Growing the Network

NOTE: I wrote this at the invitation of Skip Pizzi for a report by the SRG (Station Resource Group) in August 2009. I've since made minor additions and corrections, but it is substantially unchanged.

What public radio needs most to support new media is not just disconnected projects or specific new media initiatives in news, music or network infrastructure. It needs a comprehensive platform to provide the technical and business infrastructure for network-wide services. A small fraction of this is already in place, but much more would have to be done to effect real change.

To support new media comprehensively, the system needs a new business structure that financially incentivizes and underwrites collaborative aggregation and new media development for the key supply side participants: content producers, stations, and networks.

At the same time it must drastically up-level the online user's experience with public radio sites, provide appropriate mechanisms for direct user involvement, and provide the tools to raise significant new revenue to be distributed among the system participants via a revenue sharing business model.

Implementation

Key elements needed to make this happen:

Further development of NPR.org as a master portal to all public radio content and archives (i.e. massive, comprehensive content aggregation);

Further development of NPR.org as a platform via both private and public APIs and shared services to enable any level of content syndication, transaction of payments for syndicated content, and sharing of end user payments and contributions;

Further development of user services under the "NPR Community" concept, including applicable social network features;

A set of revenue sharing policies to distribute syndication, membership and underwriting income among producers, stations and networks;

A national membership program which allows end users to sign up either at NPR.org OR at any station, with the ability to route additional contributions to the entity of their choice.

When I have made the argument for business model reform to concerned members of the public radio establishment in the past, with few exceptions these ideas have been met by denial or disengagement. But no one has ever actually argued against them, except by avoiding the issues I raise. That's a pretty good indication I'm cutting close to the bone and have identified one of the key issues in the "innovator's dilemma" as applied to the public radio system.

(Ironically, Clayton Christiansen's description of the typical reasons for the "Innovator's Dilemma" don't apply to public broadcasting, in that making the necessary business model changes would neither work against the interests of existing customers OR reduce existing revenues with a lower-priced product. The dilemma here is the need to redesign the power relationships and business rules in the system.)

The recommendations  of SRG's original "Grow the Audience" report (with the partial exception of the first one, which cites the obvious need for "organized and ongoing support for stations in developing strategic clarity about their roles in the online and mobile networked environment") as well as previous system-centric attempts at gazing into the future — are mostly bland reiterations of the core values of the public media catechism (diversity, service, inclusiveness, community, etc.), cautiously extending a toe outside the box while continuing to view the world from inside it.

This approach cannot work, because innovation is not needed at the level of the public radio value system. Nor will modest, incremental online innovations be sufficient.

What is needed is a new set of incentives and structural relationships between the major elements of the system and the audience that will enable and fuel an expanded set of digital services with their own logical business models.

By looking at online and mobile networks only as a new distribution channel into which the old public radio network and station political and economic structure must somehow be fit, the system has consistently missed the revolutionary nature of the new developments, wasted money on overlapping and partial investments online, and failed to capture the share of online attention the quality of its content deserves. NPR.org should be a U.S. top 100 site: instead it ranks 324th in the U.S. and 1,178th globally.

Worst of all in my view, it has so far completely missed the new revenue opportunities that the digital network era can and should provide. For all these reasons, the policy of "incremental adaptation" has been a qualified failure, and will continue to fail to deliver the true promise of the network age.

In fact, the "Grow The Audience" slogan itself is both too obvious (of course you want to grow the audience — every media producer wants that) and too narrow — you don't just want to grow the audience. You want to grow service and revenue as well, and create a technical and financial platform for public media in the 21st century.

So rather than tinkering with the low-hanging fruit among the opportunities that digital networks present to public broadcasters (so far: metadata standards, podcasting, APIs and other shared technical network resources, modular content syndication, and special collaborative projects), public media and public radio needs to restructure its core business models for the benefit all stakeholders.

Current Public Media Business Models

A federated hub and branch system of not-for-profit organizations with three central networks (NPR, PRI, APM) feeding programming and services to a diverse group of independent stations with a wide range of economic circumstances.

