Update to fee model ties NPR’s income to station donor revenue

NPR’s board of directors approved a new method for calculating its member stations’ fees for programming and other services, moving to a model based on station donor revenue. 

The shift from the current model, which bases fees on stations’ total revenue and audience for NPR’s newsmagazines, will result in changes to annual payments for many members. Some will pay less, while others could eventually pay much more. The changes will take effect in fiscal year 2021 but will be phased in over at least three years.

Under the new model, “NPR’s success is tied to station success and vice versa,” Loren Mayor, NPR’s president, operations, told Current following the board vote. “… We want to therefore do everything we can to be helping drive station’s membership dollars.” 

Mayor said NPR wanted to change the fee model to be more “forward-looking.” With its partial basis on broadcast listening, the current model doesn’t “fully reflect a multiplatform world,” she said. 

The network was “looking for a good proxy for NPR’s value and something that would be relatively simple to understand and to calculate,” she said. NPR was also looking to create a more equitable structure by having stations with similar membership revenues pay comparable amounts for the same services.

NPR will aim to limit disruption over at least the next three years by capping fee hikes for stations at 10% and decreases at 3% during that time period. NPR’s revenue from member fees will grow 3% annually, and it may adjust the caps to maintain that growth. After lifting the caps, NPR would not be guaranteed a set annual increase — its income from stations would go up or down as station membership revenue fluctuates.

Among stations with annual membership income above $4 million, the median change in fees is a 9% increase, according to NPR; among stations with income below $250,000, an 8% decline.

Membership revenue	Stations	Share of total station membership revenue	Share of fees	Change in fees from FY2020
$0 to $250,000	66	3%	4%	–$740,000
$250,000 to $500,000	40	5%	7%	–$306,000
$500,000 to $1 million	44	11%	12%	–$6,000
$1 to $2 million	34	17%	19%	+$1.3 million
$2 to $4 million	18	17%	17%	+$0.1 million
Over $4 million	18	48%	40%	+$1.8 million
(Source: NPR)

Some observers and stakeholders say the new model will benefit public radio, while others fear it will hinder stations. NPR board member Jennifer Ferro, president of KCRW in Santa Monica, Calif., said during the Friday meeting that the change will prevent some stations “from being able to do local service. So we have to be able as a board and as an organization to say that, yes, I’m sorry that’s happening, but … this is what is going to happen as a result,” she said.

One NPR board member — Joe O’Connor, GM of WFAE in Charlotte, N.C. — voted against the proposal. 

Chair Paul Haaga said the board will form a group to “come up with multiple ways to address the challenges of the smaller stations.” The board will discuss these plans in more detail at its February meeting.

“We recognized throughout this process that the challenges of small and regional stations are not going to be eliminated by anything we can do on the fee front, as important as the fees are,” Haaga said. But he said “we need a multipronged approach” that involves stations of various sizes, along with CPB, donors and NPR staff, to address the challenges small stations face. 

Adopting a membership metric

News stations
Membership revenue	Rate
First $250,000	33.5%
Next $250,000	30.5%
Next $500,000	26.5%
Next $1 million	24.5%
Next $2 million	23.5%
Amount >$4million	18.1%
Music stations
First $1 million	2.5%
Amount >$1million	2.0%
(Source: NPR)

NPR floated several fee models with stations over the past year and has been gathering feedback from station leaders in meetings and at public radio conferences. Under the model passed by the board, NPR will calculate a station’s fees as a share of its membership revenue. Decreasing percentages are applied across increasing brackets of revenue.

NPR will use an average of a station’s annual membership revenue over two previous years, using data reported to CPB.

NPR is using CPB’s definition for membership revenue, which excludes donations of $1,000 and above. Stations considered rural by CPB’s definition can have less of their membership revenue used to determine their fees. NPR previously used a more narrow definition for rural stations.

NPR will also adjust membership revenue for stations that operate music and news stations and subtract the fair market values of high-end premiums. Fees for music stations will be based on membership revenue but with only two tiers and smaller percentages than news stations. The network will continue to discount fees for minority service stations.  

NPR plans to review the model’s effect on stations in two years. It will consider whether stations are struggling with the fees, Mayor said. “Those would be the kind of unintended consequences that we don’t want,” she said.

The current fee structure charges stations separate fees for newsmagazines, digital services, membership and non-news programs. Fees for newsmagazines are based on a station’s audience for the shows. The new model would combine newsmagazine, membership and digital charges into a single fee. 

In 2017, the NPR board approved an interim model that froze the revenue and audience data determining station fees. Annual increases in fees were based on a station’s total revenue. Fees for its smallest member stations have not increased, while fees for the largest member stations have increased 4.25% each year.  

Member station dues and programming fees accounted for nearly 32% of NPR’s operating revenue in 2018, its largest source of income behind corporate sponsorships, according to its annual report. 

‘A step in the wrong direction’

Some leaders in public radio are concerned that the new model will benefit larger stations that are already faring well financially while smaller stations will pay larger percentages of their membership revenue. Others say it’s a more equitable system.

Tom Thomas, co-CEO of Station Resource Group, said the model “does a good job of balancing a lot of very different circumstances” and “dramatically improves the fairness and appropriateness of the fees compared to what people are currently paying and have been paying for the last several years.”

