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Virginian - Pilot

BY steven g. vegh

THE VIRGINIAN-PILOT

VIRGINIA BEACH Its not unusual to find Pat Robertson, evangelistic founder of the Christian Broadcasting Network, on the air mixing prayer with pleas for donations during his show, The 700 Club. In telethons that are a CBN tradition, he calls for Gods blessing and smoothly segues into a familiar pitch for pledges. We want you to go to your phones right now.

CBNs reliance on donations has grown since 1997 , when they accounted for about a third of the revenue that sustains the organizations operations at its Virginia Beach headquarters.

That dependency could spell trouble for CBN if contributions hinge on the continued on-screen presence of Robertson, the longtime host of the networks flagship television program. The organization is well aware that donations slumped in 1988 when Robertson left to run for president.

CBN officials say they are not worried about another such financial disaster. They say todays donors are responding not just to Robertsons personality, but to the ministrys expanded services and the charisma of Gordon Robertson , Pats son and 700 Club co- host.

Direct donations from the public accounted for 71 percent, or $132 million, of the networks stated revenue of $186.5 million during the year ending March 31, 2004 , according to the financial statement that CBN must file with the Internal Revenue Service as a tax-exempt organization. The ministry provided the filing to The Virginian-Pilot late last month.

The second-biggest boost to the ministry is the airtime it is guaranteed on the ABC Family Channel under a provision that dates to the 1990s. Although CBN doesnt receive any money from the deal, it counted the free airtime as revenue worth $46.8 million that the organization would otherwise have had to pay to get the same time slots currently filled by The 700 Club.

CBNs latest statistics showed that 70 percent of its budget was spent on broadcasting and other educational and charitable initiatives. About 12 percent of the budget was spent on fund raising, while management costs accounted for roughly 10 percent.

The latest financial report also shows that CBN gave a total of $2.1 million in grants to dozens of other religious and charitable groups, including the United Jewish Federation of Tidewater, which got $100,000 for its new community center in Virginia Beach.

While that charitable giving was up 41 percent from 2002, it was far below 1997, when CBN gave away $17.9 million to charities.

The IRS statement also showed that the 74-year-old Robertson takes no salary as CBNs chief executive officer. The highest-paid employees are CBN President Michael D. Little, at $266,458; Gordon Robertson, who gets $246,610 as a vice president; John S. Turver, another vice president, who received $201,878; and Terry Meeuwsen, who earned $201,037 as co-host of The 700 Club.

Wall Watchers, a nonprofit group that scrutinizes religious groups financial practices, has rated CBN as average in financial efficiency when compared with more than 500 other faith-based organizations.

Rod Pitzer , Wall Watchers research director, said his analysis of CBN finances prior to 2004 showed that the network hasnt hoarded its income and spends a bit less on administration and fund raising than is average for religious nonprofits. Salaries are not excessive and, unlike some faith-based groups, CBN readily complied with requests for financial information, Pitzer said.

Donations have always been crucial for CBN, which Robertson started on a shoestring in 1960 . In 1963 , the station held its first telethon, where Robertson called for 700 people to contribute $10 a month , a group he labeled The 700 Club.

CBNs financial strength comes from regular donors, dubbed partners, who agree to contribute $20 or more every month. The organization had 386,947 active partners at the end of 2004, according to Angell Watts , a CBN spokeswoman.

Telethons are held regularly to enlist new partners and solicit additional giving from regular contributors. As is typical of telethons, The 700 Club fund-raising shows interpose vignettes of the organizations good works with appeals by Robertson and co-hosts for fresh pledges from viewers.

Membership is 65 cents a day, Robertson told viewers during the program last September. There you go two quarters a dime and a nickel, he said, laying the pocket change on his palm. Thats not a lot of money ... but you can be part of a great army of thousands that is making a difference in our world.

CBNs dependence on viewer support was dramatically demonstrated in 1988 , after Robertson left the show to run for president. Donations plummeted , forcing the network to lay off hundreds of employees . Robertson, who failed to get the Republican nomination, returned to The 700 Club, saying, I did not realize that my personal presence was as important as it is to the audience.

CBNs work force has been more stable since then. It has about 1,000 employees in Virginia Beach.

For a time in the 1990s, CBN sought to diversify its income sources by adding for-profit businesses, most notably by constructing The Founders Inn, a $36 million, 249-room hotel, next to the networks headquarters. It also tried to develop Founders Village, a $100 million real estate subdivision geared for retirees, on 60 acres near CBN.

Both of those ventures and some others pursued by CBN were unprofitable. Founders Village was scuttled in 1999 after it failed to attract buyers, and CBN lost at least $3 million in the venture. The network also lost more than $12 million it invested in 2000 and 2001 in Christianity.com Inc., an Internet enterprise.

The 2001 sale of the Founders Inn to Regent University for $21 million representing a $10 million investment write-down for CBN symbolized the ministrys decision to abandon for-profit entrepreneurialism.

