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The Value of Programming

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In studying the relationship between listener-sensitive income and public service, AUDIENCE 98 developed these major concepts:


Those concepts are supported by this report’s major findings:

Listeners place the highest value on news and information and the lowest value on locally produced music. The simple ranking across all stations is:

 
Those findings indicate major ramifications for public radio’s public service:

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What is Value?

"Value" is a rich word with many meanings. Here are two:

Financial value is the price someone is willing to pay for something.

Personal value we know when we encounter it. Because it's personal it has no universal definition. However, in the relationship between radio programming and the people who listen to it, personal value has much to do with the sharing of social and cultural values between the listener and the programming.

In public radio the meaning of "value" has become muddied as discussions of "value-based pricing" have collided with the fundamental and deeply-rooted "mission" values of the industry.

Fortunately for public radio,

the financial value that listeners place on its programming is a direct consequence of its personal value in their lives.

If programming doesn't share their social and cultural values, they simply don't listen. And when it resonates most strongly with their innermost beliefs and feelings, they find a way to support it.

Simply put, the financial value of programming to a listener is the direct result of its personal value.

The amount of money listeners are willing to send to a station is relatively independent of their financial means.

Listener support is driven by personal value, not by personal means.

Of course people must have the financial means before sending money to a radio station; but as a predictor of support, means pales in comparison to listeners' satisfaction with the program service, its importance in their lives, and the personal value they attach to it.


The Business of Public Service

Since its inception as a totally subsidized entity, public radio has matured into a "public service economy" – one that still relies on subsidies, but one that increasingly relies on payment from those who benefit from its service.

Public radio has entered into the serious business of public service. Without valued programming, it goes out of business. Without good business sense, it won't have the money to support programming worth valuing.

Ask listeners. They’ll tell you that public radio offers some of the finest, most engaging, enlightening, entertaining, creative, stimulating, valuable programming on radio today.

To preserve and enhance its service, public radio must convert listening to its programming into payment for the programming.

Ask underwriters. They’ll tell you that public radio’s educated audience is difficult to reach through other electronic mass media. Public radio’s challenge is to balance the right level of access to these listeners with the right price for access; again, the motivation being to preserve and enhance its public service.

Ask managers. They’ll tell you their responsibilities have shifted enormously in the last 15 years. Each year their licensees give less and demand more; their willingness and ability to operate the station at a "loss" is in general decline.

The manager’s focus has changed from spending a fixed subsidy to a more complex balancing of listener and underwriting incomes against programming and operational expenses. The balance need not be maintained within any single program; but it does need to be maintained across all programming in the station’s schedule.

Taken together, audience support and underwriting are called listener-sensitive income because they are indeed sensitive to listeners. During the last 15 years listener-sensitive income has grown from one of the smallest single sources of funding to the largest. As subsidies continue to decline it remains the most promising means of paying for public radio into the future.


Value and Significance Squared

In public radio, value is the amount a listener will voluntarily pay to hear an hour of programming. Value is also the price an underwriter places on reaching that listener.

The value that listeners and underwriters place on programming, in combination with the programming’s use in the community it serves, squarely determines the financial return on any programming investment made at public radio stations.

All other things held equal, a program that’s important to only one person doesn’t return as much to a station as a program that’s just as important to many people.

The sum total of listener support hinges on both the size of the audience and its satisfaction with the programming.

Without significant and valued programming, there is no listener support, no matter what the audience size. Without a significant audience, there is little listener support, no matter how valuable the programming may be to a precious few.

Significant programming for significant audiences. Not only is this an appropriate definition of public service, it is literally the formula for calculating listener support


Programming Economics

Programming economics offers a means of quantifying the expense, the income, and net return of any programming investment.

The expense of programming is usually apparent to station managers and program directors, who may find it tempting to base decisions on cost alone.

One network’s show may cost more than a similar show from another network. Spinning a local news story can be far more expensive than spinning a compact disc. And sometimes it’s just cheaper to downlink a free program than it is to make one.

