Seattle classical music station KING-FM last week laid off three on-air hosts in a cost-cutting move. Station manager Jennifer Ridewood said that the board that governs KING-FM directed her to reduce expenses “proactively” in the face of looming economic troubles. While the layoffs will reduce expenses in the short term, the future of KING-FM will require the station to generate more revenue. Oddly enough, this crisis may be just the opportunity that KING-FM has needed for years.
To understand how the station got into this fix, and what may be next for KING-FM, it’s useful to understand the station’s complex history and management structure.
KING-FM’s governing board oversees a non-profit organization called “Beethoven,” which was created in 1994 to assume ownership of the previously for-profit classical music station, which the two Bullitt sisters were donating. Classic KING-FM first came on the air in 1948. After KING Broadcasting sold its commercial TV operations to the company publishing the Providence Journal (later sold to Dallas-based Belo), KING-FM was donated to Beethoven to preserve the classical format and benefit local music groups.
The Beethoven board is made up of representatives from the Seattle Symphony, Seattle Opera, and ArtsFund, as well as representatives for Priscilla Bullitt Collins and Harriet Bullitt. KING-FM is owned by a non-profit but is still run as a commercial station. When it makes money, it gives the profits to the three non-profit arts groups in the partnership, who each receive a one-third share or “dividend.” That dividend has totaled $7 million over the years.
According to Beethoven board member Jim Tune, CEO of ArtsFund, this past June, KING-FM paid a total dividend of $210,000, which was split three ways among ArtsFund (which passes money on to smaller musical groups), the Seattle Symphony, and the Seattle Opera. This year’s dividend was down about 40 percent from the year before. In fact, the dividend amount topped out at $750,000 during the dot-com boom of 1999, but has been in decline ever since (though stable at $500,000 from 2001 to 2006). Here’s a year-by-year rundown: 1995, $200,000; 1996, $400,000; 1997, $425,000; 1998, $600,000; 1999, $750,000; 2000, $625,000; 2001, $500,000; 2002, $500,000; 2003, $500,000; 2004, $500,000; 2005, $500,000; 2006, $500,000; 2007, $350,000; 2008, $350,000; 2009, $210,000; 2010 (projected), $0.
Next year will be the first time that KING-FM will not pay a dividend to the three partner organizations since the partnership was formed. When asked about the specific impacts that declining KING-FM dividends have had on the Seattle Opera, Seattle Opera executive director Kelly Tweeddale said, “Any time an arts organization loses a significant funder, it has impact.” Seattle Symphony executive director Thomas Philion said, “KING-FM is an essential part of our community, and contributes so much more than annual dividends.”
So what's causing the decline? Obvious culprits are the faltering economy and the moribund broadcasting industry. Radio advertising revenues are down everywhere as broadcasters grapple with the effects of the recession and the continued erosion of the traditional broadcast radio audience thanks to the Internet, mp3 players, satellite radio, etc.
But the situation for KING-FM is different. It doesn't face the typical revenue fluctuations of a station that sells its own advertising. According to Fisher Broadcasting general manager Jim Clayton, Fisher (who operates several radio stations, including KOMO, KVI, and Star 101.5) has a “Joint Sales Agreement” with KING-FM, paying the station a flat amount each month for the right to sell KING's commercial airtime. Fisher keeps all the proceeds from what it sells of KING-FM’s time up to a certain undisclosed amount, above which Fisher and KING-FM share the revenue. Clayton says that this revenue-sharing level has not been reached during his three years with Fisher.
KING-FM’s Jennifer Ridewood says that under the current contract, Fisher pays less per month than it did under a previous agreement, adding that Fisher made reduction of the flat monthly fee a condition of renewing for the current period. KING-FM had no other choice than to go along, Ridewood says, since there weren’t any other companies interested in selling KING-FM airtime.
Another reason for the drop in KING's payout to the arts groups is that the $500,000 paid out in 2006 and the $350,000 paid out in both 2007 and 2008 was probably too much. These amounts were based on projections of revenue-sharing with Fisher that simply didn't come true. In effect, the Symphony, Opera, and ArtsFund were overpaid by KING-FM for the past several years. Now the station is catching up, and moving toward a dividend system based on actual numbers rather than projections.
Clayton says that KING-FM’s classical music has always been a “niche format,” and that it has been especially tough to sell during the recession. He also says that in the old ratings system (diaries filled out by a sample group of listeners), KING-FM’s ratings were “not very big to begin with” and that with the new automated, real-time People Meter ratings system, “they disappeared.” KING-FM listeners, says Clayton, “are a small but very devoted group.”
Add all this up and you have a station in trouble and likely to need to make some serious changes to avert a chronic crisis. But KING-FM is not just any old Seattle radio station that can fire a morning host here, or a program director there, and then maybe flip the format to oldies or talk. KING-FM occupies a special role in the fragile ecological system that is Seattle culture. It is an icon, having been founded by the legendary broadcasting pioneer Dorothy Bullitt, who nurtured (and likely subsidized) the station's format for more than 40 years. Then her daughters saved it from almost-certain format change by donating it to the community and the musical beneficiaries. It's also the only outlet for classical music in the Seattle area. The stakes for KING-FM have always been high.
Assuming that KING-FM wishes to continue to provide these dual services to the community — playing classical music, and providing support to its three partner organizations — it appears that the board has three options.
Business As Usual. KING could keep minimizing costs and pushing for more revenue (say by running ads more frequently), just like any radio station trying to stay afloat in a challenging time. But given the radical changes in media and audio content delivery, KING-FM (or any radio station for that matter) may never again generate the kind of revenue that was common just a few short years ago, and this may mean that arts groups may not see another penny from KING-FM.
KING's sales agreement with Fisher runs through July 2011. Fisher's Clayton says, “we want them to succeed, and we have a financial stake in the station’s success.” He seems ready to work with KING-FM to try a new approach, noting that he found management receptive in the past when Fisher asked KING-FM to change “somewhat restrictive” policies that, for example, limited individual advertisers to only one commercial per hour. Also likely to be looked at: tinkering with the format and programming.
The Nuclear Option. Though certainly only a remote possibility, the board could sell the station and split the proceeds three ways. While the station was donated to Beethoven with the intent that Beethoven would operate KING-FM as a classical station in perpetuity, Jennifer Ridewood says that there is nothing that would legally prevent the board from selling KING-FM, though it has not recently discussed this option.
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