The Value of Programming

Excerpts from the Keynote Address to the
Public Radio Program Directors Conference:
Denver, Colorado – September 10, 1997

Delivered by David Giovannoni

Written by the AUDIENCE 98 Core Team:
David Giovannoni, Leslie Peters and Kent Kroeger

I've always believed that a keynote address should strive for the right balance of inspiration and information. I think the information we'll see in a few minutes is pretty inspiring.

That said, there's going to be a lot of consternation here in a few minutes if we're not all on the same page when it comes to a few, simple, powerful, definitions. So let me start with a little explanation.

We're here today to talk about value – the value of programming.

"Value" is an extremely rich word with many meanings, and sometimes this inherent beauty of the English language gets in the way of clear thinking. It's pretty obvious that this has happened in public radio. The meaning of "value" has become a little muddy as discussions of "value-based pricing" have collided with the fundamental and deeply rooted "mission" values of the industry.

Fortunately, I think we can reconcile these meanings. To do so, we have to put ourselves in the listener's shoes.

What does a listener value? What does a person listen for when choosing a radio station?

In the relationship between radio programming and the people who listen to it, there's a very strong resonance between the listener and the programming. The person's decision to listen to a radio program has a whole lot to do with the program's social and cultural values – values that are expressed, values that are implied.

When the listener and the programming share the same values, the listener values the programming.

When the listener comes to rely on the programming – for information, for entertainment, for companionship – when the listener tunes to that station first, and most frequently – when the listener comes to realize that the programming is important in his or her life, that it would be missed if it went away – that's when the listener values the programming the most.

What does a listener value? What is a listener willing to pay for? I mean voluntarily pay for?

We know that listeners personally value programming that is important in their lives, programming that shares their social and cultural values.

Now watch this slide transition carefully…

The astounding thing is, listeners financially value programming that is important in their lives, they financially value programming that reflects what they think and feel and believe.

This is where the consternation may come in so bear with me.

The very first result from AUDIENCE 98 is this.

The financial value that listeners place on your programming – that is, the amount of money they send you per hour of listening – is a direct result of the value of the programming in their lives.

Indeed, now hold onto your seats, this relationship between personal and financial value is so close, that financial value can be used as a proxy for the personal value listeners place on your programming.

Let me say it again. Financial value can be used as a proxy for the personal value that listeners place on your programming.

Today we're going to compare the financial values listeners place on your programming. And the first question you're going to ask is, "Well, won't some programs be more highly valued financially because their listeners have more money? Don't the means available to the audience strongly determine the financial return on a program?"

The answer – the amazing answer – is NO. The personal value that a listener places on a program determines support. The ability of the person to afford the gift is minor – very minor – in comparison.

This is a clear, statistically significant, powerfully significant finding of AUDIENCE 98. Just as it was in AUDIENCE 88 ten years ago, and just as it was in the Cheap 90 study three years before that.

We've seen it three times now in three national studies. It hasn't changed in 13 years. And I think it's time we accepted it – and embraced it – and started using it to our advantage and to our listeners' benefit.

Now let me do one more definition. Most of you have heard me say this many times.

Public service requires significant programming for significant audiences.

Now don't forget we're talking about public radio programming – that's truly significant programming for the most part. And now we're saying that its significance – as valued by our listeners – has a financial component that we can measure.

As we've seen, the amount of money that a person is willing to voluntarily give us is the proxy measure we can confidently apply to the value of the programming in that person's life.

Let's play this out all the way. Because if public service has a "significant programming" component, and we can proxy that component with a financial measure of value, then the amount of money your listeners send you is a direct function of the public service your station is providing.

Here's a high tech graphic of public service. Remember – public service is the ability to serve a significant audience with significant programming.

Arbitron measures the significance of the audience four times a year. The size of the audience can be shown on the vertical axis.

In a few minutes we're going to look at the significance of the programming in terms of its value to our listeners. That can be shown on the horizontal axis.

Public service is the product of these two significances.

A program that is highly valued by a few listeners may not be such a terrific public service.

A program that is minimally valued by a lot of listeners is also not much of a public service.

But a program that is highly valued by many listeners is indeed a true public service. You've got to have both – a significant program, delivered to significant audiences – before you can be a significant public service.

And today – in 1997 – public radio truly has both. 20 million thinking Americans listen to our quality programming every week. Now I don't want to start getting into the inspirational stuff yet – we haven't even begun to get into the information. But we should acknowledge that what we do is more highly valued as a public service today than it has ever been. And it's no coincidence whatsoever that public radio generates more of its income from listeners today than ever.