What is the expense per unit of public service? What does it cost to serve one listener for one hour?

Some stations spend more, others spend less, but

overall, public radio spends about five and one-half cents to serve one listener for one hour.

Who pays for this programming? People in the audience voluntarily contribute about a penny and one-half (1.41) per hour of listening. The sale of underwriting generates another eight-tenths of a cent (.81). Licensees and tax-based subsidies at local, state, and national levels make up most of the difference.

What are listeners and underwriters paying for? The basic unit of consumption is one hour of programming – one person listening for one hour, or one "listener-hour."

Listeners and underwriters have vastly different reasons to pay for that hour. As previously discussed, listeners voluntarily pay for programming because they consider it important in their lives, because it resonates with their social and cultural values, because they are satisfied with and rely on the programming.

Businesses and other institutions have many reasons for underwriting programming. In all but the purest cases of altruistic philanthropy, underwriters evaluate the quid pro quo – their return on their underwriting investment.

The amount they pay reflects, among other things, their desire to reach the people in the audience, the difficulty of reaching them through other media, the value of association with the programming, and the financial return expected from reaching these people.

AUDIENCE 98 informs public radio's programming economics discussions with hard data about the listener-sensitive return of specific local formats and national programs and services. This is the first national update of this information since AUDIENCE 88 made it available ten years ago.


Listener-Sensitive Returns – Local Programming

The listener-sensitive return on locally produced programming is much smaller than acquired programming’s. Half (49%) of all public radio listening is to local programming. Yet it generates only 42 percent of all listener support, and a mere 25 percent of all underwriting sold locally.

Local Classical Music. Most local programming is music played from recordings. Classical music is public radio’s primary local format. Nationally it generates 22 percent of all listening, 20 percent of listener support, and 13 percent of underwriting. It offers the highest return from listeners of any local music (1.25) and its underwriting return is a low .41 – typical of local music programming.

Local Jazz, Blues, AAA. Public stations offer many types of music, but Jazz, Blues, and AAA are the only genres carried broadly enough to examine here. Local Jazz and Blues have extremely low returns from listeners – at .86 and .71 the lowest identified in this study. Local AAA returns above a penny (1.04) but again, the return is low in relation to local Classical and acquired programming.

Local News and Call-In. Most public stations produce little local information programming outside of inserts into the national vehicles. However, the stand-alone News and Call-In programs tracked in this study offer a very high return from listeners. The formats are evidently more salable than local music as well, returning close to 3 per listener-hour in listener and underwriting revenues combined (double local music’s rate of return).

Discussion. Public broadcasters often equate local production with serving their communities’ needs and interests. Although highly debatable when referring to music (what is "local" about Beethoven’s fifth symphony?) it is clearly more applicable to local News and Call-in programming.

The high value listeners and underwriters place on local information programming is fortunate for public radio because this is some of the most expensive programming to do. It is even more expensive to do well.

Does this mean that resources invested in local News and Call-In programming is well spent? In terms of significant programming the audience is saying "yes." But in terms of fiscal responsibility the answer is not so clear. Because even though the return is high, it may never be high enough to offset the expense.

As public radio comes to rely more on listener-sensitive support, high-ticket items such as these are asked to generate income commensurate with their cost.

To do so they must be placed in prime listening time; they must seek to serve the most significant audience; they must strive to be significant programming – well above the caliber of similar programming available on the station and on other stations in the market.

Yet it may be that local information efforts will never "pay for themselves," at which point station management is compelled to pay for them with the "surplus" earned from low-cost music or high-return acquired programming, or with subsidies sought for this specific purpose.

Management’s task is to maintain and enhance public service by balancing incomes against expenses.

The balance need not be maintained within any single program type; but it does need to be maintained across all programming in the station’s schedule.

Listeners and underwriters do not place as high a value on local music as they do on certain national programs or on local information. But in no way does this imply that one is "better" than another.

