The growth of public television’s station infrastructure has been the work  of decades, as civic leaders, universities, and state and local governments  have marshaled funding and operational support from public and private  sources to establish and operate noncommercial educational television  stations to serve their communities. The Corporation for Public Broadcasting Provides Federal Support to Stations and Other Public Television Entities

Funding has been a continual concern for public television. The Public Broadcasting Service Is a Nonprofit Organization That Provides Technical and Programming Support to Stations

One of the goals of the Public Broadcasting Act was to establish a system to  interconnect the individual public television stations for the distribution of  programming. PBS’s activities and services include the  following:  acquiring and promoting the programs for children’s and prime-time  broadcast that make up PBS’s “National Programming Service;”  operating a satellite-based interconnection system for distributing  programming to member stations for broadcast to their local  communities;  providing educational services, such as its Web-based TeacherSource;   assisting member stations with fund-raising and development support,  as well as a variety of engineering and technology development issues,  such as the digital transition. PBS prime-time and children’s programming constitute a majority of  broadcast hours for most public television stations. However, stations  supplement these programs with both locally produced and instructional  programming to meet the needs of their communities. Local Programming. We identified four primary types of  nonbroadcast services: educational, civic engagement, health, and  emergency services. In 2005, public television licensees reported annual revenues  of $1.8 billion, of which 15 percent came from federal sources. Finally, federal funds  help support PBS and the production of national programming. Public Television Licensees Receive Funding from Many Sources; However, Small Licensees and Licensees in Small Television Markets Exhibit Greater Dependence on Federal Funds

Public television licensees receive the majority of their revenues from four  sources: individuals, businesses, and the federal and state governments. Community licensees received a  significant percentage of revenues from individuals, businesses, and the  federal government through CPB. Eleven  licensees said that the station would discontinue operations if federal  funding were eliminated; these were generally smaller licensees in smaller  television markets. Public Television Stations Are Pursuing a Variety of Nonfederal Funding Sources, but Substantial Growth to Offset a Reduction or Elimination of Federal Support Appears Unlikely

While contributions from individual members represent a significant  source of revenue, this source is not expected to grow significantly in the  future. These  licensees said that greater underwriting flexibility  would not generate increased underwriting revenues, since  corporations and advertisers desire programming with high ratings and  a targeted demographic, which some licensees said public television  cannot deliver;  would upset viewers and contribute to a decline in membership support;  could threaten a licensee’s ability to receive financial support from a   would be inconsistent with the mission of public television and could  alter programming decisions. Because of the large costs  and risks associated with developing and producing television  programming, entities providing a significant share of the funding and  assuming the financial risk seek and generally receive a greater portion of  the rights to back-end revenues. Few Programs Are Successful. For both  commercial and public television, we found that the net proceeds to  producers and investors in program-related business ventures are a small  fraction of the retail sales prices. In general, CPB and PBS contribute less than 50 percent of  the production budget associated with programming. In particular, the report provides information  on (1) the organizational structure of public television, (2) the  programming and other services that public television provides, (3) the  current funding sources for public television, (4) the extent to which public  television stations are increasing their nonfederal funding support and  developing new sources of nonfederal support, and (5) the extent to which  public television benefits financially from business ventures associated  with programming and how this compares with commercial broadcasters.
Why GAO Did This Study

How to fund public television has been a concern since the first noncommercial educational station went on the air in 1953. The use of federal funds to help support public television has been a particular point of discussion and debate. This report reviews (1) the organizational structure of public television, (2) the programming and other services that public television provides, (3) the current funding sources for public television, (4) the extent to which public television stations are increasing their nonfederal funding sources and developing new sources of nonfederal support, and (5) the extent to which public television benefits financially from business ventures associated with programming and how this compares with commercial broadcasters. GAO reviewed revenue, membership, and programming data for all public television licensees. GAO also interviewed officials from 54 of public television's 173 licensees, the Corporation for Public Broadcasting, the Public Broadcasting Service, federal agencies, and producers of commercial and public television programming

What GAO Found

Public television is a largely decentralized enterprise of 349 local stations, owned and operated by 173 independent licensees. The stations' operations are funded in part by the Corporation for Public Broadcasting (CPB), a nongovernmental entity that receives federal appropriations. The Public Broadcasting Service (PBS), a nonprofit organization funded by fees paid by member licensees and CPB grants, operates a satellite-based interconnection system to distribute programs to local stations. These programs are created by producers inside public television and by outside production entities. Public television stations broadcast national and local programs and provide a variety of nonbroadcast services to their communities. PBS prime-time and children's programs account for the majority of broadcast hours, to which stations add instructional and local programs tailored to meet the needs and interests of their communities. Nonbroadcast services include educational, civic engagement, health, and emergency-alert services. In 2005, public television licensees reported annual revenues of $1.8 billion, of which 15 percent came from federal sources and the rest from a variety of nonfederal sources including individuals, businesses, and state and local governments. Federal funds help licensees leverage funds from nonfederal sources. Thirty of 54 licensees GAO interviewed said that cuts in federal funding could lead to a reduction in staff, local programming, or services. In general, smaller licensees receive a higher percent of revenue from federal sources and 11 said that cuts in federal support might force the station to shut down. Substantial growth of nonfederal funding appears unlikely. The one area with growth potential is major gifts, which many licensees are pursuing with help from CPB. Program underwriting by businesses and foundations has traditionally been an important source of revenues. A few licensees believe that these revenues could be increased if restrictions on the content of on-air underwriting acknowledgments were relaxed. Many licensees, however, believe that this would go against the noncommercial character of public television and could cause a loss of funding support from other sources. Public television sometimes benefits from business ventures associated with its programs, but these opportunities are infrequent and do not generate significant revenue. Public television does not have the financial resources to invest heavily in the cost of program production to secure a larger share of any resulting back-end revenues. Moreover, the sale of merchandise associated with a program generally returns only a small percentage of the retail price to the program's producer and investors, as is also true for commercial television programs. GAO provided CPB and PBS with a draft of the report for their review and comment. CPB and PBS agreed with the report.