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Revenue shortfall compounds KQED’s problems

Originally published in Current, Nov. 16, 1992
By Steve Behrens

An unexpected $3.5 million shortfall in membership revenue has created a fiscal crisis at KQED-FM/TV, which was already pinched by the failure of a real estate deal.

The income problems and resulting cutbacks in local TV production give KQED a new dose of bad press in a region where many people love and/or hate public broadcasting with uncommon passion.

With the station on the defensive, its members have elected the second and third committed critics of KQED management to its board of directors. Five other winning candidates this month were nominated by the board itself.

KQED President Tony Tiano says the station has taken the steps necessary to stay afloat, but doesn't try to downplay the situation. "It's very serious," he says. "There's no way to sugarcoat that."

The fiscal squeeze developed with the collapse of a sales contract for KQED's old headquarters and tightened as membership revenues came in low. "In cash terms," Tiano says, "the combination is pretty close to $8 million in a $32 million company," he says. Some payables are 120 days late.

In terms of its budget, the station closed fiscal 1992 with revenues $3.9 million below expectations, he adds. Cost-cutting, including executive pay cuts and staff reductions of about 28 positions between June and August held the year-end deficit to $1.1 million.

Since the fiscal year ended Sept. 30 [1992], KQED has seen only one month's results, but Tiano says revenues are "well ahead of our targets" in the tighter '93 budget.

The word from Tiano is that the figures will have to stay on target or there will have to be more changes in January, "which probably means layoffs," according to a staffer.

Tiano, who has managed KQED since 1978, will probably stick with it, says a close observer. "There's something about his personality that causes him not to be able to disengage. He can't see himself leaving at a time of trial, yet the station has been in crisis for several years. There will never be a time for him to go."

Jim Scalem, former KQED program director and now a PBS v.p., has confidence in his old boss: "There's no one more qualified than Tony Tiano to bring the station up from this low point."

"The man is a survivor," says a source familiar with Tiano. "The greatest skill he has, and he has many skills, is that he keeps the place going forward — and until this year in the black."

"One of the problems is that we had it so good for such a long time," says Jonathan Rice, the station's original program director and now a board member.

With hindsight, some observers say now the station had become "fat" and overstaffed, and the management was reluctant to cut back, even though other major-market stations had done so.

The lesson, according to a former KQED executive: "Don't fool yourself into believing that you can avoid the problems that plague the entire industry."

Life goes on

If anyone at KQED has minimized those problems, it's the FM station, which suffered only one layoff, though two news staffers also went on unpaid leave. In September, to avert a cutback to a 20-hour day, FM extended its pledging and raised an extra $50,000.

The station made a successful switch from classical music to talk/news five years ago, and continues to produce its live weekend variety show, West Coast Weekend.

KQED-TV's national productions arm also continues to prosper with its trademark cooking shows. The station just finished producing the fifth season of Yan Can Cook, the second of Jacques Pepin's Today's Gourmet and the first of DeMedici's Kitchen. A second season of Cooking at the Academy also is in the works. In addition, KQED is now shooting Green Means, a new series of how-to (save the planet) modules of two to five minutes; and fundraising for a planned series on freedom of the press. For PBS's December pledge, the station has provided a 10-part Bradshaw on Relationships.

Locally, KQED-TV is planning a series on the history of San Francisco neighborhoods and a new Friday-night public affairs series, possibly in town-meeting format.

But the only remaining regular local TV production is a reporter roundtable, This Week in Northern California. Gone are the comedy series, the late-night talk show, the 15 documentaries a year.

"It is by far the largest cutback in programming in KQED history," says Scalem. "KQED put together a scrapbook of its history, and frankly it peters out after 1990, for obvious reasons," Scalem says.

Some observers fear the station has cut too deep into its staff capacity. The ranks of current-affairs producers are down from 20 a few years ago to a half dozen today. And its corps of second-level executives has been decimated by departures and layoffs. Scalem and Marketing Vice President Jon Abbott went to PBS, production chief Marjorie Poore went part-time, and Tiano laid off TV Station Manager David Hosley and Focus magazine Publisher Susie McCormick.

Under the circumstances, it's hard to maintain morale, says a mid-level manager. "People want to ride it out, but there's no guarantee that your future here extends beyond the next pledge drive."

Deficit "shockingly big"

The first big shock this year was when independent commercial TV station KBHK walked out on its deal to buy KQED's old 8th Street building for $5 million. Though the sales contract forced the other station to pay damages of $1 million to KQED, the pullout left the pubcaster short of $4 million it had expected to have as working capital.

Now the station has spent most of a year in its new home, a rehabbed industrial building on Mariposa Street, but station spokesman Greg Sherwood says it may have to sell its furnishings to a leasing firm company and lease them back to raise some $1.5 million in cash.

