Saturday, May 14, 2011

NPR Plans Mandatory Digital Tax on Stations

NPR is unveiling an expansive network-station digital strategy at a series of meetings around the country. NPR is promising the moon to stations and ending the presentation with a “business model” that is nothing more than a mandatory tax on all stations for NPR digital services, whether the station uses the services or not.

That’s right, NPR management wants to force stations to buy its digital services package for up to $99,500 per year even if the station doesn’t want to use those digital services.

he presentation suggests that stations will earn revenue by using NPR’s digital services, but no revenue projections are given. A station paying nearly $100,000 per year has to take it on faith that it will see a return on its mandatory investment in NPR services.

t’s clear that NPR’s primary goal behind this strategy is to raise cash for its national digital services, which continue to lose money. NPR wants stations to believe, without showing revenue potential, that they can profit through NPR’s digital services even though NPR itself cannot.

When the NPR board adopted listener-hour pricing for the newsmagazines, it established the principle that the return on investment for stations should be at least 100%.* That same principle should apply to NPR’s digital services.

A true business model would show stations a meaningful financial return on their investment through new revenues, not cost-savings. Heck, a true business model would require NPR digital services to compete for a piece of the station’s budget. Instead, the “business model” taxes the revenues stations raise from their broadcast operations to fund NPR’s money losing, direct-to-listeners programming service.

None of this should be surprising, however, given NPR’s approach to digital in the past 24 months. Every time NPR has talked about partnering with stations on digital, it has talked about charging stations money.

That’s not partnership talk. Think about it. How many businesses talk publicly about taking money out of their partner’s wallet? Even fewer talk about forcing their partners to give them money when the partner doesn't want to participate in the venture.

It looks as though the Vivian Schiller station-relations philosophy has yet to leave the building.

* Stations currently derive a larger gross return on investment on the newsmagazines. The 100% return rate is actually too low on a gross-revenue basis to sustain stations so the pricing model never reached that threshold. If NPR ever pushed rates that far, many stations would have to drop All Things Considered and maybe even Morning Edition.

Disclosure: JSA provides consulting services to Sky Blue Technologies which offers Listener Interactive mobile apps and web streaming services to public radio stations.

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Anonymous David Gordon said...

John, after getting this extra piece of information about the digital tax from NPR this week, I told my staff that I thought there needed to be a housecleaning. I haven't changed my mind yet.

9:51 PM  
Anonymous Brad Deltan said...

I suspect NPR is not interested in taxing ALL the affiliate stations; just the stations in the top 20 markets. Possibly less, possibly more...but no more than the top 40 or so.

Long-term it strikes me that it makes little sense for NPR to bother with anyone but the "big fish" in Boston, New York, LA, Seattle, DC, Houston, DFW, Miami, Denver, Atlanta, Chicago and a few other markets.

Those markets are were the bulk of the money comes from, are they not? Why not simply cut partnership...REAL with those stations to effectively share ownership of the licenses and have them all hew to a unified schedule structure. (with some flexibility to allow for local news and local talk shows, for example). The rest of the country they can reach listeners via XM/Sirius satellite Radio.

Yes NPR's charter does not allow it to "own" station licenses. That doesn't mean they can't cut deals with the big boys to all effectively act like they're owned by NPR.

Of course, one does not simply make such a big leap overnight. So NPR eases its way in via schemes like the Digital Services initiative. And they don't merely target the big stations because it'd be too divisive at a time when NPR still depends on ALL the stations in the network for every dime they can get.

Sure I'm paranoid. The only question these days is: am I paranoid enough?

2:12 PM  
Anonymous Anonymous said...

John - Thanks for the full disclosure.

4:23 PM  

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