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The NewsHour has the story on the changing business of children's television.

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MODERATOR: So you have to study all week?

SPORTS FIGURE: Well, we play three hours a week, and we study about sixteen hours a week.

JEFFREY KAYE: Such not so subtle messages from sports stars will soon be a thing of the past on CBS. The network is replacing Sports Illustrated for Kids, along with the rest of its Saturday morning educational programs for children. The publisher of Sports Illustrated for Kids Magazine is Cleary Simpson.

JEFFREY KAYE: What did they tell you?

CLEARY SIMPSON, Sports Illustrated for Kids: They told us that they were very proud of the show, that they felt it had been a terrific creative success, but that they were getting out of the live action Saturday morning business, not that they were getting out of the educational programming business.

JEFFREY KAYE: Right. But for what reason? It was a financial decision.

CLEARY SIMPSON: My understanding was it was a financial decision, as opposed to a creative decision.

JEFFREY KAYE: That decision reflects the changing business of children's television. CBS stations, like all the others, must balance financial judgments against the demands of a new government rule. Since September, the FCC, the Federal Communications Commission, has required that broadcasters run three hours of educational children's programming every week. Well, when CBS changed its Saturday morning line-up to comply, ratings plummeted, as did advertising revenues, which are based, of course, on audience size.

SPOKESPERSON: Did you hear what's happening on CBS?

JEFFREY KAYE: What's happening is CBS is paying much less for its Saturday morning shows. This fall, CBS will replace all its educational programs with cheaper ones the network is buying from Nelvana Communications of Canada.

SPOKESPERSON: Six new shows that are sure to be mega hits from CBS and Nelvana.

JEFFREY KAYE: Nelvana is selling educational programs to CBS for $50,000 an episode, instead of the six-figure amount the network paid Sports Illustrated. Toper Taylor is president of Nelvana.

TOPER TAYLOR, Nelvana Communications: We have an advantage in being an international company and knowing how to finance programming around the world so that we can provide a traditional network quality program for a price that is substantially less than what the networks were paying seven years ago.

JEFFREY KAYE: The downward plunge in prices of children's programs is industry wide, according to Deborah Forte of Scholastic Productions, makers of the Magic School Bus series.

DEBORAH FORTE, Scholastic Productions: The license fees have probably gone down in the last three years by about 30 percent or more. And that's because there is all this increased competition.

JEFFREY KAYE: Networks are fighting increased competition from public television and from cable channels, which specialize in children's programming and which are not governed by the FCC. The Disney Channel, Nickelodeon, and the Cartoon Network are coming to dominate kids TV.

DEBORAH FORTE: And so, therefore, there is more migration to them because children can find a more stable home in that environment for programming that's targeted specifically to them. They don't have to search and remember to come back at 3 o'clock because there will be a children's show on. And I don't think that that's good news for the broadcasters right now.

JEFFREY KAYE: As broadcasters are feeling the pinch from other media, in turn, producers of kids shows are facing their own economic struggles and designing new ways to make and market their products. Those efforts were on display this January in New Orleans at an annual bazaar for TV programmers. The shows represented included Phil Nye, the Science Guy and Sesame Street, all of them stressing their entertainment, as well as educational value. One even claimed to be FCC approved, even though the FCC doesn't formally approve programs.

JAN SEBASTIAN, Sebastian International Enterprises: This is Real Life 101.

JEFFREY KAYE: Jan Sebastian's new company produces a program about career guidance. She says the FCC's educational dictates have launched her business.

JAN SEBASTIAN: Because the stations are required to have a certain amount of this program, they're actively out seeking it.

JEFFREY KAYE: Sebastian's programs are cheap because they're literally homemade.

JAN SEBASTIAN: I've been known to hold a camera. I've been known to do some editing. I've got the family involved. There are six hosts; two of them are my kids. So we get all the free help we can get.

