“Information wants to be free,” cry activists when paywalls or subscription services are set up by popular free websites. In response, content creators appeal to the financial necessity of charging consumers, at which point, deadlock ensues. However, “free information,” or more specifically, free media, has existed for a great deal longer than the internet. While newspapers have suffered for the last fifteen years as a result of rising competition from purely ad-funded online competitors, community funded news outlets have long provided beloved services to their subscribers. This “membership model” of news production, often supported by the government is behind highly popular outfits such as America’s National Public Radio (NPR), Public Broadcasting Service (PBS), as well as Britain’s The Guardian.
The path by which these organizations came to be mostly funded by their members were different. NPR and PBS came into being with the passage of the National Broadcasting Act of 1967, a piece of Great Society legislation aimed at using the media of television and radio for educational programming. They were modelled on successful nationally run services such as the BBC and CBC in the United Kingdom and Canada, both of which are supported by taxes. However, after 1983, federal funding for the two organizations decreased dramatically. Today, only about 10% of NPR’s funding comes from government sources, mostly channeled through the Corporation for Public Broadcasting, and competitive grants from federal agencies for specific projects. Replacing that revenue is corporate underwriting (generally in the form of slogans delivered before or after segments), which is similar to, but less frequent than the advertising heard on commercial radio and television stations. Though it was not originally part of NPR and PBS’s mission, it now accounts for about 20% of the revenue of both organizations. The difference is made up by pledge drives. Pledge drives interrupt normally scheduled programming for significant periods, often a week, during which a large portion of airtime is devoted to station personalities asking for the financial support of viewers and listeners, and offering “thank-you gifts” in return for specific levels of contribution. Even despite these efforts, PBS tends to run a small loss, spending $348 million on revenues of $328 million in 2015.
Meanwhile, The Guardian has turned to membership as its private revenue has failed to keep up with increasing costs. Despite its vast online presence, with nearly 150 million monthly readers, The Guardian has no paywall and declining advertising revenue as mobile ad dollars are monopolized by tech companies. Instead, it now asks readers to voluntarily support the mission of the paper. This practice generated £30 million in 2015. Though this is a sizable figure, it represents less than half The Guardian’s operating loss of £68 million. Future plans may involve creating content available exclusively to members, at which point the membership would amount essentially to a subscription fee, but no final details on the plans have been released.
There are several key commonalities to these organizations which illuminate both why the “membership model” works for them and how it might be adopted by other struggling media organizations. First, all combine membership revenue with other sources, including grants, corporate underwriting, and advertising. While most NPR member stations get a plurality (around 34% in 2013) of their revenue from individual listeners, without other sources, they would not be able to survive. Meanwhile, despite revenue from members, The Guardian continues to lose money. This might be a bigger problem for the organization were it not for the second factor that NPR, PBS, and The Guardian share: they are all non-profits. The Guardian is owned by Guardian Media Group, whose sole shareholder is the Scott Trust, the goal of which is to print The Guardian. NPR and PBS were both founded as public entities. While all of them make enough money from a variety of sources, including voluntary giving, to provide high quality content to their readers, it is certain that this model would not be suitable for profit seeking organizations.
Finally, all are somewhat unique. PBS provides children’s content (such as Sesame Street and Arthur) which was pioneering when first introduced and remains dominant in the industry. NPR’s newsmagazine programs have competitors on television, but are unique on FM radio, which is dominated by music formats. The Guardian is the most popular left-of-center paper in Great Britain, and has used its adversarial style to win devoted readers across the English speaking world. In short, the “membership model” works because consumers can be convinced that without their contribution, they will not be able to find similar content anywhere. This allows these three organizations to overcome the “free-rider” problem: people listening, watching, or reading, but never donating. Unchecked, it would erode donations and leave all three organizations incapable of functioning. It is no coincidence that The Guardian, which has far more competition than NPR or PBS, is having the most trouble breaking even with membership revenue. This uniqueness has led NPR and PBS to seek revenue from licensing their programming to other providers, whether they be outside the United States, or even inside (for example, HBO now pays a great deal for the right to broadcast Sesame Street in advance of PBS, thereby allowing the continuation of a show that had become a loss-maker due to high production costs).
Clearly, the fact that the membership model relies on having something resembling a monopoly to work precludes the possibility of its being universally adopted by ailing media organizations. However, this does not mean that it is not useful for some of them. Local and regional newspapers have been especially hard hit by declines in advertising as classifieds have moved to Craigslist and readers have started subscribing to The New York Times online. However, the local reporting they do is often essential to the community, especially in terms of exposing corruption at levels of government which otherwise receive no scrutiny. As a consequence of this uniqueness, a move to a blended advertisement-membership model might preserve the most important parts of these organizations, instead of trying to continue with a subscription-advertisement model that no longer provides enough revenue to keep them afloat. Membership models, which operate by monetizing the intensity of consumers’ affection, rather than their number, was pioneered on the internet (see our analysis of this phenomenon later this semester on IBR Online), may yet prove a salvation for old-media organizations as they face a transformed operating environment.