The new headquarters has a striking atrium, says John Carman, San Francisco Chronicle TV columnist. "It's kind of a big open area, and in the middle it's like an ocean liner has crashed through the wall and come to a stop, and there's Tony Tiano's office up there at the bridge of the ship."

The captain had put forth an optimistic budget for last year. "The projections were based on having a great year but that's not what happened," says Membership Director Tricia Wilson, who joined the staff well after the damage was done. California's economy weakened and unemployment rose toward 10 percent. Other stations, including KLON-FM in Long Beach suffered as well.

"He estimated that we were going to bounce out of the recession around the middle of last year, so the plan was more optimistic than it should be," says Sherwood.

"Very late in the fiscal year, some of the news came out and the deficit was shockingly big," remembers board member Jonathan Rice.

George Sarlo, a venture capitalist who had served on the KQED Board for five years, quit in August. "I wouldn't have run things the way they have been run for the past year," he explains, but declines to elaborate. "The main issue is leadership. I don't want to get into it."

"When times are bad, Tony doesn't face up to reality," says a close observer. "He doesn't like to bring people bad news."

The deficit could have been avoided "if we had acted more quickly," Tiano acknowledges. But some of the discouraging figures didn't come to light until late summer, when it was already too late to counteract the shortfalls, he says. The fiscal year ended Sept. 30.

There was good news in Tiano's report to the board Oct. 22: underwriting and major gifts were up; so were revenues from national TV production.

But the board also got a grim picture of membership revenues when Tiano put the figures on an opaque projector, says insurgent board member Henry Kroll. "The board was surprised to find that $800,000 of the $3.5 million was attributed to an error in failing to send out renewal notices to thousands of members."

Staffers say up to 18,000 members were mislaid temporarily, but former Membership Director Carol Porter — now with the fundraising firm Craver, Mathews, Smith & Co./West — says only a couple thousand were completely overlooked and most got at least some of the six letters in the usual series of renewal pitches.

Some revenues were delayed into the next fiscal year, but weren't lost forever, Porter points out.

Tiano's budget report said revenues fell short by an additional $850,000, because the station projected its fiscal 1992 renewal income on the basis of a too-high 1991 membership figure.

In other words, half of the membership shortfall was due to human error and the other half to the recession that tightened its grasp on California this year. Add in the effects of the recession, and member fundraising fell $3,455,000 below expectations — with no equivalent drop in expenses. With pledges bringing in fewer dollars per minute, the station opted to prolong drives in August and next month.

So far to fall

For KQED, the decline of membership revenues from $15.6 million in fiscal 1991 to $13.7 million last year was a fall from grace.

The station was accustomed to having nearly 20 percent of its viewers become members, almost twice the proportion at many PTV stations, according to Porter.

"For five, ten years, we have had a very high membership per capital, per viewer, and that's a wonderful thing," says Porter, "but it also means you have people on the edges of the core membership who come in and out."

The recession clearly was hurting KQED, but other factors may have contributed to the crisis.

Some insiders and outsiders speculate that members didn't like what they were seeing of KQED, either on the air or in the press.

"The evidence indicates people are watching KQED, but don't have affection for it," says Nat Katzman, a former KQED-TV station manager and now independent producer.
He connects donors' "affection" to their impressions of KQED programming. "I see serious problems in the future. What was carefully built over a 10-year period and was a very successful mix of local and national activity has disappeared very rapidly," says Katzman. "And I think it will be a very lengthy and difficult process to come back to anything approaching those levels of service."

"Because it's common to badmouth KQED, you have a lot of word-of-mouth going around," says an observer familiar with the station. He contends that some viewers drop memberships after reading a single negative newspaper article or hearing a neighbor say, "Look at those guys — they always have their hands out!"

Above the blue and windy sea

Present problems aside, Jim Scalem says KQED is the best station in the country and San Francisco the best market for public TV. The station thrived in a city where talented and often overqualified people were willing to work for low wages, says Jonathan Rice, but had to serve an attentive, demanding audience abounding in a museum-quality assortment of assertive minority groups.

"Where the expectations are so very high," says Rice, "it's doubly hard — no, it's more than doubly hard, it's extraordinarily difficult to meet them."

"If you went down the street ringing doorbells, every other person who answered would be a documentary producer wanting access to the air," says Carman, exaggerating a little.

San Franciscans have always had a love-hate relationship with the station, says Scalem. "But at no time in the history of KQED has there been so much negative publicity as in the last two years. I have to believe that it has had some effect in the drop in membership." Leading the choruses of cheers and boos are local newspaper writers, who take frequent shots at the station's program decisions and even its receptionists.

Last week in the Chronicle, Carman's column blasted KQED for having rude staffers who gave an extended runaround to a Bay Area producer who was merely calling to find out when his PBS program would air locally.

KQED spokesman Sherwood says some of the periodicals have business reasons for a grudge against the station. As publisher of the Bay Area's regional magazine, Focus, KQED is a direct competitor with local newspapers for advertising, he says.

