PRI risks lawsuit with parent MPR over Marketplace Originally published in Current, May 1, 2000 By Steve Behrens Admitting to a concern that Minnesota Public Radio will start competing with it as a program distributor, Public Radio International has filed suit to stop MPR's purchase of Marketplace. If the sale is not overturned, MPR will control both of PRI's top programs — the other being MPR's own A Prairie Home Companion. The University of Southern California, Marketplace's producer, is the defendant in PRI's suit, filed April 13 in federal court in St. Paul, but MPR is the ultimate opponent in a drama fraught with intense familial conflict. Bill Kling, president of MPR, fathered PRI — he founded it 17 years ago. But the child has grown apart from the parent and six years ago announced it was moving onto the parent's turf — program production — by initiating The World and choosing another co-producer over MPR. Now PRI says it suspects its parent, MPR, will go into competition with it as a distributor. If MPR succeeds in buying Marketplace, this is the threat that PRI foresees, according to its suit: "PRI will be forced to be a party to contracts with an entity moving towards becoming a competitor. Additionally, its competitive advantage as a programming distributor will be damaged." Unless the parties settle before the time comes, PRI is scheduled to argue in court May 12 for a preliminary injunction against the sale of Marketplace and its spinoff Savvy Traveler. And under the involuntary termination clause of its Marketplace distribution contract, PRI argued in its lawsuit that USC must turn over control of the program. This second remedy could be tough to win. Under the contract, PRI would have to show that Marketplace's "ongoing integrity and success ... would be fundamentally undermined" by the sale to MPR. PRI, USC and MPR won't comment on the situation, so it's hard to know whether it's a routine dispute among business partners that will be resolved amicably, or evidence of a bitter rift that cannot end happily — and could severely wound PRI. The three parties have assured public radio stations that Marketplace will continue to be produced, without interruption, but the suit could delay or block the major investment in the program that MPR could make and USC, its longtime owner, would not. PRI says it has been a key provider for the program, thus far. Though USC Radio produces it in Los Angeles, the Minneapolis-based network has invested more than $1 million in developing the series and has since raised more than $20 million to keep it going, according to an affidavit by Lee Sheehy, PRI's senior v.p. of business and legal affairs. This role in Marketplace gives PRI its handle on the program. Its seven-year distribution contract with USC Radio says that neither party "may sell, assign or otherwise transfer its rights or responsibilities under this agreement without the written consent of the other party." USC contends that it asked for PRI's consent on Feb. 28, and never got it after waiting for "a period that we believed to be reasonable," Martha Harris, president of USC Radio, told PRI President Stephen Salyer in a letter April 13. The purchase deal had been closed two days earlier, she reported. On the day she sent the letter, PRI filed suit, charging that the university had refused to provide details of the sale since September, when it advised PRI of negotiations with MPR. "USC attempted to pressure PRI to consent to a contract, the essential terms of which it has never seen," the suit alleges. The university provided only a heavily edited version of the sale agreement, PRI said, and then it failed to resolve the dispute through mediation and arbitration procedures written into the contract. USC did file a demand for mediation and a demand for expedited arbitration with the American Arbitration Association on April 7, according to PRI's suit, but the distributor claims USC was doing so to pressure it for consent. A rift in the family It's not every day that a company files a suit that will frustrate its biggest supplier and one of its biggest customers, as PRI did with MPR. For better or worse, the two companies are bound by a Marketplace distribution deal that runs through June 2003 and a Savvy Traveler deal through June 2001 (according to the legal papers), among many other business arrangements. Like most offspring, PRI has been gaining autonomy from its parent over the years. Kling himself chaired the distributor when it was called American Public Radio. It moved out of its home neighborhood in St. Paul, across the river to Minneapolis. In 1993-94, the company changed its name to PRI and its bylaws were amended to let it take a more active role in production, says a former PRI executive. The companies worked together on a daily basis on distribution of MPR's programs, but they grew apart. Kling left the PRI board. The distance increased in summer 1994, when PRI stepped into the leading role in a major series for the first time, hiring WGBH instead of MPR as co-producer of The World (with the BBC), according to the former PRI executive. MPR had made a big presentation to win a role in The World, and there was disappointment in St. Paul, says a former MPR vice president, Dennis Hamilton, now studying for a master's degree in public administration at Harvard University. The two organizations continued to do business, Hamilton recalls, but, "There was a nervousness on my part when PRI started to get into program production. I felt we were in some ways doing business with a company that would become our competitor." MPR-watchers saw further evidence of its national ambitions in 1997, when Kling hired former NPR News chief Bill Buzenberg. "People in the system said that means they're moving toward becoming an important network," says an observer in Washington. Then, last spring, PRI and MPR announced they were working with separate partners on competing projects to develop features for public radio stations' web sites — Minnesota with NPR, and PRI with web entrepreneur Tom Lix. Last May, on Kling's request, PRI removed its founder's name from its annual award for innovation and entrepreneurship. With MPR's purchase of USC's Marketplace Productions, and PRI's lawsuit, the parent and child became adversaries. PRI could become highly dependent on MPR, or worse, lose distribution contracts for both Keillor and Marketplace, the two must-have programs that bring stations into affiliation with PRI, according to sources with experience inside and outside the network. Why would PRI risk further alienating MPR with a lawsuit? "I think it's a move of desperation," says the former PRI executive. "If PRI believes that MPR is moving toward becoming a network," says the Washington observer, "they don't have anything to lose."

