Funding you can nurture, from your community

Welcome to the new public radio economy. In public broadcasting, as in almost every other business, the recession is forcing managers to make very tough choices. In severe cases, such as that of public radio station WMUB at Miami University in Ohio, the licensee gets out of radio entirely (Current, Feb. 2).

A dozen or more public radio stations, the ones most dependent on subsidized funding instead of listener-sensitive revenue, could face similar choices.

This is revealed by DEI’s latest examination of the Community Financial Support Index (CFSI), one of the metrics used in its Benchmarks for Public Radio Fundraising.

A CFSI of 100 means a station’s community financial support covers the full cost of its daily operation. But few stations have that much economic self-determination.

Consider these CFSI levels:

  • 90 or higher: Only 13 of the 94 stations in the 2008 DEI Benchmarks survey get at least 90 percent of their operating funds from their communities.
  • 60 or higher: Half of the stations get 60 percent or more.
  • 30 or lower: These are the stations most at risk. Eleven stations have a CFSI of less than 30. That means that they depend on funding sources out of their control for 70 percent or more of their daily operating costs. In a time when all kinds of institutions are cutting out non-core activities, that will be precarious.

Why focus on Community Financial Support?

Receiving funding from governments or from your station’s licensee has its upsides. If public radio had not received taxpayer and university subsidies, especially early on, it might not have become the strong and valued service it is today.

Subsidies have their downsides, however, particularly for the stations most dependent on them. If your station lost support from its licensee, or other outside subsidies, would it survive? Just as important, could you do anything about it?

While there’s little a station can do to influence state or university budget decisions, it has proven means of increasing the donations and underwriting that make up community financial support. Programmers’ choices influence how many people listen, and how often and for how long. Fundraisers’ decisions  determine how effectively they convert their listeners to givers and generate net revenue to invest in public service.

Increasingly, stations’ ability to sustain their service to the public depends on their ability to generate community financial support.

Is it realistic to think stations with low CFSIs can become less dependent on subsidies and gain more control over their ability to serve their communities?

The answer comes down to two factors: whether the station is valued by its community and, if so, how effectively the station converts listeners to givers and invests its fundraising budget.

To assess performance on the membership and mid-level giving side (donations from donors who give up to $999 a year), DEI’s Benchmarks project looks at this metric: your station’s net revenue per listener-hour (see sidebar).

Comparison of best-performing and median stations in member fundraising

Among the 2008 Benchmarks stations, the median net revenue is 1.6 cents per listener-hour. Top-performing stations in the survey earn 2.3 cents or more (see graphic).

There’s enormous potential in that situation: If all of the stations in the Benchmarks survey matched the performance of the top stations, public radio would gain $47.4 million in net membership revenue.

On the underwriting side, the median net revenue per listener-hour for the Benchmarks stations is 1.2 cents. Top performing stations in the survey earn 2.7 cents or more. If all of the stations in the Benchmarks survey matched the top performers, they’d share an additional $80.9 million in new net revenue.

Combining member giving and underwriting, that would amount to $128.3 million in additional net revenue for public radio stations.

Not every station in the DEI survey will become a top performer, but even a more modest improvement in fundraising efficiency could sustain some stations’ current service and keep others from going dark if their subsidies were taken away.

Why do some do better?

How can public radio stations begin to capture this additional revenue?

Let’s start by ruling out some of the usual suspects that have little effect on stations’ ability to recruit givers and earn net revenue.

DEI has studied the mix of stations in the annual Benchmarks surveys to determine whether larger market size, higher revenue or specific formats or license types give some stations advantages over others when it comes to generating givers and dollars.

These aren’t big factors in fundraising potential — with two exceptions: classical and jazz stations’ performance. In membership/mid-level giving, even the classical and jazz stations that do best at earning net revenue have an average net revenue per listener-hour 22 percent below their peers’. On the underwriting side, the top-performing classical and jazz stations have net revenue per listener-hour 81 percent below their peers’.

Aside from that gap, the top-performing stations include stations of various market sizes, revenue sizes, formats and licensee types.

Careful cost control certainly helps any station do better, but it isn’t the consistent major factor that creates top performers in net revenue per listener-hour. What top-performing stations spend on member fundraising costs goes all the way from 12 to 46 cents per dollar raised. In underwriting, the range is eight to 36 cents per dollar raised.

So, if these factors don’t lead to top performance, what does?

The answer is a general trait: Top performers are more aggressive than their peers at converting listening to givers and giving.

More of their listeners are givers. Compared to the median, top performers are 40 percent better at getting member-level donors (up to $250 a year) and 250 percent better at getting mid-level givers ($250-$999 a year).

And that’s because they ask for gifts more often and more effectively. Top performers raise money effectively throughout the year, not only during pledge drives but also during the rest of the year, and they raise six out of every 10 dollars off-air.

It’s the number of givers, not the size of the average gift, that sets apart the top-performing membership fundraisers. Top performers’ average gift from members is $87, only $2 above the average for all the other Benchmarks stations. In mid-level giving, gift size plays a bigger role; the top performers‘ average gift is $408. That’s $29 more than the average for the other Benchmarks stations.

In underwriting, comparable factors drive top performance. In DEI’s 2008 Best Practices Survey, top-performing stations in underwriting attributed their effectiveness to seven factors:

  • hiring and retaining experienced staffers who understand and appreciate public radio and allowing them to focus on bringing in cash;
  • maximizing opportunities—online, across media platforms and with agencies;
  • training their staffs (including field training with manager and peers; attending the Public Radio Development and Marketing Conference);
  • linking staffers’ compensation to revenue performance;
  • creating a meaningful presence for the station in the community;
  • involving the station’s board in fundraising; and
  • dedicating optimal on-air time to underwriting messages.

These factors are within stations’ control—or can be.

Toward 3 million givers

We’re encouraged to note that stations are making new progress in fundraising despite the recession.

Just over a year ago, DEI set forth a systemwide goal for public radio: raising the total number of donors to 3 million in a little more than four years (Current, July 14, 2008).

Public radio’s donor number stayed flat at about 2.5 million per year from 2003 to 2007, according to CPB annual revenue reports. But DEI estimates that the number grew to 2.625 million in 2008—a modest improvement in the right direction, toward 3 million givers a year.

Given the realities of corporate support and subsidies, fulfilling the goal of the 3-million giver initiative takes on increased importance in public radio’s new economy.

Why look at net revenue per listener-hour?

How is a station doing at fundraising compared with others — but without the skew of the station’s audience size or amount of listening? How is it really doing when you subtract the costs of fundraising? And how much of a station’s daily operation is paid for out of its net fundraising revenue?

To see a clear answer, DEI Benchmarks takes audience size out of the picture. Specifically, we control for audience size by using the station’s annual listener-hours. One listener-hour is one listener tuned in for one hour. Five listener-hours can be a single person listening for five hours or five people listening for an hour apiece.

On the revenue side, we look at net fundraising revenue — gross revenue minus direct fundraising expenses.

Essentially, we divide net fundraising revenue by listener-hours. For a more detailed explanation, go to the Benchmarks section of DEI’s site, www.deiworksite.org.

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