The terms of the deal will allow for more Sesame episodes per season. Sesame Workshop (once known as the Children's Television Workshop), the production company behind the series, could only make 18 installments per year on PBS. That number will be upped to 35. Sesame Street began airing on HBO January 16, 2016, and the deal is for the next five TV seasons. The New York Times has more on the deal overall.
The thought of the show no longer being exclusive to PBS is likely a very strange one to many, but it's a sign of the TV world that's rapidly coming into being — one in which there are more revenue streams than ever but it's harder and harder to find profitability, especially for independent production companies like SW.
PBS doesn't own Sesame Street
Though Big Bird and the other Sesame Street characters are among the most iconic faces of PBS, the broadcaster doesn't actually own the show or its characters. Instead, they're owned by SW, which has produced the series since it debuted in November 1969. In fact, PBS owns almost none of its iconic programs, which tend to be produced by member stations, foreign broadcasters, or independent filmmakers. The network has a programming budget, but it invests very little of it in producing its own programming and, instead, focuses on acquisitions.
In the below graphic, SW, then, is the studio, while PBS is the network. (PBS does not collect ad revenue, but it does sign corporate sponsorship deals and accept viewership donations.)
The problem for Sesame Street, as with so many other present programs, is that the market for DVDs has collapsed. Sesame used to sell huge numbers of home video copies of its episodes and "greatest hits" packages. Now, due to the rise of things like YouTube (where many of the best Sesame Street segments are available, legally, for free), that revenue has been slashed.
Though PBS has a reputation as having huge amounts of government funding, that perception is inaccurate. What money PBS does receive from the federal government is mostly spent keeping stations that cannot collect many viewer donations running. (Most of these stations are in rural areas.) When Sesame Street, then, lost that DVD revenue, PBS could not match it in terms of its licensing fee.
HBO, however, is cash rich, thanks to its copious number of subscribers. And though it's primarily known for its adult programming, the network has been active in the children's TV market for decades. (For instance, Fraggle Rock, another program featuring Jim Henson Muppets, originally aired in the US on HBO.)
Though it's rare for an HBO program to become so quickly available on another outlet (as Sesame Street reruns will be on PBS nine months after their first air date) and for HBO to purchase programming from a studio other than HBO, the monetary terms of the deal — too expensive for PBS — are almost certainly a drop in the bucket for HBO.
This deal is something of a violation of Sesame Street's founding principles
When it began in 1969, Sesame Street was revolutionary for many reasons, not least of which was its commitment to teaching preschool children basic concepts of language and math.
But its dedication to being available, for free, to as many American children as possible was also notable. At the time, NET (the network that would evolve into PBS) was struggling to gain a foothold nationwide. The popularity of Sesame Street and Mister Rogers' Neighborhood would help establish the network as a national presence.
HBO, of course, is not available for free in the majority of American homes. It's the very definition of a luxury good. And in that sense, this deal is just a little bit of a violation of Sesame Street's founding principles. It's hard to blame SW for this. And the company still found a way to make episodes available on PBS, whose youngest viewers likely won't even be aware the episodes they're watching aired months earlier on pay cable.
But these developments show just how razor thin the margin is for everybody in television right now — and just how little money niche broadcasters like PBS have when competing with the biggest fish in the pond. When we think about Sesame Street, we almost never think of its financial viability. Now, if we cue up a first-run episode on HBO Go for our kids, that might be at the top of our minds.