CONTEXT – THE FINANCIAL DECLINE OF WBAI
By John Riley, Out-FM producer and staff representative on WBAI’s Local Station Board

John Riley at WBAI Studios

John Riley at WBAI Studios in Brooklyn

(Comments given at Manhattan Neighborhood Network in their El Bario Firehouse Studio on two occasions in December 2017 to dozens of WBAI Staff who had come to learn about MNN's proposal to Pacifica Radio for a partnership to preserve WBAI's signal, mission and infuse large amounts of money to rebuild the crisis plagued station.)

Thank you all for coming out for such a crucial conversation.

I’m hoping all of you saw the invitation to today’s meeting, signed onto by 29 producers. As we wrote, we organized this because we’re both terrified about both the crisis facing the station and the solution now being pushed hard by the Pacifica National Board – a WBAI signal swap to a much weaker frequency, which I’ll get to in a minute. But we’re also hopeful about the potential for a partnership with Manhattan Neighborhood Network to offer a path forward, which we think needs to be carefully investigated.

I’d like to give some of the financial background to the present situation. WBAI and Pacifica have been in a worsening financial downward spiral for the last 10 years, leading to the current crisis that poses a threat to the survival of both our station and our network. While all 5 stations have had various degrees of chronic shortfalls, WBAI has generated deficits of $500-600K every year for the last 6 years. In short, WBAI has a failing business model. Thus, at a national level WBAI is perceived of as a terrible threat to the other stations.
 
WBAI’s problems have partly been caused by the exorbitant Empire State transmitter rent and earlier, the huge rent on our former Wall Street studio, both far higher than those faced by any other station (in fact, 3 stations broadcast from buildings owned by Pacifica). These problems preceded Hurricane Sandy that drove us from Wall Street, which is often incorrectly blamed for our crisis.

In fact, our listenership has drastically declined. In parallel, our paid membership has also gone down -- from 18,000 in 2010 to 7,000 in 2017. So it’s no surprise that the per-day pledge rate has also cratered – in the current drive, down to about $8,000 a day versus an average of $20,000-$25,000 a decade ago. WBAI management has responded by constantly increasing the length of fund drives.
•    In 2009, we had 90-100days/year
•    By 2014 174 days (24 weeks)
•    Currently 135 (20 weeks

WBAI's Declining Membership Results In Long Pledge Drives

WBAI's Declining Membership Results In Long Pledge Drives

Surveys of public radio stations have found a fall-off of 50% of listeners, or more, during fund drives.

Management has blamed producers for failing to find premiums, but chronic, late premium delivery may be more of an issue. WBAI’s membership has dropped. Late premiums may not bother people who are long time supporters, but newer supporters may not be as understanding.

Because of this dramatic revenue decline, in 2013 Pacifica mandated the layoffs of three quarters

of the paid staff – down from 27 to 7. That meant there was no one to do many of the essential jobs to run a station. Volunteers can only do so much.

Faced with the impossibility of paying the $50,000 monthly rent for the Empire State transmitter required by the contract, in 2014 Pacifica was able to get an oral agreement to pay $12,000 a month. But after WBAI had trouble even paying that amount consistently, Empire State reversed course and sued Pacifica last fall for payment of the full rent back to 2014, plus hundreds of thousands in late fees. Two months ago, a New York court ordered Pacifica to pay $1.8 Million to the Empire State Reality Trust, plus hundreds of thousands yet to be determined in attorneys’ fees.

Empire State can very soon legally seize Pacifica’s bank accounts to satisfy the judgment, which could shut down the network’s operations. It was reported this week that Empire State has filed their judgement in New York, California, and Texas, so the seizure could be imminent.

Empire State Reality Trust on Wall St.

But this is far from the only debt facing Pacifica. Interim Executive director Bill Crosier, a National Board member from Houston who by the way has no media management background, says that Pacifica has $6 million in other debts, including a large amount of unfunded pension obligations to Pacifica’s employees, bills from various lawyers and accountants, and approximately $2 million owed to Democracy NOW! under contracts that expired in 2012. And I’d note that Democracy NOW! has never made a demand for that money.

Bill Crosier, iED of Pacifica

Bill Crosier, iED of Pacifica

Plus Pacifica is liable for the Empire State rent between when the request for court judgement was made in May and now – that’s $480,000. The Fall and Holiday drives aren’t bringing in enough to change this picture in a positive way. And of course every month the debt is growing, with current monthly rent around $55,000. Pacifica’s lease with Empire State runs thru April 2020, including an annual escalator clause bringing the rent up to $75,000, and there’s no prospect of getting out of it early. WBAI/Pacifica will owe $2.1 million more in the remaining 2-1/2 years.