Choice of programming rests entirely with station management in service to the licensee’s mission for the station. The information shown here simply suggests that a station must keep expenses relatively low if it is to support local music programming with listener-sensitive income.


Listener-Sensitive Returns Acquired Programming

Acquired programming offers a gross return per hour of listening twice that of local programming. As with local programming, large differences exist among acquired programs and program types.

NPR News and Information. Morning Edition and weekday All Things Considered generate one-quarter (23%) of all listening to public radio in America. Listeners give nearly one-third (30%) of their support because of them. And into them local underwriters pour well over half (56%) of their funds.

They return nearly three and one-half cents () per hour of listener service.

Other NPR News and Information programs vary in their listener-sensitive returns. But generally they are somewhat higher than similar programming from other sources, and are much higher than programming of most other types. The significant exceptions are Car Talk and PRI’s Marketplace.

Car Talk and Marketplace. Car Talk and Marketplace each contributes about one percent of all listening to public radio. But they generate listener-sensitive return far beyond this level.

Both programs are highly valued by listeners: Marketplace at a high 1.94 per hour of service, and Car Talk at 2.65 – the highest level achieved by any major program.

Underwriters pay stations a respectable penny per hour of listening to Car Talk, bringing the show’s total listener-sensitive yield to a very high 3.64.

Marketplace is in a league of its own with underwriters paying stations more than three cents per listener-hour – twice as much as NPR News, nearly four times the system average. Marketplace earns the typical station an average of five listener-sensitive cents per hour of listening – the highest gross return of any major program or format by a large margin.

A Prairie Home Companion and Whad’Ya Know. PRI’s premier entertainment programs return listener support in the 1.8-1.9 range – about the same as Marketplace, lower than Car Talk, somewhat higher than NPR News and Information, and much higher than local music. PHC gathers more money from underwriters than does WYK. Overall, each show returns more than two cents per hour of listener service.

NPR Cultural. It would be entirely inappropriate to compare Performance Today with Car Talk, even though both are sold in NPR’s Cultural package. Performance Today offers ten fresh hours of programming per week, Car Talk offers only one.

The per-station shelf space of Performance Today is offset by Car Talk’s nearly universal carriage, so each generates between one and two percent of all listening to public radio in America.

Listeners place the value of Car Talk at twice that of Performance Today (2.65 to 1.24). For underwriters that ratio is four to one (.99 to .24). These two programs serve the public, local underwriters, and stations in very different ways. Any comparisons that might be made between the two make this point quite clear.


Asking the Tough Questions

Classical Services Compared. A better comparison would be between Performance Today, Classical 24, and local Classical music. Each has something going for it. Local Classical and Performance Today each returns 1.25 per listener per hour of use. Underwriters value local Classical and Classical 24 at twice the rate of Performance Today.

Local Classical has the highest overall return, Classical 24 has the lowest. Which offers the best public service? Which is the best buy? Here we arrive at the crux of making decisions.

Which offers the best public service? The first filters through which any program passes are, of course, its quality and qualities, its fit with the station’s goals and the licensee’s mission, and other intrinsic characteristics valued by public broadcasting.

But given the plethora of programming choices available to the public broadcaster, the question "which offers the best public service" is highly appropriate to public radio’s mission, is growing in importance, and is well worth taking the time to ask and answer.

Recall that public service is the product of significant programming for significant audiences. The significance of the programming in listeners’ lives is reflected by the value they place on it. On this count locally produced Classical music offers an advantage to the network services.

The other half of the equation – the significance of the audience – is reflected in listening estimates. The average audience as reported by Arbitron is the basis of gross listening.

But public radio has more sophisticated measures at its disposal.

Loyalty, core loyalty, and power are more appropriate measures of public service,

and each reflects the significance of the audience at the time the programming is broadcast.

Several sources of information offer decision-makers the means to assess the significance of the audience. They have a direct means of comparison among programs on their own air. Producers and distributors can usually supply information from other stations for programs not on their air. If a program is new and without a track record, well, that’s where professional experience and instinct come in.

