Income
(1)	$75,000,000	to public television licensees
	divided by 159
	$471,700	average total (base and variable) grants to each licensee
	-25,000	Basic Membership Fee
	-200,000	Cooperative Program Service Fee (average)
	$246,700	Basic supplementary to local support
	-32,468	Minimum retained for local activities (average FY 73 CPB support grant)
	$214,232	“Excess” of “new dollars”
	divided by 4	3/4 expended elsewhere
	$53,558	Average fees per participating licensee
(2)	14	hours weekly use per participating licensee
	X 52	weeks per year
	728	hours annually used per participating licensee
	$53,558	average fees
	divided by 728
	$74	average fee per hour used
(3)	$53,558	average supplementary fees per licensee
	X 136	licensees using supplementary service
	$7,283,888	Supplementary Program Service income

Table 5—Total Cooperative Production/Distribution Revenues
Basic Membership Fees	$3,575,000
Basic Cooperative Program Service	$27,200,000
Supplementary Program Service	$7,284,000
	$38,059,000

 

Table 6—Application of Funds
Local/Other-than-local	Total	Avg./159 Licensees
To public television	$75,000,000	$471,700
To cooperative production/distribution	$38,059,000	$239,365
To local-only service	$36,941,000	$232,333

Table 7—Cooperative Program Production/Distribution Support
	Total Revenue (000s)		Subtotal for Distribution (000s)		Subtotal for Production (000s)
No. of Stations	Total	Avg.*	Total	Avg.	Total	Avg.
Basic Membership Fee 143	$3,575	$25	$3,575	$25	—	—
Cooperative Program Service 136	27,200	200	10,684	79	$16,516	$121
Supplementary Program Service 136	7,284	54	—	—	7,284	54
Total 159	$38,059	$239	$14,259	$90	$23,800	$150
To Local Service	$36,941	$232
* Average for the number of stations participating at each stage: (Because the number of participating stations differs, the averages do not add arithmetically.) 159 licensees, 143 Basic Members, 136 users of program services.

A Possible Financing Model—Year 2

The first year of the SPFP involves the greatest risk, because it puts the greatest strain on the system budget for potentially conflicting station needs for local activities and cooperative services. Seventy-five million dollars should be sufficient to sustain station needs in both areas at a modest improvement over present levels of capability, but it does not provide as much improvement in either as is necessary, and particularly not in new local program services. It is likely even at the $75 million level that there would remain a frustrating gap between what the stations know they could do for their communities, and what they have the resources to do.

The picture improves as the Trust Fund grows—a growth which, with a carefully designed set of incentives in the distribution formula, is presumably more rapid than the growth in the cost of the program cooperative, and hence reduces the pressures on both the stations and their cooperative.

Following the same model as above in year 2 with a television fund of $100 mil lion, and assuming a system growth of 10 stations to 169, some of the numbers change significantly. The average PTV licensee basic grant would be approximately $118,000, and the average variable grant would be $473,000. Those grants would yield $3.9 million and $30 million to the cooperative in, respectively, basic membership and basic program ser vice fees. The supplementary service would cost each station an average of $84,000 and would put over $12.5 million into the cooperative for additional programs. The total, then, for cooperative production/distribution is $46.4 million—a 20 per cent increase over year 1 in dollars at no increase in station membership fees. At the same time, the allocation for local services would increase 45 per cent over the previous year and would exceed 50 per cent of the total television allocation for the first time.

A final word: this model, and the others in the SPFP, are one approach to formulating a public television program financing mechanism which will better serve the stations and the public than the current convoluted processes. The model is no doubt imperfect; it is certainly incomplete. But the concept places most program decision making where it belongs, in the hands of the licensees, and might make the road to long-range financing easier to travel. If it can begin to address those objectives, it is worth serious and rigorous discussion.

