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public TV and radio in the United States

What did Barney earn,
and why didn't PBS get more?

Originally published in Current, March 6, 1995
By Steve Behrens

Of all the facts, half-truths and distortions used by public broadcasting's opponents in the ongoing contest to redefine the field's public image, the Barney Billions seem the most enduring and damaging.

The mountains of money that Barney & Friends "brings in" annually, as cited by senators, columnists and ordinary people alike, have grown from hundreds of thousands to billions of dollars, though the actual net income to the show's producers is more likely in the tens of millions, and just a fraction of that is available to public TV.

The inflated numbers, however, make an indelible connection with the perceptions of moms and dads who have shopped for Barney products. "Everyone who has kids knows how much they cost," says conservative researcher Laurence Jarvik. "When they hear that CPB is not getting any of it, they know somebody is getting rich, and the federal government paid them $2 million! It's a crystal-clear case that people can understand."

Barney's jackpot held fascination not only for Jarvik and his readers in the Senate but also for PBS. The network renegotiated its deal with Barney's producers, receiving a guarantee that it will recoup its spending on the program's new season after four years, says Larry Rifkin, the Connecticut PTV programmer who brought the series to PBS. This means PBS will get back at least $1.75 million by the end of 1998, he estimates. In other words, public TV will get to broadcast the show virtually free.

"Barneygate" seems likely to live on in pubcasting history, though no one knows today whether the furor will be remembered for introducing public TV to big-time product licensing, for gravely injuring its reputation at a crucial political moment, or for its sheer one-time-only weirdness.

Figure of speech

What became Barneygate first appeared in a 1993 Washington Post article pointing out that PBS had missed getting a big share of the jackpot in Barney merchandise. The story began turning up in articles by Jarvik and speeches about "profiteering" by Sen. Bob Dole (R-Kan.).

By the time Sen. Larry Pressler (R-S.D.) began employing the story late last year, Barney was not just a parable for public TV's supposed indifference to honestly earned, red-blooded greenbacks, but also evidence that it needed no federal assistance.

Barney "made a billion dollars in one year," Pressler said on Nightline in January. "If the Corporation for Public Broadcasting had gotten 30 percent of that, it would have had a lot more than they got from the federal government."

Jarvik acknowledges that Barney by himself isn't generating quite that much cash, and complains about the "dishonest literal-mindedness of people in public broadcasting." Jarvik's point is that Bill Moyers, Garrison Keillor and many other "private parties" altogether are selling "a pretty hefty load of stuff," he says.

"It's a figure of speech: 'Get your money from Barney.' "

But among the literal-minded, Pressler's claim that Barney's income could supercede the $285 million CPB appropriation does seem exaggerated.

"Basically, they're overstating the case as far as merchandising being able to support PBS," says Karen Raugust, editor of The Licensing Letter, a trade journalist often cited by Jarvik.

That's just her informed judgment. It's easy to make claims about licensing income because few producers reveal their net revenue, and gross revenue estimates are usually offered by businesses with every incentive to brag.

Yet, having a clue about Barney's real income reveals the magnitude of "backend" ancillary income and the factors that limit its potential, even in the rare case of a certified commercial hit. The Lyons Group, originator of Barney and coproducer of the series for PBS, is a privately held company and does not release figures, but Raugust walked Current through a series of ballpark estimates.

What did Barney earn?

The general word in the licensing industry is that retailers moved $500 million or more in Barney products in 1993, his best year, she says.

"We refer to it internally as the Elvis Year," says Lyons Group spokesman Russell Mack. Barney didn't sell as well in 1994, he adds. "Now we're trying to extend it at a plateau, as a classic character." Raugust figures Barney-related retail sales have now fallen to about $100 million a year.

But let's go back to the Elvis Year. If retail sales were $500 million, that would mean about $250 million wholesale. And the rights holder--Lyons Group, in this case--usually gets royalties of 5 to 12 percent on the wholesale figure, according to Raugust.

Say Lyons' cut was 10 percent, Raugust continues. "That translates to about $25 million in royalties." And that's before Lyons Group subtracts costs or gives public TV its negotiated 30 percent cut of certain royalties.

