Without PBS dues relief, KCET says it will quit PBS at year’s end

CPB endorses Jerome's proposal for consortium of L.A.'s four stations, but leaves the dues question to PBS

By Dru Sefton

After negotiating with PBS for eight months over a proposal to reduce its dues and reconfigure pubTV in the Los Angeles market, the city’s bigget public station announced this week that it may drop out of the network by Jan. 1.

If KCET proceeds with that option, PBS would be left without a station committed to carrying its primetime and children’s schedules in the nation’s second-largest media market. It would be the first departure of a major-market member in the network’s  history.

KCET President Al Jerome told Current that he’d prefer to remain with PBS, but says — if the network doesn’t budge — he has unanimous backing from the station’s board of directors to forgo the PBS brand and the icon series of its National Program Service.

The stakes are high for both KCET, where programmers are beginning a search for programs for an alternative program schedule, and for PBS, which would have to reopen combustible program pricing issues at a time when the system has no spare money to reduce the dues burden on a big station in a bind.

The outcome also could help or hinder a proposed restructuring of the L.A. market, endorsed by CPB as well as KCET, and well received by the three other stations, to increase cooperation and reduce duplicated programming among the stations.

Jerome said he will not allow KCET to “self-immolate” under the pressure of nearly $7 million in annual dues — a charge that rose 40 percent between fiscal years 2006 and ’09, he noted.

He said circumstances had jacked up the dues that KCET pays for PBS programming, and the network’s policies had kept the dues too high.

Between 2004 and 2009, KCET brought in $50 million in restricted production support for its twin English/Spanish child-care series A Place of Our Own and Los Niños en Su Casa. The grants included two from BP, the oil company — $10 million in 2004, paid out over five years, and $15 million in 2007, paid over three years.

Los Angeles has long been seen as one of public TV’s messiest overlap situations, with four stations competing for viewer and sponsor support. KCET is the primary station—a full member of PBS, with rights to the whole PBS National Program Service and a much higher bill to pay than the three smaller stations. KOCE, KVCR and KLCS are PDP (Program Differentiation Plan) members that buy 25 percent or less of the PBS catalog.

Jerome objects to the PBS pricing policies that require it to pay $7 million a year for the whole NPS while KOCE pays $1 million to select up to a quarter of the schedule that it wants to air.

PBS said in a statement to Current that KCET paid 2009 dues equal to less than 13 percent of its total operating revenue (restricted and nonrestricted funds), which “aligns closely with the overall station average for the system during the same period.” Jerome said the station effectively paid significantly more. He and the KCET Board insist that because the $50 million restricted production grant cannot be used to pay dues, it should not be used to calculate them. They contend that dues should be figured on net operating revenue (after expenses), not total revenues.  Calculated that way, they say, the 2009 station dues of $6.95 million are 19 percent of KCET’s $37.4 million net operating revenue.

Jerome is proposing a market restructuring that’s enthusiastically supported by CPB and a CPB-funded analysis by Booz & Co., which estimates that the four stations would end up with additional savings and new earnings of $13 million a year.

The four — KCET; KOCE, a community nonprofit in Orange County; KLCS, licensed to the L.A. public school system; and KVCR, operated by the San Bernardino community college district — have been meeting for months as part of CPB’s renewed efforts to promote collaboration and reduce  competition among overlapping stations.

In Jerome’s proposal, operations and fundraising of the four stations would be closely coordinated by a nonprofit consortium. All of the stations, including KCET, would become PDP members of PBS — each carrying a portion of PBS programming, so L.A. viewers would have access to the whole national lineup. The consortium would be run by a board comprised of general managers and board chairs from each station. Jerome said the stations are currently negotiating details of how the collaboration would work.

PBS rejects the program dues part of that plan. “There must be a primary station in a market in order for the PDP policy to apply,” PBS said in its statement.

CPB won’t take sides on the dues issue, but favors a consolidation. “We would love to see them collaborate and move toward that sooner rather than later,” said Mark Erstling, CPB’s senior v.p. for system development, who has been involved in the talks. “The more quickly they act, the more quickly they can reap the benefits.”

PBS noted in its statement that Jerome had not been an advocate for PDP status in the past: “Until recently, KCET has been passionate about eliminating or restricting PDP policy as it would apply to other stations.”

As for the L.A. consortium that Jerome envisions, PBS said that “we are not aware of any business, operations or governance plans that have been developed, or that a timeline agreed upon by all the stations has been crafted.”

Both KCET and PBS agree that staying together would be mutually beneficial. Yet after eight months of negotiations between high-level execs from both sides, sources say, they appear far from a compromise that would prevent a split.

There’s a lot at stake. Earlier this year, PBS President Paula Kerger told the KCET Board that the loss of the station could bring down the entire public television system, according to two sources present in the executive session. Gordon Bava, KCET board chair, characterized the reaction from its members as, “Well, do something about it!” (A PBS spokesperson denies that Kerger made the remark.)

If other overlap stations around the country used the L.A. collaboration as a template and were allowed to become PDP stations paying reduced PBS dues, it would cut deeply into the budget for PBS programming and services, the bulk of which stations pay. The loss of KCET alone would cut nearly 5 percent of approximately $139 million in station dues that support 81 percent of its $172 million content spending.

Station execs are worried about a domino effect. “Stations have lots of economic challenges right now but there’s a danger if we each become too focused on ourselves,” said Jon Miskowski, development director at Wisconsin Public Television. “If enough stations leave PBS or go dark that will have a significant financial impact on the viability of all of us. . . . The fact is that we are all tied together. Loss of stations threatens the major series that are the heart of our viewing and a critical part of our service.”

RELATED STORY

KCET’s twin programs for daycare providers, A Place of Our Own and Los Niños en Su Casa, brought in the station’s biggest production grants — BP gave $25 million — and raised its PBS dues thereafter.

RELATED LINK

The Los Angeles Times summarizes: Struggling KCET examines its options, Aug. 4, 2010.

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