Table 8—Projection of Application of Funds
	CPB 73	% Change	SPFP Year 1	% Change	SPFP Year 2	% of Total
Program Production	$20,000	(+19)	$23,800	(+28)	$30,500	30
Program Service	10,000	(+41)	14,259	(+12)	15,909	16
Distribution Cooperative	30,170	(+26)	38,059	(+22)	46,409	46
National Program Total	5,000	(+739)	36,941	(+45)	53,591	54
Total	$35,170		$75,000		$100,000	100

 

 

Notes

 

1. 1. Public Television: A Program for Action, The Report of the Carnegie Commission on Educational Television, January, 1967, pp. 87-89, 91, emphasis added.

1. 1. “We hear, as pointed out by Mr. Macy when he testified on June 13, 1972, during confirmation hearings for the new CPB Board nominations, that PBS is structured as a station membership organization and that local station managers control the PBS Board. This is true, and to some extent it allows the local stations an important voice in national pro gram selection and scheduling. But it is also true that virtually all of PBS’s funds come from CPB, and, as a practical matter, CPB calls many of the tunes when it pays the PBS piper.” [Report No. 92-892, Committee on Commerce, U.S. Senate, June 20, 1972; Supplemental Views of Messrs. Baker, Cotton, and Griffin.]

 

1. The inadequacy of most UHF facilities is probably one of the most serious impediments to the ability of PTV stations to provide a first-class service to their communities. Sixty per cent of the PTV transmitters are U’s, and they comprise 40 per cent of all UHF television stations. While in a very few in stances it may be possible for a UHF station to “drop in” to a V allocation, it is likely that most will continue to be U’s.It should be possible for the Corporation to embark on an immediate project to provide parity between U’s and V’s. The key elements of the problem are (1) the inability of the U’s economically to transmit a signal strength comparable to the V’s, and (2) the inadequacy of most home receivers for UHF. To get at the signal strength problem, the first step might be to determine whether, indeed, the present 6 megawatt limitation is high enough, and to get the FCC to raise the limit, if necessary. CPB might then procure the design of a UHF transmitter-antenna-tower combination at the stated maximum power, fully automated and remote controlled, but with significantly lower power, tube, and maintenance cost characteristics than the equipment currently available. The design should then be put out to bid, and a mass purchase made of sufficient equipment for all present PTV U’s, and those anticipated in the near future. The unit cost might not be significantly greater—might, indeed, be less—than the present approach of piecemeal, station-by-station purchase of inadequate equipment.To get at the reception problem, CPB might develop specifications for home receivers with equivalent ease of tuning and picture quality on the V and U bands. The specifications should be published to the manufacturers with the understanding that those which meet or exceed the specifications (a) would be entitled to display the “CPB Seal of Approval” on sets at retail, and in its advertising, (b) would be identified by CPB, PBS and the stations on the air and in print media announcements, (c) would be identified in notifications by CPB and the stations to federal, state and local government purchasing agencies, schools, and universities.With the cooperation and assistance of the commercial U’s (60 per cent of all U’s) the net out-of-pocket cost of the campaign to public television would be minimized. Note: The FCC is now working on the “ease of tuning” problem—but there is much more to be done to the problem of tuner sensitivity.
2. One suggestion has been made that the budget factor ought to be corrected for the per capita income of the community served.
3. The author believes that $100 million should be considered a floor for long-term financing for public broadcasting, and that at that level 25 per cent of the total might be allocated to the CPB and radio activities described above. The sum is slightly higher than the figure ($90 million) projected for FY 1974 in the Public Broadcasting Act of 1972, as introduced by Congressman Macdonald. The number of licensees is PBS’s projection for FY 74; there are presently 139 licensees, and another 20 are expected over the next two years.
4. The present average CPB station grant is approximately $32,000. The proposed pro gram cooperative membership fee might be $25,000 (see Section IV). From an average “base” grant of $94,000 then, a station which elected membership in the program cooperative would retain $69,000 for improvement of local services.
5. The product of the factors—50% to the Trust Fund, 8.5% to the Licensee Fund—is .425. The Incentive Fund is in lieu of Base Support and Variable Support funds, so no allocation is made for that purpose. Radio incentives come from the Trust Fund increase attributable to the increase in non-federal support for radio during the year.

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