After leaving PBS, a California TV station struggles with its independence

Downtown Los Angeles, circa 2011. Jason Oertell, via Flickr

FOR MORE THAN FOUR DECADES, the main PBS station in Southern California was KCET, whose viewers tuned in to watch “American Experience,” “Nova,”  Ken Burns documentaries and “Sesame Street.” KOCE, the PBS station in nearby Orange County, could be viewed throughout the same region but spent nearly all of that time as second string; its contract limited KOCE to showing only 25 percent of the network’s schedule, and only after more than a week’s delay. When Southern Californians mentioned a PBS show, they usually were talking about KCET.

One evening in August 2010, KOCE manager Mel Rogers had dinner in Washington with PBS executives. KCET was angry over its $6.8 million annual dues, the executives told Rogers,  and its CEO was considering walking away from the network.

ICYMI: What to do with public TV’s ‘spectrum auction’ windfall?

Such a drastic step by KCET struck Rogers as so ridiculous that he didn’t mention it to his staff. “It just seemed implausible to me, knowing how important the PBS brand was in Southern California and across the nation,” Rogers says. “I thought it was a bluff.” Two months later Rogers learned the bluff had become real. KCET left PBS—and, nearly overnight, KOCE had to move from understudy to star.

In the close-knit world of PBS stations and their viewers, the defection of the top station in the nation’s second-largest market has been scrutinized and meticulously debated. KCET planned to transform itself into an independent non-commercial station—an act that no one could remember happening in a major market in recent times. Some public TV executives, struggling with their own relationships with PBS, hoped KCET could clear a new path. Dan Schmidt, head of Chicago’s WTTW, told his board that “if KCET is able to thrive without PBS, this will be a paradigm shift, which will change our business model forever.”

But in the seven years since the breakup, KCET’s great experiment with independence has largely flopped. Donations have plummeted. Financial records from June 2016 (the most recent available year) put the company’s losses at more than $19 million on revenue of nearly $68 million.

Sign up for weekly emails from the United States Project

Other stations have taken note. WFME, the PBS affiliate in Orlando, Fla., considered going independent, but instead its board sold the station in 2012 to the University of Central Florida, and it remains the dominant PBS station in the region. “Someone could make that model work in a small market,” says Jose Fajardo, WFME’s former station manager. “But in a larger market where there’s more competition for eyeballs and funding support, I don’t think it’s possible.”

As a former public broadcasting executive told me, “KCET gambled against the house, and the house always wins.”

The former KCET studio site, which the station sold to the Church of Scientology in 2011 and then temporarily leased back. J Jakobson, via Flickr

 

KCET’S TIMING COULDN’T HAVE BEEN WORSE. PBS’ biggest hit in years, “Downton Abbey,” premiered just eight days after the split. In addition, PBS was in the middle of a 10-year plan to strengthen its prime-time programming that moved the network from the 12th most-watched to the sixth by the 2015-16 season.

With its PBS program supplier gone, KCET was unprepared to fill its schedule. “There was no Plan B,” says Bret Marcus, a former KCET senior vice president and chief content officer. Al Jerome, KCET’s CEO for 18 years, retired in 2014. He did not reply to email requests for an interview.  Bohdan Zachary, former senior vice president for broadcasting, programming and syndication, who is now the general manager of Milwaukee Public Television, did not return phone messages.

Bob Ottenhoff, who joined KCET’s board about three years after the split, says that, even then, the station didn’t have a strategy. “I don’t think they had really thought through what’s the long-term plan that makes you buck all this history and media trends and the high cost of production,” he says.

In order to fill all those hours on its schedule, KCET has had to resort to non PBS alternatives, sometimes experimenting with its own new programs. Instead of the PBS NewsHour, for example, KCET runs English-language news shows from Japan, France and Germany, along with Amy Goodman’s “Democracy Now.” The station has filled its schedule with programs like “Prisoners of War,” the Israeli show that “Homeland” was based on, the Danish drama “Borgen” and British imports like “Doc Martin” and “Luther.”

KCET has focused much of its programming on local themes, sometimes filling a void in the local market with shows like “The Migrant Kitchen,” which explores how immigrants have influenced Southern California’s cuisine, and “Lost LA,” a collaboration with USC Libraries about the city’s history. It recently hired a new executive producer for its award-winning “SoCal Connected,” a signal the show could be considering more investigative segments. The station has bolstered its online presence, and uses its website as a platform to audition shows.

Was it as mistake for the station to leave PBS? ‘I wasn’t there when it happened.’

Some of the station’s biggest plans never came to fruition. Jerome announced in 2012 the station would raise money to take former ESPN broadcaster Roy Firestone’s weekly interview show nightly, but it never happened, and Firestone no longer has a show.

The biggest failure may have been a ballyhooed deal with former Disney executive Dominique Bigle. A 2011 news release said Bigle’s company would spend $50 million over five years with an initial group of “programs that explore everything from the glitz of Hollywood entertainment and multi-cultural eateries to groundbreaking academic research and technological innovation.” Only one show was produced: a weekly airing of old movies.

