Biggest radio buy is KERA’s bet on Triple A music
The biggest radio station purchase of the year, as of this month, was for a Dallas FM outlet that KERA plans to devote to Triple A music.
KERA, which already operates a news-and-information FM station, announced June 9 that it will lay out $18 million for a reserved noncommercial channel at 91.7 MHz, KVTT, owned by religious broadcaster Covenant Educational Media.
The purchase opens the door for a major audience expansion for public radio’s contemporary music-mix format.
With a 100,000-watt signal covering the nation’s fifth-largest radio market, KERA’s new station reaches a population of 6 million listeners in metropolitan Dallas/Fort Worth, according to station execs. After the new station is established, KERA expects it to garner an audience of about the same size as that of news station KERA-FM, which has a weekly cume of more than 400,000 listeners. Launch is planned for this fall.
With few full-power stations broadcasting on the left end of the FM band in Dallas, the KVTT purchase gives KERA a rare opportunity to expand its service, according to Marc Hand, a managing director of Public Radio Capital, the nonprofit consulting group based in Boulder, Colo., that facilitated the sale.
It’s the first noncommercial outlet purchased in the 10 largest markets that wasn’t seeking independence from a government or school board licensee, as in the transfers of New York City’s municipal WNYC in 1996 and the Chicago school board’s WBEZ in 1990, Hand said.
Classical music already has an outlet in Dallas — commercial station WRR. Jazz airs on two local stations — The Oasis, commercial smooth jazz, and KNTU at the University of North Texas in Denton.
Adult Album Alternative — the Triple A music mix — was part of a split news/music format in KERA’s earlier years, said President Mary Anne Alhadeff. KERA-FM went all-news/information 13 years ago but still airs a genre-jumping mix of music on Sunday nights. Host Paul Slavens also produces a biweekly Texas-music podcast as part of KERA’s Art and Seek community arts initiative.
The Triple A format “seems like a good option, given the history of KERA and what’s going on in the market,” Hand said. “They have the ability to reach a different and complementary market to their news service.”
The Triple A format airs on 147 stations nationally, and all but 34 of these outlets are commercial operations, according to NPR’s Audience Insight and Research Division. Of the 9.8 million AAA listeners counted in Arbitron’s Fall 2008 survey period, 1.5 million tuned to pubradio Triple A stations. The commercial stations posted big audience gains last fall by adding 2.8 million weekly listeners since fall 2007. The weekly cume for public Triple A outlets did not change from Arbitron’s Fall 2007 survey.
NPR researchers attributed the commercial stations’ gains to relatively new Triple A outlets WRXP in New York, KFOG in San Francisco and KSWD in Los Angeles, but noted that the audience growth came in markets where listeners are measured by Arbitron’s new Portable People Meters rather than by diaries. PPM ratings have boosted the cume ratings of many commercial music stations. Audiences were flat for commercial Triple A stations in diary markets, according to NPR.
Dallas does have a commercial Triple A station, KDGE The Edge, but it targets young male listeners, judging from the “hot ladies” and “local girls” displayed on its website. “As with many commercial Triple A stations, it has narrowed its range of service,” Hand said. Commercial stations broadcasting the format have generally “pulled back from what makes Triple A unique and local,” Hand said, opening up a “good opportunity for public radio to be reviving the format.”
Secure enough to invest
KERA is in a relatively good fiscal position compared with many pubcasting outlets. Proceeds from the 2003 sale of KDTN, its second TV channel, were invested in a program endowment. Audited financial statements for licensee North Texas Public Broadcasting valued its investment portfolio at almost $20.1 million as of June 30, 2008.
The KERA stations have yielded a fiscal surplus for four consecutive years, Alhadeff said, and their membership has grown 18 percent this year. The upward trend, she said, is “rare in the system.”
“Our market is growing, and there’s an increased appreciation for public radio and television,” Alhadeff said. “There’s not ever been a better time for us to pursue something like this. We wanted to make it work.”
Putting the deal together took 18 months. “We went through five different iterations of the business model, beginning in January 2008,” said Erik Langner, PRC director of acquisitions. As the economy entered freefall and the credit markets tightened, KERA had to rework financial details of the sale. At one point, PRC and KERA tried to finance the purchase through the sale of bonds, said Jason Daisey, KERA c.f.o. “With the disruption of the credit markets and the economy going into recession, it turned out to be not the smartest route to go.”
Then PRC assembled a consortium of “mission-focused” lenders — the National Cooperative Bank, which helped finance the purchase of KCPW in Salt Lake City last year; PRC’s own Public Radio Fund, a mutual fund that invests in nonprofit causes; and FJC, a big New York-based manager of donor-advised charitable funds.
KERA will pay a blended interest rate of 6 percent on the loans, with payments totaling less than $1 million a year, according to Langner and Daisey.
In the end, delays in financing the sale may have worked in KERA’s favor. The $18 million purchase price is “a few million lower” than the value of KVTT as estimated by an independent appraiser, Daisey said. “I feel we got a pretty fair price on the station,” he said. “It was informed by what was happening in the economy ... and is not a small about of money.”
“This is certainly a great time to buy,” said Hand. “Station values on the commercial side are depressed. The Catch-22 is that access to capital is very tight.”
FCC approval of the license transfer could take up to six months, but an operating agreement between KERA and Covenant allows the pubcaster to take over the station within 120 days.
Decisions about programming and staffing are in the works, but Alhadeff expects to model the new schedule after existing Triple A public radio stations, combining a mix of nationally distributed fare such as World Café, local in-studio performances by artists, and hosted music shows. “As we were investigating this, we found that KERA still has a massive CD collection from when we were a music station,” Alhadeff said.
“We have a performance studio in the building that has not been used for performances for years,” she added. “It is where our volunteers have been answering phones during pledge drives and is acoustically perfect.”
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Web page posted June 22, 2009
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