Public Radio Fund Drives

Sometimes I like to listen to classical music on WGBH, one of our local NPR stations. For what seems like a large percentage of the days in the year, however, they interrupt the programming for 20 minutes per hour with annoying fund drives. How much of WGBH’s revenue comes from driving listeners insane/away? Their annual report says that in 2008, only 12 percent of the total budget was from individual donations. Let’s assume that half of this money comes from people who would have given via the Web or via mail solicitations. The total revenue from on-air fund drives is therefore only about 6 percent of total revenues.

This 6 percent does not come for free, though. During fund drives, the station has less air time in which to sell ads. The station has fewer listeners during fund drives, which reduces the amount that can be charged for an ad. Furthermore, companies might not want their ads to run while listeners are being annoyed. Ad revenue, referred to in the annual report as “corporate support”, is 17 percent of total revenue and let’s assume that it could grow to 18 or 19 percent without the fund drives. Now the station is irritating listeners for a net 4 percent revenue boost.

Even this 4 percent isn’t free. The station needs to hire people to run the pledge drives, speaking on the air, coordinating volunteers, buying pizza, negotiating with companies for products and services to give away to donors. WGBH’s IRS Form 990 reveals that the station spent 10 percent of its total revenue on fundraising. If we assume that one third of that went to on-air fund drives, the net revenue boost from interrupting programming to have fund drives is only 1 percent.

I.e., if the station could trim expenses by 1 percent it would not need to do a fund drive ever again.

Another way to look at this is that the station spent 10 percent of its budget on fundraising. It received 12 percent of its budget from individual donations. If it trimmed expenses by 2 percent, it could stop asking for money via direct mail, on-air, on the Web, etc.

Is there any fat to be trimmed? Back in 2006, according to the IRS Form 990 (available from guidestar.org), the company was paying 14 vice presidents between $200,000 and $300,000 per year in current and deferred compensation. Henry P. Becton, Jr., the president, helped himself to $350,000 per year. [Did they need to pay Becton $350,000 for fear that this hard-charging young executive would be hired away by a new station in Los Angeles? The guy was in his 60s and about to retire, but presumably the Trustees of this non-profit organization thought that the wisest use of donor money was to give Becton a big pay raise.] In this economy, giving these folks a 5 percent pay cut should not result in anyone leaving for a commercial TV station (all of which are making drastic salary and staff level cuts).

If you weren’t annoyed enough by WGBH’s pledge drives, keep in mind that (1) the station could eliminate all fundraising and suffer only a 2 percent net loss (because they spent so much on administration, mailing, etc. in trying to get the money), and (2) all of the net proceeds from individuals barely suffice to pay a handful of top executives who never get anywhere near a TV camera or audio mixing panel.

The preceding analysis is in some ways too optimistic about fund drives. On-air fund drives might have made sense in the early days of public radio. The only other way to reach listeners and potential donors was via expensive printed direct mail. Public radio stations did not sell advertising in the early days and therefore there was no immediate cash value to having a larger audience. Listeners had no MP3 players, no satellite radio, no Internet radio, and no podcasts. A crummy station had a monopoly at least on its little corner of the dial and was guaranteed at least some audience. In the 21st Century, however, a public radio station has new competition and new opportunities, e.g., reaching listeners on the other side of the country or planet. Via its Web site and email, the station can communicate with listeners and ask for money “out of band” in a way that does not reduce the value of its service. One wonders if the fund drive is simply a leftover that hasn’t been eliminated because non-profit managers aren’t nimble enough to adapt to a changed world. By reducing the audience size and running up admin costs at an organization where a lot of employees are paid over $200,000 year, the fund drive probably reduces profits.

I’m listening to CBC Classical right now, which is free of all commercials, free of fundraising solicitations, and streamed at a much higher audio quality than WGBH’s Internet feed.

28 Comments

  1. Elsa Dorfman

    June 22, 2009 @ 6:36 pm

    1

    how can we broadcast this blog entry. you hit the nail on the head. we need lots of people to read yr blog . last week was wbur fundraising and my head is still splitting. this is something the people at emerson college radio and umass radio shld read too. then they will stop their onair fundraisers that mimic wbur and WGBH. many thankx. onward. e.

  2. Dan Lyke

    June 22, 2009 @ 7:21 pm

    2

    Out here in the SF Bay Area, KQED tells me that I can forgo the “thank you gift” and instead give the money that would have gone to the premium to an SF food bank. Uhh… yeah, if I’d wanted to donate to the that charity, I would have.

    I haven’t dug into it, but I believe that the reason that public radio stations are still running fund drives is that that’s how they get the subscriber lists that they sell in order to make the real money.