Now let's talk about underwriting. Why do underwriters value public radio?

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 your audience, the difficulty of reaching them through other media, the value of association with your programming, and the financial return expected from reaching your listeners.

Underwriting support may or may not reflect public service. But it IS sensitive to the size of the audience. You all understand this. The amount you can charge an underwriter for an on-air credit is highly dependent on the number of listeners who will hear that credit.

Taken together, audience support and underwriting are called listener-sensitive income because they are indeed sensitive to listeners – sensitive in different ways, but sensitive none the less.

And this is important. Because during the last 15 years listener-sensitive income has grown from one of the smallest single sources of public radio funding to the largest.

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 depends 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 the 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. Listeners voluntarily send money to preserve and enhance this programming service.

Ask underwriters. They'll tell you that public radio's educated audience is difficult to reach through other electronic mass media. And they'll work out a deal with you to get a short message to your audience. By balancing the right level of access to your audience with the right price for access, you can preserve and enhance your station's public service.

Ask your managers. They'll tell you their responsibilities have shifted enormously in the last 15 years. Each year your licensees give you less and demand more; their willingness and ability to operate your 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.

That brings us to programming economics – a scary term for some, but a simple term. Programming economics lets us compare the expense, the income, and net return of any programming investment.

The expense of programming is usually pretty apparent, isn't it. It's so apparent, in fact, that it's 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.

Program economics asks: 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? 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¢). Your licensees and tax-based sources make up most of the difference.

It's relatively easy to track the answer to the expense question. But you need a study like AUDIENCE 88, or the study upon which AUDIENCE 98 is founded, in order to answer the income question.

Your job as programmer is getting harder. You are an increasingly key player in the financial and public service survival of our industry. You are being called upon to balance the costs of programming against their incomes – against their public service.

Some programs may lose you money; others may make you money. Not every program has to break even. But overall, you do need to maintain an economic balance across all programming in your schedule if you're going to stay in business, if you're going to stay on the air.

In order to make these decisions, you need information – Information about the value of programming to listeners and to underwriters.

Let's look at some of that information right now.

What does programming return? There are various ways to measure return. Let's focus first on the amount of listening programming returns.

Local and acquired programming each generate about half of all listening to public radio in America. From a listener's perspective, as judged by the amount of time spent listening to each, they're equal.

Listening is the vertical axis, by the way, on our public service chart. Listening is our measure of the significance of audience. We'll get to the horizontal axis in a minute.

Acquired programming generates a little more listener support than audience size would predict. Fifty-eight percent of all listener support to public radio is generated by acquired programming.

Seventy-five percent of all locally-sold underwriting is generated by acquired programming.

Here's a graph of the same information. Acquired programming generates more than its share of listener and underwriting support at public radio stations.

Let's look at the major networks. National Public Radio generates 36 percent of all public radio listening in America. One out of three hours Americans spend with public radio are tuned to NPR programming.

It generates 43 percent of all listener support, and 65 percent – two-thirds – of all underwriting sold locally.

For Public Radio International, those numbers are 10 percent, 10 percent, and 9 percent.

But this isn't the story.

This is the story.

Let's break out Morning Edition and All Things Considered – just the five-day shows. ME and ATC alone generate one-quarter of all listening to public radio in America, nearly one-third of all listener support, and well over one-half of all locally sold underwriting.

Take the five-day news shows out of NPR and you have a network that is the equal of PRI.

Let's look at the horizontal axis.

This is the value of programming per listener-hour. What does a listener, what does an underwriter, give to you for serving one person for one hour?

Overall, here's that 1.4 cents that the average listener gives to be served by one hour of programming. Underwriters average .8 cents. The two numbers add to a total listener-sensitive income of 2.2 cents per listener hour.

As we've seen, listeners value acquired programming more than they value local programming (1.6 vs. 1.2 cents).

Underwriters value acquired programming much more than they value local programming. Now maybe they value it higher; maybe it's an easier sell; maybe it's because a lot of acquired programming is in prime time, and underwriters are used to buying prime time or drive time. I don't know the answers to these questions, yet.

Here's the same information graphically. The system total of 2.2 cents is shown in yellow. The bars to the left are listeners' valuations; the bars on the right are underwriters' valuations. Clearly, the difference is driven primarily by the higher valuation placed by underwriters on acquired programming.

Let's look at the valuation of local formats.

As shown here, News and Call-In is stand-alone News and Call-In. This is not the news you insert into the major national vehicles.

