The best idea ever
— and it’s FREE!

Originally published in Current, April 21, 2008
Commentary by David Othmer

It’s time to change public television’s membership fundraising model. It’s time to expand our membership revenue streams from the current two — asking viewers to support “programs like this one,” and selling them overpriced premiums — and instead offer them a much broader array of goods and services, as well as philanthropic opportunities.

It’s time, in short, to offer free membership.

Free is here. Free is now. In the March [2008] issue of Wired, the magazine’s editor-in-chief and author of The Long Tail, Chris Anderson, examined a growing variety of profitable pricing strategies that bring down the price of goods in many industries to zero, or nearly zero.

He starts with King Gillette’s discovery more than a century ago that he could make more money by giving away the more costly-to-make razors and charging for the cheaper-to-make blades, and he brings the phenomenon up to date, citing Radiohead’s recent decision to offer their latest album on a pay-what-you-like basis on the Web.

Anderson traces how changing technology — the Internet, digital storage costs and the rise of wireless communications — have reduced the costs of many products and services so close to zero that they can be given away to promote the sale of other services. This explains how Google can be celebrated as a groundbreaking business even though it prices most of its consumer services at zero dollars.

But the basic practice of blades-and-razors cross-subsidies used by Gillette still works in non-Internet businesses, too, Anderson says. For example, Ryanair, the European low-cost air carrier, generates more revenue from non-ticket revenue — such as charging for extra bags and food—than from tickets.

Likewise, rock bands are giving away CDs of their music because the discs’ promotional value in selling concert tickets exceeds their potential net revenue. Free is here. Free is good.

Our practice of raising funds on-air . . . has lost its appeal. For 30 years, I’ve publicly, privately and enthusiastically supported on-air fundraising as the most efficient way to raise money for public broadcasting — producing public broadcasting’s first $1 million fundraiser, its first $2 million fundraiser (both at WNET in the late ’70s and early ’80s) and the first $1 million fundraiser at WHYY (’85). And now, seven years after leaving station payrolls, and after seven years of watching and listening to pledging I once thought was essential, I can tell you flat out it is a terrible way to raise money. It wastes resources, including airtime. Our audience is right — it’s annoying, it’s demeaning, it’s insulting.

It’s also antediluvian, antitechnology and antisocial. Continuing to inflict pledge drives on our viewers brands us in ways we shouldn’t want to be branded.

The solution: free membership. As in: free razor, paid-for blades. In our case: Give away the membership, charge for a huge menu of philanthropic options, products and services, many yet to be imagined.

In other words, it’s time to stop trying to get people to pay for something they can get for free (“programs like this one”) and start charging them for a large number of mission-related goods and services —that they actually want to support—and that are available only (or most conveniently) through us.

There are three reasons this idea will work:

1. Membership—among the potential supporters who like what we do—will increase hugely. Today, we get one member for every 10 or 12 regular viewers, which amounts to one of every 25 or 30 households in the market. Free membership would likely capture between a third and a half of the total households in the market, depending on how clever we are. That means we will have orders of magnitude more people—who express an affinity for our services—to sell razor blades to.

2. Costs will decrease monumentally. Here’s where we can benefit from the Internet economics that Anderson recommends. The entire new membership function would be web-based, reducing our costs of capturing and serving members to — you got it — nearly zero. No more on-air fundraisers interrupting or displacing our best programs, no more printing and mailing seven flights of renewal notices, far fewer staff members assigned to fundraising instead of mission-related work, perhaps not even paying for production of pledge specials designed more to induce impulse sales rather than fulfill our mission. Data from CPB’s Stations Activities Benchmarking Study indicate that the true costs of fundraising are so high that net revenue from on-air fundraising is a small percentage of the gross.

nder the free option, with more donors/customers and lower costs, the gross revenue per member we would have to raise to replace our present net income would be far, far lower. We’d face a relatively small challenge to replace lost net income but gain a huge opportunity for net growth.

