April 5, 1999

NPR's New Online Venture Puts Local Stations on the Defensive

By ANDREA ADELSON

he nation's public radio stations, already forced to become more business minded as government subsidies shrink, are coming under new pressure to behave more like commercial stations.

The pressure comes from National Public Radio, the network programmer on which many of the 700 public stations rely for a significant portion of their daily broadcasts.

Two weeks ago NPR, which itself relies on its member stations to finance its operations, struck an Internet deal with its largest affiliate, Minnesota Public Radio. The two organizations, which already operate individual Web sites, intend to develop a collaborative online network that would open this summer.

The effort is meant to strengthen local stations' own Web sites, many of which now offer little more than a weekly programming chart. The planners say they will not compete with local stations by creating a public radio supersite or by transmitting Webcasts of radio programs (although local stations would have the option of Webcasting NPR programs from their own sites). Instead, the Web service would help stations around the country supplement over-the-air fare by offering online chats with program hosts, selling merchandise electronically and providing access to online audio archives.

The stated strategy is to convert online visitors into local listeners. Currently, half the visits to NPR's site are by individuals who are seeking information and are not yet regular listeners, according to NPR.

But many of the nation's public stations, which together are heard by some 28 million listeners weekly, see the NPR-Minnesota pact as a potential revenue-sapping threat that could siphon listeners from their broadcasts. Stations are increasingly reliant on listeners, who support public stations by paying to become members and are the basis of ratings to attract corporate underwriting.

"I'm really concerned about what happens to our members when they disappear into a national site," Marita Rivero, general manager of WGBH-FM in Boston, said during a recent telephone conference call in which managers of public stations discussed the planned venture.

In an attempt to reassure skeptics, Kevin Klose, NPR's president, said later in an interview, "Nothing we do will do anything but strengthen that relationship."

Compounding the stations' worries is an impending Oct. 1 deadline. That is when NPR, which dominates public radio's morning and evening drive-time with its news shows "Morning Edition" and "All Things Considered," will begin charging stations for its programming based on a station's audience size -- ending the network's time-honored, not-for-profit practice of assessing fees based on a station's operating budget.

The consequences will be felt in both small and large cities. For example, WNYC-FM in New York is the nation's largest public station, listened to by one million people each week. Though it ranks but No. 22 in the market, with only a 2.8 percent share in February, the station is able to attract corporate underwriters interested in appealing to a well-educated audience. In populous New York, even a No. 22 ranking means a million listeners a week; on that basis, come October, the station's NPR fees, now $1.6 million a year, are certain to rise.

"We can't assume this kind of burden at this time," said Laura R. Walker, president and chief executive of the station, which is still struggling to pay off the license it bought for $20 million in 1997 from New York City. Ms. Walker also said the ratings-based fee model "doesn't recognize the value of the audience we bring to NPR, which they sell to their own underwriters."

The beneficiaries of the new programming payment system will probably be stations in rural areas, whose smaller audiences should mean that their payments to NPR will decline.

All of this is coming in a fiscal year in which the industry is forecasting that for the first time in public radio's three-decade history, at least half the $500 million annual cost of operating the nation's noncommercial stations will come from listener donations and corporate sponsors, instead of from public subsidies.

Abandoning the old egalitarian, pay-what-you-can system for a more market-driven fee structure is intended to create more accountability. And it should also mean that stations should be able to keep more of the proceeds when they create successful home-grown programming, rather than having to pay more to NPR simply because they have more money.

Ruth Seymour, general manager of KCRW-FM in Santa Monica, Calif., which has its own popular daily new music showcase, "Morning Becomes Eclectic," each day after NPR's "Morning Edition," said the incentives of the new network fee structure would probably cut both ways. Under the old payment system, she said, "NPR was being insulated from the success or failure of their product."

But in many cases, the changing economics of public radio are likely to speed up the industry's consolidation. Weak college-licensed stations, which are losing academic subsidies and in many cases are unable to build their audiences, are ceding independence and teaming up -- just as many commercial stations did when federal station-ownership limits were lifted several years ago.

At Pasadena City College in California, for example, trustees are considering such a partnership for station KPCC, which lost money last year and is facing a 59 percent increase, to $236,000, for NPR news fees. A decision is possible as early as this month.

Minnesota Public Radio is bidding for management and licensing control of the Pasadena station. The Minnesota organization, which is public radio's largest member, is best known for producing Garrison Keillor's "Prairie Home Companion."

Begun in 1966 by William H. Kling at a small, troubled college station, the St. Paul-based organization is now a $32 million, six-state media empire of 30 stations with a $110 million endowment.

"We feel we can copy that success in L.A.," Will Haddeland, a Minnesota Public Radio spokesman said, referring to the Pasadena station. The plan would be to remake KPCC into a news-talk station with a local news-gathering staff. In addition, MPR would help underwrite the establishment of a digital broadcast academy at the two-year college, with KPCC at its center.

The Minnesotans also see KPCC as a tap into a highly skilled Southern California broadcasting talent pool. "We have a difficult time recruiting qualified people to downtown St. Paul," Haddeland said.

The new pragmatism also explains the NPR-Minnesota Public Radio online alliance. The mouse-wielding multitudes from hundreds of public radio sites could be an alluring audience for online corporate underwriters.

Still, some NPR member stations fear the power of Minnesota Public Radio and its founder, Kling, who also runs a for-profit company, Greenspring. One of Greenspring's ventures was a catalog, which sells public radio tie-in products and is distributed to listeners around the nation -- a business the company sold last year to the Dayton-Hudson Corp. for an estimated $120 million.

Public radio stations, which reaped no financial benefit from the deal, are worried that Kling may replicate that experience on line, said one station manager, speaking on condition of anonymity.

Kling, who also took part in the recent conference call, was asked how electronic-commerce revenue would be apportioned among stations. "It's not how we divide it up," he responded, "but build it up." More details about the plan are to be outlined in May at a public radio conference in Washington.

In any event, airwave rivalries are likely to carry over to the virtual world of the Web. One of NPR's prime programming challengers is Minneapolis-based Public Radio International, which distributes the daily business show "Marketplace" and a weekly narrative by Ira Glass, "This American Life," to many of the same stations that carry NPR programs.

Public Radio International is developing online tools to allow searches of its own programming archives and also to let affiliate stations create indexed listings of their own self-produced programs. Public Radio International's partner in this effort is Newmarket Network, the Boston-based creator of for-profit, online sites for the producers of four public radio shows, including PRI's "Savvy Traveler."

"Stations can take as much or as little as they want," Salyer said. "Our goal is to provide the richest array of choices to the listening community."

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Related Sites
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• National Public Radio

• Minnesota Public Radio

• WGBH Radio

• WNYC-FM

• KCRW-FM

• KPCC

• Public Radio International

• Newmarket Network