Public Radio Model Q&A
June 8, 2010
2:00 PM – 3:00 PM
The June 8 Public Radio Model Q&A allowed Knight grantees the opportunity to hear more about the business model of WBUR, one of Boston’s NPR member stations. WBUR Station Manager, Corey Lewis, responded to questions, facilitated by Jim Bildner, CWV Advisor.
The Q&A provided a brief overview of how a successful member NPR station sustains its membership and develops its audience, including a brief overview of the following aspects of WBUR’s business model: allocation of resources, cost of revenue, expenses, membership rates and renewals, and how to make large fundraising events profitable.
Jim Bildner introduced the Q&A in the following context: based on sentiments and thoughts shared at the March 5 convening, the public radio model can be very informative for the grantees in terms of sustainability and monetizing content. NPR is a cooperative and so it is at the station level that there is a real analogy between the grantees and the public radio model.
WBUR is the third largest radio station in US, after New York City and San Francisco. Adjusted for population, WBUR has one of the strongest business models of an NPR station in the country. WBUR can allocate more of its resources to programming than its commercial counterparts. Each show is better sourced than a commercial counterpart because the public radio model allows WBUR to invest all of its resources back into the station and a greater portion of these resources are allocated towards programming.
WBUR is a $21M organization comprised of three primary funding sources:
• $1.9M (9%) is from large scale philanthropy (contributions over $1200)
• $7M is from membership revenue (contributions under $1200)
• $9.2M (45%) is from corporate underwriting
• Only 56K of 800K quarterly listeners are contributing members, and of 56K that give, only 700 members give over $1200
WBUR engages in pledge drives, direct mail campaigns, promotional products, and annual events for members.
• 6 per year
• Amount per week per pledge drive: $450K – $1.2M per drive
• Cost of supporting the actual membership drive: the pre-campaign includes the cost of the station’s air-time for the week prior to the pledge drive and also includes the cost of direct mail efforts that accompany each pledge drive
• Each member receives 16 pieces of mail per year, 3 per pledge drive
• Additional mail to alert people that their memberships are up for renewal and for holiday-themed giving on Mother’s Day and Valentine’s Day
• Promotional products draw members/listeners to the station and they are based on two types of partnerships:
• Corporate partners: invest cash in WBUR and provide a product as part of promotional giveaway. This generates additional sales and PR for the corporate partner
• Transactional partners: WBUR has a transactional relationship with the local florist, who sells them the flowers at deep discount but is not focused as much on building a customer base
• As part of a transactional relationship, WBUR partners with a local florist on Mother’s Day and Valentine’s Day and allows people to send flowers with the proceeds going to WBUR: $2M in flower sales per year
• How it works: WBUR buys the flowers at a heavily discounted rate while the florist gets “a lot of play” and free marketing on air
• Annual gala brings in $400K each year
• 20 additional discrete member events throughout the year: one recent event with special guests brought in $40K in ticket sales and $40K in corporate donations. This event included large donors (contributing over $1200) who were able to connect and gain access to high profile newsmakers
Application of Promotional Products for Grantees:
• Grantees can find a vendor known in their community for a specific product and if that product is appropriate at a specific time, the product can be utilized to draw people to the site on a commercial basis (i.e. anyone who buys the flowers becomes a WBUR member, because they are buying flowers and giving to the station)
• Another WBUR example of a promotional giveaway: Economist magazine has given 200K in annual subscriptions to WBUR in the past because its style is in alignment with WBUR’s style of journalism
• Incentive for Economist: Expands potential subscriber base by 200K people who receive free subscriptions in year 1, and become paying members the 2nd year if they renew their subscription. An increase in subscriber numbers is also a selling point to Economist advertisers
• Incentive for WBUR: Brings in more members and net revenue
• Other examples: WBUR has a membership card that provides discounts at local companies. Plymouth Rock Insurance Company generates $1.9M per year in insurance policies by offering discounted insurance to WBUR members. Other discounts apply to local tire companies, restaurants, interior designers
Cost of Revenue
Some of WBUR’s revenue sources cost more per dollar contributed/earned than others: high net-worth contributions, membership and underwriting development.
• High net-worth contributions(contributions above $1200): 2 staff raise $1.8M – 13 cents on the dollar
• Membership development (gifts under $1200): $7M brought in via direct mail and flower sales and 7-8 staff are involved in supporting these processes – 35 cents on the dollar
• Underwriting and corporate development staff: $9.2M in underwriting with 14 staff in the underwriting department, which is one of the largest in the country – 21 cents on the dollar.
