Thursday, May 26, 2011

NPR’s Digital Services Proposal is Really a Membership Issue

The crosstalk about NPR’s Digital Services proposal ranges from practical to apocalyptic, with some parties taking a Harold Camping-like approach to inaction on the part of stations – only the date of doomsday keeps getting pushed into the future. It was supposed to be when podcasting hit, right? Or was it streaming that was going to kill public radio? No, it was television.

Anyway, the world is changing and NPR proposed imposing mandatory* fees on stations to pay for new digital services.At least that’s what it looks like on the surface. In reality, NPR is proposing a major overhaul of its membership model.

NPR’s current membership model is a very democratic approach to membership pricing and it was put in place to eliminate some inequalities that were developing among NPR member stations in the late 1980s and early 1990s.

Currently, all stations pay the same modest fee to become members of NPR. This gets each station equal representation and voting rights within NPR’s governance structure, it offsets the costs of NPR’s National Affairs Department, and covers some other shared costs of operating a membership organization. Stations are also required to pay the membership fee to have access to NPR’s programs.

NPR’s program prices are separate from membership dues. Program prices are variable based on each station’s ability to pay, and in the case of the newsmagazines, the audience they attract. There is a relationship between the value received from broadcasting the programs and what stations pay. Since all programs could be purchased a la carte, a station could pick and choose programs that created the best value for its mission.

It wasn’t always this way. A portion of the programming costs were wrapped up in the membership dues and the dues were based on total station revenues. In the 1980s and early 1990s, there was considerable concern among member stations about having the true costs and revenues of programs buried in this business model. Stations did not want their membership dues to subsidize programs they did not want.

The NPR Board adopted this principle and approved the current pricing structure. Additionally, the Board intended to develop clear boundaries between NPR’s Membership functions and its program offerings. They wanted a firewall between money collected for lobbying and more collected for programming.

The proposed Digital Services business plan erases those boundaries. If mandatory fees for Digital Services are implemented, then the NPR Board is reversing, or at least suspending, the most fundamental principles of its current pricing model.

NPR’s Digital Services proposal is not a fee-for-value proposition. NPR isn’t trying to create digital services that can survive in the open marketplace. NPR wants stations to subsidize the creation of what amount to an entirely new member services division by reverting back to the old membership pricing model. Stations must pay for all of NPR’s Digital Services whether they want them or not. Stations with more money pay more, not because they are receiving greater value, but simply because they have more money. And the budget for this new member services division inside NPR will end up being more than twice what NPR currently spends on membership. It will be as large, or larger, than the old Cultural Programming Division budget.

Kind of amazing, isn’t it? After years of trying to break free of the membership model, NPR management is turning to that model to pay for its digital offerings to stations. Not only that, it’s an open-ended subsidy model. It’s an admission that Digital Services cannot survive in the open marketplace for the foreseeable future.

The argument for making Digital Services a part of membership is that such a start-up requires subsidies and full station participation to survive its infancy. That’s a valid argument. The problem with making Digital Services a part of membership is that they will become the equivalent of an entitlement program.

The costs will rise over time. Station usage of services will wane. Like NPR’s program offerings, a few components of the service might become essential, but most will not. There will come a time when half the stations will be using only a third of the offerings. Or something like that. However, just like marginal radio programs, there will be enough stations using each component of the service that their champions will argue to keep them around.

The other problem with the mandatory-fee membership model is that there is no incentive for Digital Services to super-serve the stations. There’s no reason to embrace station success when the station has no leverage in the business relationship. There’s already evidence of this from NPR’s proposal to stations, which didn’t offer a single example of their revenue potential under the Digital Services umbrella. The effort wasn’t even made.

If NPR’s management and Board believe overhauling the membership model to support Digital Services is the way to go, then there’s still a lot of work to do. The idea itself is a major shift in the nature of the membership organization. Such shifts always require a careful reexamination of policies, governance and oversight, lines of accountability and measures of success.

For example, will the Membership Committee of the board have any oversight of Digital Services? Can member stations have direct input on the budget for Digital Services since they are now paying mandatory fees for those services? Should member stations vote on the budget or have to approve budget increases beyond the current business plan? These are legitimate questions once the membership model is invoked.

The thing is there are other, more effective ways to go about accomplishing the objectives of NPR’s digital proposal. There are other approaches that pool resources and encourage broad participation without the draconian steps of overhauling the membership model and imposing mandatory fees. They are not as simple as forcing everyone to pay, whether they want to or not, but they will foster a better working relationship with stations and result in a more robust set of services.

Hopefully, NPR’s leadership will step back and realize that while their objectives might be the right ones, the approach is all wrong. You don’t start a partnership with member stations by forcing radical changes and cost increases on their backs. The membership should be consulted on how to make this work. There are a lot of creative and smart people at stations. As partners, they can help NPR find a way.

*Mandatory - a synonym for ‘required’ but not as apologetic

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Anonymous Brad Deltan said...

Thanks for staying on this one, John!

12:11 PM  

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