National Prosperous Radio

By Daren Fonda/Washington

Visit National Public Radio at its headquarters in Washington, and you might think you have accidentally wandered into a corporate headquarters. The network, which once operated out of a cramped basement, today fills a sleek seven-story building with a lobby curved like a radio wave. Its studios feature the latest digital sound gear. Executives, if prodded, talk about "branding," "revenue growth" and "audience fragmentation." They speak such words softly--NPR is, after all, a not-for-profit organization whose member stations constantly beg listeners for contributions. But it's getting harder to keep its success a hush-hush affair.

After nearly going bankrupt in the mid-1980s, NPR is enjoying its best stretch ever, with a weekly audience up 48% since 1998 and revenues, in a flat economy, projected to grow 5% this year. As war and terrorism jitters create a hunger for more in-depth news--with little of it to be found on many commercial stations--listeners are turning to NPR programs and to public radio in general. Some 29 million Americans tune in at least once a week--an audience boost of 16% since the Sept. 11 attacks of 2001. Listeners are also attracted by a fresh burst of creativity among producers of public-radio programs, thanks in part to a spirited rivalry between NPR and Public Radio International (PRI), a network based in Minneapolis, Minn.

Belying its reputed distaste for crass commerce, NPR has become quite entrepreneurial--in a once cozy environment that has turned surprisingly competitive. NPR doesn't own any radio stations. It is an independent producer and distributor of shows, led by the venerable news programs Morning Edition and All Things Considered. More than 700 of the 908 public-radio stations in the U.S. pay annual NPR membership dues of $7,845, plus "carriage fees," which run as high as $1.3 million a year, to broadcast NPR programs. But in contrast to common practice in commercial radio and TV, public-radio stations don't have to affiliate exclusively with one network. Most also pay carriage fees to PRI for such popular offerings as This American Life, a slice-of-life feature show, and Studio 360, starring culture critic Kurt Andersen. PRI also distributes most of the shows produced by Minnesota Public Radio, including Garrison Keillor's A Prairie Home Companion.

Long the whipping boy of politicians who want to cut its subsidies, public radio has become less dependent on federal funds. The U.S. Corporation for Public Broadcasting will dole out $82.7 million to public radio this year, only about 15% of public radio's spending. Most stations are also getting less money from the states, and some small stations are struggling.

Nonetheless, NPR, PRI and many large and medium-size stations have surprisingly healthy balance sheets. Though NPR has suffered a 40% drop in corporate underwriting revenues, from a peak of $33 million in 2000, its total revenue has fallen only 6% and is projected to rise in 2003. NPR plugged much of its shortfall by raising carriage fees and wheedling new cash from big charitable donors. (It recently won a $14 million MacArthur Foundation grant.) NPR has also started selling ad space on its headquarters building, and is widening its brand with two channels on Sirius Satellite Radio and an expanding online presence. "It's been a tough two years, but I think we've weathered it better than many for-profit networks," says executive vice president Ken Stern, 38, who joined NPR in 1999 and is credited with improving its financial health.

Many stations can afford to pay higher fees for NPR's programs these days because they have a broader base of listeners to tap. New York City's WNYC just completed its strongest winter fund-raising drive, reaping $1.2 million, and in the past six years its budget has increased nearly threefold, to $24 million. "We get very little government support," says WNYC president Laura Walker, 45, "but our listeners come through."

One reason people are contributing is that public radio seems to fill a void. Since 1996, when Washington loosened rules on station ownership, a few radio giants have scooped up hundreds of local stations. Today six chains broadcast to 42% of the national radio audience, according to Inside Radio, a trade publication. The giants say their efforts have saved faltering stations while making available more formats--different types of music, news, sports and talk. But the chains have increasingly turned the airwaves into McRadio, with little local flavor, brief news breaks and scant noncrisis coverage. The percentage of Americans who listen to radio for at least 15 minutes at any given time has fallen to 14.5%, from 17.5% in 1989, reports Inside Radio. Commercial stations are "losing out on the growth in the U.S. population," says Inside analyst Tony Sanders. NPR's Stern says this trend "has been to the detriment of radio generally but to the benefit of public-radio listeners."