Earlier article Marketplace: another buy for Minnesota Originally published in Current, April 17, 2000 Minnesota Public Radio is again the successful suitor in the Los Angeles area, acquiring Marketplace Productions last week, three months after taking charge of KPCC-FM, Pasadena. The production house makes the daily Marketplace and Marketplace Morning Report and the weekly Savvy Traveler for public radio. MPR took ownership April 12 and put its name on the broadcasts two days later. It has already negotiated a lease for a downtown Los Angeles facility to be shared with part of the KPCC news staff, said MPR President Bill Kling. As in Pasadena, MPR brings capital for expansion to a public radio institution that had never had enough under the ownership of higher education. Home of Marketplace for 10 years, the University of Southern California, began working with consultants from its business school two years ago to determine the needs of the radio production unit, and the university decided it could not make the needed investments, said Martha Harris, v.p. of public relations for the university. Teaching and research had priority for capital, she said. When the consultants advised that Marketplace Productions needed more capital, the radio producers were surprised and pleased that the university was open to transferring the asset rather than insisting on keeping it, said Jim Russell, g.m. of Marketplace Productions. USC issued a request for proposals two years ago and considered a half-dozen applicants, he said. As part of the deal, USC and its business and journalism schools will be named in the on-air credits of Marketplace programs ("produced in association with"); the production unit will engage USC interns and its staff will participate at the university, said Harris. Russell will not only continue to run the Los Angeles unit but will become MPR's v.p. of national programming and will oversee its existing national productions, spending part of every month in St. Paul, according to Kling. The position, vacant for a year, was previously held by Tom Voegeli and most recently by Dennis Hamilton. The influx of capital from public radio's largest and richest licensee will help Marketplace Productions move into better quarters, raise talent compensation and develop new programming, Russell said. By fall, the staff will be able to leave a crowded and windowless building on USC campus for new downtown quarters. For digital equipment, Marketplace had already raised $600,000 from Korn/Ferry International's FutureStep.Com employment web site, he said. The production house will also be able to raise pay to a competitive level from the university's lower pay rates, Kling said. And the producers can begin moving on new ideas for national programs--initially including added updates for the Marketplace Morning Report module, which now does its last feed before 7 a.m. Pacific time, according to Russell. Marketplace may also develop a weekend offering, he said. California dreamin' A major reason for buying into the Los Angeles production house is that the area's huge talent base is not involved enough in public radio, Kling said. Santa Monica station KCRW has proven that big-name talent can be brought into pubradio, Russell said, and he wants to develop national programming with talent from the region's movie, music and theater circles. In MPR's earlier L.A. venture, a 15-year lease deal with Pasadena City College, it is turning the college's eclectic music station KPCC into a news/talk station. Bill Buzenberg, MPR's news chief, is supervising the hiring of a news director and major staffers, according to Kling. Craig Curtis, MPR's top programmer, meanwhile has been working with nearby public radio stations to help find new homes for two popular music programs, The Sancho Show and a 1930s/1940s music show. "We think they'll both be picked up," Kling told Current.. Fans of the shows have been complaining loudly about the format switch. KPCC's downtown news bureau will share space with Marketplace Productions in the new quarters near the Museum of Contemporary Art in L.A.'s Bunker Hill area, said Kling. Other KPCC journalists will work out of station headquarters in Pasadena or in a new Orange County bureau.

 

 

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