3. We will treat members as true partners. Today’s ask — “support programs like the one you’re enjoying right now” — is a limited appeal to a limited audience, for a limited time.

Under the free membership option, we will speak online with a much larger audience, 24/7. And with the Internet’s segmentation possibilities, we can offer a much wider variety of options to our many passionate and specialized niche audiences.

Some offers will be market-price or even discounted, such as DVDs of programs, access to special on-demand HD video on our sites, subscriptions to the new online services such as PBS Kids Play, or new mission-related products and services.

But giving up on pledge drives won’t require giving up on the philanthropic motive.

In fact, nonprofits are a terrific example of the three-party economic systems that Anderson says are a key to viability for “free” in many cases.

The most common three-way deal is advertising on commercial radio or TV:

1. Users get the service free.

2. Advertisers pays for the ad, which funds the content.

3. The media proprietor publishes content and ads together.

Philanthropic support of public TV—think underwriting or membership—is also a three-way deal:

1. Users watch public TV for free.

2. Some users and other donors voluntarily pay for the content.

3. The public station broadcasts the content and thanks the donors.

As an interactive medium, the Web not only improves philanthropy with its brilliant handling of credit card payments, but it can also vastly improve upon the pledge pitch.

For instance, we can build on the model developed in recent years by PACs such as MoveOn.org: We can ask subsections of our expanded membership to help support specific programs, initiatives and community services that have the undiluted, specific appeal of the programming that each donor loves the most — a far more powerful motivator than an appeal to support a station in general.

PACs use this power to raise money to campaign for their objectives. For instance, a PAC will plan a commercial, show the storyboard to its members through the Web, tell them how much it will cost to produce and broadcast, and invite their members to pitch in $25 or $50 to cover the cost. This has worked very effectively for three or four election cycles. We can learn from their experience.

In our case, we could ask members for local programming funds (as WNET already has—see the New York Times, “A Year into Job, WNET President Seeks a Heightened Urgency,” Jan. 30, 2008), for expansion of services such as Ready to Learn, and, by partnering with other community entities, for a huge number of other services that promote our goals as community service organizations (see Current, If we’re just TV, that isn’t going to cut it,” Feb. 19, 2008). Our net would come from the difference between our revenues and our expenses.

We can even go to members with our old-fashioned “win this one for the Gipper” pitch if we need to. But since there will now be 10 times as many members, and since they’ll be used to responding to a variety of opportunities, we can ask them for support based on their history with us, instead of depending on a hard-sell pitch for the highest price we could imagine putting on a DVD/book combo premium.

The key to the success of this idea—and its beauty—is that it has the potential to turn a fundraising opportunity into a fundraising- and mission- expanding opportunity.

The old offer was: “Support this programming service and we’ll send you an overpriced premium.”

We’ll replace that with: “Participate in and benefit from an ever-expanding variety of services to our community.”

Out goes an audience relationship that is increasingly transactional. In comes a relationship focused on the community’s needs, not ours.

I am so confident that this idea will succeed that I am willing to work for any station for free to help set up the system, for a very small percentage of the income (the razor blades). Or, of course, you can pay my pathetically low daily rate (the razor), if you prefer.

See how it works?

Be honest, you’ve gotta admit it’s the best idea ever — and I’m giving it to you . . . for free.                               

David Othmer is a media consultant and part-time wine-grape grower based in Philadelphia. He worked as station manager of WHYY-FM/TV and, before that, as director of broadcasting at WNET, New York. E-mail: DavidOthmerataol.com.

Web page posted Sept. 8, 2008
Copyright 2008 by Current LLC

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EARLIER ARTICLES

Public TV's membership has declined slowly since 1993, though pledge premiums help keep the gross revenue rising.

LINKS

Free! Why $0.00 is the Future of Business, by Chris Anderson, Wired magazine.

Charlie Rose talks with Chris Anderson, March 2008.

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