Monday, April 08, 2013

Public Radio 2018: The Inevitability of NPR Raising Money Directly from Listeners

This is the fourth installment in our series on what public radio looks like in 2018.  In this posting, why NPR will be raising money directly from listeners and doing it with the belief that it benefits NPR’s member stations.

First, some background. NPR policy prohibits direct listener fundraising.
  This is to protect the business model of its member stations.  For most of these stations, listener contributions are the single largest source of income.  The prevailing belief in the industry is that, given the option, listeners would prefer giving their money directly to NPR and not their local stations.   The assumption is that the entire public radio business model would be wrecked should that happen.

t will happen.  Within five years NPR will raise money directly from listeners.  It just takes a little basic audience segmentation to understand why.

Today there are three types of NPR News listeners:
  • Station Only Listeners
  • Station and Listeners
  • Only listeners
The first two types of listeners hear pledge drives and get off-air solicitations from their local stations.  The Only listeners do not. 

The Only audience will eventually be large enough, if it isn’t already, to be a significant source of funding for public radio.
  If NPR remains banned from asking them to give, then there will be one or two or five million listeners who are never asked to support public radio.

No pledge drives.
  No emails.  No letters.  No telemarketing.  No annoyance.  Such a deal.

And NPR claims that its online audience is much younger than current station audiences.
  That means a new generation of listeners who will grow to treasure public radio programs with the belief that those programs are free, paid for by someone else.

Further complicating matters, the Station
and Listeners will eventually start giving less to their local stations.  It’s only a matter of time.  Every single study on listeners and giving shows that people donate to public radio because they value the entire service they receive from the station.  They give because the programming on their station is personally important and they would miss it if it were to go away.

Research also shows that listeners who use their stations less -- are less likely to give.
  That will be true for people who use their station less because they are getting the programming they value from a different source.  Their station could go away.  The programming would not.  That will reduce the likelihood of giving to the station.

The entire public radio business model would collapse under this scenario.
  There will be millions of new listeners who will never be asked to give.  There will be hundreds of thousands of current donors who will feel less compelled to give because they now have multiple sources for the content they value.

That will be bad for NPR given how much it relies on stations for income.
  It will be even worse for stations that need excess revenue generated from NPR programs to help pay for local and digital initiatives.

And listener support is likely to become even more important if station audiences shrink in the digital age.
  The fracturing of the radio audience will likely cause a reduction in business underwriting support for NPR and stations alike. On-air announcements will reach fewer listeners, lowering the number of sales and reducing the value of each announcement aired.   Plus, Federal funding will be sharply reduced or gone in five years.  The need for listener contributions will be greater than ever.

There’s only one solution and that is for NPR to raise money directly from listeners.
  It’s the only way to capture giving from listeners who will have no exposure to station fundraising and from listeners who value their entire public radio listening experience across station and NPR outlets, but not enough to give directly to a station.  It is the only way to more than replace federal funding and shrinking business support.

In time, NPR will make this case to stations.
  They will argue it is in the stations’ best interests for NPR to raise money directly from listeners.

Getting there won’t prove easy even when it is obviously necessary.
  And NPR might not be willing to make the changes it must make to truly benefit stations.

The fundraising piece is simple enough.
  NPR could be up and running with a highly effective fundraising operation in no time.  There’s sufficient evidence from markets with two NPR stations that shows many listeners will give to two public radio services if they value both.   So stations will still be able to raise significant, albeit less, money from listeners.  But collectively, NPR and stations should be able to raise more money from listeners, for less cost, than stations currently raise.

The problem is that public radio’s spending model, how money changes hands in the business, will also have to change dramatically to protect stations’ ability to serve their communities with national and local programming.

NPR will have to give up charging stations for its programs, or significantly cut back on what it charges, to take into account reduced station revenues.
  That change will make or break the new public radio economy. 

If the new business model is implemented properly, with the stations’ best interests in mind, then stations will have a cash windfall to invest in local and digital initiatives. NPR will end up with more money than it gets from stations today.
If implemented without the stations’ best interests in mind, then the new public radio economy will severely damage stations while providing NPR with more cash.

It is inevitable that NPR will be raising money directly from listeners in 2018.
   Whether it will be done for the betterment of all of public radio is the open question.


Anonymous Anonymous said...

I have a friendly running debate with a mentor of mine (we are both public radio employees in different, but adjacent, markets).

I think NPR will make a deal with the top 10 or 20 stations in the network: sell your licenses at a pittance to NPR, or we cut you off from NPR programming entirely.

Sound crazy? Not necessarily. Recall that most (not all, but most) NPR affiliate stations are legally owned by a four-year college or university.

In every such case, the station is but a small, small part of all the issues that college faces on a daily basis. And in most cases, the station has little to no academic justification to exist as far as the college is concerned; they keep the license because it looks good and it doesn't cause the college any trouble.

NPR can leverage that easily: what college president is going to choose to have a massive PR nightmare on their hands as the local community gripes about losing their favorite NPR programming, compared to getting a million or two dollars (which is a "pittance" compared to what the NPR outlets licenses' in the top 20 markets are worth at market rates!) in free money to hand over the license? Especially if NPR basically keeps most, if not all, the local staff in place...but removes the staff from the colleges' payroll. Thus saving the college money and hassle. That would be the smart move from NPR since in most cases, those staff members are already doing a good job at running the station.

So assuming NPR pulls that one off, NPR now owns the biggest stations in the biggest markets and can do whatever it wants with them...including, of course, fundraising. Fundraising that all goes into NPR's official budget now.

With the earning power of the top 20 markets on their side, I don't see how NPR really has to care much about the rest of the network. I imagine it behooves them to keep them involved somehow but NPR will hold all the cards and can basically dictate terms that will be far more friendly to NPR than to member stations.

My colleague thinks I'm nuts; that no college president would sell out that easily. I think it's inevitable that most of them will, based on the specifics of why so many colleges have sold off their licenses in the last five years.

8:48 PM  
Blogger RadioSutton said...

Nearly 100% of NPR's $50 million in annual underwriting revenue is because of listening to stations in the top 10 markets. Those stations probably pay NPR another $15 to $20 million in fees. Pulling the news programs from those stations is, at minimum, a $65 million hit on NPR's budget.

9:26 AM  
Blogger Randy Eccles said...

If NPR fundraising is inevitable, a membership ID should be assigned each donor, they MUST indicated their local station(s).

Keep the current system of program payment and transfer the directed revenue to the respective stations or apply it to their bill. A little more accounting for NPR but if the additional revenue is there, it'll be worth it.

This will also help stations that struggle to put together strong fundraising appeals and could still allow for local appeals.

10:01 AM  

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