Exploring options for Classic KING-FM

Welcome to Seattle's next media melodrama, this time concerning an icon in Seattle's cultural history. Much more than a single radio station is at stake.
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One of KING-FM's signature programs in the afternoon rush hour.

Welcome to Seattle's next media melodrama, this time concerning an icon in Seattle's cultural history. Much more than a single radio station is at stake.

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 'ꀜproactively'ꀝ 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'ꀙs useful to understand the station'ꀙs complex history and management structure.

KING-FM'ꀙs governing board oversees a non-profit organization called 'ꀜBeethoven,'ꀝ 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 'ꀜdividend.'ꀝ 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'ꀙs 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'ꀙs 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, 'ꀜAny time an arts organization loses a significant funder, it has impact.'ꀝ Seattle Symphony executive director Thomas Philion said, 'ꀜKING-FM is an essential part of our community, and contributes so much more than annual dividends.'ꀝ

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 'ꀜJoint Sales Agreement'ꀝ 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'ꀙs 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'ꀙs 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'ꀙt 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'ꀙs classical music has always been a 'ꀜniche format,'ꀝ 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'ꀙs ratings were 'ꀜnot very big to begin with'ꀝ and that with the new automated, real-time People Meter ratings system, 'ꀜthey disappeared.'ꀝ KING-FM listeners, says Clayton, 'ꀜare a small but very devoted group.'ꀝ

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, 'ꀜwe want them to succeed, and we have a financial stake in the station'ꀙs success.'ꀝ 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 'ꀜsomewhat restrictive'ꀝ 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.

New York-based radio station broker Gary Stevens said in an email to Crosscut: 'ꀜTwo years ago, a Seattle FM would have been worth $50-70 million, even if it wasn't profitable. In the current meltdown, so few radio stations have traded, there aren't comparable sales numbers, but if I had to guess, KING-FM might bring $15-25 million, in today's market, assuming a buyer could find financing."

A sales price of $25 million, with each of the beneficiaries investing that new endowment and getting 3 percent a year in interest, would match the historic high annual KING dividend of $250,000. Of course, the community backlash from such a sale may not be worth it, and the classical format would almost certainly perish — not an easy call for any current board member. The nuclear option seems very unlikely, at least for now.

The Hybrid, Public-Radio Model. The most intriguing option is to emulate public radio, with pledge drives to generate new revenue. KING-FM already solicits pledges via its online streams, and there are numerous examples of other classical stations in the US that operate under this model. KING-FM'ꀙs ownership is already non-profit, so contributions in support of the station are already tax-deductible.

Chicago'ꀙs WFMT is the best long-standing example of this hybrid approach. Like KING-FM, WFMT is owned by a non-profit organization and is operated as a commercial station; it also enjoys a coveted commercial position in the middle of the dial. WFMT station manager Steve Robinson says his station airs 'ꀜanywhere from four to as many as 12 minutes of commercials an hour, depending on demand.'ꀝ But there'ꀙs a significant difference between the often-jarring commercials heard on KING-FM and the tony commercials on WFMT. All of WFMT'ꀙs commercials are what'ꀙs called 'ꀜlive reads,'ꀝ meaning that the announcer on duty simply reads the commercial message. There are no glitzy production values, no background music, no down-market ads for cheap mattresses, and no catchy jingles.

In addition, WFMT has operated as a listener-supported station for nearly 60 years. It has 22,000 members, nurtured by three pledge drives a year. They ended their most recent fiscal year (on June 30) in the black, and Robinson says they beat their pre-recession goals for membership and advertising.

The WFMT business model is obviously attractive, but making that switch would mean KING-FM would join an already crowded field of pledge-seeking media in the Seattle market: radio stations KUOW, KPLU, KEXP, and KBCS; and TV stations KCTS and KBTC.

Joey Cohn, assistant general manager at KPLU, says that his jazz station shares about 20 percent of its audience with KING-FM, and that having another station seeking contributions 'ꀜcould cut into KPLU'ꀙs bottom line.'ꀝ Checking in with other pledge-supported media in town found similarly unsurprising sentiments, but both Wayne Roth, general manager at KUOW, and Moss Bresnahan, CEO of KCTS, felt that this community could accommodate another listener-supported radio station.

Another analogous situation is in Boston, where commercial classical station WCRB was purchased for $14 million in late September by non-profit public broadcast powerhouse WGBH (which already operates a listener-supported radio and TV station). According to WGBH spokesperson Jeanne Hopkins, WCRB has been a fixture in Boston for 60 years. WGBH purchased the station, 'ꀜin order to preserve its classical format,'ꀝ Hopkins says. Once the sale is approved by the FCC, 'ꀜwe plan to operate it as a traditional non-commercial station,'ꀝ says Hopkins, 'ꀜwith membership and pledge drives and underwriting announcements.'ꀝ WGBH'ꀙs flagship FM station will become more of a public affairs outlet and shed its classical programs, according to Hopkins, while WCRB will remain all-classical, with a particular emphasis on live performance using WGBH'ꀙs symphony-sized broadcast studios.

Still another example of the shift is the migration of New York's famous WQXR, recently sold by its owner, The New York Times Co., to a public radio station, WNYC. It will remain a classical station, but with a narrower spectrum of music (far less vocal music, for instance, and few off-repertoire selections) and far fewer commercials as it takes on a "public radio sound."

Classical music stations are surviving and even thriving in some other big cities, sometimes by using unconventional models. It'ꀙs also worth noting that every person interviewed for this story expressed hope and optimism for KING-FM'ꀙs future.

Reached overseas and asked about the options outlined above, Beethoven board president Chris Bayley wrote in an email: 'ꀜThe board has met several times over the summer to consider our options. As you know we include representatives of the beneficiary arts organizations so our deliberations have definitely reflected their desire for return of the dividends which over the first ten years amounted to over $5 million. In addition to benefiting these groups (essentially our shareholders) we want to promote classical music, which includes keeping it on the air. I agree the hybrid option is intriguing but am not familiar enough with WFMT to say more than that. The board is working hard to find the best solution for all concerned.'ꀝ


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