Thursday, June 30, 2011

NPR Digital Services: Show Stations the Money

Word from the NPR Orlando road show is that the Digital Services revenue estimates for the first few years aren't quite solid yet. That makes sense given that the Digital Services team hasn't been able to deliver a revenue plan to stations.

Further, it sounds like NPR's $15 million first-year revenue estimates included what they expected stations to earn locally.

At the Charlotte road show, stations were told that 20% of those $15 million would come from national underwriting. That explains $3 million and leaves unexplained the sources of $12 million.

To borrow a concept from the Internet-boom days, these are vapor dollars. There's lots of talk about potential but no concrete plans to show.

It appears that NPR is counting on stations to bring in up to $12 million in new revenues through its Digital Services offerings. That number could be reduced if NPR received some foundation money to support this initiative but so far there is no news of that.

These new financial numbers don't kill the Digital Services business model proposed in this blog. NPR can still take all of the financial risk here. Two components change. First, it takes a few more years for NPR to break even. Until then, the Board can subsidize the project as it was planning to do in its mandatory fee model. Second, stations get less direct money from NPR in out years since NPR expects them to be making more money locally.

How Will Stations Make Money?

Those who follow public radio finances know that the two primary sources of station income are listener contributions and underwriting (business support). At many stations, those two sources of income are nearly equal.

Using that model -- where donations and underwriting bring in equal revenue -- NPR's Digital Services offerings would have to generate $6 million from each source in new revenues for stations.

The word new is highlighted because we've encountered stations that try to count web contributions during fund drives as web income, not fund drive income. As accounting tricks go, it's pretty lame.

So the question is how does NPR Digital Services help stations generate 60,000 brand new $100 contributions, outside of pledge drives, in its first year? A similar question can be asked on the underwriting side. How does NPR Digital Services help stations generate 2,000 brand new $3,000 underwriting contracts in its first year? The numbers and ratios can vary but you get the idea.

Apparently no one at NPR is asking these questions. Or, if they are, they aren't willing to commit to answers.

Stations deserve better than that if NPR is going to impose mandatory fees for its services. These are not difficult problems to solve. All they require is a passion for station success and a little creativity. So far both have been absent in this process.

In the next posting on this topic, we're going to look at an article on NPR Digital Services published by Harvard University's Nieman Journalism Lab and why the author got it half right.

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Anonymous Bryan said...

Forcing stations to pay for this digital package sets a dangerous precedent. I'm am also shocked that station phone apps and streaming isn't included in the plan.

3:05 PM  
Anonymous Anonymous said...

John brings up a very good point. Is it NPR Digital Services Job to help stations sell underwriting opportunities and create methods to increase revenues?

So far the answer is no. Or worse, yes, but we really don't know how.

There are many old school arguments why NPR has not entertained this concept: Stations don't want NPR knowing their who their donors are-Revenue sharing both on major donors and underwriting has been lackluster etc.

But we are in the new school now. And there are plenty of "schools" out there whose primary mission is help radio stations make money on the web. While they mostly deal with commercial stations, it's only a matter of time till they come selling to the public radio market.

NPR Digital services isn't the only game in town--just the most overpriced one.

9:29 AM  
Anonymous Brad Deltan said...

NPR Digital services isn't the only game in town--just the most overpriced one.

Worth noting: NPR itself isn't the only game in town, either. With the (relative) success of The Takeaway, it is technically feasible for a news/talk station to drop all NPR affiliation and go solely with PRI and perhaps APM. It would not be EASY to do, but it is possible. It's even more possible if you're willing to toss in a little music here and there...on overnights, perhaps.

4:15 PM  

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