Times are tough on Sesame Street.
Sesame Workshop, the nonprofit responsible for Elmo, Big Bird, Cookie Monster and the rest of the stars of “Sesame Street,” is confronting what executives have described as a “perfect storm” of problems.
The organization is losing its lucrative contract with HBO, which has paid $30 million to $35 million a year for a decade for rights to the show. With Hollywood suddenly watching every penny, nothing nearly as rich is in the offing.
Then there is the Trump administration. Its cuts to the United States Agency for International Development have stripped Sesame Workshop of some valuable grants that the nonprofit did not anticipate abruptly losing. The administration’s attacks on public media could bring some further cuts.
What’s more, “Sesame Street” is at risk of getting lost in the shuffle of a deeply competitive and fast-changing children’s TV landscape. The show reliably ranks far behind shows like “Bluey” and “Cocomelon” in Nielsen’s streaming numbers — and YouTube is eating up even more of the attention.
Together, those forces have left the organization trying to figure out how to navigate the coming years, a crisis that the nonprofit says will require a “reset.”
Sesame Workshop cut about 20 percent of its staff, or nearly 100 people, a few weeks ago. Without the cost cuts, the organization would face a deficit of nearly $40 million next year, according to internal documents reviewed by The New York Times. Even with the cuts, it has had to draw $6 million from its investment fund for the first time in more than a decade to help cover some of the budget shortfalls.
The uncertainty surrounding “Sesame Street” is just the latest fallout from the significant changes sweeping the television business in the streaming era. Other longtime television franchises and classic genres of broadcast and cable are facing similar challenges. In a concession that change is needed, beginning next year “Sesame Street” will have a reimagined look.
Sherrie Westin, a 27-year veteran of Sesame Workshop who became chief executive last year, acknowledged in an interview that the nonprofit faced a new economic reality but said she was “confident we will be able to sustain this work.”
“This is not a rejection of ‘Sesame Street,’ and ‘Sesame Street’ is not going away,” she said. “But we absolutely have a responsibility to change as the world around us is changing if we want to continue to deliver on our mission.”
“Sesame Street,” which has been airing since 1969, is one of the longest-running programs in television. The organization behind it — originally named the Children’s Television Workshop — has hit financial headwinds before. Just a decade ago, DVD sales plummeted. They were a key source of revenue, and Sesame Workshop had to hunt for a lifeline.
That was when HBO, which had just debuted a stand-alone streaming service, paid the license fee of $30 million to $35 million to air new episodes as well as back-library episodes and specials, two people with knowledge of the deal said.
The windfall allowed “Sesame Street” to add episodes every season. PBS, which had aired “Sesame Street” from the start, would then air them many months after they appeared on HBO.
The arrangement kicked off controversy, but it paid off financially. Even as recently as 2022, Sesame Workshop generated $271 million in revenue and more than $20 million in profit, according to financial forms.
The end of the HBO deal, though, has coincided with a big shift in the streaming business. Wall Street soured on the chase for subscribers instead of profits, leading companies to cut way back on spending. The Peak TV era died, the number of new shows being made plummeted and an industrywide contraction took hold.
When Max, HBO’s streaming service, announced plans to drop the Sesame deal last year, its executives said children’s programming was no longer “core to our strategy.” Instead, Max made a two-year, $6-million-a-year deal to stream nonexclusive back-library episodes, according to internal documents.
In April, Sesame Workshop executives met with major streaming companies to begin negotiations for a new distribution deal. The executives anticipated reaching one within several months.
But the reality of the post-Peak TV environment quickly became apparent, and the timeline was pushed back several times. Nearly a year later, Sesame Workshop remains in discussions with major streaming players like Netflix, YouTube and Amazon Prime Video, according to the internal documents. It is also in discussions with other outlets like Tubi, Roku and PBS.
Even before the search for a new distribution partner, Sesame Workshop had acknowledged that it needed to make changes for a rapidly changing — and deeply competitive — landscape.
The 56th season of “Sesame Street” goes into production next month, and will be revamped. The show will drop its traditional magazine-like format in favor of three segments — two 11-minute stories to open and close a show and a shorter animated feature in between. The show will also try to increase comedic elements, music and animation.
Sesame Workshop found that parents trust and respect “Sesame Street” but that children adore a show like “Bluey” because it is more likely to provide bigger laughs and induce them to play after an episode ends, according to internal documents. Children also engaged with brands and shows like “PAW Patrol,” “Mickey Mouse Clubhouse,” “Peppa Pig,” “Baby Shark,” “Cocomelon” and “Blippi” more than “Sesame Street” last year.
Then there’s YouTube, which is awash in children’s content, some of it high quality (The Ms. Rachel channel is a standout and was recently licensed by Netflix to good returns) and much of it not.
Pediatricians and children’s media experts give “Sesame Street” high marks for its commitment to educating children with each episode.
“The environment around Sesame Workshop is changing so dramatically that what they are doing, and doing well, may not be as desirable as something that gives you a quicker hit of dopamine,” said Dr. Michael Rich, the director of the Digital Wellness Lab at Boston Children’s Hospital.
Despite the troubles facing the organization, the timing of the job cuts was still notable to staff. Much of Sesame Workshop’s administrative work force — which includes education experts, fund-raisers and paralegals — had been preparing to declare a union for months. On March 4, the employees announced that they were forming a union and kicked it off with a rally outside the nonprofit’s Midtown Manhattan offices. Immediately after the rally, workers assembled for a staff meeting where they learned about the cuts.
“We really went from our highest highs to our lowest lows that day,” said Phoebe Gilpin, a senior director of formal learning at Sesame Workshop, who was laid off. “It was a moment of joyful celebration and elation, and then emotional whiplash.”
Six of the seven workers who spoke at that rally soon found out they were laid off, said David Hamer-Hodges, a director of organizing at a local chapter of the Office and Professional Employees International Union, the union the workers are seeking to join.
A spokeswoman for Sesame Workshop said the job cuts “were planned and fully decided upon well before we were aware of employees’ intent to organize, and the union’s official demand for recognition coincided with the announcement of the layoffs.”
The union efforts will continue despite the job cuts, Mr. Hamer-Hodges said, though Sesame Workshop leadership has indicated that it will not voluntarily recognize the union.
In an interview, Ms. Westin, the chief executive, said the nonprofit would take new steps to find a way to fund its work, including through “additional philanthropic development.” Even if the revenue from a new distribution deal is smaller than the HBO pact, there is a good chance the show will be available either in more households than Max or for free, as it used to be.
“I am confident that we will get through this, and more children will have access to ‘Sesame Street’ than ever before,” Ms. Westin said. “It’s critical because the world needs ‘Sesame Street’ more than ever before.”
Ms. Gilpin said the broader changes in children’s media had left her and her departing colleagues with an uncertain future.
“‘Sesame Street’ has been such a stable force in children’s media for such a long time,” she said. “People who have worked in it their whole career are now facing a landscape that is very unfriendly. If what I’m committed to doing is children’s media, where can I go to keep doing this? There are not a lot of places to go.”