Plus we learned this week of a new problem: Work by Pacifica’s Chief Financial Officer on the 2016 audit stopped in October in preparation to possibly file for Chapter 11 bankruptcy – more on bankruptcy in a minute. As a result, Pacifica won’t be able to finish its required audit by the deadline of Feb. 15 set by the Attorney General of California. This could lead to the end of Pacifica’s non-profit 501c3 status. There is a possibility of a extension, but even that may be a problem to finish.

Pacifica has reacted to all these problems in extreme crisis mode, and board members from the other 4 stations seem intent on throwing WBAI under the bus. To satisfy the immediate $1.8 million judgment, the National Board is considering getting a loan – either from a wealthy individual or through a bank loan arranged by a professional public radio broker, to be secured against one of the buildings owned by Pacifica in LA, Berkeley or Houston. Crosier claims that the Houston property and part of the Berkeley complex – an unused restaurant and the small National Office -- recently got much lower appraisals than expected, totaling about $2 million, though he did not comment on the appraisal of the LA property, which reportedly is worth considerably more.

Both Crosier and Pacifica’s Chief Financial Officer based in Berkeley, Sam Agarwal, are strongly pushing for the National Board to immediately take two courses of action:

1)    authorize them to declare Chapter 11 bankruptcy – which means reorganization, not dissolving -- if Pacifica can’t obtain a loan quickly enough to prevent Empire from seizing its accounts, and
2)    move toward a swap of WBAI’s powerful middle-of-the-dial signal for a far weaker signal, which one WBAI board member estimates could cut our potential listener range by half. Crosier and Agarwal are also arguing to secure any loan against a future signal swap.

We don’t have time to discuss the devastating effects of either action, but I’ll make a few points:
1) Bankruptcy can’t alter court judgements, so it can’t reduce the $1.8 million Empire State debt, merely delay its payment.
2) Some lawyers have estimated that Pacifica might face up to $1 million in attorneys fees for bankruptcy.
3) Bankruptcy would surrender control of Pacifica’s future to a federal judge and a committee of creditors, and might conceivably dissolve our National Board and the requirement in our bylaws that any signal swap or sale must be subject to a vote of the entire national membership.

Shrinking WBAI?

Shrinking WBAI?

The Pacifica National Board has been largely meeting in secret to discuss a WBAI signal swap. Part of what we know – that they voted in September to begin obtaining bids – is only due to a leak from a whistleblower. Finalizing a signal swap would take several months, first to organize the referendum of all Pacifica members – and note that the BAI voters could vote it down but it could still pass with a majority of the other 5 stations’ members - and then to get FCC approval, which can take up to 3 months.

If our signal is swapped, we stand to lose many listeners whose radios are out of the signal range or who never hear about the new frequency, which would include many who are not internet-connected, plus the many occasional listeners who only turn to WBAI in crisis. 99.5FM is an important part of our brand name. Having far fewer potential listeners with a less powerful signal and a failing business plan will only lead to another sale before long.

MNN - Public Access

MNN - Public Access

Now to the question of a Public Service Operating Agreement or PSOA. In 2013, the National Board put out a request for proposals for such an agreement, which Dan Coughlin will explain more about shortly. MNN was one of the entities that submitted one. The National Board later paused the process to see if WBAI could develop a viable sustainability plan, which never happened. The other main applicant has since, I understand, withdrawn its proposal. Ten days ago, MNN updated and resubmitted their proposal for a Partnership with WBAI/Pacifica to rebuild the station financially and technologically, expand jobs at the station, and help rebuild membership. I believe this proposal could address some of the concerns we all share about our station’s future.

I’ve been one of several local board members invited recently on to a Pacifica National Board meeting call to discuss the current situation and have been dismayed that the current PNB has no plan to rebuild WBAI - NONE. Additionally one of the PNB representatives from WBAI told us at last week’s local board meeting that a PSOA would not be discussed at the PNB level. I believe we can change that.

Today’s discussion can be the opening for an exploration of the pros and cons of such an agreement, including the terms that could be negotiated between the two parties, and what terms we want to include. Everything from bill payment, to the carry over of workers to programming decisionmaking would be up for discussion. And on the subject of programming, I’d encourage everyone to read the handout that includes comments by Pacifica’s FCC attorney about how a PSOA works, including the responsibility of the license-holder, in our case Pacifica, to continue to have a major role in programming decisions.

But for this proposal to come to fruition, we will need to build support for the proposal among producers, listeners, community groups, and elected officials, and exert intensive pressure on the Pacifica National Board. We’ll talk more about that as we wrap up this meeting.