CET in Cincinnati and ThinkTV in Dayton made the leap nearly three years ago, and by most accounts their union looks strong. The two stations, just 50 miles apart in separate southwestern Ohio media markets, are now incorporated as Public Media Connect and serve a region of 1.4 million households and more than 3.5 million people.
Together they showed an operating deficit last year, as did many stations, but the budget gap has been shrinking and is projected to go positive this year. Their combined staff is down, but then so is staffing elsewhere since the recession hit.
The combined organization appears to be weathering the economic crisis, maintaining the local identities of its pre-merger partners and getting ready to move beyond its initial consolidation phase.
“I’d say it’s been very successful,” said David Brugger, the veteran industry consultant and retired president of the Association of Public Television Stations who had been hired by the stations to facilitate their negotiations.
“We went into this with the idea that it would take at least a couple of years to get the pieces in place,” said David Fogarty, president of Public Media Connect. And while there’s “still a lot of work to do,” he said, the broadcaster is ready to seek out new opportunities and new ways to engage the community.
The merger of CET and ThinkTV differs from previous public TV mergers in fundamental ways. Although their signals overlapped significantly, they grew out of different media markets. The stations had budgets and staffs of roughly the same sizes. Previous big public TV mergers saw major players swallow up smaller stations in the same markets. San Francisco giant KQED merged with KTEH in San Jose, while New York‘s WNET joined with Long Island’s WLIW.
And yet, as economic challenges and technological opportunities prompt more consolidation within public broadcasting, lessons learned in Cincinnati and Dayton could be instructive for stations thinking of linking.
Brugger said he currently is consulting with stations about two possible mergers, not ready to be announced, and predicts more, particularly in more than two dozen markets where there are overlapping pubTV signals.
Among the points Brugger stresses at the start of talks is that “not every consolidation of stations will save money.”
When he talks with station boards, he asks them to consider an important question: “How will you thrive in an economy in which revenue sources are decreasing?” Among the “eight to 11” stations that he sees doing well in the downturn, Brugger found that a significant common thread was their “commitment to community.” That means being on top of local issues for programming decisions and making civic involvement “part of (their) daily activities — attending every kind of function in the community.”
Brugger said that when he brings up the subject of preserving local identity, “that always takes up a lot of discussion time.”
Maintaining partners’ original identities is a theme that Fogarty also repeatedly emphasizes. He pointed to local programming such as Cincinnati’s CET Arts, which spotlights performers and performances in southwest Ohio, along with expanded educational services and local participation in initiatives such as American Graduate: Let’s Make It Happen, which is looking at ways to solve school dropout issues in Cincinnati.
The seven-issues-a-year members’ magazine PMC Connect underlines community identity, with a four-page Dayton or Cincinnati insert in each 20-page issue.
“When we talk internally,” said Fogarty, “it’s about a single organization.” Our perspective, he said, is that “we have two local brands” but a single “gateway” to them.
When leading boards through talks about consolidation, Brugger also raises touchy issues that could potentially scupper the deals. The cost of merging is substantial, he said, including expenses for staff buyouts and integrating systems such as master control and accounting. In the Ohio merger, combining operations and establishing the interconnection between the Cincinnati and Dayton facilities has cost more than $1.5 million, the organization reported.
The boards must confront sensitive matters such as choosing a c.e.o. and a headquarters site.
The two Ohio operations were similar in size, in markets of comparable size. Cincinnati is the 34th-largest TV market out of 210 markets counted by Nielsen, while Dayton ranks 64th. Both also had very proud — and separate — histories. CET was the first licensed educational television station in the country, launching in 1954, and its online service CETconnect.org was an early innovator in digital services for public media. The Dayton station dates back through earlier mergers to a predecessor that began in 1959.
The stations had overlapping signals, however. And a financial squeeze. So, after several false starts, the stations began merger talks that lasted a year and nine months before culminating in a deal.
Fogarty, formerly the head of Dayton’s ThinkTV, took over once the merger was forged, while Susan Howarth, CET’s president, departed and became head of WEDU in Tampa. When the merger was announced in late 2008, each station had about 50 employees, although Fogarty said those numbers included both part-time and full-time staff, along with positions that were unfilled at the time. Soon after the July 2009 launch of PMC, the number of employees was down to 74 as a result of a reduction in part-time workers, retirements, job cuts resulting from consolidation and a decision to leave some vacant positions unfilled, Fogarty said.
Today, the combined operation has a full-time staff of 67. Of those, 20 positions have regional responsibilities, including senior managers, managers and operational staffers. And the positions are split almost equally, with 32 based in Cincinnati and 34 in Dayton, said Fogarty, who did not include himself in the count. He downplays a local newspaper account a year after the merger that suggested that “some” inside the Cincinnati station felt there had been a “takeover” by the Dayton operation, with the departure of CET President Howarth and other personnel and technical changes.
“There wasn’t a takeover here,” said Fogarty, who attributes the grumbling to a misunderstanding about some of the changes that occurred.
Adjusting the programming and scheduling to create maximum efficiency while continuing to maintain local programming for the Cincinnati and Dayton communities proved challenging as “PMC was faced with significant changes in the channel lineups of the regional cable company serving both the Cincinnati and Dayton markets,” said Fogarty. He said the stations then negotiated as a combined entity, resulting in PMC having 13 cable-channel positions in each market.
Viewership of CET in Cincinnati has seen a “significant increase,” he said, while ThinkTV 16 in Dayton has been stable and ThinkTV 14, between the two cities, has seen a reduction.
Support from PBS and CPB for the merger has been helpful as well, said Fogarty. “PBS has allowed us flexibility in programming use across all of our stations to assure diversified service. With this flexibility, overall programming expense has been reduced — particularly from non-PBS distributors.”
Meanwhile, the combined operation is projecting that member and major-donor support for this year will be about 97 percent of the amount received in 2009, before the merger. More would be better, of course, Fogarty said, but he regards the results as “a very good performance within our understanding of the national trends.” He noted that Ohio has been particularly hard-hit by the economic crisis.
Although PMC was born with a substantial deficit to address, its finances appear to be moving in a positive direction. Brugger said Fogarty “started with a deficit he is curing.”
In fiscal year 2009, before the merger, CET and ThinkTV reported a combined operating income of $12.5 million and combined operating expenses of $13.9 million. Two years later, and two years into the merger, the combined stations reported fiscal year 2011 “operating support and revenue” of $11.4 million compared to “operating expenses” of $11.5 million, yielding a $100,000 deficit (not including investments and other types of accounting activity).
For this fiscal year, however, Fogarty said his team is projecting a positive net income: total operating income of $10.7 million, despite “significant” cuts in state aid, and expenses just over $10.4 million.
Like Brugger, Fogarty expects to see more pubcasters merging in the future. For station leaders who are headed that way, he advises:
- Ensuring there is a consensus among boards, management and staff on the value and purpose of the merger/consolidation.
- Setting clear performance targets.
- Recognizing organizational differences, because integrating or reorganizing staffs and operations will take time, and creating a common or shared culture takes much longer.
- Being aware that mergers and consolidations will require upfront financial investment that, hopefully, will offer savings and efficiencies over time.
- Understanding that a merger’s real value has to be future service and opportunity.
Whatever the efficiencies and cost savings, a consolidation helps to give the organization time to plan the future.
Brugger also stresses the importance of making sure station boards and managers understand everything they are getting into.
“You have to walk them through all that,” he said. “It’s like a dating process.”