NV89 Performance and Intangible Value

After two full years signing on in Reno, the financial results of the operation are significantly below expectations while the difficult-to-quantify benefits are many. Before embarking on the project, the Board was supplied with a briefing document that included the challenges and risks. Some of those challenges have proven to be significant obstacles.

Challenges

Running membership and underwriting from Las Vegas is simply more efficient given the cost of travel but getting traction in the market has been very tough. Underwriting buys are smaller and making a book of business for a salesperson selling one station has yet to be viable.

Membership department in Las Vegas prioritized maximizing revenue from our news format in Las Vegas as a more efficient strategy than hiring a part time person in Reno for FY2017 and FY2018.

Prior to sign on we were reasonably confident we could trade out studio space with KNPB Public TV, ultimately their space was too small, and their available office space was rented before our deal was finished. The expense of office rental and studio is significant but does provide our own news bureau in addition to a performance space.

Signal strength – we anticipated we could improve the signal and those options have not come to fruition yet. There is a key permit held by KUNR due to expire in January 2020 that will provide options to expand the NV89 signal strength and coverage area if KUNR doesn’t move on it this summer (prior to snow making mountain access impossible). If they do or they don’t, we have options.

We were aware of, but underestimated the resistance of, Reno businesses and philanthropic entities to engage with Southern Nevada organizations.

The models we worked with prior to launch projected that NV89 could break even by the end of FY2019. Despite the additional expense of rent and studio build out, our expenses were lower than the model but the revenue projected was not realized for the reasons identified above. Those results are compounded by a model that built in projected year over year increases.

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NV89 Financial Performance Against Original Model Since Inception

On the other hand…

• Every dollar of NV89 revenue is NEW money • NV89 creates NVPR more efficiency • We are a statewide news service and have fulfilled “eponymous destiny” • The music discovery format contributes to key diversity metrics of audience and community service • NV89 is driving marketing and morale • NV89 is an asset and adds financial value to the balance sheet

NV89 is not only a station and it’s not just another NVPR channel, it is a stand-alone music brand for Nevada Public Radio that shows up in the ratings on our HD services and is visible in social media and video. (See Appendix A, a separate break out of accomplishments and the astonishing $30M+ of PR value generated since 2017.) Strategically, the music discovery format is a solid bet to expand our reach and increase our listener base. Financially, though, the value of NV89 and our position in the north may not be so easily apparent.

Every Dollar of NV89 Revenue is NEW Money

▪ Consider our most recent $10K grant award from the E.L. Cord Foundation designated solely to NV89 operations. This foundation, with over $57M in assets and $17M in annual revenue, very rarely awards funding to organizations outside of the Reno/Carson City area.

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▪ The Wiegand Foundation, with $131M in reported assets and annual income of over $15M, is based in Reno and lists supporting arts and cultural affairs and civic and community affairs as its lead areas of focus. Of the $48M awarded since 2000, 58% ($28M) was awarded to organizations in the Reno/Carson City area, 36% ($17.3M) was distributed among organizations in 13 other states, and 6% ($2.8M) was awarded to organizations in Las Vegas.

▪ $41.6K of the $1.3M generated in Broadcast Underwriting revenue in FY17-18 was generated from our signal in Reno. New relationships with advertisers that did not know us have been cultivated and they are spending marketing dollars on NV89 as the brand becomes more and more identifiable in the market such as Patagonia Outlet Reno, Another Planet Entertainment and Sierra Nevada College. Long-time KNPR advertisers, Caesars and Jaguar Land Rover, are supporting NV89 with product lines located in the north without slicing dollars away from KNPR and the other products that they buy from Nevada Public Radio.

▪ Federal and state funding is marginally increased with the service in Reno and Carson City. It is hard to determine the amount allocable for federal funding, but we receive an additional full slice of the base dollars available from the state, which is about $3K annually.

▪ Messaging on NV89 for our vehicle donation program has attributed to the upswing in revenue from that line item this fiscal year. Over $2.7K has been generated from NV89 listeners.

As current NV89 revenue renews and we continue to build the revenue base in Reno, all revenue lines are revenue that we could not generate otherwise. We have added many advertisers that are prospects for statewide marketing and can include Desert Companion and broadcast in southern Nevada. (See Appendix B for a list of new advertisers in Reno cultivated in the last two years.)