Member renewal rate on subscriptions: WBUR does not practice the same aggressive techniques – primarily telemarketing and acquisition mail – that other NPR stations do elsewhere. While this means that other stations have higher acquisition rates than WBUR, the cost of acquisition driven by these aggressive techniques is much higher than other direct-mail costs and it is also more intrusive to the potential contributors. Per dollar spent on membership renewal rates, WBUR is more efficient and ends up with greater net revenue.
• 50% renewal rate every two years
• 28K (50%) of members are new each year
• 2nd year renewal rate is near 1/3 as opposed to 50% for other more aggressive stations that use telemarketing and acquisition mail
• After the third year, renewal rates are much higher than the first or second year. Most members become members for the long term after the 3rd year
• Compared to other benchmark NPR stations: WBUR has one of the highest dependencies on over-the-air fundraising and direct mail; WBUR has one of the highest percentages of new members and one of the lowest percentages of renewal members
• WBUR has found it more effective to allow members to auto-renew their membership/subscription once per year instead of requesting small monthly gifts
• General trends in public radio station membership: According to Corey Lewis, membership rates were flat until a few years ago when it began to rise while the size of the average membership donation has gone down in recent years
• The increase in WBUR’s membership base is attributable in part to its unique programmatic offering in its location. Local Boston TV stations were focusing on entertainment news and the Boston Globe was threatening closure. These trends led to increased support and listeners to WBUR and NPR in general
Annual gala: WBUR’s annual gala is its largest single event and grossed $400K in its 10th year. The gala lost money in its first few years not because it did not bring in any contributions, but because WBUR was paying for each expense. They began looking for cost-saving mechanisms through partnerships and donated resources, which has led to the annual gala becoming more profitable.
• Started off losing money: At its start, WBUR had to pay for the venue and felt the need to give away seats and tables to everyone who asked (i.e. they used to say “yes” to every underwriter and big donor)
• In its early years, the gala was primarily an event to cultivate support and members: the gala is centered around awarding the Daniel Shore journalism prize to the best young/promising journalist
• In order to maintain profitability now, there are a few operating guidelines: no comps for underwriters or partners to assure that all seats are paid, trade arrangement with hotel to avoid cost of venue space, donated food or drink to avoid cost of food and beverage
• Other logistics and organizing tips: WBUR uses overseers to drive table sales, there is a capacity commitment to the gala with 1.5 staff full time hired for 2 months leading up to the event
• Half-revenue ($200K) comes from auction items: Underwriters can underwrite a part of air time and donate something for the auction
• Attendance: 40 tables at the gala, each table costing between $5K and $25K
• Where do you find full time people? The station manager secures venue and costs, while different departments provide significant internal capacity, which is supplemented by two-short term gala staff as needed. The membership staff provides the materials and program, while the underwriting department provides corporate donors. It is a common practice in the non-profit field to hire part time employees to add capacity for large fundraising events
• The annual gala is a great opportunity to bring more people in as long term donors and vendors
WBUR Brand: WBUR is owned by Boston University, but it has established an independent brand that is seen by the advertising community as being a powerful mechanism for reaching people. The WBUR brand helps propel the 45% of revenue that comes from corporate underwriting.
• Underwriters believe that the halo they acquire from a listening audience that has been cultivated, maintained and retained by WBUR is one with more buying power than the less effective “noise” created by advertising at for-profit stations
• WBUR uses testimonials from underwriters and leadership donors to attract more underwriters and donors
• WBUR’s brand has become so strong that it is at the point where it has become an “honor” for large donors and underwriters to provide a testimonial about their contribution
Listening to users: Corey Lewis and Jim Bildner emphasized how WBUR is intentional about listening to its listeners, who are also its members and consumers of promotional products.
• WBUR utilizes many tools to understand and identify its listeners: the tools to gather this data are paid for and used most by the underwriting staff to talk to companies about WBUR’s audience, demographics, and audience reactions to messages
• Consumer data allows WBUR to know when people are listening, why they’re listening, how they’re listening
• It is not very costly to acquire data on your consumers
Demographics of members vs. demographics of listeners: Due to the time spent on gathering and understanding consumer data, WBUR knows the following about its listeners.
• Older members give more
• Average donation: $123
• Average donor: 55% W, 45% M
• Average age: 55-64
• Average education: Masters degree
• Primary geographic area: 5-6 towns in Boston give the most as well as several wealthy “pockets” in the metro area
• Peak listening hours: 6AM – 9AM; 3PM – 8PM
• Attract many non-drivers because of content
• Nuances of demographic giving: WBUR capturing as many members in the city as could be expected (i.e. market sizing)
Content to build audience: In light of more competition, WBUR has stepped up efforts to develop local content and locally originated national content.
• Kick off party with local content: commit dollars to local news and production, providing more content
• Strong history of solid collaboration with local TV station, airing content from both enterprises (WGBH and WBUR): now they are both competing on air