When CPB President Richard Carlson testified at the House appropriations subcommittee in January, his estimate landed in the same ballpark. He figured that Lyons Group netted $20 million last year.

Carlson may have been working with more inside information about the Lyons Group than most outsiders. He had talked the night before with Dick Leach, head of the Lyons Group and father-in-law of Barney creator Cheryl Leach.

A figure from a third source further indicates that Barney royalties are in the tens of millions at best. Connecticut PTV's Larry Rifkin projects that CPTV will bring in $1.6 million in royalties over the first three seasons of Barney & Friends. And during that time, its share of the royalties was 15 percent, he says.

These figures imply that certain categories of videocassettes, books, audio and foreign broadcast rights gave the Lyons Group royalties of about $10.6 million for three years. Lyons probably earned many additional millions on royalties for lunchboxes, talking Barney dolls and the like, but public TV had no rights to share in those proceeds.

Another reality check comes from Children's Television Workshop, famous for Sesame Street. CTW earned total net royalties of just under $20 million in fiscal 1994, according to according to spokeswoman Ellen Morgenstern. That represented an average net royalty of 5 percent, she says. Using Raugust's back-of-the-envelope formula, that would imply sales of $400 million wholesale and about $800 million retail, which happens to be her estimate of the Sesame Street retail gross.

Licensing provides the biggest positive number on CTW's books and permits the company to cover two-thirds of the cost of making Sesame Street. But CTW earned its licensing money the same way any producer does, the hard way.

"It took CTW a long time to learn how to market," says Jerrold Robinson, a former president of the Licensing Industry Merchandisers Association who sold Disney-character sportswear for many years. He credits William F. Whaley, CTW's longtime licensing president, for learning the trade from the ground up.

CTW's success in licensing ironically gave Whaley the stratospheric pay that Jarvik cites as evidence of cushy salaries in public TV. Indeed, as CTW acknowledges, Whaley was taking home about $700,000 a year, including a salary over $400,000 plus incentives. He quit CTW last June, and his successor earns a flat $240,000.

Taken by surprise

When PBS bought broadcast rights for Barney & Friends, it admittedly did not have much practice in aggressive bargaining with its producers, most of which had been nonprofits like CTW or its own member stations. Revenue was split by policy, not negotiation. There was little question where the money would go. It usually stayed within public TV, says Peter Downey, PBS's senior v.p. for program business affairs.

Moreover, there was usually very little of it. Licensing revenues have only been an issue the last few years, since Shining Time Station's Thomas the Tank Engine and Barney became "monster hits," says Raugust.

Besides, PBS was just trying out a short run of Barney and had limited hopes for it. "We were naturally skeptical of a guy in a dinosaur suit," says Downey.

Even after airing a few episodes, PBS was so unimpressed by Barney & Friends that the network canceled it in June 1992. With an attitude like that, Rifkin points out, PBS was unlikely to angle for rights to sell Barney toys.

Kids and parents wanted more of Barney, however, and they rewarded public TV with improved kidvid ratings and underwriting/membership dollars that Rifkin estimates at $15 million over three years.

But PBS didn't go after big backend money in its deals for the first two seasons. In the first season, Connecticut PTV had a 15 percent share of net royalties; CPB and PBS were entitled to 7.5 percent each, but CPB ceded its royalties to PBS, according to Rifkin.

For the third season, however, PBS negotiated royalties covering a wider range of products, including all videocassettes, according to Rifkin, plus the new guarantee that public TV will recoup its spending.

The percentages are about the same, though CPB stopping putting money into the series and has no share. Public TV will get 30 percent of net income from audio and video--shared equally by PBS and Connecticut PTV. But it still won't get a piece of royalties from toys or other Barneyana.

PBS has a different deal to suit the circumstances of each program, Downey says. "What I can say universally is that public television is entitled to an income share on all commercial activities of the producer."

"The third season [of Barney & Friends] was negotiated at a time when it was clearer that Barney had settled into the world of the preschool audience," explains Rifkin. "PBS felt additional considerations were warranted and Lyons Group agreed."