The “disruption really is an indicator of how seriously broken the model that we have been using has come to be,” Thomas said. “Anything that would get us to a more appropriate, more balanced, more fair system is going to require some significant change.”

Thomas said he agreed that membership revenue is the best revenue-based option for determining fees. “Most SRG members are strongly of the view that what they pay to NPR should reflect their audiences’ use and value associated with NPR programming,” he said.

That thinking guided NPR’s use of audience data to determine newsmagazine fees “back in the day where virtually all of the use was on the broadcast platform,” Thomas said. But that approach was complicated by limited listening data “for a not insignificant portion of NPR’s membership,” according to Thomas, and by digital platforms becoming more popular. 

Thomas said he also believes that large stations have been overpaying in fees for NPR’s digital services. NPR established the fee as a way to expand public radio’s digital capacity. It was “very heavily tilted towards larger stations who were thought to have the capacity to jumpstart these kinds of activities,” Thomas said, and was “a very light touch” for smaller stations. 

“Allowing big, powerful stations not to count $1,000 gifts is an advantage to larger stations and a disadvantage for smaller stations.”

Gavin Dahl, Station Manager, KDNK

“But the irony is that over time … the larger stations in the system proved to need least from NPR in digital services,” Thomas said. As a result, the largest stations were paying fees disproportionate with their use of NPR’s digital services, while stations that used them more paid “at a very modest cost” compared to the open-market price for such services, Thomas said.

SRG has advocated for rolling the digital services fee into membership dues because the era of jumpstarting digital capacity in the system “had come and gone, and it was time to move to a more steady-state operation with a more equitable allocation of those costs,” Thomas said.

Paul Westhelle, executive director at Jefferson Public Radio in Ashland, Ore., said he opposes the model’s structure because “it’s the reverse of the federal tax code.” The smallest stations won’t have much opportunity “to really generate much local programming to add value to the national programming when you’re paying a third of $250,000,” Westhelle said. 

Under the fee structure, Jefferson Public Radio will pay a larger portion of membership revenue to NPR “than the stations with the most organizational capacity,” he said. “That seems like a step in the wrong direction to me.” Without a cap, Jefferson Public Radio’s fees would have increased by 39%, according to Westhelle. 

Westhelle said he would have preferred a model with lower fees for smaller stations and discounts for stations with high broadcasting and engineering costs, such as those in mountainous regions. Despite his concerns, Westhelle said he believes that NPR has “done a really good job of trying to make the process inclusive and transparent,” he said. “It’s been completely transparent. And the structure is right out there for us all to see.”

The station will do its best to increase non-membership income to keep its fees down, Westhelle said. “If we’re successful, we may be able to sustain our level of national programming,” he said. “In principle, however, we will prioritize local news over national programming, since we believe local news is both a mission and business model imperative.”

‘Growing the pie’

Gavin Dahl, station manager at KDNK in Carbondale, Colo., said he applauds a shift to a revenue-based model because stations in areas without easily trackable listener data could be underpaying NPR. But “allowing big, powerful stations not to count $1,000 gifts is an advantage to larger stations and a disadvantage for smaller stations,” said Dahl.

“I’m not asking them to change how they handle capital campaign funds or underwriting,” Dahl said. “I just think all member donations, big and small, should be included when tabulating what we owe.”

NPR projected that KDNK’s dues would have more than doubled without the cap, according to Dahl. That “could literally mean one fewer staff member at my station,” he said.

Mayor said NPR heard from stations that including major gifts in their membership revenue would be unfair “because often major gifts are for infrastructure, for a building or for some project that we’re doing that is truly local, that has absolutely nothing to do with NPR.”

“There’s now an alignment between NPR and stations … to grow membership revenue. To me, that’s a really important difference.”

JJ Yore, GM, WAMU

If NPR were defining major gifts, it would have picked a gift level higher than $1,000, Mayor said. “But one of the logistical principles on this was that we wanted to be able to use CPB data in the way that they got it without adding a lot of subjectivity to those numbers,” she said. 

JJ Yore, GM of WAMU in Washington, D.C., said the new structure is “a very good thing” because “there’s now an alignment between NPR and stations, from my point of view, to grow membership revenue. To me, that’s a really important difference.”

The new model is about “dividing revenue, dividing the pie in a different way,” Yore said. “The bigger thing that we have to be focusing on is growing the pie in terms of audience, in terms of revenue, in terms of reach.”

NPR estimated that WAMU’s fees would have dropped about $700,000 if not for the 3% limit on reductions, Yore said. Early in NPR’s development of the new fee model, WAMU faced an increase of about $1 million on top of its current $2.6 million annual payment. A first model shared with stations this year set fees at about 15% of revenue from membership, sponsorship, major gifts and friends groups according to slides from regional meetings that were obtained by Current. 

Under that model, the largest stations would have paid higher percentages of fees, and smaller stations would have seen cuts. NPR’s Mayor said eight stations would have paid “enormous increases” to limit hikes for 150 stations.

Larger stations told NPR the fees would be “debilitating” and “would really stifle innovation and service at those stations,” Mayor said.

“We’ve heard from a number of small stations that they have concerns about this model,” Mayor said. “I think we want an open dialogue about ‘What would be helpful? What are the ways that NPR and its resources could be supporting you?’ and go from there.”

Digital Editor Mike Janssen contributed reporting to this article.