It's Not Bypass, It's Listener Choice

"Bypass" is the term public radio people use when discussing NPR's forays into satellite radio, podcasting, and Internet streaming. The concern is that NPR can bypass stations and reach listeners directly. Implicit, but not spoken, is that bypass is a two-way highway.

If bypass is going to be a problem, it is because listeners will choose to bypass local stations.

Why would listeners choose Morning Edition on the satellite and bypass Morning Edition on their local station? What would cause a donor to abandon the station he's listened to for six years and supported with cash for three? Why would a potential new listener choose a morning program void of any local information whatsoever?

Is the fear that listeners will be drawn away by something better or pushed away by something they don't like?

Our Commerical Future?

This is an edited excerpt from one of my postings on the PUBRADIO listserv. It is in response to a discussion about corporate sponsorships and other potentially commercial practices in public radio.
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We go on the air at fundraising time and tell listeners we treat them like citizens, not consumers. In the Wall Street Journal they read, "Listeners 'are very resistant to being sold anything,' says Kevin Klose, president and chief executive of National Public Radio Inc. 'That's not what they come to public radio for.'"

Then they hear announcements inviting them to buy merchandise for "dads and grads" at the NPR shop. We tell them we're not trying to sell them something and then we try to sell them something.

NPR isn't in this alone. It happens with acquired programs. It happens at stations. It happens during pledge drives. Add all of our "public radio" selling to all the underwriting credits touting the brand new products and services now available to our listeners and we are left with one, inescapable conclusion.

We are deep into the business of selling stuff to listeners.

That's going to bother some of them. Perhaps a lot of them. Listening might drop. It might not. We don't know.

What we do know is that public radio is too dependent on that money to walk away from it. NPR isn't going to stop promoting the NPR Shop. As hard as we've tried, stations aren't going to stop selling listeners on the cars, vacations, and restaurant gift certificates they offer as pledge drive incentives. If anything, our commercial activities will increase as public radio spends more money on all the local programs that are supposed to save it from "new competition on multiple-delivery platforms."

The issue before us is not whether we are becoming more commercial. We are. Keeping our programs on the air depends on our listeners buying the stuff promoted on our air. The issue going forward is how we plan to manage our increasing commercialism.

Trying to convince listeners that it isn't happening, when it really is, is a bad place to start.

Does Audience 2010 Mark The End Of An Era?

The Audience 2010 project is once again proving the value of having a rich database of respondent-level Arbitron data for public radio. The industry's ability to analyze and act on this data has helped stations and networks increase audience and revenues for more than two decades. But that might be coming to an end.

Arbitron’s current planned rollout of its Portable People Meter (PPM), announced this week, puts those benefits at risk. That plan includes phasing out its current diary-based system beginning this fall.

As of now, Arbitron's PPM plans do not include making available to public radio the type of respondent-level data (currently known as mechanical diaries)
that makes analyses such as Audience 2010 possible. Respondent-level data is the basis of programming analysis tools such as the RRC's Listener PC, AudiGraphics, and even Arbitron's own PD Advantage.

Those products could work off of PPM respondent-level data if it were made available. There are no technical barriers that we know of. So far it appears that the only programming analysis tool available to public radio will be Arbitron’s proprietary software, which is being designed primarily for commercial broadcasters.

Audience 2010 is a terrific example of how public radio uses respondent-level Arbitron data in ways that commercial radio has yet to mine. It would be a shame if the switch to PPM suddenly limited public radio to using only commercial-radio analyses to make and track programming decisions.

I've noted before on this blog that PPM holds great promise for public radio (One Minute On PPM).

Those hopes are based on the assumption that public radio will have direct access to respondent-level PPM data so it can continue to analyze Arbitron data in ways that are appropriate and productive for public radio.

Off Topic, But Amusing

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Sirius Math

Yes, I'm serious about my proposal to allow all NPR programs live, in real time, on satellite radio... but only if stations get to keep their current broadcast rights and get significant relief on programming fees.

This could be just the ticket to extending public radio's reach and improving public radio's financial health.

Here's one possible outcome after five years, assuming that Sirius generates 1.5 million NPR-driven subscriptions in year two and 1.85 million subscriptions in year five.*

- Stations would save $53 million per year in programming fees. Each full member station would pay an annual fee of around $20,000 to cover program-related services.

- NPR would average $74.5 million per year in programming revenue from Sirius and stations. In the fifth year, NPR would collect nearly $85 million. By comparison, NPR collected $58.5 million in programming fees in 2004.

