Thursday, May 20, 2010

The NPR-Station Business Model Must Live Up to Its Original Intent or Change

In the discussion about new media, too little attention is paid to new revenue models. Even less attention (almost none, in fact) is paid to the expense side of the equation. That has to change if stations are going to come close to reaching just one or two of the goals laid out by the Grow the Audience project. It has to change for many stations to survive the turbulence of shifting media consumption patterns.

Outside of personnel costs, the fees for NPR newsmagazines are often the biggest chunk of a station's budget. As noted in our last posting, those costs are a bigger burden than ever.

NPR charges stations for Morning Edition, All Things Considered, and Weekend Edition based on how much listening those programs generate for each station. There are three key concepts behind that pricing model.

1. Every hour of listening to NPR News has a financial value to the station. More listening creates more revenue potential for the station from listeners and business underwriters.

2. NPR has an incentive to help stations increase listening and local revenue potential. More listening to NPR Newsmagazines means more money for NPR.

3. NPR has a disincentive to cause listening to go away from stations. Causing stations to lose audience means less money for NPR.

On the surface, this pricing model is ideal for the new media marketplace. Here's why:

NPR is now aggressively trying to get listeners to use its mobile apps. A mobile app is, in essence, a radio station. So NPR is asking listeners to bypass local stations.

We've covered the bypass issue before. Ultimately, bypass is about listener choice. Listeners will gravitate towards the best listening experience. If NPR is offering a better experience than stations, they will go.

If NPR sticks to the original intent of the current pricing model and audience for the newsmagazines at stations goes down, then NPR would collect less money from stations. That's the way it should work but history suggests it won't happen.

The pricing model was never properly implemented and the adjustments made by NPR over the years -- from capping station prices that were too high to changing the price points on listening -- have not been true to the intent of the model. NPR just toyed with the numbers until everyone was reasonably happy or at least willing to live with their program fees.

It is still not a given that more listening to NPR apps will result in less listening to stations. If it does cause station audiences to drop, then stations are going to have to pay NPR less money. Otherwise NPR will drive many stations out of business. Those that survive will have very few resources to invest in local programming and other goals laid out by the Grow the Audience project.

It will be interesting to see if NPR will actually live up to the intent of its current policy -- that it will trade cash from stations for listening through its apps -- or whether it will change the rules of the game when the current rules are no longer convenient.

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