Developing a business model for a community radio station in Port Elizabeth: A case study. By Anthony Thamsanqa “Delite” Ngcezula Student no: 20531719 Submitted in partial fulfilment of the requirements for the degree of Masters in Business Administration at the NMMU Business School Research supervisor: Dr Margaret Cullen November, 2008 DECLARATION BY STUDENT FULL NAME: Anthony Thamsanqa “Delite” Ngcezula STUDENT NUMBER: 20531719 QUALIFICATION: Masters in Business Administration DECLARATION: In accordance with Rule G4.6.3, I hereby declare that this treaties with a title “Developing a business model for a community radio station in Port Elizabeth: A case study” is my own work and that it has not previously been submitted for assessment to another University or for another qualification. SIGNITURE: __________________________ DATE: ________________________ i ACKNOWLEDGEMENTS I would like to express my sincere gratitude and thanks to my research supervisor, Doctor Margaret Cullen, whose academic guidance and encouragement was invaluable. I wish to thank Kingfisher FM as without their cooperation this treatise would not have been possible. I would like to thank my wife, Spokazi for putting up with the long hours I spent researching and writing this treatise. I wish to thank my girls, Litha and Gcobisa for their unconditional love. I would like to thank my parents, Gladys and Wilson for the values they instilled in me. I wish to thank the following people who made listening to radio an experience and inspired my love for radio presenting and broadcasting: England: Dj Neil “Foxy” Fox – Breakfast Show Host at Capital FM, London; United States of America : Tom “ The Fly Jock” Joyner – presenter and owner of “The Tom Joyner Morning Show” (A syndicated breakfast show with a daily listenership of 10 million across most states in North America); South Africa: The late Chris Dunga (Umhlobo Wenene FM) and the late Sanuse Nqoloba (Radio Transkei); Mr Stan Mosia (Umhlobo Wenene FM); Mr Vuyani Makaza (Umhlobo Wenene FM); Mr Zolani Bongco (Umhlobo Wenene FM); Mr Mbulelo Ngewu (Umhlobo Wenene FM); Rev Loyiso Jonga (Umhlobo Wenene FM); Mr Fikile Lubisi (Radio Ciskei & Umhlobo Wenene FM); Justice Ramahlola (Metro FM, P4 Durban, Kaya FM & Radio 2000); Lionel Myles (Radio Toyohandou); Mark Gillman (5FM); Thato “Fresh” Sekwane (YFM & 5FM) and John Bishop (ex-Algoa FM Breakfast Show Host). I wish to thank the following friends and true servants of radio broadcasting for constantly engaging; challenging, probing, stimulating and tapping into my “little” radio broadcasting knowledge: Sthembile “Sterra” Ngqezana (Umhlobo Wenene FM); Luyanda “Luks” Gidane (Umhlobo Wenen FM); Lulama Matya (SABC News); Gift Ngqondi (Nkqubela Community Radio); Luvuyo Masele (Nkqubela Community Radio); and Elvis Mali (Tru FM). Lastly, thanks to God Almighty, for blessing me with everything I have. I thank Him above all else. ii SUMMARY AND KEY TERMS Summary The purpose of this treatise is a development of a suitable model for a community radio station which would lead to operational effectiveness and ensure sustainability. The treatise has three phases namely a theoretical phase, a narration phase and an integration phase. Firstly, in the theoretical phase the research study investigates what the literature review reveals about community radio stations and business models. This treatise argues that a total dependency of community radio stations on donor funding leads to operational ineffectiveness which threatens their sustainability. The treatise also argues that a business model could be adapted for a community radio station by identifying the business issues which the literature review revealed, and use these to deconstruct a theoretical business model. Secondly, in the narrative phase the research study investigates the important business issues for a selected community radio station. The treatise argues the board and management of this selected community radio station revealed additional business issues of operations and gave different ratings to business issues which are important in their operations. Thirdly, in the integration phase, the theoretical model deconstructed in the theoretical phase, was revised by including additional business issues of operations revealed in the narrative phase. The research study concludes that this revised model is a suitable business model for a community radio station and can lead to operational effectiveness and ensure sustainability. Key terms: Community; Community Participation; Governance; Business Model; Independent Communications Authority of South Africa (Icasa). iii TABLE OF CONTENTS PAGE CHAPTER 1 INTRODUCTION TO THE MAIN PROBLEM 1.1 INTRODUCTION TO COMMUNITY RADIO STATIONS……. 1 1.2 PROVIDING A BROADCASTING SERVICE…………………. 