Contribution to NVPR Overall Efficiency

NV89 makes Nevada Public Radio more efficient per covered head. Without operations in Reno, it costs us $3 per covered head to operate the whole of Nevada Public Radio; but with NV89 and northern operations, we reduce our cost per covered head to $2.75. Operating frequency in Reno and Carson City provides an efficient means to acquire new listeners, expand our reach and manifest our destiny as a state-wide institution.

Focusing in on the costs surrounding just news content production, we spend $1,786 for one hour of original content produced by the broadcast editorial staff.1 Without Reno, the total cost per covered head is about $0.30. With our presence in the north, we reduce the cost of that original content production to $0.25 per covered head and increase our reach by 16%...getting more for less.

The cost per hour of original local content production for NVPR reduces from $1,786 per hour to $80 per hour with Reno (producing 22 hours a day of locally hosted music programming). All original local content production is tightly aligned with our goals and relevance.

1 Includes KNPR’s State of Nevada and original local newscasts.

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Cost to Operate NVPR Cost to Produce News Cost Per Hour of Original Per Covered Head Content Per Covered Head Local Content

$1,786 $3.00 $2.75 $0.30 $3.50 $0.35 $0.25 $2,000 $1,000 $80 $2.50 $0.25 $- $1.50 $0.15 Without With Reno Without Reno With Reno Without Reno With Reno Reno

To fully compare the financial viability of Reno operations and the music discovery format, we would need to perform a full analysis of each “division” that carries expense in the Nevada Public Radio portfolio; i.e., State of Nevada, KSGU, KLKR, Classical 897, etc., and appropriately determine what revenue can be attributed to each.2 However, a better approach may be to look at what we would be spending in order to fulfill the strategic goals outlined in our three-year plan to increase content reach and impact by developing new audiences, delivering original statewide journalism, growing a younger and more diverse audience and being a first-mover in NPR/public media initiatives. At a cost of $49 per hour of original programming on NV89, we would be hard-pressed to find cost-effective solutions that not only fulfill the goals, but also provide a multi-platform, turn-key format with quality brand recognition and a deep commitment to diversity.

Statewide News Service and “Eponymous Destiny”

Having a signal and studios to serve Reno/Sparks and Carson City confirms our commitment to be a statewide public media institution. NV89 serves as a news bureau for northern Nevada and the state capital. There is no other broadcast media company with our statewide reach or distributing statewide original news content. The “statewide” status is key case element in grant applications and a compelling characteristic for funders who seek to bridge the geographic, cultural and political regions of Nevada. When our technical upgrade is complete, we can fully “co-host” our program live from northern and southern Nevada.

Being in Reno matters…the Reno metro area was ranked No. 1 nationwide for job growth by the Milken Institute's 2018 Best-Performing Cities List, which was released in January 2019. According to the CES (the Current Employment Statistics program of the Bureau of Labor Statistics), total employment reached an all-time high in April 2019 at just over 255K. In 2018 alone, 29 companies moved/expanded into the area with 15 headquarter relocations.

2 Nevada Public Radio as a whole provides public service to the community; it is not our general practice to subdivide financial analysis to specific stations.

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Reno/Sparks Metro Area Total Job Growth

Source: CES/CPS (https://www.deptofnumbers.com/employment/nevada/reno/)

Reno’s economy is more diversified than Las Vegas with the tech industry booming in northern Nevada and its population more educated. 3 There is no reason to predict that migration from California will slow, despite the run up in housing costs and rents in the Reno area.

Education

Graduate Degree

Bachelors Degree

Associates Degree

Some College

High School Graduate

9th to 12th Grade

Less Than 9th Grade

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Las Vegas Reno

Income and Property Value Las Vegas Reno Median Household Income $56,699 $61,360 Median Property Value $245,500 $329,000 Property Value Growth 7.5% 10.5% Source: DataUSA (https://datausa.io/profile/geo/las-vegas-nv/?compare=reno- sparks-nv-metro-area#economy)

3 Reno Population. (2019-06-05). Retrieved 2019-06-09, from http://worldpopulationreview.com/us-cities/reno/

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Music Discovery Format Contributes to Key Diversity Metrics

With KUNR as the primary NPR station up north and good coverage from Capital Public Radio out of Sacramento, the music discovery format on NV89 [in between those two dial positions] targets a younger audience and reflects the way Reno wants itself to be viewed: a culturally vibrant city, one that is home to working artists and the gateway to the iconic Burning Man Festival. NV89’s studios are in the heart of the redevelopment district, and our performance space, “The Biggest Little Stage,” has featured up-and-coming artists as they swing through town as well as local artists. Arts leaders report that we encapsulate the way that Reno sees itself as a hip hub for the arts.