As donations and membership declined, KCET searched for new sources of cash. The station’s most valuable asset was its 4.5-acre Sunset Boulevard studio, which the city of Los Angeles designated a historical-cultural monument. The station sold the lot to the Church of Scientology in 2011 for a reported $45 million, which became $28.8 million after the station temporarily leased back the property.

“I’ve always been curious how much from the sale of the building did they end up sticking in an endowment or did they spend it all to move and operate,” says Steve Bass, president and CEO of Oregon Public Broadcasting. “That could have been the game changer. “

In 2012, the station merged with the satellite network LinkTV, becoming KCETLink. Paul Mason, then Link’s CEO and president, says his nonprofit was in such deep financial difficulty that it was considering dissolving. Meanwhile, KCET told Link it had $12 million in the bank, according to Mason. At the first joint board meeting in January 2013, Link’s leadership was in for a surprise. “KCET unleashed all its financials, and we saw it was smoke and mirrors,” Mason says. “Link board members were irate. We came out of that meeting, and felt we had been had.”

Ottenhoff, who had been on Link’s board and was experienced in the nonprofit world, agrees. “We were struggling as an independent station, and we associated with an organization that was struggling as much as we were but with higher expenses,” he says.

 

MICHAEL RILEY, who became KCET’s CEO in 2015 after Jerome retired, has his office on the sixth floor of a Burbank high rise, a floor above most of those involved in production. Riley was head of the ABC Family Network before he resigned in 2014 to spend more time with his partner in London.  Former employees say Riley (along with Juan Devis, the chief creative officer) has brought new enthusiasm and energy to a station that had stagnated under the previous regime. If Riley can fix KCET’s money woes, increase its ratings and provide TV and web viewers with an attractive alternative, he will be a hero. If he fails, can he be blamed for the mess he inherited?

Riley was reluctant to sit for an interview. Ariel Carpenter, the station’s vice president of communications, first said that according to the KCET’s lawyers, the Federal Communications Commission prohibited interviews during the ongoing broadcast spectrum auction. I sent Carpenter an FCC memo that said interviews were OK, as long the station did not discuss its plans for the auction. Eight days later, Carpenter replied and said that, because a portion of the auction was finished, I could interview Riley by phone.

During our October 2016 call, Riley distanced himself from the problems he had inherited at the station.

Was it as mistake for the station to leave PBS? “I wasn’t there when it happened,” said Riley.

What happened to the money from the studio sale? “It’s difficult for me to comment because I wasn’t there at the time.”  

Former employees had questioned whether a cash-squeezed organization like KCET had spent too much money on its new offices and told me that the 18 or so editing bays usually were empty. Riley said that wasn’t true, and there had been a “really nice increase in facilities rental.”

Foundation support increased by 30 percent during the past three years, according to Riley. The station is concentrating on “hyperlocal story telling, about connecting communities together, and global storytelling,” often in partnership with other organizations. He pointed to the Long Beach Opera’s production “Fallujah,” about American soldiers in Iraq, that KCET had broadcast live. “The ratings were not great but it’s one of the things we’re most proud of,” he said.

The chilly relationship with PBS has warmed since Riley took over. Paula Kerger, president of PBS, visited KCET’s offices in fall 2015. “We continue to talk to them about a lot of different things,”  Riley said, referring to PBS. “We don’t know what the relationship is going to look like in the future. We want to make sure anything is possible.”

Riley has also met with Andrew Russell, the soft spoken former PBS executive who was involved in the negotiations with KCET before the split, and who became KOCE’s CEO after Rogers retired. “We are talking to KCET and seeing if it makes sense to do something together,” says Russell, who did not share details.

 

KCET’s building is better equipped than most commercial and public television stations. It was clearly built to support KCET’s ambitions—which just haven’t materialized.

 

DESPITE THE INCREASED foundation support, KCET’s financial statements paint a troubling picture. The station paid an annual interest rate of 8.25 percent on a $2.5 million credit line with City National Bank, an indication of the bank’s risk. The station also borrowed nearly $2.9 million from restricted funds in fiscal year 2013 to pay for other operations. “That’s not something you do lightly,” said Bill Holder, dean of the Leventhal School of Accounting at USC. “You would want permission of the donor or a legal interpretation that what you’re doing is appropriate.”

According to its most recent financial report, KCET lost $7.3 million on revenues of $19.9 million during the fiscal year ending June 30, 2016. An optimist might point out that the loss was $1.2 million less than the previous year.

Grants, gifts, contributions and membership fees, the lifeblood of non-commercial media, continued a slide that had started while the station was affiliated with PBS. Records from fiscal year 2014 to 2015, the most recent timeframe available, show contributions and grants fell more than $5.8 million.

After selling the Sunset Boulevard studio in 2011, KCET moved eight miles north to Burbank, where it leased 55,000 square feet on two floors of a 14-story building near NBC, ABC, Disney and Warner Brothers.  The space includes two sound stages, one of them outfitted in virtual 3-D. The day I toured the station, the mixed martial arts company Ultimate Fighting Championship was editing “UFC Now” in a production control room.