    Luckily, NPR coverage hereabouts is bad enough that my decision is easy: I get my NPR programming via podcasts, and just donate directly to the program. I get less junk mail that way too.

  3. Brad Templeton

    June 22, 2009 @ 8:12 pm

    3

    They may not be getting “advertising” during the pledge break, but they also aren’t paying for programming, so that’s a slight error in your calculation. You really need to factor the cost and revenue of the pledge break to the cost and revenue of airing more programming (with its cost of sponsorship sales and cost of programming.)

    And of course, the pledge breaks are just an excuse to change stations if on the radio. On the TV one changes channels — or just fast forwards the recording. Online listeners could be given a special value — once they pledge, the pledge breaks stop appearing in their online stream. Hard to do that on-air, would require fancy equipment and illegal encryption.

    As noted the public support does reveal what listeners really support, which is highly useful information. However, that could also be learned with short 1 minute pledge breaks after programs.

    They could offer online specials to donors, such as the ability to stream programs after the fact (if rights can be arranged) or higher quality streams, downloadable mp3s for the car etc. That’s quite handy. We used to record the east coast morning edition to the mp3 player and then could listen to it in the car on a morning drive, skipping the parts you are no interested in. Get the traffic elsewhere.

  4. Levi Barnett

    June 22, 2009 @ 8:39 pm

    4

    Listening to the CBC Classical online may be free, but it’s not free for Canadian taxpayers. While the CBC may make for great radio, it might not make for a good policy comparison with your local NPR affiliate.

    In 2005-6, the CBC says it received ~C$1.006 billion dollars in government funding.

    According to the Corporation for Public Broadcasting, public broadcasting in America received ~US$1,046,056,000 in government support in FY 2005.

    Census figures estimate that Canada had 31.6 million people in 2006 while the USA had 298.4 million. Very roughly, the Canadian government was spending 10 times as much per capita on public broadcasting. Hence it’s no surprise that a CBC program might not need to beg for money as often as the local NPR affiliate.

  5. philg

    June 22, 2009 @ 10:10 pm

    5

    Levi: I’m not sure why the denser population of the U.S. makes it more expensive to run public radio. The cost of spinning some classical CDs is the same whether 1 person is listening or 1 million. Canada is larger geographically than the U.S. and the cost of running a radio station in Nunavut, not connected by road to any other part of Canada, is a lot higher than running a transmitter in Cleveland. Not to mention the cost of getting reporters out to remote communities in the Northwest Territories, Nunavut, Quebec, etc. (see http://www.cbc.ca/north/ ).

  6. Andrew

    June 22, 2009 @ 10:56 pm

    6

    WGBH doesn’t sell ads, it’s a noncommercial station. So no revenue loss there.

    The real real reasons fat public stations do fundraising are simple:

    a) CPB and PBS (and some corporate) grants can’t be used for arbitrary purposes, but they usually can be used for fundraising. So you spend $30MM of constrained money to collect $25MM of listener-supplied soft money. It makes a certain kind of sense.

    b) Despite evidence to the contrary, someone produced a study that shows that listeners feel _more_ connected to a public station that they contribute money to than one that doesn’t ask. And that a high percentage of regular listeners do in fact contribute. So theoretically, it raises listener loyalty. Audience numbers are part of the data required in CPB and PBS grant applications. (I don’t know why they call them “applications” even though the same set of applicants get funds every year..)

    I agree that WGBH and WBUR are egregious, though. KQED is bad too. One of the three (I think KQED) tried a “silent” fundraiser a few years back where they just mentioned it periodically without interrupting programming significantly. I don’t remember how it worked out for them.

    All three of those stations have operating budgets higher than 95% of major market commercial stations, incidentally. But they do much more original content production, which is hugely expensive compared to commercial radio fare.

  7. philg

    June 22, 2009 @ 11:12 pm

    7

    Andrew: “WGBH doesn’t sell ads”? In exchange for a specified sum of money, WGBH will read the name of a company on the air. They talk about the product or service that company delivers. They talk about how great that product or service is. They talk about how many years the company has been in the same business. Said company and said product or service are entirely unrelated to the entertainment or news program. If the company wants the material read twice as frequently to listeners, the company has to pay WGBH twice as much. This is not an ad?

    One of our Cambridge neighbors used to say “Just because I like to strap on a dildo and fuck my girlfriend doesn’t make me a lesbian.”