Which is the best buy? This purely financial question can be put another way: "Which programming option will yield the greatest net return?" Net return is the income derived from a programming investment minus its expense.

Income from listeners is a direct result of public service. Income from underwriters is a direct result of the size, qualities, and "match" of a program’s audience to the underwriters’ target. Of course these listener-sensitive sources are highly dependent on a station’s ability to turn listeners into supporters, businesses into underwriters.

Getting back to our example, local Classical returns 1.66 per listener-hour, Performance Today returns 1.48, and Classical 24 returns 1.21. But

if either of the national programs served twice the number of listeners in the same time slot as local Classical, they would in fact generate more income for the station.

Managers who have purchased AUDIENCE 98 Programming Economics reports for their stations have available listener-sensitive return estimates for all programs and formats in their schedules. Those without this local information can apply the national figures in this report’s master table to their own assessments of programming power.

Considering the Cost. The question "which is the best buy" isn't answered until the cost of producing or acquiring the programming is taken into account.

Managers and programmers tend to significantly underestimate the cost of local production, while in the same breath unfairly comparing it to the cost of acquisition.

This is not to say the local production is unwarranted – far from it. It is to say that the price tag of local production is higher than many at stations would maintain. Indeed, it is likely to be several times the cost of acquiring a similar (or superior) product when all is said and done.

In sum, answering the question, "Which program is the best buy?" requires an honest assessment of the true cost of each option relative to its listener-sensitive returns. This isn’t so simple when comparing the price of an acquisition to the cost of local production. It is, however, much easier when comparing similar acquisitions.


Conclusions

The price that national program producers and distributors can charge stations for programming stands squarely upon its value to station management.

The price that station management is willing to pay starts with intrinsic programming characteristics – production value, mesh with mission, and all the qualities we take as given (and never for granted).

These left-brain judgements are augmented by the right-brain concerns of fiscal limitations and responsibilities.

A program’s financial value to a station is highly influenced by the value listeners place on it, and to a lesser extent the value underwriters place on its listeners.

It’s not just cost; it’s not just listener support; it’s not just underwriting; it’s not just the size of the audience served; it’s all of these and more.

At all levels in public broadcasting, we are being called upon to maintain and enhance our public service by balancing listener-sensitive incomes against expenses.

Programming that may have been possible in a fully subsidized economy may simply be unsustainable in public radio’s hybrid public service economy. Programs that some think of today as "loss leaders" may, in the face of hard economic and public service data, prove simply to be "losers."

As with most good things in life, the cheapest options may not be the best bargains, and the most expensive may pay the greatest dividends.

– David Giovannoni
AUDIENCE 98 Core Team

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For More Information

This report offers more information and background.

David Giovannoni presented this report in the Keynote Address to the 1997 PRPD Conference in Denver, CO.

Additional financial data can be found in Maximizing the Public Service Investment. It describes how to calculate programming costs, and details the business and listener support revenue return for public radio's major programs and formats.

We've also supplied Key Definitions to help you understand this report.

AUDIENCE 98 Associate John Sutton offers four sidebars detailing several important aspects of this research.

In Cause and Catalyst: Turning Listeners into Givers he discusses the dangers of evaluating the return of programming through pledge tracking

What We Learned by Gathering Underwriting Information from Stations addresses the need for industry tracking standards to better assess and improve business support.

The mechanics of linking underwriting and listener support to listening are detailed in How AUDIENCE 98 Links Underwriting Income to Listening and How AUDIENCE 98 Links Listener Income to Listening, which Sutton wrote with Leslie Peters of the AUDIENCE 98 Core Team.

For those who want to delve deeper previously published reports that bear directly upon the value of programming are available in ARAnet's On-Line Research Library. Perhaps the most important is the seminal Programming Economics book written in 1989.

 

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Audience Research Analysis
Copyright ARA and CPB.  All rights reserved.
Revised: September 01, 2000 12:38 PM.