Tuesday, June 28, 2005

Will All Boats Rise Together?

There was a time when a primary goal of NPR's pricing models was to strengthen the audience and economic performance of both NPR and its member stations. The idea was that all boats would rise together.

That goal is no longer being met, at least not for every station. Since 2001, at one major market licensee, NPR fees have grown four times faster than listening to NPR News, and twice as fast as the station's total revenue base. An extreme example? Perhaps, but there is other evidence of a disconnect between what NPR wants to charge and stations’ ability to pay.

NPR has repeatedly capped its price increases to soften the financial blow for some stations. Most recently, it had to tap Kroc money to ease the pricing burden.

Is the NPR pricing system broken? That subject calls for a full examination, and is too complex for one article. But the question itself and its implications are pretty serious. NPR's newsmagazines air during drive times, the dayparts that must be the most profitable on a station's broadcast schedule. Because listening to radio is usually greatest then, drive time programming must generate sufficient surplus revenue to fund large chunks of the station's indirect costs. That's the overhead that supports broadcasts and includes items such as engineering, administration, marketing, and innovation. If it can't cover its overhead the station cannot function nor can it compete.

We're starting to see stations with shrinking surplus revenue of drive time revenue. A reduction of that "profit” makes it likely that there are stations running in the red during drive time. If drive time doesn't carry other essential costs the station's entire operation is threatened. That is not a recipe for self-sufficiency.

For all boats to rise together, NPR needs to come up with a pricing model that buoys audience growth and economic self-sufficiency, both at member stations and at NPR.

To stay afloat, station managers must budget appropriately, fundraise well, spend wisely, and continue to strengthen their audience service by making necessary programming changes. They must also help NPR create a pricing model that allows it to grow.

Two years ago, CPB studied station financial health and found financial problems on the rise. We believe part of the problem might be that current newsmagazine program prices are cutting the surplus drive time revenues too thin. It is a topic worthy of additional research. With the right actions, public radio could continue to ride wave after wave of success.

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