Fundraising expenses growing twice as fast as revenue in public TV

Originally published in Current, Oct. 21, 2002
By Dan Odenwald

Revenues to public TV stations continued to climb between 1999 and 2001, but the cost of raising those dollars grew twice as fast, according to the latest results from the Station Activities Benchmarking Study.

The annual survey, which grew out of the Public Broadcasting Management Association Best Practices Study, examined the performance of 90 stations over three years, reported Maura Grogan, president of Non-Profit Business Strategies, at this month’s PBS Development Conference in Dallas.

Also in Dallas, conferees discussed the use of preproduced pledge programs, called "virtuals," as well as PBS’s new pledge standards, crafted in part to deal with growing concerns about fundraising practices. Such concerns led PBS President Pat Mitchell to conclude, "I fear that we are approaching a point at which pledge will define public television" (see page 18).

Besides the warnings about pledge, the nearly 1,000 development pros at the conference faced a litany of depressing statistics.

According to the benchmarking study, public TV’s overall gross revenues grew 7.2 percent, adding millions of dollars to stations’ coffers, Grogan said. But expenses grew by 13 percent.

Rising costs also undercut growth in several major revenue lines—membership expenses grew 14.2 percent, major giving expenses climbed 8.3 percent and underwriting expenses were up 10 percent.

"The trends in our industry are not looking very good right now," Grogan said. "All of the financial and audience trends are down."

PBS painted a similar picture for the past year, based on a smaller but more recent sampling of station data. The network projected that total revenue in fiscal 2002 finished 3.1 percent ahead of fiscal 2001. Even as revenue climbs, the total number of donors continues to drop. Total donors declined 4.1 percent between fiscal 2002 and fiscal 2001, according to PBS. But that’s slightly better than the 4.5 percent drop posted the year before.

Overall, the total number of donors has dropped 10.9 percent since 1999, according to the PBS Station Index, an analysis of data from 15 representative stations. Public TV has approximately 4.5 million members.

While the growing expenses reported in the benchmarking study cut into the bottom line, the system did post modest gains in net income, which rose 4.3 percent between 1999 and 2001.

Net membership revenues were up 4.9 percent. Major giving net grew 2.3 percent and underwriting net 4.3 percent. As Grogan crunches 2002 data, she expects those net figures to improve, reflecting widespread station cost-cutting this past year to offset projected deficits.

Not all expenses are bad, Grogan said. Though fundraising costs for major gifts more than doubled between 1999 and 2001, stations can expect to recoup those dollars as their major giving programs mature.

Pledge costs, on the other hand, appear to be out of control and Grogan said she doesn’t know why. As more stations employ cost-saving preproduced pledge specials to fill out their schedules, Grogan was surprised to see pledge costs jump 32 percent between 1999 and 2001. Figures indicate that pledge salaries alone went up 207 percent. Grogan isn’t sure what could explain such a steep rise in costs and is examining data to see whether there are aberrations in the study.

The survey shows that the average station is spending 96 cents of every dollar allocated to pledge to acquire new members with the hope that once members join, they stay, Grogan said. But research shows many pledge-acquired donors don’t re-up the second year.

"We’ve got to be very careful about how much we’re spending to get those folks in," she said.

As fundraising costs climb, stations are attracting fewer supporters for the dollars they’re spending. Overall, public TV saw a 24 percent decline in new donors from 1999 to 2001, Grogan said. There were not enough new donors to replace normal attrition, even at top-performing stations. Contributors giving under $1,000 dropped 8 percent.

But stations appear to be having more success asking for larger amounts. Donors giving more than $1,000 grew by 61 percent.

Primetime ratings erosion helps explain some of public TV’s struggle with pledge. PBS lost 11 percent of its audience between the 2000-01 and 2001-02 seasons. Even so, stations are paying 9 percent more to buy programs than they were in 1999. "We’re spending more to generate less audience," Grogan said.

Without audience, a station can’t generate members, donors or underwriters. "There’s only so much development officers can do to be more efficient and more creative," she said. "They have to work hand-in-hand."

On a brighter note, Grogan said, several stations are reporting more success in fiscal year 2002, which was not measured in the study shared at the Development Conference.

"I think a lot of these numbers in the development area are going to show improvement in 2002," she said. "I think . . . we’re going to see turnaround on some of this stuff."

Recent research from PBS suggests that’s true. Pledge revenues increased 20.2 percent from fiscal year 2001 to 2002, thanks to more and larger gifts, reported Beth Suarez, PBS’s senior director of individual giving. New pledge revenue was up 24.6 percent and pledge renewals were up 21.9 percent.

Pledge now accounts for 36 percent of total station membership revenues, compared to 31 percent in fiscal 2001, Suarez said. However, almost all of this growth was driven by new and rejoining pledge donors, who historically have low renewal rates, she said.

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