  8. Gabo

    June 23, 2009 @ 8:58 am

    8

    Here’s a fundraising idea for you:

    There are some programs on GBH that I hate. Presumably, somebody else loves them, or else they wouldn’t be there. “Sound and Spirit” will never fail to get me to change the station. What a cloying, annoying bunch of hoo-hah. And the Takeaway? We call it the Talkaway in our house. Whose idea was that? Instead of presenting the news, we’ll have a bunch of folks pretend to be joshing around with each other (though it’s obvious they don’t even know each other) and we’ll all talk about how the news makes us _feel!_ What, is it cheaper or something?

    So here’s the idea: competitive fundraising. You can donate money either to save a program or to kill it. Like American Idol. Vote a show off the air with your money. I’d give 100 bucks if I could 86 Sound and Spirit, and I might donate twice if I had to.

  9. Bob

    June 23, 2009 @ 10:07 am

    9

    Compare that to Jazz.fm. They get approx 50% from limited advertising (4min/hr.) and 50% from listeners. They used to do fundraising throughout the year, but as you noticed with WGBH, listeners complained. So now they do 2 per year, but for a week (or so) at a time, and get it over with.

    All and all a very good station.

  10. tekumse

    June 23, 2009 @ 11:00 am

    10

    My experience with non profits suggests that you are greatly overestimating the fundraising cost. Typically development is such organizations consists of two people – the director and the assistant. Director, helped by the president, meets with large donors. The assistant creates reports out of Raiser’s Edge – large donors, medium donors, mailing list, etc. Membership lists get sold and the non-profit will make some money, but often they also buy such lists so they can target potential members. All the other work is done by volunteers, often the volunteer coordinator is a volunteer as well. Calling, greeting, stuffing letters in envelopes, decorating, cleaning, attaching labels – all of this is practically free.

    One of the biggest expense is the software where Raiser’s Edge has a practical monopoly even though it is the usual bloatware. Including server costs it runs easily in the 6 digits annually even for a small org. Until recently the data was locked in their proprietary DB formats. Now they trump the competition which uses FileMakerPro as a backend. But since people in such organizations are woefully incompetent in technical matters they just assume there is no alternative and year after year keep paying hundreds of thousands for a glorified label maker.

  11. philg

    June 23, 2009 @ 12:29 pm

    11

    Tekumse: I did not “estimate” WBGH’s fundraising costs. They reported them to the Internal Revenue Service on their Form 990, which is available to the public at guidestar.org (requires free registration). WGBH spent $19,765,090 in 2006 on fundraising, including nearly $7,976,360 on salaries. This was more than 10 percent of their total expenses. In 2005, they reported spending $17.5M on fundraising, about 10 percent of their total $177M in spending. In 2004 they reported spending $16.4M out of a total of $181M.

    It would appear that their fundraising expenses are growing faster than revenue. If individual donations shrink slightly due to the Collapse of 2008, they will spend more on fundraising than they receive in individual donations. We won’t know until the 2009 Form 990 is available.

  12. Andrew

    June 23, 2009 @ 12:31 pm

    12

    @philg: I intended to amplify your rhetoric — “enhanced underwriting” can sound a whole lot like advertising, but there are still a few hard and fast rules that make it different, if you know what to listen for. Obviously, that’s a bogus criterion for making real world distinctions, but there it is.

    Regardless, WGBH doesn’t lose underwriting revenue during fundraising, because they don’t collect per-spot. That would be illegal. Of course, a sponsor can elect to participate in only X weeks/episodes/whatevers, so there is still a direct relationship between the cost and the frequency of the sponsor message.

  13. Andrew

    June 23, 2009 @ 12:35 pm

    13

    @self: “illegal” above meaning “in contravention of the Rules” and therefore subject to censure and fine from the Commission, and therefore almost certainly disallowed in the WGBH underwriting pits, where (for all their sins) they probably take such stuff pretty seriously, and unquestionably pay their lawyers a bunch to do so.

    Also, FCC cops carry sidearms.

  14. Drew

    June 23, 2009 @ 1:04 pm

    14

    Phil you should consider the 12% a steering committee.

    Otherwise, NPR will just morph in to FOX and CNN if the corporate interests take over. We already know what happens when adverts rule…

    I also believe that NPR and friends should collect about 10% more money than they actually need, invest long term and make a huge endowment for themselves, eventually they won’t need any outside funding and we can forgo this whole funding time waste.

    The money that individuals send to NPR should be the vote that counts.

