Monday, March 05, 2012

The Failure of Top-Down Policy-Making

A recent article at, the public media industry news site, starts with the following sentence:

"There’s a growing disparity between the haves and have-nots among public stations. Their abilities to expand services and revenues are diverging."

This is the conclusion of public radio's top thinkers at the Public Media Futures Forum held in Washington, DC last month.

Their conclusion is no surprise at all.

This is Economics 101. Every marketplace sorts itself out this way. Businesses with resources or acumen rise. Businesses with fewer resources or weak management sink.

And public radio is a business. Most of the industry's revenue is "listener-sensitive" income. Listener donations and business support are derived from providing a service in the marketplace and then cashing in on the value of that service.

At the Futures Forum Tom Thomas of the SRG presented the fact that just 32 licensees (out of hundreds) bring in half of the revenue generated by stations. Again, not a surprise because this is Economics 101.

20% of the beer drinkers drink 80% of the beer consumed in the U-S. 35% of public radio listeners account for 70% of all public radio listening. You know the concept. It's called the Pareto Principle.*

The Pareto Principle has always applied to public radio and the gap between the "haves" and "have nots" in public radio has been growing for decades. Audience researcher and industry innovator David Giovannoni wrote about this in his "Radio Intelligence" columns in the late 1980s. That's right, this economic class-gap in public radio was predicted more than two decades ago.

The bigger story here might be the belief that public radio's leadership can still effect significant financial change in the industry through top-down policy initiatives. We think that approach is unlikely to succeed, with one exception, because closing any financial gap among stations is an exercise in the redistribution of wealth.

When it comes to redistributing income, the only significant pool of money to work with is federal funding. Even if there was some way to help the less well-off stations by changing the formula by which they get CPB money, that money is far from secure and getting it would end up making smaller stations even more dependent on subsidies. The collapse of WMUB provides a stark reminder of why that's a bad idea.

According to Current, participants in the Futures Forum focused on collaborations among stations as a way to help ease financial pressures. More specifically, they focused on why most station collaborations fail. The headline for the article was "Cohesion: It helps collaborators want the same things."

That headline illustrates the problem with top-down policies. Why would two or more stations to choose to collaborate when their goals or needs don't align? The answer, for short-term gain. A carrot is dangled, stations grab it, and only then start doing the due diligence needed to determine if the collaboration will work.

The process is backwards. That's why they fail. In order to succeed, stations must develop reasons for collaborating to the benefit of both organizations and plan in a way that transcends the current staff and management. Top-down policies that pre-determine which collaborations should work best work against successful outcomes.

It doesn't help that there is a lack of cohesion among public radio's national organizations. It would good if the national leadership in public radio all "wanted the same things." But right now, the goals of the industry's major organizations couldn't be more different.

NPR's primary goal these days is to further grow its direct-to-listener offerings and audience. CPB is now primarily funding projects that will help it get funded again.

Neither organization is doing much to help stations become more self-sufficient in the open marketplace. That's what they have to want in order to help stations.

Instead, each organization in its own way, has been encouraging stations to spend more money on activities that don't pay for themselves. Or in the case of NPR Digital, forcing stations to spend money on activities that don't pay for themselves.

If public radio's national leadership wants to tackle what it perceives to be a economic problem in the industry, then it has to stop viewing the world through the subsidy lens and start viewing stations' situations in the context of market forces.

It's the same kind of leap public radio had to take decades ago when it became apparent that it was subject to the rules of radio. Once the industry took that leap, the growth was phenomenal. If the Futures Forum took on helping public radio work within the laws of the marketplace, then similar gains could be made in the coming years.

* For a true economic and policy wonk experience read up on the Pareto Efficiency.

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