- Sirius would net $86.5 million over those 5 years in additional subscription revenues. Sirius is taking the biggest risk here, not making any profit until the third or fourth year.

1.85 million annual subscriptions for Sirius is about 7% of public radio's current weekly Cume. Most of those listeners won't even leave the Cume because a satellite subscription is for just one radio. Sirius listeners will still use local radio.

Yes, this idea has its risks and the numbers might need some adjusting.

The potential reward is more money for NPR than if it sticks with the current business model, more money for stations to produce local programming and strengthen their own financial positions, and most important, more of the public served by public radio.

That makes it worth discussing.


* This model is based on Sirius' actual average subscription rates and acquisition costs from 2005 financial statements, found online at Sirius.com. Sirius' cost for NPR programming would average 38% its NPR-driven revenues. By comparison, Sirius spent 43% of its subscription revenues on programming in 2005.

Time To Consider All Things

Could NPR Executive VP Ken Stern, if given permission, negotiate the same deal for NPR that Howard Stern got with Sirius satellite radio? How about half the deal -- given that NPR's programs would remain on terrestrial radio?

Stern (Howard) is worth a half-billion dollars to Sirius over five years. Perhaps Stern (NPR) could make the case that Morning Edition and All Things Considered are worth $250,000,000 over five years.

To cover the NPR fee, Sirius would need just over 350,000 new annual subscriptions at the $142 annual rate. More subscriptions are needed, of course, in order to make a profit. Roughly triple that to 1,000,000 new subscribers (huge news when H. Stern did it) and you still have not dented the public radio weekly Cume by 5 percent.

I'm certain the math would get a bit more complicated than what's presented above, but it's probably not off by much.

Suppose it could happen. NPR could make its programming, put it on the satellite, and give it to stations. That would be one of the conditions of the deal.

Free, or even almost free, programs to stations would free up lots of cash to create all those new services, local or otherwise, that are supposed to strengthen public radio.

I'm not the first one to make this suggestion. But every other time it has come up, it has been dismissed out-of-hand. This is an idea that could radically restructure public radio for innovation and growth. It's worth thinking about. After all, we are the industry that boasts of considering all things.

Posts Relevant To The Satellite Radio Discussion

This is a recap of some previous posts on RadioSutton that you might find relevant to the satellite radio discussion. You might have to scroll some to find the appropriate posting.

Will All Boats Rise Together?

http://radiosutton.blogspot.com/2005_06_01_radiosutton_archive.html

Be The Best Button

http://radiosutton.blogspot.com/2005_03_01_radiosutton_archive.html

Why Listener-Hour Pricing Isn’t Working

http://radiosutton.blogspot.com/2005_01_01_radiosutton_archive.html

20,000,000 Downloads In One Hour

http://radiosutton.blogspot.com/2005/09/20000000-downloads-in-one-hour.html

Shared Sacrifice

(Updated March 2, 8:20a)

Our previous posting mentioned that NPR and stations would have to make some sacrifices if NPR's flagship news programs were to appear on satellite radio in real time.

The sacrifice for stations is obvious. They will receive more competition for their current audience and that creates financial risk.

NPR's sacrifice is on the financial side as well.

These days, NPR brings in essentially the same amount of money in corporate underwriting as it does in station fees and dues.

NPR's program pricing policy allows NPR to charge stations up to 50% of the gross financial value stations derive from NPR's newsmagazines.

Put another way, NPR has staked itself a 50% claim on all individual contributions and business income stations raise on-air and off-air due to programs such as Morning Edition and All Things Considered. NPR doesn't charge that much today, but for some stations, it's getting close.

So NPR gets to keep 100% of the money it raises by selling station audiences to national underwriters. It gets to keep 100% of the money it raises by selling books, CDs, and t-shirts to station listeners through the NPR on-line shop. It is allowed to charge stations up to 50% of the money NPR newsmagazines generate locally.

That means in the NPR-Station Partnership, where one needs the other to raise significant funds, NPR is entitled to around 67% of the money. (note: the original post stated 75%, which was based on a different set of assumption than the ones used here.)

That wasn't a good economic model to begin with, which is why NPR has had to offer dues relief to stations for several years. It's an even worse economic model for stations when listening to public radio is in decline and NPR wants to reach listeners directly via satellite. Those changes are direct threats to station revenue.

Certainly, changing the NPR-Station financial equation to help stations has it risks. And it won't be as easy to do as it is to write about. But the whole reason for getting NPR newsmagazines on the satellite is to grow public radio's public service to the nation and the world. If NPR isn't willing to take a financial risk to do that, why should stations?