Former employees criticize the opulence of the new offices. “KCET’s building is better equipped than most commercial and public television stations,” says one television executive. “It was clearly built to support KCET’s ambitions—which just haven’t materialized.”

 

We get anger and betrayal and grief. It’s a sentiment I’ve seen again and again and again. People in this community grew up with KCET.

 

KCET BANKED ON a potential multimillion-dollar windfall from the Federal Communication Commission’s auction of broadcast spectrum to mobile carriers. (Because of technological advances, stations can share their over-the-air spectrum without viewers noticing.) KCET signed an agreement to share its spectrum with a PBS affiliate owned by the Los Angeles Unified School District that had put its spectrum up for sale. The two stations agreed to share proceeds of the sale.

KCET leveraged the potential profits to negotiate a $15 million line of credit in July 2015. “Management believes that the new bank relationship provides sufficient funding to bridge KCETLink to the spectrum auction,” according to its financial statement. “KCETLink will use the proceeds from the auction both to retire current debt and to invest so as to provide a steady stream of income in support of operations and programming.” Five-and-a-half months later, the station received another loan, for $2.5 million.

Prior to the auction, financial and media analysts bandied about estimated prices for an LA station’s spectrum. Bill Baker, former president of New York PBS station WNET, had heard estimates as great as $200 million. But when the auction concluded in April, the total figure stations received nationally was far lower than predicted. KCET ended up with $63 million. (Editor’s note: In an October 2017 press release about the spectrum auction results, KCET announced that it would sublet nearly 25,000 square feet of its office space to The Switch, which “will serve as the outsourced provider of all broadcast origination, master control and technical services to KCET and Link TV.”) In addition to spending $15 million to pay off debt, the station plans to use the remainder to set up a fund that will spin off $1 million to $2 million annually for programming, in addition to its $5-million endowment.

“$60 million doesn’t do much,” Baker said. “One million to $2 million a year is nothing.” He suggested the money be spread out via $100,000 grants that could help filmmakers jumpstart projects.

I wanted to interview Riley about the results of the spectrum auction and its effect on the station’s future, so I emailed Carpenter in late June, asking if she could set up another interview. She emailed back, “I’m sorry but he is unavailable for an interview.”

About 10 days later, I received a news release from the station saying that the latest Nielsen figures showed KCET was the highest rated public broadcast station in primetime in Southern California during the second quarter of 2017—a surprising development, and one that suggested the station had turned things around. The station’s publicist asked if I wanted to interview Riley, and I said yes. Then I received another email from Carpenter. “Michael is actually not available for interviews,” she wrote. “Sorry for the confusion.”

The news release mystifies KOCE’s Andrew Russell. In February 2017, before the start of the second quarter, KOCE’s week-long ratings were 64-percent higher than KCET’s, and it’s primetime ratings were 82-percent higher than KCET’s, according to Russell. “It’s not consistent with what we’ve seen,” he says. “We find KOCE ratings are consistently higher than KCET and that’s been true for years.” 

According to numbers provided by Carpenter, KCET’s whole day and primetime viewership for 2017 each grew by 25 percent over the previous year. “Our journey as an independent has not been without challenges, and we have worked diligently to re-engineer our cost and overhead to ensure sustainability of our mission,” says Carpenter, who tells CJR that the station’s latest ratings “indicate very positive momentum.”

“This was higher than any other broadcast TV station in the Los Angeles market for that time period. We’re extremely proud of what we’ve accomplished and are well-positioned for decades to come.”

 

A NUMBER OF FORMER KCET supporters remain angry at the station. For three days in 2016, volunteers helped build KOCE’s float for the annual Rose Parade, where Ken Burns was grand marshal. An older couple sought out Russell at the parade prep site. The wife said they wanted to thank Russell for saving PBS for Southern California. Then she told Russell that the couple’s names had been written on a brick at the old studio, alongside bricks bearing the names of other donors who made large contributions. She said the couple couldn’t forgive the station, and can’t speak Jerome’s name because of what he and KCET did.

“It was a very personal moment,” Russell says. “We get anger and betrayal and grief. It’s a sentiment I’ve seen again and again and again. People in this community grew up with KCET. It’s a big loss, is what it is.”

ICYMI: In West Virginia, a state financial crisis poses the greatest threat to public media

Correction: A previous version of this story misspelled Bret Marcus’s name. Additional efforts have been made to clarify the reporting timeline.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Jeffrey Gottlieb is a freelance writer. While working at The Los Angeles Times, he shared the Pulitzer Prize for Public Service Reporting in 2011 for uncovering widespread corruption in the Southern California city of Bell. He also received the George Polk Award, the Investigative Reporters and Editors Medal and the Selden Ring Award. He previously received a George Polk Award for uncovering Stanford University’s questionable spending of federal funds when he worked for the San Jose Mercury News. His articles have appeared in Mother Jones, The Nation, Time, Rolling Stone and Los Angeles Magazine.