The term around here in those days was, focus on the core business, of religious programming, Little said in an interview last summer.

Greatly offsetting those business failures was CBNs windfall stemming from the sale in 1990 of The Family Channel. Created in 1977 by CBN, The Family Channel was the nations fifth-largest cable network by 1990 , when it was sold in a leveraged buyout to a group led by Robertson.

CBN ultimately cleared more than $300 million from the sale of securities it received during that buyout. In addition, it donated securities to Regent that brought that university, also founded by Robertson, more than $250 million.

The Family Channel and its parent company were sold by the Robertson-led company to Fox Kids Worldwide Inc. for $1.9 billion in 1997. The channel became part of ABC when that companys parent, Walt Disney Co., bought it in 2001.

The Family Channel proceeds swelled CBNs accounts. The ministry had $128 million in cash and securities investments in March 1998, according to CBNs IRS filing for that tax year. But those assets plunged to $74 million two years later and $7.4 million in March 2002, according to the subsequent statements. They since edged up to $13 million , as of March 2004, according to the latest IRS filing.

Little said CBN decided not to hoard the money.

The ministry used its improved cash position partly to reduce its liabilities. They shrank from $58.5 million in April 1997 to about $24 million in March 2004, according to the ministrys IRS filings, largely due to a reduction in long-term debt.

CBN also sank millions into the expansion of its WorldReach operation, the ministry arm devoted to developing religious broadcasting and programming outside the United States. Little said CBN built massive, state-of-the-art studios in Ukraine, Indonesia, and the Philippines, and a satellite uplink center in Cyprus that allowed broadcasts in the Middle East.

In addition, the ministry greatly stepped up donations to other evangelistic charitable groups, giving more than $52 million over a four-year period ending in March 2001, according to statements filed with the IRS.

That was in addition to CBNs long-standing support for its sister organization, Operation Blessing.

The strength of CBNs bottom line flows in large part from its agreement with Fox. As a condition of its purchase of The Family Channel, Fox gave the ministry daily airtime on the channel in perpetuity. That provision, which remained in effect after Disneys takeover, guarantees that CBN can always reach its core television audience, which the ministry says now stands at about 18 million viewers a month.

Little said that financially, The 700 Club is to CBN what the offering plate is to a typical church. In our case, the collections are five times a day, he said, because the show is seen as much as five times a day in some markets around the country.

Given its reliance on viewer contributions, CBN would still seem vulnerable to a reprise of the 1988 revenue slump if Robertson retires or stops appearing on the show.

But Robertson said he has few fears that history will repeat itself.

In an interview in February , he said CBN has a fund-raising council that includes experts in marketing, direct mail, major donor contributions and other specialties. Robertson meets with the group weekly.

If I drop dead, these people would still be doing very well. They know what to do, Robertson said. He also praised Littles ability as president, and his son, Gordon.

Gordon, as far as an on-air presence, its amazing how the people love him, Robertson said. Hes not some novice; he has a law degree, worked in our computer operations, worked in our news operation ... and now hes in charge of The 700 Club and our telethons, and a good part of our overseas operations.

CBN also has two tangible assets a multimillion dollar trust, and land that could buffer a drop in donations.

The $67 million trust fund, which Robertson established in 1991 , is set up to go to CBN either in 2010 or upon the deaths of Robertson and his wife, Dede , whichever is later.

Robertson said last month that the trust now exceeds $67 million , but he declined to give a specific figure. The trust, which CBN already lists as an asset, is under the exclusive control of Robertson, who has not divulged how it is invested.

Additionally, CBN still owns several hundred acres of prime real estate along Interstate 64 in Virginia Beach and Chesapeake that, Little said, happens to be the largest piece of undeveloped land along an interstate in Hampton Roads. So, it has potential.

CBN has already leased 12 acres to Amerigroup, which built an office building on the site, and Little agreed the arrangement is a potential development model that could generate further real estate annuities for CBN.

But Little also said that CBN has no firm plans for the acreage. Weve just kind of held it loosely to see what might turn up. Id say were in a holding pattern, he said.

Additionally, CBN is such a large operation that no matter how the land ultimately is developed, its not a key component of our financial future, Little said. Similarly, regardless of the trusts size, it wouldnt stretch very far, given CBNs overall spending requirements, he said.

That leaves private donations as the biggest income source, which troubles neither Little nor G. Michael Carter , CBNs chief financial officer.

Both said that while The 700 Club was CBNs lead activity in 1988 , the organization today is a much more diversified ministry involved in Christian-themed animation, overseas evangelism, Christian television shows for domestic and international audiences, philanthropy and a Christian newscast.

As a result, CBN viewers now have far more reasons to donate than in the past, when their money might have seemed to go mainly toward The 700 Club, Little said.

The future is strong because CBN is such a multifaceted entity that donors are impressed with that list, so much that they want to be a part of it, Little said.

* Reach Steven G. Vegh at 446-2417 or steven.vegh@pilotonline.com.