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.


Pledge standards speak of values, make no rules

No PBS Development Conference is complete without a rigorous discussion of pledge content. Up for debate this year were the new voluntary PBS pledge standards written by PBS staff and the Development Advisory Committee in February.

PBS President Pat Mitchell said the standards were crafted in response to "warning signs that need to be heeded." She cited three: Over the past 10 years, the total number of pledges declined by 20 percent, the number of pledges per minute declined by 50 percent, and the total hours of pledge climbed by 78 percent.

"We must ask ourselves if we are pushing pledge beyond its sustainable development," she said. "I fear that we are approaching a point at which pledge will define public television. We will make it just too easy to reduce our services from public television to pledge television."

Rather than handing down a list of do’s and don’ts, the standards’ authors sketch broad themes for pledge producers to consider. For example:

n Public TV’s obligation is to deliver a unique, valuable service. That obligation must continue to be met during pledge.

n Pledge programming should reflect the same values as the regular schedule.

n Public TV has developed and nurtured trust with viewers—trust based on their intelligence. Pledge must build on that trust.

n Pledge messages must connect viewers with the importance and mission of public TV.

n Pledge must never manipulate, mislead or confuse.

n Premiums and member benefits are useful and appropriate, but should build upon the trust between stations and viewers.

n Pledge messages must seek to engage donors of all giving capabilities.

n Pledge is an integral part of a station’s overall development activities, and it must be evaluated as more than an immediate source of revenue.

n Each station must develop a commonly agreed-upon set of measurements for evaluating pledge success.

Stations are too diverse to prescribe more specific guidelines, said Robert Altman, PBS senior v.p. for development. Even if they weren’t, the network couldn’t force stations to follow rules, he said. But Altman sees value in simply articulating the broad themes. It’s up to stations to establish their own rules and practices, he added.

When PBS distributes its own pledge specials, it will require producers to incorporate the standards, Altman said.

Some development pros think the guidelines are too vague to make much difference. Doug Eichten, president of public radio’s Development Exchange Inc., said public TV’s pledge standards allow a wide variety of interpretation. Eichten is considering proposing pledge standards for public radio but envisions a more specific document with clearer rules on fundraising practices.

The standards say little about the content of pledge specials, but the topic couldn’t be avoided during a session on virtual pledge breaks.

Nancy Wood, development director at Prairie Public Broadcasting, left her 13-year career in public radio for a job in public TV development last month. It was a difficult decision. Wood said she can’t stand to watch PBS during pledge. Public TV’s development practices run counter to everything she learned in public radio. Why does public TV sacrifice its core programming for self-help gurus and wrinkle cures? she asked.

"The problem is, I could put on a million regular programs and make $2,000 or put Wayne Dyer on and make $50,000 that night," said Preston of Twin Cities PTV. "That’s an easy decision for me in the short term."

But balance is the key, he said. An on-air fundraising portfolio should be a mix of both regular programming, which pleases NPS loyalists, and pledge shows, which make money. "If we stuck to the regular schedule, we’d have happier members but fewer donors and less cash," Preston said.

Independent producer Jim Scalem thinks the pledge content "issue has been blown way out of proportion." He asked if any researcher had empirical evidence that Wayne Dyer or Gary Null led to one canceled membership.

But Gustavo Sagastume, PBS v.p. of programming, said it’s wrong-headed to think of pledge programs as different from regular programs. Research shows that the people who watch pledge are public TV’s core viewers, he said. "The reality today is that pledge programming is as much of the branding of public TV as regular programming is."

—Dan Odenwald


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