3 stations where bigger is better

Many others also could improve service
by carefully combining operations but offering multiple program streams

Originally published in Current, Sept. 15, 2008
Commentary by Marc Hand and Susan Harmon

No doubt, extremes of bigness have led to abuses by various corporations and groups of every kind. But in many fields, the public’s expectations of quality and the work required to meet them tend to dictate a point at which a bigger organization is better.

A corner bakery needs at least an early shift to mix the dough and a late shift to sell the last loaves that evening, for example. An auto manufacturer needs to be big enough to keep engineers developing better models for the future.

In public radio, too, people are expecting higher quality, and we are expecting more from ourselves. If we want to improve and sustain our local presence while building our national enterprise and earning the deeper trust of listeners, public radio stations must marshal the resources to significantly expand service and audiences.

We believe many public radio stations are not strong enough to do the job. They lack the economic scale.
To achieve this scale, public radio needs to construct more community-based organizations that distribute multiple, distinct noncommercial formats via a number of broadcast stations and online services.

Building these stronger organizations will take vision, discipline, money and, most importantly, a focused commitment to change our scale and effectiveness.

At Public Radio Capital (PRC), we serve change-oriented public broadcasters interested in expanding their audience. We act as their nonprofit station broker and financial advisor as they plan, finance and acquire new radio stations.

There are risks for organizations that reach out and grow, but those risks are more than balanced by the rewards that come with economies of scale — new programming, new audiences, and increased membership and underwriting revenues. These, in turn, re-energize the stations, supporting expansion of online content, in-depth information, unbiased news, diverse music and cultural programming and greater public service overall.

In our work as catalysts for this expansion, we get a uniquely close view of the benefits and challenges of building multichannel operations. We bring together stations, spectrum opportunities, strengthened leadership and the options for financing expansion. Since 2001, when PRC was established as a separate organization after being incubated as a project of the Station Resource Group for two years, we have guided public radio transactions valued at more than $161 million, helping to give more than 32 million people access to public radio.

To explore the advantages of scale, we focus here on three organizations that recently created multichannel operations: Cincinnati Public Radio, Iowa Public Radio and Puget Sound Public Radio.

Cincinnati Public Radio

Rich Eiswerth, president of Cincinnati Public Radio, was hired 10 years ago to manage a single classical music and news station, WGUC. He immediately began working on strategic planning with his board. Together they quickly realized that the organization would benefit from adding a second radio channel. It was clear that WGUC’s mixed format of classical music and news couldn’t reach its audience and service potential for either kind of programming.

Adding news programming at the expense of music was not an option, because WGUC has a longstanding commitment to classical music. If Cincinnati Public Radio wanted to serve news listeners better, it would need to acquire a second frequency. And Xavier University had a station, WVXU, that duplicated many of WGUC’s expenses and programming.

Public radio had an opportunity to use both its funds and its frequencies more efficiently. Competing with another public radio station seemed self-defeating when both stations faced more than enough broadcast and new-media competition for audiences and community support. All of WGUC’s board members recognized the strategic imperative of creating a two-station service.

When Eiswerth heard that Xavier University wanted to sell WVXU, he immediately set up an executive session of the WGUC Board. Because his management team had already done strategic planning and weighed expansion options, the board quickly gave Eiswerth the green light to move forward.

When WGUC and Xavier announced the sale, Eiswerth and his team used focus groups and all available means of communication to seek the views of both stations’ audiences about possible program changes. A board committee and WGUC executives also developed and rolled out an extensive rebranding and marketing plan for WVXU. When they made the program changes a few months later, some audiences were alienated, but others felt that the stations had heard and considered their voices in advance.

Eiswerth says the three biggest challenges in combining the stations over the last three years were finances, finances and finances. WVXU was losing the significant facilities and operating support it had received from Xavier University. Support from CPB and state agencies also had declined. At the same time, the combined licensee was now responsible for paying the acquisition debt of $15 million.

On the upside, CPR dramatically cut operating expenses and sold WVXU’s repeater stations outside the Cincinnati area. Now underwriting sales are up 50 percent above the sum of what the two stations raised separately in 2006.

Eiswerth says two staffing changes greatly increased the organization’s productivity. First, he hired Barry Weinstein, a seasoned CFO from private industry who helped him establish the financial discipline necessary to make the new organization sustainable. Second, he contracted with Public Radio Partners (PRP), an outsourcing firm that manages underwriting sales for public broadcasters. Phoenix-based PRP began to manage CPR’s underwriting staff as well as hire and train new salespeople, also based in Cincinnati.

At the same time CPR was combining the stations, Eiswerth points out, it also simplified their on-air formats and strengthened their program services. Adding programs and staff members reinforced the local news service used by both stations. Under a single management, the stations are more cohesive and better organized.

Cincinnati Public Radio
before and after merger

Chart showing changes in audience share and financial results from FY05 to FY08

Audience data: Arbitron person 12+ person shares, full week, spring survys. Fiscal data is audited except for FY08. Source: Public Radio Capital selection of data from Cincinnati Public Radio.

Iowa Public Radio

In late 2004, Iowa’s Board of Regents established the nonprofit Iowa Public Radio to merge and oversee the public radio operations licensed to the three Regents’ universities. Iowa Public Radio includes flagship stations WOI-AM and FM at Iowa State University, WSUI-AM and KSUI-FM at the University of Iowa, and KUNI-FM and KHKE-FM at the University of Northern Iowa. The combined operations have revenues of more than $7 million a year and about 60 employees.

