| sun­nier days on sesame street

AF­TER A MERGER KNOCKED HIM FROM HIS CEO’S PERCH, JEF­FREY DUNN CON­SID­ERED GLOBE-HOP­PING. IN­STEAD, HE HEADED TO HAR­VARD AND THEN ON TO RE­TOOL AN ICONIC NOT-FOR-PROFIT.

Forbes - - CONTENTS - By Kerry Han­non

Af­ter a merger knocked him from his CEO’s perch, Jef­frey Dunn con­sid­ered globe-hop­ping. In­stead, he headed to Har­vard and then on to re­tool an iconic not-for-profit.

At the an­nual Hal­loween bash last year, Jef­frey Dunn, the 63-year-old CEO of Sesame Workshop, didn’t dress up as Bert or Ernie but as the Statue of Lib­erty. “I was dis­traught by the di­vi­sive­ness and the tox­i­c­ity in this coun­try,” he says. “I wanted to make a state­ment to our em­ploy­ees of what we at Sesame stand for.”

His Lady Lib­erty cos­tume worked on an­other level, too. Six years ago, Dunn gained the fi­nan­cial free­dom to do any­thing—or noth­ing at all. Mat­tel Inc. had just paid $680 mil­lion for the com­pany where he was CEO, HIT En­ter­tain­ment, owner of Thomas the Tank En­gine and other chil­dren’s char­ac­ters and pro­gram­ming. Flush and out of a job, Dunn wanted to work in the char­i­ta­ble sec­tor. But his wife, Karen, sug­gested they first take a few years to travel the world and sit on the beach. A tem­po­rary re­tire­ment, of sorts.

“I was like, ‘No, I am not ready for that. Not sure if I ever will be,’’’ he re­calls. Any­way, Har­vard was call­ing. Dunn had earned his B.A. in his­tory and his M.B.A. there decades be­fore. Now he’d been ad­mit­ted to Har­vard’s Ad­vanced Lead­er­ship Ini­tia­tive, a year­long pro­gram for corporate ex­ec­u­tives and pro­fes­sion­als in their 50s and 60s in­ter­ested in ap­ply­ing their skills to so­cial prob­lems. For a tu­ition of around $65,000 the hand­picked fel­lows (for 2018, 48 were cho­sen from more than 550 ap­pli­cants) get to au­dit cour­ses and hash out prospec­tive projects with pro­fes­sors and fel­low stu­dents.

What sealed the deal for the Dunns— high school sweet­hearts who have been mar­ried 36 years—is that spouses of fel­lows are wel­come on cam­pus too. So while Jeff dived into non­profit ac­count­ing, me­dia and kid’s ed­u­ca­tion and eco­nom­ics, Karen, a nurse by train­ing, stud­ied art and mu­sic.

Dunn be­gan as a fel­low in Jan­uary 2014. Then, mid­way through his year, a rep­re­sen­ta­tive from Sesame’s board called him for a con­sult. The non­profit’s li­cens­ing rev­enues (from Tickle Me Elmo and the like) and DVD sales had been slid­ing for a decade, and its op­er­at­ing losses were grow­ing. “Sesame found me be­cause I was a known en­tity in the kid space,’’ he says. Be­fore tak­ing over at HIT in 2008, he’d spent 13 years at Vi­a­com’s Nick­elodeon, where he helped cre­ate Nog­gin (now Nick Jr.) as a joint ven­ture with Sesame Workshop.

Al­ready in Har­vard term-pa­per-writ­ing mode, Dunn de­liv­ered a ten-page re­port to Sesame’s board. By Septem­ber he’d

been hired as the first out­sider to head the in­su­lar or­ga­ni­za­tion. Sesame needed a “fi­nan­cial turn­around, a cul­tural turn­around and a strate­gic turn­around,” says Har­vard Busi­ness School pro­fes­sor Ros­a­beth Moss Kan­ter, who is di­rec­tor of the Har­vard Ad­vanced Lead­er­ship Ini­tia­tive and a coau­thor of a case study on Sesame.

Per­haps Dunn’s most sig­nif­i­cant struc­tural and cul­tural change: He cre­ated two busi­ness units. One was for Sesame’s phi­lan­thropy and so­cial im­pact work, mostly funded by foun­da­tions and gov­ern­ment. The other ran Sesame’s TV, me­dia and li­cens­ing op­er­a­tions; it would have to op­er­ate with an eye to the bot­tom line. “Peo­ple thought ‘non­profit’ meant we don’t have to make money, or we can lose money,” Dunn says. “Non­profit is a tax sta­tus: If your rev­enues don’t ex­ceed your ex­penses, you don’t stay in busi­ness—it is not sus­tain­able.”

