Where 'Sesame Street' Gets Its Funding — and How It Nearly Went Broke

Courtesy of Sesame Workshop
Twenty million copies of 'The monster at the End of This Book' series have been sold. Puppeteer Caroll Spinney's 'How to Be a Grouch' was published in 1976.

With operating costs of more than $100  million a year, the 50-year-old children's show was at one point barely bringing in enough money to stay afloat — but are sunny days finally ahead?

It pays practically no taxes. It gets hundreds of millions in corporate grants. It invented the Elmo doll. You'd think Sesame Street would be paved in gold. But Sesame Workshop, the organization that produces the program, reported an operating income in 2018 of just $1.6 million. Barely enough to keep Cookie Monster in chocolate chips.

As a non-profit, Sesame Street plows the majority of the money it takes in — from grants, royalties and licensing deals — back into its content. But it's a sprawling, expensive operation that employs about 400 people, including several highly skilled puppeteers (Caroll Spinney, the top-tier puppet master who played Big Bird, made about $300,000 a year before he retired in 2018). Workshop president Jeffrey Dunn, the organization's highest-paid individual, earns about $663,000, according to the Workshop's 2018 tax filings. Production costs have remained relatively economical over the years, but bumped up a bit to around $25 million after Sesame Street moved to HBO in 2015, where the Workshop now produces 35 episodes a season (almost twice as many as used to be made for PBS). Add other expenses, like nearly $6 million in rent for Lincoln Center corporate offices and Queens production facilities, as well as the cost of producing content for its YouTube channels and other outlets, and Sesame Workshop's total operating costs add up to well over $100 million a year.

Nobody is saying how much HBO is paying to license the show or for the rights to stream 150 hours of its nearly 5,000-episode back library — when Sesame Street had first-run episodes on public airwaves, PBS was forking over about $4 million annually — but these days distribution fees and royalties make up the biggest source of revenue: $52.9 million in 2018. Donations — about 31 percent of the Workshop's income — came close behind, bringing in $47.8 million last year. There have also been some recent block grants, like the Lego Foundation's $100 million donation, although that money is earmarked entirely for a Sesame Street project to help children affected by the Rohingya and Syrian refugee crises. Licensing revenue, including toys, games and clothing, came in at $34.5 million.

That $1.6 million operating income in 2018 (what would be called profit if Sesame Street weren't a nonprofit) is down from the year before, but it's still a big improvement from 10 years ago. After the 2008 recession, corporate funding dried up, while at the same time DVD sales started bottoming out, all of which nudged the show into the red. In 2014, the year before it migrated to HBO, the program was operating at a loss of $11 million. The financial squeeze necessitated the deal with the pay channel. "It was one of the toughest decisions we ever made," says Steve Youngwood, Sesame Workshop's COO. He admits that the conversations with PBS were "complicated."

Way down on the list of Sesame Street's revenue streams, by the way, is the U.S. government, which ponies up only about 4 percent — less than $5 million a year — in grant money. But getting any money from Washington, D.C., has been challenging from the start. Sesame Street co-founder Lloyd Morrisett remembers traveling to the Capitol in the early 1970s, during the Nixon administration, to beg for money. "Casper Weinberger was secretary [of health, education and welfare] and we went down to talk about funding, because it was all in doubt," he says. "It was the biggest office I'd ever been in — it was like a football field. While we were making the pitch, Weinberger got a phone call he had to take. His assistant leaned over and said, 'It's terrible you have to come down here for this — Maurice Stans has that money in his safe.' " Stans was the finance chair of Nixon's re-election campaign who was at the time rumored to be behind the $1 million payoff to the Watergate burglars (he eventually pleaded guilty to campaign-law violations).

"We were dumbfounded," says Morrisett of the assistant's slip-up. "But they did continue the money."

Read more about Sesame Street:

50 Years of Sunny Days on 'Sesame Street': Behind the Scenes of TV’s Most Influential Show Ever

Kareem Abdul-Jabbar: My 50-Year Friendship With Big Bird and 'Sesame Street'

Childhood Heroes or Poor Role Models? Meet the Muppets Evicted From 'Sesame Street'

'Sesame Street' Movie's Writer-Director Reveals Plot Details

'Sesame Street': Meet the New Puppeteer Inside Big Bird

This story first appeared in the Feb. 6 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.