Public media faces a Pac-Man moment

Revenue and viewership at nearly all organizations are flat — and with the loss of federal funding, likely to drop in the coming year (in some cases, precipitously). In almost any other industry, consolidation would almost certainly be happening.”

Tom Davidson, the Bellisario Professor of the Practice in Media Entrepreneurship at Penn State University

In 2000, the cellular phone industry had more than 100 companies (six of them huge) fighting to gain a foothold in the mobile phone market. And why not? It was booming.

In 1995, the U.S. had 33.8 million cell phones in use. A decade later, there were more than 200 million.

But once growth slows, consolidation inevitably follows. The go-go-go entrepreneurs start to cash out, and steady management (and back-end cost savings) become bigger financial drivers than top-line growth.

Think of it as the corporate version of the 80s arcade game Pac-Man. It’s why today, we have only three major cell phone companies. The same forces are why we’re down to just six cable and satellite providers of any size (and Dish is teetering).

Public media should take some lessons from this.

Revenue and viewership at nearly all organizations are flat — and with the loss of federal funding, likely to drop in the coming year (in some cases, precipitously).

In almost any other industry, consolidation would almost certainly be happening. An array of governance structures (501(c)(3)s, government entities and university licensees) makes mergers more complex.

But more should happen anyway.

Our mission is based on localism — universal coverage of our broadcast signals and deep engagement with our communities.

For decades, that’s meant local ownership. But that’s not necessarily required. Local content and local engagement are the keys. Given the urgent need to repair stations’ crumbling finances and secure sufficient funds for digital transformation, we should explore any viable structure to achieve this.

Cost savings — and the opportunities for new projects — drove Vermont Public Radio and Vermont Public Television to merge in 2021. Rhode Island Public Radio and Rhode Island PBS did the same in 2023.

As I write this, Penn State University’s board of trustees has voted to sell WPSU to Philadelphia dual licensee WHYY for $1 to stave off the threatened shutdown of public television and radio in a vast swatch of rural central Pennsylvania.

The new vote, in mid-October, reversed a decision a month earlier. In September, the Penn State board rejected a takeover overture from WHYY — because WHYY asked for the university to continue an annual subsidy — $17 million over five years. The new proposal calls for no university funding, though WHYY does reserve the right to pull out of the deal if it can’t raise substantial funds to cover the merger’s costs.

Those three examples are noteworthy and offer lessons that more of us should consider. More to the point, they prove a model that our colleagues in commercial broadcasting have used for decades — consolidate to drive back-office savings and improve decaying finances.

When thinking about cost savings, not all dollars saved are equal. You shouldn’t outsource or consolidate strategically critical functions. You should outsource or consolidate functions that are commodities.

I’ve encountered significant resistance from station leaders regarding the outsourcing of critical functions, such as master control, programming and finance. They often express concerns like, “I’ll get in trouble with the FCC if my log files are inaccurate!” or “My audience expects that we make all content decisions locally!”

Those leaders are confusing critical with strategic. Processing financial transactions for a 501(c)(3)’s budget is critical. However, it’s also the sort of task that can easily be centralized — same with master control and (I would argue) most programming decisions.

Cost savings there give stations more flexibility to invest in the truly strategic, especially community engagement and the right local content.

Those savings are behind some of the well-known shared services efforts that already exist: NETA has long offered shared accounting and finance services to smaller organizations. The same applies to services such as The Programming Service for Public Television for programming, the Centralcast Alliance for joint master control, and the Contributor Development Partnership for managing membership appeals.

But might more radical steps — true mergers, or their close cousin, local management agreements — create even more savings?

It’s a question boards and CEOs need to start asking themselves. I know of a couple of potential mergers that were broached, then scuttled when the hard questions of governance (and sometimes bruised board egos) arose.

Those objections need to be pushed aside. Our audiences are fleeing to digital platforms (which know far more than we do about our viewers, listeners and users). The distinction between public television, public radio, public media and our nonprofit news brethren increasingly feels artificial.

These hard financial times offer the opportunity for bold reinvention. Break out your quarters and your favorite arcade t-shirt … and think about playing Pac-Man.

Tom Davidson is the Bellisario professor of practice in media innovation at the Bellisario College of Communications, Penn State University. He previously was a reporter, content leader, general manager and product builder at Tribune, PBS, UNC-TV and Gannett. He can be contacted at tgd@tgdavidson.com.