All Unquiet on the Western Front

Minnesota Public Radio's empire- building purchase of Marketplace Productions hits a snag

On Friday, April 14, the Dow Jones Industrial Average dropped more than 600 points and the Nasdaq index fell by nearly ten percent as investors fretted about the onset of a bear market. But in St. Paul, Minnesota Public Radio was in a bullish mood. That day officials at the public-radio behemoth, whose 30-station network includes KSJN-FM and KNOW-FM in the Twin Cities, announced that they were buying Los Angeles-based Marketplace Productions, producer of the popular business program Marketplace, from the University of Southern California. Terms were not disclosed.

The acquisition of Marketplace, carried on 296 public-radio stations nationwide, represents yet another sign that Minnesota Public Radio (MPR) is serious about becoming a national player in the industry. (Along with Marketplace, the deal also includes Marketplace Morning Report and the travel program The Savvy Traveler.) "MPR's strategic relationship with Marketplace Productions is an example of public radio's role in the national trend of merging media forces," read a press release heralding the purchase. "The new affiliation of Marketplace Productions is part of MPR's long-term strategy to develop more national programming, especially in the talent-rich Los Angeles market."

The businesslike tone of the announcement underscores the extent to which public radio, and MPR in particular, has become a big business. And as in the for-profit world, when enough money is at stake, skirmishes are bound to break out. The day before the public announcement of the sale, Minneapolis-based Public Radio International (PRI), which distributes Marketplace and The Savvy Traveler and has a significant financial stake in both, sued the University of Southern California (USC) in federal court in Minneapolis, alleging breach of contract and an attempt to "flagrantly violate" a contractual agreement.

According to court documents filed in the case, PRI's contract with USC stipulates that neither party could sell its interest in Marketplace Productions programs without the written consent of the other. PRI charges that it never gave any such approval to the deal with MPR.

The court documents indicate that officials from the university informed PRI last September that negotiations with MPR were under way, and that on February 28 the school asked for PRI's consent to the sale. But letters from Lee Sheehy, PRI's senior vice president of business and legal affairs, to USC's general counsel indicate that PRI continually sought information about the proposed deal, only to be steadily stonewalled by USC, save for a heavily redacted version of the purchase agreement.

A March 10 letter from Sheehy to USC sought a host of paperwork related to the proposed sale, including "all unredacted transaction-related documents," the initial proposal from MPR, and information about proposed investments in the program. "Frankly, this process has become circular with USC referring us to MPR and MPR indicating it cannot act because of concerns raised by USC," Sheehy complained in a March 31 missive. And on April 7, in a letter requesting a meeting with USC officials in Minnesota to sort things out, he wrote, "USC has asked us to consent to a transaction but refused to disclose the material terms."

On April 13 USC Radio president Martha Harris wrote to PRI president and CEO Stephen Salyer, stating that the sale had closed two days earlier, and that the school had "failed to receive your consent after a period that we believed to be reasonable." She hoped the three parties could "amicably resolve any issues as to payables and receivables," she added. PRI filed suit that day.

Citing the lawsuit, MPR spokesman Tony Bol declined to comment for this story; he also refused to supply general information about MPR and its business strategy. PRI spokesman Dan Jensen won't discuss the lawsuit either; nor would he comment on whether PRI had been interested in purchasing Marketplace Productions. USC's Harris points out that the school is seeking to have the matter mediated outside of court but won't comment beyond that.

The suit highlights the interlocking relationships in the world of public radio. Originally known as American Public Radio, PRI was founded in 1983 by five public stations, including Minnesota Public Radio. The idea was to create an alternative to National Public Radio (NPR) for the distribution of programs like A Prairie Home Companion, which NPR had passed on. According to spokesman Dan Jensen, PRI's revenues in fiscal year 1999 were $19.7 million.

MPR president and CEO William Kling was a founding board member of what is now PRI, and the two organizations still do a fair amount of business with one another. Among the approximately 70 programs and specials PRI distributes, many are produced by MPR, including Minnesota Orchestra, Pipedreams, The St. Paul Chamber Orchestra, Saint Paul Sunday, The Splendid Table, The Writer's Almanac, and Sound Money. PRI's most popular show is MPR's A Prairie Home Companion, carried on 488 stations.

 

Minnesota Public Radio, meanwhile, is far and away the most successful regional public radio network in the country. And the company has the money to keep growing. For the fiscal year ending June 30, 1999, MPR reported revenue of more than $31 million--nearly $4.8 million more than its expenses during the same period. In 1998 MPR's parent organization, the Minnesota Communications Group, sold a for-profit subsidiary, the Rivertown Trading Company catalog business, to the Dayton Hudson Corporation (now known as Target Corp.). According to documents on file with the Minnesota Attorney General's Office, the Minnesota Communications Group recorded a gain on the sale of approximately $94 million. (Most of that, $85.6 million, was set aside for a permanent endowment for MPR that will provide steady future dividends; the balance was made available "for future investments...for the long-term benefit of MPR.")

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