We are a partner to the working musicians of the entire state in an unduplicated position to identify emerging artists and provide them regional and national exposure through our NPR Music/VuHaus affiliations. Our on-air hosts have already established themselves as peers to KUT Austin, KCRW Santa Monica and KEXP Seattle in their contributions to the wildly popular NPR Music brand, NV89 curation of songs and artists make national “best” lists regularly. Those hosts also produce content for KNPR’s State of Nevada.

Reaching younger and more diverse audiences and engaging them is an objective for all of public media. It’s a “must do” for continuing relevance, and a key indicator for accessing grant funding.

NV89 makes “checking the box” to satisfy compliance with the CPB diversity mandate easy. A recent survey of musicians in our Local 891 playlist revealed we are engaging a diverse group.

• Using standard census categories, 35% are under 20 years of age and another 27% are under 40 (those age cohorts are 20% and 17% of the general population of Reno). • 18% identified as Mexican/Chicano, 3% as American Indian, 24% as multiracial. • 21% checked the “other diversity category” which included LGBTQ, Differently-abled or Veteran status.

Reaching this demographic is not possible with our existing signals in Las Vegas on the news and classical format.

Nevada Public Radio is a part of the NonComMusic Alliance, an advocacy group led by NPR. NV89 expresses the values of this cohort of stations and their community service.

“Public radio music stations reach audiences across multiple platforms – on air, online, on video, on stage, and on-the-go. From broadcast to podcast, from video to live sessions, they meet listeners wherever they are with convenient, engaging listening experiences. Arguably no other entity or music provider in

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America matches public radio’s breadth and variety of music engagement. A recent noncomMUSIC Alliance survey of 87 music-format public radio station partners (serving nearly nine million listeners) shows that a majority of these local stations provide a unique portal for music discovery and make music more accessible with:

• Knowledgeable local hosts and expert curation • Special music programs to explore essential and emerging music and artists • Live music performances in studio and in communities • Music journalism, news, and local information • Educational programs and cultural initiatives

Together, these initiatives foster community among music lovers, support local artists and the local music scene, and develop the next generation of musicians and audiences. This common mission of community service, education, and cultural support separates local public radio music stations from other music providers.” Marketing and Morale NV89 has refreshed our Nevada Public Radio brand and rounds out our media footprint. NV89 is showing up in HD listening in Las Vegas. As we expand no cost NV89 branded events to Las Vegas we engage a younger demographic. NV89 has introduced northern Nevada to Nevada Public Radio as the premiere public radio service to the state. An increasing portion of our staff are the target demographic for this service, they already follow NPR’s Tiny Desk and NPR Music content online and via social media. For NV89 to be a regular contributor to these very hip and vibrant elements of the NPR brand drives morale and engagement in the work of making the service a success. An Asset The Reno signal and Carson City translator represent an asset valued at $657,463 on our balance sheet. Possible exit strategies are sale of the license, LMA with UNR for a student station, or program with KNPR pass through. All these would eliminate the intangible benefits listed above. The buyers for public radio signals are deep pocked religious broadcasters. Once signal is relinquished from the public radio portfolio, they are permanently lost and the universal service mission of public broadcasters is diminished. Acquiring additional signal in Las Vegas was not successful in 2015 and the opportunity to acquire affordable signal in Reno may not present itself again. While there are no bonus dollars for preserving signal in the public domain, universal service is embedded in the Public Broadcasting Act, which provides funding for the CPB. Nevada Public Radio has historically held the position that we will act to acquire, preserve and expand our public radio signal and service. This was the philosophy behind acquisition of repeater signals across Nevada including Elko, St. George, Utah and the network of translators that connect our vast western region. None of our investments in Elko, Tonopah, Panaca, Lund/Ely could even remotely show a profit as stand-alone operations. It is the whole of Nevada Public Radio and the audiences we aggregate that generates our value. What if we had invested the funds spent on NV89 elsewhere? If we had left the funds in our endowment portfolio that we used for NV89 equipment and studio build- out, we would have earned an estimated $76,000 over the course of the last 25 months.

