NPR: How a Diverse Revenue Stream Works

(MoneyWatch)  In the comments thread following his excellent piece about NPR over on Mashable, Josh Catone documents one of the key business reasons public radio is faring better during the current media industry shakeout than are many commercial networks.

It boils down to NPR's diversified set of revenue sources.

A surprising number of people, including some who should know better, think NPR is funded primarily by the federal government. Much of this misunderstanding is ideologically motivated by those who perceive a "liberal bias" in NPR's reporting. They are wrong, on both counts.

It's worth taking a closer look at NPR's non-profit business model at a time when some are calling for newspaper companies to convert themselves into non-profits in order to survive. In the U.S., a non-profit company does not necessarily not make money -- far from it. It simply is exempted from having to pay taxes on most of its revenue, as long as the IRS determines that it qualifies as an educational organization or in another of various charitable categories.

U.S. public radio, according to Catone, has six major sources of revenue:

• 31 percent from listeners in the form of pledges, memberships, and other donations
• 20 percent from businesses via corporate underwriting
• 11 percent from the Corporation for Public Broadcasting (CPB), which is federally funded
• 10 percent from licensee support
• 9 percent from foundations and major gifts
• 5 percent from local and state governments, and
• 14 percent from all other sources.

Notice that barely one dollar in six comes from government. Listener support is by far the most important source of revenue, but advertising (in the form of corporate underwriting) is the second-most important source. Over the years, smart executives inside public radio, both at NPR and at its ~800 member stations, have carefully adjusted underwriting opportunities so that they appeal to media buyers.

NPR and its member stations not only attract strong support from their listeners but from their advertisers as well. They provide the kinds of demographic and psychographic data about those audiences that advertisers value. This is, in the end, a powerful business model -- one that can survive periodic downswings in business cycles quite nicely.

Which gives me an opportunity to upend a cliche, when it comes to running a business, "Don't collect all your eggs from one basket!"