Wealthy Viewers Have Subsidized Sesame Street for a Long Time

The show’s business model relies on profits made from licensing revenue, and it’s suffering in the streaming era.

Kevin Lamarque / Reuters

On Thursday, The New York Times reported that HBO would essentially sponsor Sesame Street’s next five seasons. The premium-cable channel will increase the number of new episodes per year, from 18 to 35, and retain exclusive rights to each new season for nine months after it’s completed. After that de facto embargo ends, new Sesame Street episodes will air on PBS, just as always.

Sesame Workshop’s new partnership does not change the fundamental role PBS and stations play in the lives of families,” a PBS spokeswoman assured the Times.

There’s a lot to react to here, including the realization that Sesame Street’s friendly Brooklyn brownstones now sit alongside HBO’s other memorable depictions of the tri-state area, in such child-friendly classics as Girls and The Sopranos. But I want to focus on two things: the economics behind the move, at least according to the Times; and how the understanding of Sesame Street as an educational tool has changed over time.

A portrait of the author with Elmo

Before that, though: Almost everyone has a Sesame Street memory, so here is one of mine. When I was a young kid, I had lots of VHS tapes with songs and segments from the show. One of these tapes included “Elmo’s Song.” This was during the interregnum between the character’s introduction, in 1985, and his global ascendancy, in 1996, via the commercial behemoth that was Tickle Me Elmo.

This period came well after Sesame Street’s establishment but quite a few media macro-economies ago. I watched Sesame Street on repeat, like a lot of kids, and I did this on VHS tapes my parents had purchased.

Today, when kids watch Sesame Street on repeat, they’re far more likely to do it on a streaming service like Netflix or Amazon Prime. And that’s a problem for Sesame Workshop, because no streaming service pays the bills like physical media sales do. As the Times writes:

Historically, less than 10 percent of the funding for Sesame Street episodes came from PBS, with the rest financed through licensing revenue, such as DVD sales. Sesame’s business has struggled in recent years because of the rapid rise of streaming and on-demand viewing and the sharp decline in licensing income. About two-thirds of children now watch Sesame Street on demand and do not tune in to PBS to watch the show.

PBS was not able to make up the difference, so Sesame was forced to cut back on the number of episodes it produced and the creation of other new material.

That cut-back has now been reversed, as HBO’s support will allow Sesame Workshop to produce a longer season. Sesame Street will now also no longer appear on Netflix or Amazon Prime.

Sesame’s migration to cable begs to be understood as a failure in public funding, and it is in part. In a kinder society, PBS would have more funding, and it could rush in to support a struggling flagship. But what changed Sesame Workshop’s financial situation wasn’t a PBS funding cut but the media environment itself. The same economics that have hurt musicians—the transition from physical ownership to digital ownership to streaming—are what threatened Sesame Workshop’s budget and sent it running to HBO. In a world with less media ownership, even widely beloved, publicly funded media need a premium patron.

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Sesame is almost certainly the most studied TV show ever, and probably the most studied piece of American pop culture ever, too. Sesame Workshop boasts that more than 1,000 studies have been conducted into its efficacy and that “preschoolers who watch [Sesame Street] do significantly better on a whole range of cognitive outcomes than those who don’t.”

One of the best studies on Sesame’s effectiveness was only just released. In June of this year, a study from the National Bureau of Economic Research said that the show is “the largest and least-costly [early childhood] intervention that’s ever been implemented.” This study examined the very first kids who watched Sesame Street after its debut in 1969 and looked at their educational progress and career progress afterward. Kids who watched Sesame Street did a better job of staying with their grade level through schooling, it found; the study couldn’t isolate quite as well whether it bumped their graduation rates or career wages. As Alia Wong wrote for The Atlantic at the time, that makes the TV show as effective as Head Start, the federal government’s more complete (and much more expensive) early-childhood intervention program.

That was, in part, Sesame Street’s goal: to supplement or replace preschool at a time when, especially in poorer or more urban areas, it was very much the exception, not the rule. The new study says it managed to do this. Sesame Street improved outcomes for boys, black children, and kids living in “economically disadvantaged areas.”

When it was first proposed, Sesame Street’s “general aim” was that it would “promote the intellectual and cultural growth of preschoolers, particularly disadvantaged preschoolers.” It has long struggled to make good on this “particularly.” Since it isn’t just poor children watching the show, but middle-class and more affluent ones, Sesame Street is said to do little for the national achievement gap.

A book-length 1975 study, Sesame Street Revisited, took up this issue. It found “no evidence that any gaps were being narrowed because of Sesame Street.”

In fact, it said, Sesame Street might be making things worse: “If the series was having any effects on the academic achievement gap, then the data […] indicated that the direction of such effects was toward widening rather than narrowing the gap.” This makes some sense, because presumably more affluent children would be attending preschool and watching Sesame Street.

It wouldn’t be impossible to narrow the achievement gap by showing all children the same TV show, wrote the authors of Sesame Street Revisited, but it would be hard. They flirted with limiting Sesame Street’s viewing audience to urban and underprivileged areas, so it could only help those kids.

Since then, more evidence has reinforced Sesame’s educational bonafides, and this year’s study even found that disadvantaged kids benefited most from the show—a good sign for its ability to combat the achievement gap. And Sesame Street has of course changed a lot too: A segment on the show introduced in the last decade focuses specifically on narrowing the “word gap” between high- and low-income children.

Yet the problem remains. Sesame Street was made to give poorer children a leg up, but by virtue of being a popular TV show, it’s helped richer children too. So Thursday’s news, that affluent HBO viewers will get new Sesame episodes for a full nine months before non-premium-cable subscribers get them, doesn’t so much create an unfortunate tension as ratify one. Think of all those DVD and t-shirt sales, and how crucial they were to Sesame Workshop’s bottom-line: Sesame Street has long relied on appealing to richer homes in order to subsidize helping poorer ones.

Now, that relationship will dictate the creation of the show itself.