  15. philg

    June 23, 2009 @ 2:43 pm

    15

    Drew: Excellent point, though perhaps the influence is already there. Public broadcasting is heavily funded by the government and therefore we should assume that it would be reluctant to run stories critical of government spending and waste. For example, http://news.yahoo.com/s/ap/20090622/ap_on_re_us/us_rubber_rooms_1 is a story about NYC taxpayers paying $65 million per year to teachers sitting in a room doing nothing. I don’t remember hearing anything like it. The New York Times, which does not receive government money, has run stories on how hundreds of millions of taxpayer dollars are spent on Long Island Rail Road disability pensions: http://topics.nytimes.com/top/reference/timestopics/organizations/l/long_island_rail_road/index.html

    If we believe that funding leads to editorial influence, you’d expect NPR to be a major proponent of increased governing spending and reluctant to criticize taxes or waste.

  16. Chris Devers

    June 23, 2009 @ 3:45 pm

    16

    A thought:

    As Andrew notes, “Despite evidence to the contrary, someone produced a study that shows that listeners feel _more_ connected to a public station that they contribute money to than one that doesn’t ask. And that a high percentage of regular listeners do in fact contribute. So theoretically, it raises listener loyalty.”

    It may be the case that public broadcasters can take this data and present it to their commercial underwriters as a way to up the rates they would be able to command otherwise. If WGBH/WBUR/KQED etc can demonstrate to potential advertisers that they have a certain dedicated demographic that is willing to pay out of pocket for the station, even if the amount spent collecting those funds were enough to cancel out the funds, they might be able to attract underwriters that are willing to pay more to reach such an audience. It’s a net win.

    On a similar line of thought, I’ve heard that the amount publications like newspapers & magazines collect in subscription revenues is typically about equal to the cost put into collecting those revenues, so on paper it’s a wash. On the other hand, they can turn around and tell advertisers that, say, “10 million people subscribe to the New York Times, and another 10 million buy it every day at newsstands”, thus signalling to advertisers that the demographic is worth paying more to reach — as opposed to, say, the Metro, which may give away 10x as many copies, but probably can’t command the same ad rates (and which, in fact, runs more house ads etc).

    Obviously, this strategy hasn’t been entirely successful for print publications in recent years, but it also isn’t clear that this facet of the business model is the core of the problems they’re all experiencing.

  17. philg

    June 23, 2009 @ 4:14 pm

    17

    Chris Devers: Newspapers and magazines collect subscription revenues that are far in excess of their costs of marketing subscriptions. What the revenues do not completely cover, in the classical newspaper case, are the costs of production, printing, and distribution (typically union jobs, with lifetime employment guarantees in the case of the Boston Globe). This is why the newspaper needs to sell ads as well.

    The only way that a newspaper could afford to behave like an NPR station would be if it received most of its money from taxpayer funds.

  18. Bill

    June 23, 2009 @ 6:05 pm

    18

    Phil: Sorry, but the story about the teachers sitting around was featured on This American Life. (http://www.thisamericanlife.org/Radio_Episode.aspx?episode=350)

    Does anyone know if NPR stations are _required_ to do listener fundraising by NPR itself?

  19. Chris

    June 23, 2009 @ 9:30 pm

    19

    I felt guilty so I dropped my local station $20. That just whet the appetite of “the beggars.”

    Now I’m getting mailings and calls asking for more. Good grief. I only listen to them on my commute (which is at the most 15 minutes). So I thought $20 was plenty.

    The sent me membership cards (3) and a letter. The membership card entitles me to discounts at very cliched NPR listener stores. Places I would never go in other words.

    At work and home I listen to Pandora.com. I create a station and can listen free all day.

  20. Paul P.

    June 23, 2009 @ 11:19 pm

    20

    My personal horror story: I donated $1,000 to Folk Alley WKSU. I got back a “tax deduction” for (approx) $700. I was really upset, called the station, their logic was that I-personally got “$300 worth of benefit” from having my name broadcast as a supporter (“once every 4 hours, for a full day!”). Furthermore, the Kent State “School of Accounting” had deemed this “fair/reasonable”. I was furious. Was told the “CFO” was out of town tor 2 weeks, would get back to me.

    More time/argument, finally got my receipt for $1,000. Never listened to the station again.

  21. Andrew

    June 24, 2009 @ 10:49 am

    21

    @Paul P: you were just on the wrong end of an accounting rule.

    Having your personal name mentioned is of no value to you, but having your business name mentioned might have been. 501(c)(3)s are required to subtract any “value received” in exchange for your donation from the deduction value. This includes gifts for personal use (mugs, tote bags, etc) too, but in your case your pledge probably looked like a corporate donation ($1000 is much higher than most personal pledges), so it got lumped into wrong category.

    Less forgivable (to me) is that a single donation to a station gets you on so many freakin fundraising mailing lists. And donating to a college station often gets you added to the college’s general donor list. I’m looking at you, WZBC. 🙂

  22. Anon100

    June 25, 2009 @ 7:32 am

    22

    I would suppose that if/when various people donate to the station, that:

    – Is useful information when lobbying for money from the government (‘look, X people donated to us in the last 5 years, a significant number of voters must care about us.’)

