Achieving Growth and Sustainability via Acquisitions, Collaborations & Public Service Operating Agreements Erik Langner Managing Director, Public Media Company Nora Casper Finance Director, North Carolina Public Radio 2017 Annual Conference | May 30-June 2, 2017 Public Media Company Our mission is to foster sustainable and innovative public media growth. 2017 Annual Conference | May 30-June 2, 2017 Stations are vulnerable to Federal and Institutional Subsidy Cuts (Television) Federal and Institutional Subsidies as a percentage of Total Direct Revenues (FY2015)*, CPB Grantees Only <$5 MILLION $5 MILLION - $10 MILLION $10 MILLION - $20 Four out of ten licensees MILLION are state networks $20 MILLION - $50 MILLION $50 MILLION+ AVERAGE 0% 10% 20% 30% 40% 50% 60% Chart source: Corporation for Public Broadcasting, AFR data for TV grantees *Total subsidies for all stations divided by total station direct revenues in each category 2017 Annual Conference | May 30-June 2, 2017 Stations are vulnerable to Federal and Institutional Subsidy Cuts (Radio) Federal and Institutional Subsidies as a percentage of Total Direct Revenues (FY2015)*, CPB Grantees Only <$1 MILLION $1 MILLION - $2.5 MILLION $2.5 MILLION - $10 MILLION $10 MILLION - $25 MILLION $25 MILLION+ AVERAGE 0% 10% 20% 30% 40% 50% 60% Chart source: Corporation for Public Broadcasting, AFR and FSR data for radio grantees *Total subsidies for all stations divided by total station direct revenues in each category 2017 Annual Conference | May 30-June 2, 2017 Revenues Growing, but Driven by Larger Stations (Television) Chart source: Public Media Financial and Operational Results FY15, Corporation for Public Broadcasting, June 1, 2016 Revenues: Total cash revenue, excluding capital and investment Larger Grantees (>$10 million), Medium Grantees ($10 million - $5 million), and Smaller Grantees ($<5 million) 2017 Annual Conference | May 30-June 2, 2017 Revenues Growing, but Driven by Larger Stations (Radio) Chart source: Public Media Financial and Operational Results FY15, Corporation for Public Broadcasting, June 1, 2016 Revenues: Total cash revenue, excluding capital and investment Larger Grantees (>$3 million), Medium Grantees ($1 million - $3 million), and Smaller Grantees ($<1 million) 2017 Annual Conference | May 30-June 2, 2017 Expenses are Growing TV Radio 15/14: 4.4% 14/13: 3.7% 15/14: 2.8% 14/13: 1.1% Chart source: Public Media Financial and Operational Results FY15, Corporation for Public Broadcasting, June 1, 2016 Expenses include depreciation and amortization, excludes investments in capital assets 2017 Annual Conference | May 30-June 2, 2017 Scale Matters TV Radio Chart source: Public Media Financial and Operational Results FY15, Corporation for Public Broadcasting, June 1, 2016 2017 Annual Conference | May 30-June 2, 2017 PMC Client Status-Quo Projections (Past 3 Years) • TV median (based on 5 projects) • Projected growth in revenues: 3.2%/year • Projected growth in expenses: 2.2%/ year • Radio (based on 19 projects) • Projected growth in revenues: 2.8%/year • Projected growth in expenses: 3.0%/year Revenues include in-kind; exclude capital contributions and gain/ loss on investments Expenses include in-kind, depreciation and amortization; excludes investments in capital assets 2017 Annual Conference | May 30-June 2, 2017 PMC Client Status-Quo Projections (Past 3 Years) 2017 Annual Conference | May 30-June 2, 2017 PMC Client Status-Quo Projections (Past 3 Years) 2017 Annual Conference | May 30-June 2, 2017 Achieving Greater Scale • Acquisitions • Benefits • Access to a new market • Opportunity to provide a separate and distinct service or the expansion of existing service(s) • New revenue and audience potential • Economies of scale • Risks • License acquisition and capital improvement costs • Management and staff time devoted to planning, fundraising and implementation 2017 Annual Conference | May 30-June 2, 2017 Acquisitions: Colorado Public Radio • In 2001, Colorado Public Radio (CPR) purchased a second station (AM) serving the Denver-Boulder area and “split” formats between the two channels • In 2008, the news service on the AM was shifted to a new FM signal (KFDN) • In 2015, CPR purchased a second FM to provide both of its services (news and classical) on the FM dial • In 2015, a third FM was purchased to air a 24/7 Alternative Music service 2017 Annual Conference | May 30-June 2, 2017 Acquisitions: Colorado Public Radio Colorado Public Radio Revenues and Expenses Total Revenues FY2000-FY2016 Total Expenses $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY2007 FY 2008FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Colorado Public Radio Balance Sheet Total Assets FY2000-FY2016 Total