With an average household income of $78,000, NPR's audience is among the most affluent and educated in the nation. Public-radio listeners are staying tuned in for the same amount of time weekly that they did in 1995, despite an 8% drop in time spent listening to radio overall. One reason: NPR spent much of the 1990s bulking up its news staff, adding 28 reporters and correspondents and opening 31 offices, with the aim of becoming more of a primary news source rather than a purveyor of features a few days late under the guise of "analysis." The 9/11 attacks were a watershed. NPR News broadcast for a record 90 hours straight, adding 2.6 million weekly listeners, and it has gained 270,000 more listeners since then. Its two big news shows--Morning Edition and All Things Considered--have a combined weekly listenership of 15.7 million, making them the U.S.'s No. 2 and No. 3 programs, after conservative commentator Rush Limbaugh's show. Even Newt Gingrich, who wanted to dismantle NPR when he was a conservative leader in Congress, today says he's a fan and contributor. "Either it is a lot less on the left, or I have mellowed," he said in a recent speech.

NPR's audience roughly reflects the nation's ideological breakdown of conservatives, moderates and liberals, according to a 2002 survey by the Pew Research Center. But many conservatives believe that the network remains the voice of the liberal elite. "There is a strong market for liberal voices, and it's being satisfied by NPR to a great degree," conservative media critic Brent Bozell said on an NPR talk show. Bruce Drake, 54, vice president of NPR News, acknowledges that if the Fox network's conservative TV and radio star Bill O'Reilly were given a regular slot on NPR, "I might have a listener revolt." Drake adds that O'Reilly appeared as a guest on an NPR talk show last year.

Supporters of Israel have criticized NPR's treatment of that country, and NPR, trying to show its balance, made transcripts of its Middle East coverage available free on its website. NPR has also been criticized as being biased against President Bush's policy toward war with Iraq. The network says it fairly presents a wide range of views. Griping may reflect a polarizing radio audience, with listeners flocking to one end of the spectrum or the other. "Rush Limbaugh and Michael Savage are shouting, while NPR has positioned itself as the opposite, with carefully modulated voices," says David Schutz, an industry consultant in San Diego.

NPR's news shows have few challengers, but its music, talk and variety programs face tough competition, not only from PRI but also from regional stations jostling to take their offerings national. WNYC, for instance, is gaining a national audience for a variety show called The Next Big Thing. Nationally syndicated shows account for 55% of public-radio airtime, a share that has grown 10 percentage points in the past decade.

PRI, founded in 1983, has become a formidable competitor, syndicating 70 shows and adding about three new ones a year. It has been gaining on NPR in share of public-radio broadcast hours, with 21% to NPR's 24%. But some of PRI's shows are in time slots with few listeners. NPR's weekly audience is nearly twice as large. PRI took in $24.8 million last year, compared with $106 million for NPR, and projects an 11% increase this year. "We're a not-for-profit but think of ourselves as an entrepreneurial company," says PRI president Steve Salyer, 52.

A good part of PRI's strength stems from its close ties to Minnesota Public Radio--which owns 33 stations in Idaho, Iowa, Michigan, Minnesota and South Dakota and has emerged as a top program incubator. MPR's stable includes hits such as A Prairie Home Companion, the financial show Marketplace and the music service Classical 24, all syndicated by PRI. "The economic model is working," says MPR president Bill Kling, 60. "Stations can afford the cost of our programs, underwriters will pay to produce them, and we're more sophisticated about it all than we were."

Kling, who helped launch PRI, says, "We created PRI because NPR had no interest in ideas that it didn't generate." NPR missed opportunities to syndicate A Prairie Home Companion and This American Life. In November, NPR opened a new studio in Los Angeles, a move that some industry observers say came in response to the takeover of L.A. station KPCC three years earlier by MPR's parent company. That station now receives back-office support from MPR, and a cash infusion helped it bulk up coverage of local news, resulting in a surge in listeners and revenues. MPR wants KPCC to be a West Coast hub for producing and test-marketing new programs.

NPR is trying to court more listeners among minorities and the young. All Things Considered has brought in two new hosts, Melissa Block, 40, and Michele Norris, 41, an African American, and the show will reflect their interests. NPR has a surprise hit in The Tavis Smiley Show, its first signature talk show with an African-American host. Since NPR launched the show last year, under pressure from black member stations, it has become one of the fastest growing in the network's history. It airs in nine of the top 10 markets. A provocative interviewer, Smiley says, "With all due respect, it took NPR a while to get here." For his part, NPR's Ken Stern says, "African Americans are larger users of radio than any other demographic group in the country. We see that as an opportunity." If you didn't know better, you might think he was a businessman.