Stable of antagonists

But with public conflicts like KQED's, reporters wouldn't need hidden motives to draw them to the station.

The station drew attention for a long-running labor struggle, for example. KQED designers and current-affairs producers signed with the National Association of Broadcast Engineers and Technicians (NABET) in October 1989 and other unionized employees' contracts expired in March 1991. Negotiations continued on and off until March this year.

"NABET was doing everything it could do to stir up the media and promote strife," says a former staffer. "It was basically at war with Tiano."

"Both sides let negotiations go on for a full year," Rice recalls. "Neither side was willing to compromise and they tried to pin the other to the mat."

Finally this spring, the union won raises of 3.3 percent a year for top-level engineers, and higher boosts for lower-paid staffers, says local President Kevin Wilson.

"Nobody won that skirmish," says a former staffer. "Everybody lost. KQED as an institution lost. And the union lost — now they're laying off designers." Many of the new union-member producers are gone as well.

When KQED asked the union for wage concessions this fall, union members said no way.

In December, KQED gained another antagonist. Thomas E. Fanella, president of KTEH, 60 miles south in the Silicon Valley capital of San Jose, discovered that Tiano had quietly obtained primary affiliate status with the American Program Service — the right to claim exclusive Bay Area rights for programs distributed by APS.

Fanella was furious. Dependent on APS for a fifth of its primetime fare, KTEH generated a letter-writing campaign against the San Francisco station. So far, KQED hasn't claimed exclusivity for any APS programs, but it got some more bad press.

"One-trick pony"

But KTEH is a newcomer to the ranks of KQED's permanent stable of critics, led by board member Kroll, Laurence Hall and colleagues in the Committee to Save KQED. The committee has repeatedly filed petitions against the station at the FCC. Last year, as a consequence of one of those struggles, the station [lost] its second TV channel, KQEC.
Allied with Kroll and Hall are independent producers who ridicule KQED's cooking shows and condemn its local programming.

"They have an annual budget of $32 million, and they're currently turning out a half-hour of local programming a week," says Lawrence Daressa, a producer/distributor who thinks the KQED Board should do to Tiano what the General Motors board did recently to its top executive.

In return, KQED loyalists have little use for Kroll and his advocacy for local shows.

"He's a one-trick pony," says Stanley Friedman, an attorney on the KQED Board. "He carps at us in the press generally. When Henry says he wants to make a local program, I say, `Show me where to get the money.' I can't find it, but I want to generate it."

Rice says the critics fondly recall KQED's glory days when staffers were underpaid, programs were cheaper to produce and he started a nationwide wave of shirtsleeves newscasts with Newsroom, produced under various titles in 1968-80. Making Newsroom back then cost less than $1 million a year, Rice recalls. "Now it would be $20 million. I can say there's just no way we could provide the kind of service they remember. There's a lot of changes in the world that I hate."
Kroll began his ambivalent relationship with the station as librarian for Newsroom. "Those people over the years have been the single most destructive force in the history of KQED," says Scalem, who volunteered and worked at the station for 32 years before going to PBS.

When one votes twice

Kroll was able to join the KQED Board last year because, unlike most stations, this one has its members elect the board.

This fall's election was marked not only by its outcome but also by logistical problems.

To save an estimated $30,000, KQED decided to distribute the ballots to its voting members by inserting them in the program guide in Focus magazine. Alas, the printer's automated equipment put double ballots in many magazines, and the printer had to make an extra 10,000 ballots, says Sherwood. The station notified members what to do, but 2,100 of the 32,000 voters sent back double ballots.

The station's election contractor dealt with double ballots (counting only one when both contained the same votes, and counting neither when the votes were different, as 300 pairs were).

This procedure apparently satisfied all the candidates. Even if all the 300 ballots in question had been cast for the top runner-up petition candidate, filmmaker Peter Adair, it wouldn't have been enough to put him on the board, according to Sherwood.

When Kroll won his seat last year he was only the second board member in KQED history who wasn't nominated by the board itself. In January, he'll be joined by two women elected from the New Priorities slate that petitioned to be put on the ballot: Sylvia M. Siegel, a feisty consumer advocate who has fought the state's utility companies for 20 years, and Sasha Futran, a radio journalist who lost her role as a commentator of KQED-FM.

Siegel, who got the second-highest number of votes cast, says the station "is going steadily downhill" and needs a management audit to see how well the executives do their jobs.

What will these skeptics do for the cause of public broadcasting in the Bay Area? Jonathan Rice risks a reply: "To the extent that they want to return to the impossible past, they're not going to be helpful," says Rice. "And to the extent they can find a way for us to reawaken the challenge we met so well in the past and knock heads so that noncooperating groups start to cooperate, there's a chance they can make a difference."

Web page posted April 13, 2004
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In the 1950s and 1960s, the founding leaders of KQED made it one of the most fertile producers of public TV programs.

FCC revokes KQED's license for second channel, 1988.