Liabilities $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005FY 2006 FY2007 FY 2008FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 2017 Annual Conference | May 30-June 2, 2017 Acquisitions: Recent Expansions • 2017 • Rhode Island Public Radio’s acquisition of WUMD-FM in North Dartmouth, Mass. • Colorado Public Radio’s acquisition of KXRE-AM in Manitou Springs, Colo. • 2016 • Nevada Public Radio’s acquisition of KJIV-FM in Sun Valley, Nev. • University of Pennsylvania's acquisition of WNTI-FM in Hackettstown, N.J. • Community Radio for Northern Colorado’s acquisition of KJAC-FM in Timnath, Co. 2017 Annual Conference | May 30-June 2, 2017 Achieving Greater Scale • Public Service Operating Agreements (PSOA) • Benefits (from a licensee’s perspective) • Retains the ownership of its capital asset, while being reimbursed for the costs and administrative time associated with managing the station • Retains a primary connection with the station from a public relations perspective • Might receive promotional underwriting credits or other noncash benefits • Risks (from a licensee’s perspective) • Has responsibility for the license and any other matters related to ownership, including filings or reports to the CPB • Viability of the operator 2017 Annual Conference | May 30-June 2, 2017 Achieving Greater Scale • Public Service Operating Agreements (PSOA) • Benefits (from an operator’s perspective) • Eliminates the high costs associated with buying or financing the acquisition of a station. • Generally has long contract terms • Option to buy the station at a predetermined price • Risks (from an operator’s perspective) • Licensee may sell station at a future date. 2017 Annual Conference | May 30-June 2, 2017 PSOAs: The Wheeler School • In 2011, RIPR took over the operation of the Wheeler School’s WELH 88.1 FM • RIPR moved its NPR News service from AM 1290 to the FM 88.1 • Enabled RIPR to expand its coverage and improve its audience and revenue generation 2017 Annual Conference | May 30-June 2, 2017 Collaborations: Kentucky PR Network • Five of Kentucky’s public radio stations are exploring collaborative efforts (in discussion) • Share reporters • Exchange local news stories • Develop a statewide approach to underwriting sales • Share costs of membership • Share costs of new technology projects • As a result, less money and staff time dedicated to business matters, and more time to focus on producing local and regional reporting that listeners will value 2017 Annual Conference | May 30-June 2, 2017 Established in 1976 News Format 394,000 people listen weekly In the top five in Raleigh metro market and number one among college educated listeners Annual Revenue of $11.4 million for FY2016 2017 Annual Conference | May 30-June 2, 2017 WUNC’s Broadcast Coverage 2017 Annual Conference | May 30-June 2, 2017 WFSS Broadcast Coverage 2017 Annual Conference | May 30-June 2, 2017 Fayetteville/Fort Bragg 6th Largest NC City 590,000 people 58,000 Soldiers Median age 29.8 91% have HS Degree 23% have Bachelors Fayetteville Observer 5th largest newspaper in NC 2017 Annual Conference | May 30-June 2, 2017 Acquisition of WFSS This was a mission driven acquisition designed to preserve public radio service in an underserved media market. WUNC wanted to expand service to military and veterans communities. WUNC hired a military reporter to cover Ft. Bragg in Fayetteville, as well as other military installations in NC. WUNC received multiple grants to fund military reporting, including grants from CPB and the Woodruff Foundation. 2017 Annual Conference | May 30-June 2, 2017 Acquisition Details WFSS 91.9 FM WFSS broadcasts WUNC programming Purchased from Fayetteville State University (FSU) Previous Jazz Format Purchased May 13, 2015 100,000 Watts Cash Purchase Price: $1,350,000 And $400,000 over ten years in underwriting announcements specific to FSU on WFSS 2017 Annual Conference | May 30-June 2, 2017 WFSS Financial Impact WFSS Operating Budget: $46,000 Underwriting Revenue: Approximate $26,000 Increase Fiscal Year Number of Donors Revenue 2015 – Pre-Purchase 1,149 $28,547 2016 1,452 $37,377 2017 1,630 $38,519 2017 Annual Conference | May 30-June 2, 2017 Growth Opportunity Fayetteville is a majority minority city 56% African American, Hispanic or mixed-race 75% of population connected to military Prior to acquisition, WFSS had more than 30% African American listeners WUNC total network African American audience is 12-17% Current Audience 9% audience growth in Fayetteville through Fall 2016 Accounts for approximately 5% of total audience Possible brand confusion in diary market 2017 Annual Conference | May 30-June 2, 2017 Q & A 2017 Annual Conference | May 30-June 2, 2017 .