By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
The pursuit of a bigger audience for fundraising has also motivated MPR's recent forays into the Southern California media market, where it just signed a 15-year agreement to run a sleepy public-radio station in Pasadena, requiring an annual $3 million investment for the next five years. A Los Angeles Business Journal story published in January of 2000 reported that "the end goal [for MPR] is to generate programming that can be syndicated nationwide," with the goal of "more revenues for MPR, and the potential to create a new cash-cow series along the lines of Prairie Home Companion." The story also noted that MPR planned to turn the station into a "fund-raising powerhouse." Never mind there are already four public radio stations serving the area, with a combined budget of $15 million. MPR is hungry for listeners who can be turned into both donors and consumers.
Over the years, the network has mastered the art of synergy, hawking trinkets associated with its editorial content. MPR entered this business by marketing novelties associated with Garrison Keillor's aforementioned Prairie Home Companion, then added products associated with the content of other public-radio stations. By 1992 this side of MPR's business was called Rivertown Trading--a catalog company and subsidiary of Greenspring, which manages all of the network's for-profit ventures. At the time, Rivertown Trading was taking in annual revenues of more than $100 million.
In light of Rivertown's phenomenal growth, three of its top executives decided they wanted a piece of the action. By 1998 they had persuaded the board of the Minnesota Communications Group (MCG)--MPR and Greenspring's corporate parent-- to grant them something called "Value Participation Units" (VPUs). These VPUs were to be used to compensate the executives in relation to the growth of Rivertown, and promised them a percentage of any increase in value of the company. In the private sector a comparable arrangement would involve stock options. Bill Kling, the president of MPR and Greenspring; Thomas Kigin, vice president and general counsel for both MPR and Greenspring; and Donna Avery, Kigin's wife and then-president of Rivertown, were granted VPUs. But because there was no such thing as publicly traded Rivertown stock, the executives stood to profit most from the VPU arrangement if Rivertown were sold. This created a tremendous conflict of interest. Should MCG hold on to and operate Rivertown as an asset and revenue producer or should it sell the catalog company and create a permanent endowment? It's a good guess that the executives were influenced by the knowledge that, collectively, they could reap $7.6 million if Rivertown were sold.
This conflict was pointed out in a report by the Minnesota Attorney General's Office in January 1998, which raised concerns about the potential for private profit should MCG decide to sell one of its for-profit subsidiaries. Two months later Rivertown was sold to the Dayton Hudson Corporation for $123 million, which resulted in VPU payouts of $3 million to Kling, $3 million to Avery, and $1.6 million to Kigin. Local and national media questioned the amount of the payouts, but no one looked into the legality of the VPUs.
Normally it probably wouldn't have been easy to get such a scheme approved by a nonprofit board of trustees, but the executives at MPR had eased the way by filling the board with just the sort of people who would understand such a compensation system--executives from the financial industry itself. By 1999, 25 of the 36 members of the MPR board came from the corporate and/or financial world. Many of them were representatives of investment houses and banks, or businesses associated with that industry, including executive headhunters and executives from PR firms. And though MPR has the largest broadcast newsroom in the state, and boasts the call letters KNOW, the only journalist on the board was Bill Buzenberg.
Whether one considers the Rivertown deal and its attendant compensation to top MPR executives right or wrong, there is no denying the financial stability it provided to the network. MPR's large endowments, combined with government monies, conservatively guarantee the network an income of more than $13 million per year. As for pledge drives like the one that got started this week? The truth is MPR really doesn't need your money.
Other public broadcasters do, however. KFAI-FM (90.3), for instance, offers listeners international news and opinion from a chorus of alternative voices, all for an annual budget of about $1 million. And their endowment is worth even less. So unless you really need one of those special gifts they give at MPR for making a monthly pledge (an O Brother, Where Art Thou? CD or the chance to win a trip to Paris), you might think about investing in public radio stations struggling to raise the radio bar in Minnesota. Otherwise, you are simply giving your money to people who want to talk some more about money.
Red, White, and Green
A hard-luck am station takes a hard right into politics
BY MIKE MOSEDALE
Hugh Hewitt is feeling the love. It is a little after 8:00 p.m. on a weekday in late January, and the Los Angeles-based talk-radio host has just wrapped up a broadcast from an ice house on Lake Minnetonka. For the past three hours he has talked fishing. He has chatted up sponsors. He has made cornball jokes about "Minne-so-cold."