Stations pay the central networks and independent producers for syndicated programming (aka content) based on market size and other variables.

Central networks’ business models also include tax-based support grants from CPB, grants from public and private foundations, corporate and institutional underwriting, and returns on endowment investments, in addition to station dues.

Stations monetize their individual services in four ways:

Direct grants from CPB (tax-based support)

Institutional grants from their controlling entities (states, colleges, school boards, NPOs)

Underwriting by corporate, institutional and individual advertisers

Voluntary direct memberships and donations from listeners

The fact that the elements of this system are now over 50 years old and the current version at least 30 years old should tell you that it is at least time to take another look at the structural underpinnings of the public media system.


Digital Axioms

I take the following to be axiomatic when discussing the opportunities provided by ubiquitous digital networks:

End users win. Power moves from the core to the edges. End users, formerly known as listeners and viewers, gain the ability to choose from an unprecedented range of options, and to express those choices at will.

Content originators win by the ability to reach end users directly, without the gate-keeping and editorial functions previously exercised by intermediaries like network distributors and broadcast stations, and by the real prospect of universal access to all levels of content.

Content aggregators win by the extreme convenience of "one-stop" interactivity, users’ preference for minimizing the number of sites they have to deal with, and economies of scale.

Intermediaries tend to lose. They are "dis-intermediated" — rendered unnecessary by both direct network access to content, and by user preference for more comprehensive services and more refined user experiences. Local stations are most at risk in the new order and must find new ways to justify their existence.

Content scarcity is replaced by content abundance, along with a new set of abundance-related issues. Unlike broadcasting, bandwidth is effectively infinite, and there is no practical limit or shortage of content. The focus shifts to finding desired content via search, rankings, tags, recommendations, shared links and other network-native strategies employed directly by the end user.

Scheduled mass audience broadcasting is gradually replaced by on-demand use, subscription feeds and customized, user-controlled aggregation on a range of wired and wireless platforms.

Digital Business Models

If you accept the axioms above, certain conclusions follow:

Massive content aggregation is the only way to provide a broadly competitive service in the network era. This does not imply that NPR.org or PBS.org would make stations irrelevant. Public media's federated network/station structure is ideal for delivering an aggregated service from multiple "points of presence" on the network.

To meet the varying needs and desires of end users, a substantial number of customizable tiered service options, payment models, and total cost of service need to be supported. The closest model for this today are large cable TV services; online services can and should be more granular.

National memberships should be encouraged at both the network aggregator level and the local service (station) level, for the benefit of the entire system. This is where the new revenue is going to come from, but the proceeds must be shared. In fact...

Fair and transparent revenue sharing is the future of most online media. Public radio can lead in this because of its mission, history, and existing federated structure. Payments for content can flow in all directions, not just from stations to the central networks and producers. For example, in some cases NPR could underwrite or even pay stations to carry its content in order to extend the total reach of the network.

Payments to content providers should be proportional to actual usage, with minimums where necessary. Unlike broadcasting, it is possible to account for all uses of network delivered digital content. Producers should have a share in the revenue generated by unusually popular content.

These ideas are only a starting point. Building out the new relationships will require vision, commitment, and flexibility from all stakeholders, with one guiding principle:

Think Network.

:: SH

Comments

[John Proffitt]

Insightful and spot-on as usual.

When I saw the recommendations last week from that SRG report, I just about had steam coming out of my ears -- it's the perfect advice. For 1995. CPB should never fund a study like that one again, since we have plenty on the shelves already.

I've been too busy with other stuff to blog on this yet, and now that you've handled it so masterfully I probably won't bother (it's like following a better comedian -- who wants to do that?).

But the core message I would give to station is that the relationships of network to stations and the relationships of users to stations and networks are being completely reshaped, and the ways we act, interact and collaborate have to change, too.

Ugh. Too much to say, but even now I have to run off to do some other stuff. Meanwhile, thanks for the thoughts, Stephen. I only pray people start listening. You've been a beacon of good ideas -- and proven digital media success -- since I first heard you speak back in 2005.