Two public TV stations in the San Francisco area have agreed to merge, the first combination in a major market since New York’s WNET and WLIW tied the knot five years ago.
The licenses of KQED-TV/FM and San Jose’s KTEH will be transferred to a new nonprofit, Northern California Public Broadcasting, whose transmitters will stretch north to KQED’s new FM outlet in Sacramento and south to KTEH’s sister station serving the Monterey area.
Jeff Clarke, president of KQED, will head the combined licensee; Nick Donatiello, KQED’s chairman, will chair the new board. Most of the KQED Board, 23 directors, will move to the new licensee’s board, joined by three members from the San Jose station’s board.
KTEH will retain its identity, however, with Thomas Fanella remaining as president, and Clarke said the merging stations are committed to maintaining the home facilities as they add one for KCAH in Watsonville/Monterey.
“Both of us are coming together from positions of strength,” Clarke says. Neither manager plans to leave or retire, he said. Both stations are operating in the black.
That doesn’t mean KTEH was wealthy. “KTEH has struggled to find money to buy programming,” San Jose Mercury News columnist Charlie McCollum wrote after the merger was announced. It has had to hold separate fundraising drives to save such series as EastEnders and for DTV conversion, he said.
Leaders of the two stations agree that the merger means that they’ll have more options for improved and diversified programming.
With the marriage, KTEH will be able to choose among all of PBS’s program offerings and not be restricted to 40 percent of the schedule that it purchases through PBS’s program differentiation plan for stations in overlap markets.
John Michael Sobrato, a real estate developer and chairman of KTEH, ticks off the advantages for San Jose, which are echoed in San Francisco: “We can offer a broader and more diverse range of programming to the [audiences] of all three stations,” he says. “Instead of programming competitively to run certain key programs, we can ... minimize duplication.”
KTEH operates a digital transmitter, and the station now will be able to offer digital multicasting, further adding to program variety, Sobrato says. Using KQED’s high-definition gear, it will be able to produce in HD.
The merged stations also will gain efficiencies of scale and greater buying power, Sobrato predicts. In particular, when dealing with program syndicators, Clarke observes, “we should be able to do smart deals that save money.”
The combined stations’ third advantage will be a stronger position to sell regional underwriting, Sobrato says. When added together, KQED and KTEH’s household ratings give them the fourth-largest audience in the Bay Area market, bigger than the audiences of two commercial stations, according to their fact sheet.
KQED also may have new underwriting prospects to cultivate. To avoid treading on KTEH’s turf, it didn’t assign underwriting salespeople to Silicon Valley, Sobrato says. In addition, major donors and foundations resisted contributing to two pubTV stations 30 miles apart, he says, because they regarded the stations as duplicative.
The Bay Area was one of the metro areas where CPB played matchmaker in the late 1990s, when it spent about $10 million nationwide to foster collaborations and mergers among overlapping pubTV stations.
The WNET-WLIW merger got an assist from CPB’s initiative, and so did facility-sharing deals in several cities. But four of the five Bay Area stations talked about their prospects for collaboration and decided facility-sharing wouldn’t be worth the trouble, said CPB exec David Clark in 2000. Clark was director of CPB’s Overlap Market Project.
KQED’s Donatiello is not surprised that mergers are rare, despite their advantages. There are substantial impediments, he says.
KTEH’s Sobrato agrees. “Both CPB and PBS are strong supporters of merging—in concept. But when it comes down to dollars and cents, there’s very little financial incentive from either,” he says. A merged station gets a smaller annual CPB grant than the two stations got separately, and PBS charges more for programs, he contends.
Those policies aren’t likely to change, either, Donatiello argues, because, in the one-station, one-vote world of pubTV, small stations outnumber large ones, and “the more you merge, the fewer votes you get.”
“A lot of mergers have to start with the chemistry between the CEOs, or they’re not going to happen,” Sobrato observes.
The merger bubbled up in the cooperative chemistry that Fanella and Clarke fostered since Clarke came to town in 2002. They worked out deals for KTEH to carry more PBS shows and air the NewsHour at 11 p.m., for example.
The two managers lunched regularly, taking turns on each others’ home turf and often discussing cooperation. During a meal on the Monterey peninsula last summer, Clarke recalls, Fanella proposed going all the way: “I think we need to merge.”
“All it took was to stop thinking about our individual station’s ‘sovereignty’ and start thinking about the enhanced services we could provide to our constituents,” Fanella told Current.
“They concluded the best way to work together would be to be together,” Donatiello summarizes.
The managers asked six key board members to join a small committee that would vet the idea.
“We knew we were looking at substantial challenges in our television business,” Donatiello says. Board members were aware of McKinsey & Co.’s earlier recommendations that CPB encourage mergers.
The KQED Board was already familiar with many of the issues. It had considered them not long ago when it was deciding to buy the Sacramento FM station now called KQEI, Clarke says.
In the end, both boards voted unanimously to combine.
“We loved the deal, warts and all,” Donatiello says. “We ultimately believed the benefits outweighed the risks.”
The managers agreed to maintain facilities in both San Francisco and San Jose, while creating one in the Monterey area, but they didn’t jam the agreement with details about executive roles or what programs would air on which channels, according to Fanella.
These questions, including sensitive staffing issues—“who does what where”—will be decided over the next six to nine months, Clarke says.
Web page posted May 30, 2007
Copyright 2007 by Current Publishing Committee