That new ethic led to Dunn’s most au­da­cious move. For 45 years the Pub­lic Broad­cast­ing Ser­vice had been the home of the Sesame Street tele­vi­sion show, where gen­er­a­tions of preschool­ers learned to rec­og­nize let­ters and love Cookie Mon­ster. But what PBS was pay­ing for broad­cast rights cov­ered less than 10% of pro­duc­tion costs. So in 2015 Dunn ne­go­ti­ated a five-year li­cens­ing deal with HBO, the pre­mium ca­ble chan­nel known for its edgy and some­times vi­o­lent con­tent. HBO would pay enough— an es­ti­mated $20 mil­lion-plus a year—to cover most of Sesame Street’s pro­duc­tion costs and would get the right to air newly pro­duced episodes ex­clu­sively for nine months. Af­ter that pe­riod, PBS sta­tions would get those shows for free.

“It to­tally changed our eco­nom­ics,” Dunn says. “It re­placed that lost rev­enue from the DVDs and other mer­chan­dise, and we to­tally stopped the bleed­ing.” In the fis­cal year ended June 2014, Sesame had an op­er­at­ing loss of $11 mil­lion on rev­enues of $104 mil­lion. In 2017 it had an op­er­at­ing profit of $6.7 mil­lion, on rev­enues of $118.5 mil­lion.

As he did with rev­enues, Dunn took a bold ap­proach to an­other Sesame prob­lem—keep­ing up with changes in ed­u­ca­tion tech­nol­ogy and in how me­dia is con­sumed. He axed a four-year-old in­ter­nal in­no­va­tion lab that had pro­duced no vi­able prod­ucts and launched Sesame Ven­tures to in­vest in star­tups fo­cused on chil­dren’s ed­u­ca­tion, de­vel­op­ment and health. At Har­vard, Dunn says, “I was go­ing to school with all these kids, sit­ting there and lis­ten­ing and talk­ing to them, and know­ing full well most of these things hap­pen from star­tups, not ex­ist­ing play­ers.”

So far, Sesame has in­vested in more than 40 star­tups, in­clud­ing Epic!, which gives kids and teach­ers ac­cess to a per­son­al­ized dig­i­tal li­brary of high-qual­ity ebooks, and Kano, which sells kits to teach chil­dren com­puter cod­ing. “You can’t force peo­ple in­side, who’ve been do­ing it the same way for­ever, to change their habits,’’ Har­vard’s Kan­ter says. “When you part­ner with those star­tups and con­nect them to the peo­ple in­side, new cre­ative sparks be­gin.” Sesame is also com­plet­ing a pi­lot pro­gram with IBM that pairs its char­ac­ters with IBM’s Wat­son to test adap­tive learn­ing for preschool­ers.

What about the phi­lan­thropy and so­cial im­pact side of Sesame? It, too, seems to be thriv­ing. In De­cem­ber, Sesame Workshop and the In­ter­na­tional Res­cue Com­mit­tee started work on a new, re­gional ver­sion of Sesame Street that aims to reach 9.4 mil­lion Syr­ian refugee and lo­cal chil­dren in Jor­dan, Le­banon, Iraq and Syria with ma­te­rial more rel­e­vant to their ex­pe­ri­ences and cul­ture. It’s funded by a $100 mil­lion five-year grant from the MacArthur Foun­da­tion, which notes that be­fore this ef­fort less than 2% of global hu­man­i­tar­ian aid money was be­ing spent on ed­u­ca­tion, and only a sliver of that 2% on young chil­dren.

“The Syr­ian refugee cri­sis is the hu­man­i­tar­ian is­sue of our time,” Dunn says. “These chil­dren are, ar­guably, the world’s most vul­ner­a­ble on the planet, and by im­prov­ing their lives we cre­ate a more sta­ble and se­cure world for us all.” The new pro­gram will be dis­trib­uted via tele­vi­sion, mo­bile and dig­i­tal plat­forms, with ex­tra ed­u­ca­tional con­tent given to par­ents, clin­ics and child de­vel­op­ment cen­ters.

These days, Dunn makes a weekly eight-hour round-trip com­mute via Am­trak from his Bos­ton home to Sesame’s Man­hat­tan head­quar­ters. But he’s not com­plain­ing. “You don’t get the op­por­tu­nity many times in life to re­ally change the world, but this may be one of them,” he says. Sure, this isn’t ex­actly vol­un­teer work—Dunn’s of­fi­cial com­pen­sa­tion in 2016 is listed as $689,000, though he says he de­clined to take all of it. “You only need so much money,’’ Dunn con­cludes. “But you can’t sit on the side­lines.”

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Sweep­ing the clouds away: CEO Jef­frey Dunn turned around Sesame Work­shop’s fi­nances with an HBO deal.

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