Duggan maps path to shared gains for system
PBS will manage program rights in 'station equity model'
Originally published in Current, Dec. 4, 1995
By Steve Behrens and Karen Everhart Bedford
PBS put forth a new framework for thinking about its relationship with member stations last week, asserting that they're all in the same boat, endangered by common competitors and capable of saving themselves through collective action through PBS.
For PBS, the timing of the Fall Planning Meeting could hardly have been better, since many station executives were favorably impressed with the recent $75 million Reader's Digest Association program deal.
President Ervin Duggan laid out a "station equity model" that will guide the network's actions and pledged that PBS will add 50 percent to the funds wielded by its chief program executive by the year 2000 -- an increase from $110 million to $160 million. The Reader's Digest commitment amounts to one-quarter of that gain, he said.
The station equity model calls for "pointed, strategic, coherent" management by PBS of the system's brand, program rights and other national assets of the stations, Duggan said in a Current interview after the Nov. 27-29  meeting in Washington. He urged the stations to recognize the high value of the "equity" in system assets that benefit them.
In the past, program fees paid by the stations to PBS have been seen as taxes, Duggan said. "In the future, those funds will be seen more and more as an investment, and we will seek to create gains, a library, rights. And to the extent that we do that, equity will be owned by the stations."
The model pulls together a number of themes stressing the importance of cooperative action that have been voiced increasingly by national leaders.
Inconsistent carriage of key PBS programs, a frequent target of Duggan's, "is a classic example of the chaotic, disparate and inefficient management of an asset--a distribution system that is being used in an atomized way rather than a coherent and consistent way."
As part of the model, PBS also proposes full funding of a larger number of key programs, to facilitate production and to exploit their back-end value in videocassettes and other media.
Met with producing stations
The model pairs a "plus" and a "minus" for producing stations: while PBS will provide full funding for important programs, it will also increasingly seek control of nonbroadcast and other rights.
This fits with a more "coherent" approach to program buying, since PBS would have less money left over to buy lesser programs. Total hours of programs purchased would decrease in the short term, Duggan said.
Increased PBS control over program rights will also help keep shows out of the hands of competing cable networks, said PBS Executive Vice President Bob Ottenhoff. Producers now sometimes sell off rights and undervalue their underwriting potential as they struggle to complete their funding, he explained.
Duggan said he met last week with reps from producing stations, who were "quite naturally concerned about negotiations about ancillary rights." Rather than harming the producing stations, which he called public TV's "golden goose," PBS wants to nourish them with full funding of programs, he said.
"Full funding by itself does not enable us to stay in business," said Bill Kobin, president of KCET, Los Angeles. "Perhaps that makes us sound greedy, but we can't survive" on fully funded programs alone.
Producing stations rely on back-end revenues from their programs to finance their development and production of new programs. "For every project that gets funded, there are many that don't get funded, and they cost a hell of a lot. We have to get more back than we spend on a project to keep a creative factory going."
If KCET hadn't gotten a percentage of the ancillary revenues for its new series Puzzle Place, for example, "we would not have been able to go ahead with production of the final programs," Kobin added. "Sometimes I think PBS doesn't understand that, or doesn't want to understand it."
"If producing stations don't remain strong, than ultimately the quality of the NPS will be affected and reduced," Kobin said. "The system's interest itself is at stake here."
Not a "zero sum universe"
In an interview, Duggan contended the some stations' gain doesn't mean other stations' loss. "The dramatic reality is that we are not living in a zero-sum universe," said Duggan, pointing to a handy example of the proverbial expanding pie. "The Reader's Digest has never been approached to fund one dollar of public television programming in the past. This is not a zero-sum game. I have come here to help break this system out of zero-sum thinking."
Whether managers will adopt the station equity model as their way of thinking is not clear. Reporters were excluded from the Fall Planning Meeting and couldn't judge station reaction. PBS Executive Vice President John Hollar said managers' common reaction was that the model was "clear," "solid" and "smart," while some managers interviewed afterward said they still had many questions about the idea.
Burnie Clark, president of KCTS in Seattle, questioned what the model would mean to his station as a national producer. Under the new model, back-end revenues that have helped KCTS pay for its less financially viable programming "would be rerouted to go through PBS." And if PBS concentrated on the "surest successes" for back-end earnings, the network's program diversity could suffer.
"I left feeling I had a lot of questions," Clark said. He was impressed with the effort PBS had made to think through the model, but said it was "unclear" what process the network will use to refine and develop its model. He expects PBS will hold further discussions about making the model work for stations, producers and PBS as well, and wants to see a business plan with financial estimates.
"The overall goals of the equity plan are very, very good," said Don Burgess, g.m. at KUAT in Tucson. "As someone said in the meeting, the difficulty comes in the details."
Burgess also pointed to conflicts between the plan and the producing stations. As he heard the plan, PBS would hold the purse strings more tightly, dictating who produces what programs, and controlling ancillary rights. Major producing stations would merely do "work for hire," he said. "It would change the balance of power within the system, or it could," he said. "It certainly will upset the status quo, and public broadcasting has a difficult time dealing with anything that upsets the status quo."
"PBS showed leadership in putting a plan on the table," said Virginia Fox, president of Kentucky ETV. "I believe the economy is going to force all of us to operate on a more businesslike basis."
The model was not presented with enough specificity for Fox to know whether it was flawed or not, but "the assumptions that underlie it are absolutely right on."
"I can't imagine it will do anything but strengthen" producing stations, Fox said. "If I thought it was going to hurt the producing stations, I could not support it as strongly as I do."
Skip Hinton, president of Southern Educational Communications Association, said PBS's presentation was "clearly responsive to some things PBS has heard from its members." He said the model is based on the "concept of gaining greater equity for the system in producing, purchasing and leveraging programs to greater financial advantage."
Bryce Combs, g.m. of WMVS, Milwaukee, felt that PBS executives told stations "what they wanted to do but were not clear on how they get there." He suspects that PBS will end up offering products that compete with member stations through online, cable or direct broadcast distribution. "To get more money, they're going to have to sell to somebody. The only thing they have to sell is programs."
"We need to know what and how and who will be doing that, and what the tradeoffs are," Combs said. These questions came up at the Fall Planning Meeting, but there were "no specific answers given."
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Later news: Following the Station Equity Model, PBS proposes a $52 million boost in its revenue budget for fiscal 1997.
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