While PBS could demand a lot in its third-season Barney deal, it could not demand a payback guarantee on Wishbone, a new preschooler series from a producer affiliated with the Lyons Group. "We have no idea how Wishbone is going to do," says Downey. "It could be a total flop."

Factors in the bargain

As elsewhere in the media world, these rights negotiations hinge on the interplay of needs and wants, assets and liabilities that buyer and seller bring to the table.

Downey recites a list of "imponderables" that are factored into the result.

The buyer, for instance, must decide whether program spending is just a broadcast license fee or an investment. Does PBS get the program's value by airing it for the viewers, or does it spend more and hope to see a financial return? "Balancing those concepts is a struggle," says Downey, "especially in a noncommercial environment."

PBS traditionally has tried to buy program rights as cheaply as possible, a practice Rifkin endorses. Developing commercial properties is risky, he says. "If public television can avoid it, it is best to avoid it." For every Barney that succeeds as a product, he says, there are many that bomb.

"Even the most knowledgeable people . . . can't really understand why that [Barney] phenomenon happened and another didn't," says Howard Blumenthal, producer of Where in the World Is Carmen Sandiego? and author of The Business of Television.

If PBS wrote a big check for a wide range of rights, it would be responsible for exploiting them, Blumenthal says. "Then they're the ones licensing bedsheets. If those rights exist, then somebody has to exploit them." PBS would need to hire experienced licensing specialists or sublicense the rights to someone else. And most likely the network would end up paying royalties back to the creator, who wouldn't completely relinquish a share of the profits.

To reach the right price, buyer and seller have to imagine how much each side stands to win or lose. How much is the broadcast exposure promoting the toys and other merchandise, Downey asks, and how much is that merchandise promoting the viewing of the program? Rifkin acknowledges that the repeated daily TV exposure of Barney has "extremely significant" value to its rights holders.

The next big thing?

The Great Multicolored Hope of public TV licensing is The Puzzle Place which premiered in January. Fisher-Price toys based on the show were shown last month at the Toy Fair in Manhattan, but they will not go on sale until June, says Cecily Truett, c.e.o. of Lancit Media Entertainment.

"We did not want the appearance of being overcommercialized," says Truett. She wants to avoid slapping the show's name on "cheap, low-quality products." The only products available earlier, this month, will be a line of Puzzle Place videocassettes, available initially only through public TV stations.

PBS's deal for Puzzle Place dates back about three years, pre-Barney, according to Downey, but he contends public TV is getting "a fair return." KCET is an equal partner with Lancit.

The exact split of net licensing proceeds will be 31 percent each to Lancit and KCET, 19 percent to CPB, which contributed about a quarter of the revenues, and 19 percent to actors, writers, puppet creators and other talent, says Truett.

"Had we to do it over again," Downey remarks, "PBS might wish to claim a share of that revenue on the theory that what's creating the wealth is the appearance of the program on all the public television stations."

An unusual spectacle provided by the CPB funding debate has been Republican senators' complaints about private businesses making profits.

This galls Truett, a former South Carolina public broadcaster who built the company with her husband Larry Lancit into an $18 million stockholder-owned corporation on the basis of its prospects for Puzzle Place, Reading Rainbow, and various new theatrical film and licensing projects.

"This company has every intention of becoming ... a very profitable business by doing good work, and our shareholders have made a big investment in The Puzzle Place."

If Pressler wants public broadcasters to take more of the profit potential of programs, she says, he shouldn't expect the private sector to come to the aid of public TV. "That's cool," she says. If the programs are to be made, producers would just go to the government for funds.

Web page posted Sept. 12, 1995
Copyright 1995 by Current Publishing Committee

LINKS

A decade later, Rep. Ginny Brown-Waite (R-Fla.) revives the old complaint about public broadcasting as a "massive corporation," rich with toy money, "shielding its profits so that it can continue to feed at the federal trough." Accuracy in Media, a perennial critic of pubcasting, carries to message on its website.

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