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Instead of spending operating funds for NV89, we could have: • Hired development staff and accelerated major gifts within the Las Vegas market; but we would not have yielded all the intangible benefits described above. That could have yielded $200,000 net over the 2+ years of NV89 operation. • Hired a couple of journalists and created additional content from northern Nevada; but that would not have impacted revenue or reach. • Invested $75K-$100K annually in Las Vegas marketing efforts; but our return on that investment would be marginal and not guaranteed to either increase revenue or reach stated goals in the Three-Year plan. Conclusion Management is acutely aware of the challenges in this area of NVPR operations and is working on all fronts to work smartly to mitigate them. The content and brand of NV89 is strong and attracting national attention. Our lead programmer has already been poached by a major market because of the brand/service we created together. An exit plan that would sell the license outright or create an LMA with UNR or another qualified operator would immediately negate all the work done in the last three years to create a very strong music brand for NVPR. We also cannot recover the sunk costs of legal, technical and format development that were part of our efforts to forge an LMA with UNLV in 2014 and 2015. That work product enabled management to reduce costs on the start-up of NV89. Switching to a “pass through” of KNPR would unlikely draw audience or membership since it would duplicate KUNR. We cannot claim legitimacy in Reno if we were to move all operations to Las Vegas, which would be technically possible but likely cost us our programming and on-air talent who live in Reno. All the intangible values described here are not possible in Las Vegas because we have no signal capacity and purchasing commercial signal is the only option. Reno is a market where we must have a footprint if we consider NVPR as a statewide service/institution. To call for NV89 to be revenue positive without considering the hard to quantify benefits described above would be an underestimation of the interrelated nature of all our operations that exist to serve our mission. More relevant questions are: • What is our tolerance for additional years of some deficit balanced by these intangible benefits? • Is there a break point on ROI for having an account representative working in the market given what we know now? • What impact on member acquisition can we estimate when digital marketing and outreach is activated? • Will KUNR let their permit expire that would open up the opportunity to boost the signal power? • What metrics can we agree are the KPI’s for this part of operations so we can move forward with consensus?

8 APPENDIX A

NV89 RENO – Metrics since launch April 2017

10,500 weekly broadcast audience 3,234 social media followers combined 52,768 engagements on all platforms combined 915 subscribers on TuneIn Radio 14 segments on State of Nevada 247 Nevada artists in playlist 27 videos uploaded to VuHaus 9 Music stories published to NPR Music 31 live music performances 11 in-studio band interviews (8 national, 3 local) UNR producing video content from the Biggest Little Stage NV89 goes to SXSW with NPR Music Hosted panel at SXSW 2017

Press coverage since launch: - onreno.com - allaccess.com - radioink.com - current.org - reno.com - downtownmakeover.com - Reno Gazette-Journal - insiderradio.com - renotahoetonightmagazine.com - laketahoebreakingnews.com - rgj.com - lasvegassun.com - socialnworldwide.com - Las Vegas Weekly - spingo.com - lasvegasweekly.com - SPARK! - nevadaappeal.com - The Sunday / Vegas Inc. - newsreview.com - thisisreno.com - npr.org - nnbw.com

TOTAL UVM/CIRCULATION: 1,110,021,864 TOTAL PUBLICITY VALUE: $33,299,207.41

9 APPENDIX B

NV89 Advertisers – NEW to Nevada Public Radio

A Poetic Body Access to Healthcare Animal Ark Another Planet Entertainment Artown BHFS (direct) Bonfire Entertainment City of Reno Arts & Culture City of Sparks Emerge Conference LLC Federal Judicial Center – University of Nevada Reno Food Bank of Northern Nevada Fresh Bakin' Girlmade Golden Voice Grand Sierra Resort Granlibakken Tahoe Harrah's Lake Tahoe Humane Network iZotope, Inc. Jaguar Land Rover Reno JMax Productions LEAD with Horses Liberty Food & Wine Exchange MRD Foundation Inc Nature Conservancy Nevada Arts Council Patagonia Outlet Reno Piper's Opera House Regina Lockwood Ferrari-Lund Real Estate ServiceMaster 1st Response Sierra Nevada College Silver Legacy Resort Casino SNV Cohousing LLC The Abbi Agency The Children's Cabinet The District at Green Valley Truckee Meadows Bicycle Alliance Utility Telecom - Reno

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