KCET Shoots ‘Puzzle’ With Short Funds : Television: Children’s series ‘The Puzzle Place’ is still short $2 million of its $6.5-million budget. Station executives hope underwriting, product licensing will make up deficit.

Less than two weeks before production begins on a second season of the PBS children’s series “The Puzzle Place,” KCET-TV Channel 28 concedes that it still is short $2 million of the $6.5-million budget.

But executives at the public-television station are moving ahead anyway, believing that the remaining money will be found and promising that, if it isn’t, they will scale back ancillary activities around “Puzzle Place” rather than make up the deficit out of other KCET funds.

Stephen Kulczycki, senior vice president for programming and station manager, frankly allowed that KCET is gambling that the program will draw further underwriting and other revenue, although he insists that it is “a good gamble to play . . . a solid gamble.”

But KCET President William H. Kobin takes issue with that word. “I wouldn’t call it a gamble. . . . We will have enough for production.”

Kobin insists that with $4.5 million in advances and guarantees from licensing and merchandising of products based on the series, there is enough to produce the remaining two-dozen programs.

The series, which celebrates diversity and teaches problem solving with a group of interracial puppets, debuted in January. Commissioned by the federally funded Corporation for Public Broadcasting, “Puzzle Place” is designed for children 2-6.

KCET and its production partner, Lancit Media Productions, hope to make up the difference with underwriting, more product licenses and, presumably, sale of “Puzzle Place” merchandise. Production on the second season starts April 3 on the station lot in Hollywood and concludes in early July. “Puzzle Place” products go on sale this summer.

Asked about a worst-case scenario where the toys bombed and no more money came in, Kobin maintained that the production itself would not be in jeopardy, nor would other station activities suffer.

Asked whether it would affect salaries, equipment or anything else at KCET, Kobin replied bluntly: “It wouldn’t affect any other project at all.” Instead, other components of “Puzzle Place” could be trimmed, such as educational activities, advertising and promotion, he said.

Ever since Kobin arrived in 1983, KCET has had a policy not to proceed with a production unless it is fully underwritten, stemming from difficulties encountered with the acclaimed series “Cosmos” in 1980 and the fiscal problems of a previous regime. Kobin maintains the “Puzzle Place” situation does not violate that policy, because the commitment for the series’ 65 episodes, contracted with CPB, will be met.

“This is very, very different from not having any idea where money is coming from and saying we’re just going to go blindly ahead and produce,” he explained. “We’re not doing that at all. I made a commitment (about) that, and we would never do that.”

Both Kobin and Kulczycki agree that they are close to signing a national underwriter for the series. A foundation, a corporation? “I just wouldn’t say a word more,” Kobin said.

Kulczycki told The Times the same thing in November, saying KCET was so close to lining up another underwriter that he could “feel it in my nostrils.”

Of the guaranteed $4.5 million, KCET would or could not say how much is advance money that is on hand. But Kobin insisted that the “guarantees” in the package are “not dependent on sale of product. Advance is money we already have in the house. Guarantees (are) written legal contractual obligations to produce the money at a specified, later date--binding agreements with reputable organizations.”

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Thus far KCET and Lancit (“Reading Rainbow”) have made 41 half-hour episodes at $10.3 million. They were funded by CPB, which gave the first $4.5 million; Southern California Edison, which contributed $3.5 million, and $2.3 million in advances on licensing and merchandising.

“Puzzle Place” licensees include Sony Wonder and Sony Music for home video and audiocassettes, Fisher-Price for toys and Russ Berrie & Co. for gift items. They are pursuing deals for another 12 to 15 licenses on such items as clothing, lunch kits, party goods and educational materials.

“We’ve got some companies that are real interested in what we’re doing,” Kulczycki said. “They’re excited about what they’ve seen on the air. We’re not in a position to say who they are. They’re coming aboard. We’re optimistic about signing them up, so much so we’re proceeding. We think there is more potential for licensing around the world, for other products and so on.”

As for program underwriting, Kulczycki admitted that they’ve been “really close” previously. “But enough of us believe that the (right) words are being said, and the way that it is being handled suggests that this is a solid gamble for us to take. . . . We believe it so much we’re going to make it happen.

“The other options are to close it all down,” he continued, “and we don’t think that’s a good plan. It’s so hard for a children’s series to stick with kids. This one has come out of the gate as strong as ‘Barney.’ ”

Indeed, among public-TV children’s programs, “Puzzle Place” is right behind “Barney & Friends” in ratings. Kulczycki said that in its first eight weeks in the 32 top markets, “Puzzle Place” was tied with “Shining Time Station” at 1.5 in average rating per broadcast (about 1.4 million households). “Barney & Friends” led the pack with a 1.8 rating.

KCET officials believe that the ratings and reviews such as TV Guide’s, calling the series an “impressive” addition to PBS’ daytime lineup, will be helpful sales tools.

“Puzzle Place” already is the most expensive series KCET has ever produced. The 13-part “Cosmos” cost $8.2 million but helped push the station into financial hot water because KCET was forced to dip into station funds to complete the project.

Gary L. Ferrell, KCET’s senior vice president of finance, has said that the two situations are different. “With ‘Cosmos,’ there wasn’t any short-term opportunity to recover,” he said, whereas “Puzzle Place” has immediate product that is expected to generate additional revenue.

In fact, KCET’s big hope is that the merchandise will be so popular that there will be enough money to produce episodes beyond the first 65.

Ironically, “Cosmos” subsequently netted KCET about $1 million--with videocassette sales.