3 1.3 THE PURPOSE OF THE RESEARCH………………………… 5 1.4 SUBPROBLEMS…………………………………………………. 5 1.5 PRIOR RESEARCH……………………………………………... 5 1.6 DELIMITATION OF RESEARCH………………………………. 6 1.6.1 Type of a community radio station……………………………… 7 1.6.2 Geographical delimitation……………………………………….. 7 1.6.3 Employment level of employees to be surveyed……………... 7 1.7 ASSUMPTIONS………………………………………………….. 8 1.8 SIGNIFICANCE OF THE RESEARCH………………………… 8 1.9 THE DEFINITION OF TERMS…………………………………. 9 1.9.1 Business model………………………………………………….. 9 1.9.2 Community……………………………………………………….. 9 1.9.3 Radio……………………………………………………………… 10 1.9.4 Radio Station…………………………………………………….. 10 1.9.5 Community Radio Station………………………………………. 11 1.10 AN OVERVIEW OF RELATED LITERATURE……………….. 11 1.10.1 Introduction………………………………………………………. 11 1.10.2 Best practices……………………………………………………. 12 1.10.3 Business model………………………………………………….. 13 1.10.4 Effectiveness…………………………………………………….. 15 1.10.5 Performance measurement……………………………………. 15 1.10.6 Sustainability…………………………………………………….. 16 1.11 RESEARCH DESIGN…………………………………………... 17 1.11.1 Research Methodology…………………………………………. 17 1.11.2 Literature Review………………………………………………... 17 1.11.3 Empirical Study………………………………………………….. 18 1.12 OUTLINE OF THE RESEARCH………………………………. 19 1.13 CONCLUSION…………………..………………………… 19 CHAPTER TWO BROADCASTING AND COMMUNITY RADIO STATIONS 2.1 INTRODUCTION………………………………………………… 20 2.2 HISTORY OF BROADCASTING………………………………. 20 2.3 BROADCASTING IN SOUTH AFRICA……………………….. 21 2.3.1 Broadcasting Regulation……………………………………….. 23 2.3.2 Broadcasting Legislation……………………………………….. 23 2.3.3 Commercial Broadcasting……………………………………... 24 2.3.4 Public Broadcasting…………………………………………….. 25 2.4 COMMUNITY BROADCASTING……………………………… 25 2.5 COMMUNITY SOUND BROADCASTING LEGISLATION…. 27 2.6 GOVERNANCE OF COMMUNITY RADIO STATIONS…….. 28 2.6.1 The board………………………………………………………… 29 iv 2.6.2 Management…………………………………………………….. 30 2.7 OPERATIONS OF A COMMUNITY RADIO STATION……... 31 2.7.1 Sales and Marketing Department……………………………… 32 2.7.2 Administration Department…………………………………….. 32 2.7.3 Finance Department……………………………………………. 33 2.7.4 Programming Department……………………………………… 34 2.7.5 Music Department………………………………………………. 35 2.7.6 Production Department………………………………………… 36 2.7.7 Technical Department………………………………………….. 37 2.8 SERVICES AND PRODUCTS OF COMMUNITY RADIO….. 38 2.8.1 Community Radio Programmes……………………………….. 38 2.8.2 Community News and Current Affairs………………………… 39 2.8.3 Community Outreach Programmes…………………………… 40 2.8.4 Advertising, Informecials and Programme Sponsorship…… 40 2.8.5 Promotional Merchandise……………………………………… 41 2.9 CONCLUSION…………………..………………………… 41 CHAPTER THREE BUSINESS MODELS 3.1 INTRODUCTION………………………………………………… 42 3.2 TYPES OF ORGANISATIONS………………………………… 43 3.2.1 Profit and Non-Profit Organisation…………………………….. 43 3.2.2 Manufacturing and Service Based Organisation…………….. 44 3.3 COMMUNITY BASED ORGANISATIONS…………………… 45 3.3.1 Governance and Management………………………………… 46 3.3.2 A service system………………………………………………… 47 3.3.3 Service marketing………………………………………………. 48 3.3.4 Best Practices…………………………………………………… 49 3.4 PORTER’S FIVE FORCES……………………………………. 50 3.5 THE VALUE CHAIN……………………………………………. 52 3.6 TYPES OF BUSINESS MODELS…………………………….. 53 3.6.1 Community Participation Model……………………………….. 54 3.6.2 The Input/Output Model………………………………………… 55 3.6.3 Quality Management Model……………………………………. 56 3.6.4 Customer Satisfaction Model…………………………………... 57 3.7 CONSTRUCTING A BASIC MODEL………………………….. 58 3.8 THE PROPOSED BUSINESS MODEL……………………….. 59 3.8.1 Community……………………………………………………….. 59 3.8.2 Mission and Vision………………………………………………. 60 3.8.3 Stakeholders…………………………………………………..…. 61 3.8.4 Funding…………………………………………………………… 61 3.8.5 Service Provision………………………………………………... 62 3.8.6 Customers………..………………………………………………. 63 3.8.7 Service Marketing……………………………………………….. 63 3.9 CONCLUSION…………………..………………………………. 63 CHAPTER FOUR RESEARCH DESIGN AND METHODOLOGY 4.1 INTRODUCTION………………………………………………….. 64 4.2 RESEARCH DESIGN…………………………………………….. 65 4.3 RESEARCH METHODOLOGY………………………………….. 65 4.3.1 Case Study……………………………………………………….... 66 v 4.4 METHODOLOGY RATIONALE…………………………………. 68 4.5 RESEARCH DATA……………………………………………….. 69 4.5.1 Population Sample………………………………………………... 69 4.6 DATA COLLECTION……………………………………………… 70 4.6.1 Semi-structured interviews……………………………………….. 71 4.6.2 Guidelines for semi-structured interviews………………………. 73 4.6.3 Interview questions……………………………………………….. 74 4.6.4 An outline of questions…………………………………………… 75 4.7 RESEARCH NARRATIVE……………………………………….. 75 4.8 DATA ANALYSIS AND INTERPRETATION…………………… 76 4.9 RELIABILITY, VALIDITY AND GENERALISABILITY……….... 77 4.10 CONCLUSION………………………..…………………………… 78 CHAPTER FIVE RESULTS: PRESENTATIONS AND DISCUSSIONS 5.1 INTRODUCTION…………………………………………………… 79 5.2 PRESENTATION: THE NARRATIVE…………………………….