Sometimes I like to listen to classical music on WGBH, one of our local NPR stations. For what seems like a large percentage of the days in the year, however, they interrupt the programming for 20 minutes per hour with annoying fund drives. How much of WGBH’s revenue comes from driving listeners insane/away? Their annual report says that in 2008, only 12 percent of the total budget was from individual donations. Let’s assume that half of this money comes from people who would have given via the Web or via mail solicitations. The total revenue from on-air fund drives is therefore only about 6 percent of total revenues.
This 6 percent does not come for free, though. During fund drives, the station has less air time in which to sell ads. The station has fewer listeners during fund drives, which reduces the amount that can be charged for an ad. Furthermore, companies might not want their ads to run while listeners are being annoyed. Ad revenue, referred to in the annual report as “corporate support”, is 17 percent of total revenue and let’s assume that it could grow to 18 or 19 percent without the fund drives. Now the station is irritating listeners for a net 4 percent revenue boost.
Even this 4 percent isn’t free. The station needs to hire people to run the pledge drives, speaking on the air, coordinating volunteers, buying pizza, negotiating with companies for products and services to give away to donors. WGBH’s IRS Form 990 reveals that the station spent 10 percent of its total revenue on fundraising. If we assume that one third of that went to on-air fund drives, the net revenue boost from interrupting programming to have fund drives is only 1 percent.
I.e., if the station could trim expenses by 1 percent it would not need to do a fund drive ever again.
Another way to look at this is that the station spent 10 percent of its budget on fundraising. It received 12 percent of its budget from individual donations. If it trimmed expenses by 2 percent, it could stop asking for money via direct mail, on-air, on the Web, etc.
Is there any fat to be trimmed? Back in 2006, according to the IRS Form 990 (available from guidestar.org), the company was paying 14 vice presidents between $200,000 and $300,000 per year in current and deferred compensation. Henry P. Becton, Jr., the president, helped himself to $350,000 per year. [Did they need to pay Becton $350,000 for fear that this hard-charging young executive would be hired away by a new station in Los Angeles? The guy was in his 60s and about to retire, but presumably the Trustees of this non-profit organization thought that the wisest use of donor money was to give Becton a big pay raise.] In this economy, giving these folks a 5 percent pay cut should not result in anyone leaving for a commercial TV station (all of which are making drastic salary and staff level cuts).
If you weren’t annoyed enough by WGBH’s pledge drives, keep in mind that (1) the station could eliminate all fundraising and suffer only a 2 percent net loss (because they spent so much on administration, mailing, etc. in trying to get the money), and (2) all of the net proceeds from individuals barely suffice to pay a handful of top executives who never get anywhere near a TV camera or audio mixing panel.
The preceding analysis is in some ways too optimistic about fund drives. On-air fund drives might have made sense in the early days of public radio. The only other way to reach listeners and potential donors was via expensive printed direct mail. Public radio stations did not sell advertising in the early days and therefore there was no immediate cash value to having a larger audience. Listeners had no MP3 players, no satellite radio, no Internet radio, and no podcasts. A crummy station had a monopoly at least on its little corner of the dial and was guaranteed at least some audience. In the 21st Century, however, a public radio station has new competition and new opportunities, e.g., reaching listeners on the other side of the country or planet. Via its Web site and email, the station can communicate with listeners and ask for money “out of band” in a way that does not reduce the value of its service. One wonders if the fund drive is simply a leftover that hasn’t been eliminated because non-profit managers aren’t nimble enough to adapt to a changed world. By reducing the audience size and running up admin costs at an organization where a lot of employees are paid over $200,000 year, the fund drive probably reduces profits.
I’m listening to CBC Classical right now, which is free of all commercials, free of fundraising solicitations, and streamed at a much higher audio quality than WGBH’s Internet feed.