    – Encourages everyone who listens to think that public broadcasting is at risk of not having enough money, so the listeners will tend to support funding for public broadcasting if the issue ever comes up (which it does, at least indirectly, every time a candidate runs who is associated with giving more or less money to a million little different possibly optional government activities.)

  23. njkayaker

    June 25, 2009 @ 12:56 pm

    23

    Aren’t public radio stations required to provide some level of funding through membership contributions to get additional federal support? Getting membership money establishes that there are people who are interested in what the station provides.

  24. anilo

    June 25, 2009 @ 2:54 pm

    24

    I couldn’t agree more. I always listen to NPR on my 30 minute commute, but switch to other stations for the couple days with fund raising. I can’t stand hearing the same speech on what a difference $20 will make for them.

  25. Ted Marcus

    June 25, 2009 @ 11:10 pm

    25

    Although I’ve been a long-time supporter of two public radio stations in Los Angeles, I’m beginning to wonder about the continued viability of public radio. We have one classical radio station here, KUSC. I have never thought much of their programming, but they were the only game in town when I didn’t have my iPod with me.

    When I got a new car six months ago, it came with XM radio and a three-month trial subscription. I found the two XM classical channels greatly preferable to KUSC (along with a “show tune” channel that doesn’t exist on the air), so of course I bought a subscription. A few months later, I got myself a Sanyo R227 Internet radio. So even when my computer isn’t on I can listen to the CBC channels (thank you Canadian taxpayers, eh?), San Francisco’s (commercial) KDFC, and best of all, Switzerland’s national treasure called Swiss Classic (thank you Swiss taxpayers). And there are several hundred other classical channels that I haven’t bothered with. So who needs KUSC?

    The two stations I support (KPCC and KCRW) carry unique news and “independent.” I think I’ll continue to support them because they provide a valuable service and are the first place I turn for breaking news. But with XM in the car and Internet radio at home, there’s much less time (and need) for them.

  26. David Molnar

    June 27, 2009 @ 3:11 am

    26

    One issue that may contribute to fundraising, even when it has low return on investment: 501c3 organizations need to demonstrate a certain amount of public support to keep their tax status. The IRS ideally wants to see 33 1/3% of the operating budget come from public contributions (minus any benefits received by donors as a result of their contributions, as discussed in previous comments about benefit from having name mentioned). If an organization fails to meet the 33 1/3% threshold, then it ends up with some questions to answer for the IRS. There is an alternate “facts and circumstances test” that can save an organization’s tax status if less than 33 1/3% but at least 10% of its budget comes from members of the public.

    Here’s some pages that discuss these issues:
    http://www.sharinglaw.net/npo/PublicSupportTest.htm
    http://www.onestopbizhelp.com/nonprofit/status.htm
    http://www.irs.gov/publications/p557/ch03.html#d0e4630

    Failure to meet either the 33 1/3 % or the 10% + “facts and circumstances” means that your organization becomes a “private foundation” in the eyes of the IRS. Private foundations have a number of rules and restrictions not applicable to 501c3 public charities, so unless an organization is specifically envisioned as a private foundation, it will do pretty much anything it can to avoid falling into this category.

    I am not a lawyer, and I haven’t reviewed the 990 form. Still, it wouldn’t surprise me if one of the motivations for these pledge drives is to survive an IRS review of the nonprofit status…the way the law is set up leads to some odd incentives for organizations that force them to do public fundraising even if their “business” model would not otherwise require it. I know about this because I am part of the Noisebridge hacker space in San Francisco — we decided to seek 501c3 public charity status and this is one of the things we’re working with now.

  27. Allen

    September 2, 2009 @ 10:48 am

    27

    Update from yesterday’s Boston Globe:

    http://www.boston.com/business/articles/2009/09/01/at_wgbh_the_picture_seems_a_bit_cloudy/

    “Just two years ago, WGBH celebrated the opening of an $85 million state-of-the-art headquarters that symbolized its self-described status as a “public media powerhouse.’’

    Maybe they regret that 30′ x 45′ LCD screen now?

  28. Bruce

    February 24, 2010 @ 11:37 pm

    28

    I live in Los Angeles. When I first moved here in 1995 I discovered the local NPR affiliates and the pledge drives occurred once per year. NOW pledge drives occur maybe two or THREE times per year. What’s happened? Has the percentage of government funding for Public Broadcasting decreased since 1995? Why the increase in pledge drive time between now and the mid-90s? Does anyone know anything about this?

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