Friday, June 03, 2011

Context for NPR's Proposed Digital Revenue

NPR is telling stations its proposed mandatory digital service could bring in as much as $50 million in new revenues five years from now. The revenue floor is projected at $15 million annually.

Now $50 million is a lot of money, but it is not as much as you might think.

Currently, public radio stations bring in around $500,000 million dollars in listener-sensitive income. That's listener donations and underwriting.

So NPR believes that new digital revenues will be somewhere 3% to 10% of what stations currently raise from their communities.

If you add in public radio's tax-based funding, foundation support, and other income, then the $50 million per year in new digital revenues is just 5.5% of all public radio revenues.

All of a sudden, $50 million isn't so much especially if digital audiences and revenues are supposed to replace current revenues as audiences disperse to web-based listening.

$50 million is basically growing the current annual listener-sensitive revenues by two percent per year over the next five years. That's assuming things go really well and the majority of stations buy in to the plan. And for this the NPR Board wants to impose a mandatory tax on stations.

Really?

Nationally, $50 million annually is small thinking. Really small thinking. Stations deserve better than this.

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3 Comments:

Anonymous Anonymous said...

What would you do, John? Really? If you were the president of NPR, what would you do about digital?

12:17 AM  
Blogger RadioSutton said...

I think "what to do" is a question for the NPR Board.

If I had any pull there, I'd put the digital effort on hold until a new President was in place. And if I had pull with the NPR Board, I'd make sure the new NPR President was passionate about member station growth and success.

The digital effort is being positioned as "in the stations' best interest" but beneath that rhetoric, there's no passion for station success in the proposal.

In fact, the "business model" shows how NPR Digital Services will pay for itself three times over, or something like that. It's a perfect example of the problem. NPR is putting forward a proposal that looks inward. It says, "We can pay for ourselves." It is "NPR focused."

The proposal shows no tangible results for the typical station. There is no "station focus." It lacks a passion for station success.

Instead of railroading the project through as is, the Board should wait to implement until it brings in a President who can rework the useful concepts in the proposal into something that better represents station interests.

If I had pull, that's what I would push for.

6:46 PM  
Anonymous Stephen Hill said...

This issue and this argument is a perfect example of the growing misalignment between station and network interests in the wake of the Internet.

It takes various forms. "Channel conflict" is the term used to describe the situation when end users can access the same content in multiple places, like at NPR.org vs. Station.org vs. mobile app. In this case, the issue is how to pay for digital R&D in a business that is consistently starved for investment resources. How to sell national underwriting and distribute the revenue from it is another area, and there will be more going forward. The deeper struggle will be over who will monetize the end user, and how.

You can argue about these sub-issues all you want, but until the question of the underlying business models of the system that create these conflicts are brought into the sunlight and seriously discussed, we won't really get anywhere. The public media system will continue to lag behind other media in the development of next generation digital services, and also to benefit from the revenue generation opportunities these services will enable.

To get past these conflicts you have to re-align the interests of all the stakeholders, which requires both a new service model and a new business model to support it.

What I would do:

1/ Create a comprehensive, aggregated public media online service for end users — a public-facing version of the Public Media Platform. Call it Public Media Online.

2/ Make that service available at every point of entry to a more broadly defined PUBLIC MEDIA NETWORK: i.e., all stations, all networks, all producers, all affiliates. It would offer both expanded levels of free service and premium tiers of access to members.

3/ Create a national membership program with premium access to Public Media Online as the principle benefit. This membership would be promoted by all members of the Public Media Network.

4/ Here's the enabling innovation that makes the rest of it work: phase in a full and fair revenue-sharing business model that incentivizes and rewards all stakeholders for participation.

My core conviction is that the only way to secure the future of public media is with the public.

This is where the service goes and this is where the money is to fund it. When you do the math on national membership, we are talking about the potential for hundreds (not tens) of millions of dollars each year to be distributed to network stakeholders.

As a side effect, the network would in time become immune to politically-motivated defunding efforts and threats to its journalistic independence.

I have addressed these ideas in more detail in a paper called "Funding the Future of Public Media." It's posted online on my blog here. A printable PDF version is here.

:: Stephen Hill

5:47 PM  

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