NPR sees sharp downturn in advertising revenue, leading to talk of cuts
By Paul Farhi,
NPR’s new chief executive is signaling that there may be some static ahead for the radio and digital news organization.
Halfway through its fiscal year — and six months into Gary Knell’s tenure as chief executive — Washington-based NPR has seen a sharp downturn in corporate “underwriting,” or advertising revenue. The falloff has led to projections of an annual operating deficit and internal discussions about staff and program cuts.
Another problem area: The strong audience growth that NPR’s news and entertainment programs experienced over the past decade appears to have flattened, a potentially worrisome development because more stations are carrying NPR’s programs.
The increasingly bearish climate poses a challenge for Knell, a highly regarded public-media manager who became NPR’s chief executive in December. Knell replaced Vivian Schiller, who resigned in March last year after an embarrassing episode in which two NPR fundraisers were recorded making disparaging comments about conservatives in a meeting with two men posing as donors from a bogus Islamic group. The meeting was secretly taped by a conservative activist, and helped push House Republicans to cut off federal funding of public broadcasting (the money was later restored).
NPR has operated at a deficit in three of the past four years, Knell said in an interview Wednesday, and it has had to dip into its endowment to cover its expenses in those years.
But the hole is growing deeper: Through March, NPR recorded a $2.6 million deficit, over and above what its endowment covers. The growing deficit makes it “likely” that NPR will end its fiscal year in September in the red, said Dana Davis Rehm, a spokeswoman.
Knell spelled out some of the details in a meeting with NPR employees on Wednesday. But he stopped short of suggesting that NPR would have to chop its staff or its lineup of news and entertainment programs. “That’s the last thing I want to do,” he said in an interview.
Like many news organizations, NPR is facing higher expenses this year as it covers the Olympics in London and the presidential election at home, among other major national and international stories.
The situation isn’t nearly as dire as in 2008, when a $23 million shortfall led to the dismissal of 64 employees, or about 7 percent of NPR’s workforce, including several longtime correspondents and program hosts. It also dropped two daily programs to save money, including “News and Notes,” a show designed to attract more African American listeners.
This time, there have been internal discussions about dropping “Tell Me More,” a daily program also aimed at African Americans and other minorities, according to people who are privy to the matter. They said nothing has been decided.
Knell noted in the interview that all of NPR’s traditional sources of funding are under pressure and that reducing expenses is critical. “NPR has been withdrawing from the bank and we can’t keep doing that,” he said. “We have to be at break-even or be in a positive position on an annual basis, or I can tell you at some point we’re going to have to turn the lights off.”
NPR, which is a nonprofit organization, derives its revenue primarily from “dues” paid by affiliated stations for its programs; corporate sponsorships; and institutional donations and major gifts, such as the blockbuster $200 million contribution from the late McDonald’s heiress Joan Kroc in 2003. Less than 2 percent of its revenue comes directly from federal taxes.
The weakest area, Knell said, has been corporate sponsorship, which pumped about $50 million into NPR last year but has fallen off 2011’s record pace.
At the same time, NPR’s fundraising operation has been slowed by high-level departures. Jaime Porter, who headed the operation after her predecessor, Ron Schiller, resigned abruptly in the wake of last year’s video “sting,” left NPR last month for a post at Georgetown University. The senior director of individual giving, Joshua Friedman, resigned in the fall for a job at Arizona State University.
A senior editorial manager, executive editor Dick Meyer, left in November for the BBC’s American news operations. He hasn’t been replaced.
These events are playing out as NPR’s ratings growth has leveled off. Total weekly listenership for NPR last year fell just over 1 percent, to 26.8 million people, the first drop in a decade, according to NPR internal data published by the Project for Excellence in Journalism. This came despite a rise in the number of stations carrying NPR’s programs — 789 compared with 764 the previous year (NPR affiliate WAMU [88.5 FM], is the top-rated station in the Washington area).
Public broadcasting continues to face the threat of losing its federal funding, although lawmakers have turned aside such proposals for years. Rep. Doug Lamborn (R-Colo.) and Sen. Jim DeMint (R-S.C.) are leading the latest drive to defund the Corporation for Public Broadcasting, the congressionally created entity that passes tax money to public radio and TV stations.
CPB is seeking a $445 million advance appropriation, the same amount it received the year before. While NPR receives little of this money directly, NPR-affiliated stations rely on it for about 15 percent of their budgets. They, in turn, pay programming fees to NPR that comprise about 45 percent of NPR’s budget.
In a letter sent last week to colleagues seeking support for wiping out CPB’s federal funding, Lamborn cited the growing federal budget deficit. He also attacked the compensation of the heads of PBS and NPR. According to Lamborn, PBS President Paula Kerger received $603,403 in 2010, and former NPR chief executive Schiller received $479,011 in 2011.
“Certainly, thriving media entities that can afford to pay their executives such generous salaries should not be asking taxpayers to subsidize them,” he wrote.