JEFFREY KAYE: Because few shows can be made so cheaply, other producers are turning to merchandising tie-ins, as well as global and corporate partnerships for financing. One program, "Homer's Workshop," teaches construction skills. It has the backing of the Home Depot hardware chain.

RICHARD PERIN, Producer, "Homers' Workshop": It's their way in the bigger picture of saying 20 years, 30 years from now a kid will know how to use a screwdriver so maybe he'll build something.

JEFFREY KAYE: From whom? He'll buy at Home Depot.

RICHARD PERIN: Hopefully Home Depot, I'm sure, but it could be a local hardware store. It makes no difference. What Home Depot is committing is signage in their store tied in with the show and the local broadcaster. Every circular, every newspaper ad will be tagged with "Homer's Workshop," Station XXX.

JEFFREY KAYE: Is that going to be the future of educational television, this kind of tie-in?

RICHARD PERIN: If you can get corporate sponsors like the Home Depots to underwrite the production or produce, then, yes, that's going in the right direction.

JEFFREY KAYE: Toper Taylor expects his CBS programs will provide merchandising opportunities.

TOPER TAYLOR: Here is a Franklin plush doll. He's made by Eden, and they're one of our licensors on Franklin.

JEFFREY KAYE: And Franklin is--

TOPER TAYLOR: Franklin is going to be one of our shows on CBS.

JEFFREY KAYE: Right.

TOPER TAYLOR: And it's a scholastic book that's sold about 14 million copies in the U.S..

JEFFREY KAYE: Besides merchandising tie-ins, producers benefit from corporate consolidations and global economic relationships. Nelvana receives government subsidies from Canada and Europe. Disney, which owns ABC, trades on its worldwide reputation, and Fox recently signed a deal with Saban, producers of Power Rangers, to form an international powerhouse. Donna Mitroff, vice president of Fox Kids Network, says the partnership will provide programming for Fox TV and for the Family Channel, which Fox recently acquired.

DONNA MITROFF, Fox Kids Network: I think the advantage that we maintain a network operation, we build a cable franchise, and then we have all of the infrastructure to support that with the in-house production of the contacts and the international use of programming that Saban has built up over the years.

JEFFREY KAYE: Consumer advocates are closely watching the changing economic landscape for children's television.

KATHRYN MONTGOMERY, Center for Media Education: Parents do care a lot about this.

JEFFREY KAYE: Kathryn Montgomery of the Center for Media Education lobbied for the 1990 Children's Television Act, which required more educational programs. She says she's not happy about the many commercial tie-ins but believes children's programming is a vast improvement.

KATHRYN MONTGOMERY: The Children's Television Act was a design to counter some of these powerful market forces that had basically wiped out any educational and informational programming for children and to provide a kind of countervailing force to ensure that there's some place for those kinds of shows. And it has done that. We do have programs on the air now that wouldn't have been there before.

JEFFREY KAYE: However, Montgomery worries that as stations scramble to cut costs, the quality of children's programming will suffer.

KATHRYN MONTGOMERY: Are they going to put some investment into it? Are they going to let parents know and children know that they're there? That's the big question. Will they live up to that responsibility? Will they really serve the need for children--of the child audience, which is their obligation to do so? Or will they write off the child audience?

JEFFREY KAYE: And what's the answer?

KATHRYN MONTGOMERY: And I don't know the answer, and I'm not going to try and say it now, but we'll be watching them closely.

JEFFREY KAYE: The FCC is also monitoring stations. Broadcasters are required to file quarterly reports with the agency describing their educational programming. FCC Chairman William Kennard believes the rule is working. He is not discouraged by low ratings.

WILLIAM KENNARD, Chairman, Federal Communications Commission: How many programs in prime time have been dumped by a network because they didn't get the ratings? But ultimately I am confident that with all the talent in the broadcast networks and the production community they will find the right formulas to create entertainment programming that also educates our children.

JEFFREY KAYE: Finding those formulas presents a challenge for broadcasters. In trying to get kids to watch TV that's good for them, they often face the same dilemma as parents who want children to eat their vegetables.

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