Wednesday, January 12, 2005

Why Listener-Hour Pricing Is Not Working

Fees for NPR's Morning Edition and All Things Considered are based, in large part, on listener-hours. The idea is that every hour of listening these programs generate for a station has a financial value. Some of that value comes from listener contributions and some comes from business supporters. When the listener-hour pricing model was introduced, the goal was to make an NPR listener-hour so profitable for the station that the station would want as many of them as they could get. It was a win-win proposition.

But it hasn't worked out that way. Here's why. NPR's fees for Morning Edition and All Things Considered pricing work out, on average, to be about half of the net revenue generated by these programs -- net revenue being the amount of money raised minus the direct cost of raising the money. That's a problem because, as with any public radio industry average (the statistical mean), the majority of stations tend to be below average performers.

Put another way, it is very likely that the majority of stations are sending the majority of their net revenue from drive time to NPR.

That's not a winning formula. Financial surpluses from drive time help pay for general operating costs, they fund innovation, and they fund investment in future growth. Drive time must become more profitable for stations if public radio is to grow.

Some of that burden rests with stations that have below average fundraising performance. But even the top-performers are going to face tough times if the cost of network programming eats away at their share of drive time revenues.

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