Cindy Browne was hired in 2005 by an executive council charged by the Regents with hiring an executive director who could design the processes, operational structure and transition plan. Browne says this executive council, which since has been transformed into a board for the nonprofit, has been influential in every step of the process, including negotiation of the local management agreement between IPR and the regents and the universities.

Rather than expect IPR to show savings in its first three years, the state permitted the network to increase expenses by tapping stations’ reserves. An executive director and two new director-level senior managers were hired, and funds were invested in network infrastructure. But the network expects a balanced budget for fiscal year 2009 and surpluses beyond that.

In the meantime, the network began to marshal its resources to provide consistent news and classical services for much of the state. IPR brought together 14 stations and sorted out three distinct program services — news/information, classical and Triple A music — all the while keeping the Iowa character and content intact, which was especially important for news.

In a major shift of the workplace culture, IPR repurposed the general managers on the three university campuses. As IPR directors, each now manages a key area of the IPR network — operations, finance and marketing. A secondary but important role is to provide local oversight and to maintain relationships with their respective universities.

The changes led to some image confusion and left some listeners with a sense of loss. While IPR worked to establish its statewide brand, staffers who had operated in a competitive mode for so long found it difficult to cede the identity of local call letters.

The universities were helpful in assisting with the reorganization and reassignment of staff in the newly combined operation. Changing the stations’ cultures and creating a unified team were the network’s biggest challenges, and managers say the effort — with full cooperation of the universities — has largely succeeded.

To elicit the ideas, concerns and hopes of the listeners, IPR initiated a Listening Project, holding community meetings across Iowa and conducting surveys of members and the general public. A development audit helped to shape the network’s fundraising efforts. Browne reports that revenues are increasing in response to the investments made to unify membership and underwriting.

Browne cites geographic distance as the greatest challenge. Distance limited the face time needed to build camaraderie between staff from different stations, communicate the new vision, focus on staff morale and advance good ideas. In short, Browne says this amounted to “complexity times four.”

Browne believes the merger will benefit Iowa in three ways:

Puget Sound Public Radio

It has been the habit of Puget Sound Public Radio’s board and management to update their strategic plan every year. Over the past three years, that process gave birth to an acquisition strategy.

For years earlier, according to Wayne Roth, general manager, “We anticipated a multichannel future but didn’t envision gaining any new stations.” Since the licensee saw no affordable Seattle/Tacoma stations it could buy to supplement its main FM channel, it began airing multiple streams on HD Radio and on the Internet. PSPR initially offered its differentiated KUOW-2 news/information format as an Internet stream in summer 2004 and then put it on one of its HD channels in February 2005.

In the meantime, Public Radio Capital had financed the acquisition of the upgraded KXOT in Tacoma, formerly owned by Bates Technical College. So when we offered the use of the frequency to PSPR, Roth and his staff readily adapted the KUOW-2 format by simulcasting it on KXOT beginning in July 2006.

Also in 2006, PSPR was moving to acquire KUOW-AM in the state capital of Olympia, extending KUOW service where previously there was no full-time public radio news and information station.

Roth believes PSPR would not have been ready to take on the responsibility of operating KXOT without having already developed the format and, with its board of directors, planned an aggressive multichannel strategy.

PSPR also was ready to seize expansion opportunities because it had cash reserves. It could invest in an acquisition without immediately having to begin generating surplus revenue to cover the cost. It could hire four new staff members for KXOT and lay plans to hire four more. PSPR also commissioned research from George Bailey at Walrus Research to help it define programming gaps in the market.

Roth believes his board was motivated to “save” KXOT for public radio. Civic leaders on the board didn’t want to see the station sold outside of the field. PSPR leaders also understood that expanding distribution capacity would leverage other investments, such as their collaboration in regional newsgathering with eight other stations in the Northwest News Network (NNN). With more stations, they had more airtime available to distribute quality programs produced by PSPR, NNN and other sources.

Urgency to merge

We hope these examples will inspire others to rethink what local public broadcasting organizations could look like, how they could improve existing services and introduce new formats for new audiences to public radio.

The process of building stronger public radio organizations depends on establishing a strategic framework at the top levels (boards, licensee representatives, managers), keeping focused on the public-service potential of combined operations, asking hard questions about the best use of institutional resources and infrastructure, and developing financial projections that enable us to determine the best options for combined operations.

In almost every market, there are standalone public radio stations that could benefit from combining core services, saving money by having a single management team, solidifying distinct formats, and increasing revenue rather than competing for it.

From our experiences, organizations with greater scale will be the ones positioned to make the most gains in public service, to be able to most effectively use new and multiple distribution options, and to develop important new program services and formats. They will be significant community institutions. As these case studies illustrate, sometimes bigger is better.

Marc Hand (mhand@publicradiocapital.org) and Susan Harmon (sharmon@publicradiocapital.org) are co-founders, managing directors and board members of Public Radio Capital.

The subtitle of the article has been revised slightly from the printed edition.

Hand previously was co-owner of a group of commercial stations in Colorado; v.p. of Questcom Radio Brokerage; executive director of Western Community Bilingual Radio; and consultant for CPB, NPR and the National Federation of Community Broadcasters. Hand spent five years with the Station Resource Group (SRG) helping public radio stations expand services via acquisitions, collaborations and partnerships, leading to PRC’s creation.

Harmon managed stations—for 14 years as v.p. for radio and administration at KERA-TV/FM in Dallas/Ft. Worth and 11 years as g.m. of WAMU in Washington, D.C. Throughout her career, she served in public radio leadership positions on the boards of national organizations, including NPR, PRI and the Station Resource Group, which she helped found in 1984. She worked as an SRG consultant before joining Public Radio Capital.

Web page posted Sept. 17, 2008
Copyright 2008 by Current LLC

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