Listeners value your local News, your local Call-In, higher than they value your local Classical music, and much higher than they value your local Jazz. Again, this is not because these audiences have differing means; it's because these audiences truly value your local News and Call-In more than they value your local music. News and Call-In is the most valued programming that you do.

This is a terrific finding. Because News and Call-In is also the most expensive programming you do. So it needs to have a higher return.

Notice that the differences are not so much in the underwriting amounts; they are truly driven by the different values that listeners place on the programming.

It's worth noting what we mean by local music formats. This is Classical music produced locally; this is Jazz produces locally. There is probably very little that's "local" about your choice of what Beethoven CD to play, or your Mozart, or your Armstrong or Coltrane. The assembly and presentation are local; the music is not.

Contrast this to News and Call-In, where the subject matter tends to be highly local. You can focus on community events, community issues, community news. I would suspect – although we have not looked into this yet – that the value is derived because the programming is truly local, is unique, is not available on compact discs or on other stations.

Again, compare the high listener values of the truly-local News and Call-In to all "local" Music. It's clear what listeners value.

Let's look at this by network.

There really isn't much difference in the listener valuation of programming by acquired source. The difference lies in the "underwritability" of the programming, with NPR's being the most underwritable, and PRI's far outdistancing other acquired sources'.

But again, this isn't the story.

What's driving NPR?

Clearly, the five-day news shows.

Look at the differential in underwriting.

There are a lot of people who'd agree that NPR Cultural programming is incomparable.

They'd be right.

The shows just can't be compared.

How do you use this information? How are you going to use it to make programming decisions?

You know the cost of programming. You know its audience (how many listener-hours it generates). You can easily figure the cost per listener-hour.

This information gives you the return per listener-hour.

Let's compare three classical options: local Classical, Performance Today from NPR, and Classical 24 from PRI.

This is what you can expect to be returned by each program per listener-hour. Local Classical and Performance Today are each valued about the same by listeners. And local Classical and Classical 24 are each valued about the same by underwriters. Each show has something going for it.

The question you have to address, through calculations you can do yourself, is: What's the cost of each one of these programming options per listener-hour?

Listeners value local Classical and Performance Today about the same. Given that they provide about the same level of public service (if, in fact, the audience sizes are indeed comparable) then which is the "best buy"?

You have to compare the cost of production to the cost of acquisition. And you know what? A lot of time the cost of production is much higher than you would think – a whole lot higher than a lot of people, even in this room, would think.

Let's compare some news options.

Overall, look at how much higher these bars are than for the previous Classical music options.

Look at how your listeners value Marketplace, weekday All Things Considered, and Local News – extremely highly.

(You thought Jim Russell was insufferable before....) Five cents per listener-hour - most of that from underwriters. That resonates with what you know, doesn't it – it's an easy program to sell.

Weekday ATC not far behind. Local News (and Call-In) doing great.

Again, it's only half of the story. Yet it's an important half, and it's the half you didn't have before today.

What does Marketplace cost you to serve a listener for an hour? What does weekday ATC cost you to serve a listener for an hour? What does your local News cost you to serve a listener for an hour? These are the equations you have to work out yourself.

There are people who say that our listeners don't value entertainment as much as they do our earnest, in-depth news programming, our serious Classical music and Jazz programming.

I think those people need to get right with our listeners.

Look at this tremendous listener valuation of Car Talk – the highest value listeners place on any major national program, bar none.

And it's underwritable.

Overall, a very high return show. But also a very expensive show. So the question again is, what's the balance? Are you making money with Car Talk? Are you losing money on Car Talk? Either way it's okay, as long as your entire schedule is supporting the loss or benefiting from the gain.

So what is the value of programming? I think it comes down to two questions, "Which program is the best buy?" "Which program is the best public service?"

The answers to these questions require 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, as the price is much more apparent.

The price that you should be willing to pay to NPR, PRI, and others should reflect the value of that programming to you. The price that you should be willing to pay starts with the programming's' intrinsic characteristics – production value, mesh with mission, and all the qualities we take as given (and we never take for granted).

These left-brain judgements are augmented by the right-brain concerns of fiscal limitations and responsibilities. A program's financial value to you is not just its 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 of 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.

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

Not only is it incumbent upon you to figure this out – it's now become your responsibility.

We've come a long way together in the last twenty years. I have no doubt that you can accept this responsibility and continue to move public radio forward in its service to the public.

Listen to 30 minutes of questions and answers.

 

For More Information

The Value of Programming.  AUDIENCE 98 explains The Value of Programming on the local and national levels.

• 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.

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