August 10, 2006
Calvert and Ford Foundations Help Launch Public Radio Fund to Democratize the Airwaves
by Bill Baue
The foundations jointly seeded $4.5 million in the revolving loan fund administered by Denver-based
Public Radio Capital to provide low-interest loans to public radio projects nationally.
Back in 1999--three years after the Telecommunications Act of 1996 opened the floodgates for
corporate consolidation of radio station ownership--a group of leading public radio station
managers gathered to discuss how public radio could move forward in such an environment. The group
determined that lack of access to capital was limiting the ability of public radio to hold its own
against the increasing homogenization and corporatization of the airwaves, according to Marita
Rivero, vice president and general manager of WGBH radio and TV in Boston.
"A light bulb went off
when someone in the back of the room said, 'We need a public radio bank,'" Ms. Rivero
Enter Public Radio Capital (PRC) in 2001, a 501(C)3 organization committed to bridging the
divide between the non-profit world of public radio and the complex financing environment of the
media world. Over the past half-decade, PRC has facilitated $100 million worth of financial
transactions for more than 20 public radio projects reaching more than 22 million people
And just yesterday, PRC joined the Calvert Foundation and Ford Foundation to launch a new Public Radio Fund, an
initiative that borrows the community investing model of a revolving loan fund that
self-perpetuates by channeling loan repayments into a pool for originating new loans.
"The Public Radio Fund is a rare, first-of-its-kind opportunity for mission-based investors
around the country to band together behind grass-roots, alternative, independent media," said Tim
Freundlich, director of strategic development for the Calvert Foundation, an independent non-profit
spawned by the Calvert Group of socially
responsible investing (SRI) mutual funds. "In the face of growing concern about over-concentration
in media ownership, we feel more public radio in more places in the US is a positive thing for the
country, and that's the goal of the fund."
"This will be the largest multi-station
investment fund campaign ever undertaken for public radio in the US," added Marc Hand, managing
director of PRC. "Beginning this fall, the Public Radio Fund will help public broadcasters all
over the US gain access to capital on an affordable basis, and move more quickly and aggressively
when an opportunity to compete for a valuable channel comes on the market."
The fund is
seeded with $4.5 million--$3 million that Calvert Foundation has aggregated from small individual
investors, and $1.5 million from the Ford Foundation--with a target of reaching $15 million over
the next year. This amount will support five to ten stations directly, with the recycled capital
in the revolving loan fund likely securing financing for 20 to 30 more stations. Institutional and
accredited individual investors (namely high net-worth folks) can invest $100,000 or more in the
fund, with below-market interest rates ranging from zero to three percent for three-year notes and
as much as four percent for five-year notes.
Community investment typically trades off
market-rate financial returns in exchange for so-called "social returns"--namely, the benefits to
society and individuals from the investment. A November 2005 report by the Investors Circle
Foundation (the non-profit arm of the social venture capitalist and angel investor
organization) jointly sponsored by the Calvert and Ford Foundations examined the notion of social
returns in the media industry. Entitled The Double Bottom Line (DBL) Media Industry: An
Analysis of Investment Opportunities, the report defines DBL media as comprising three broad
characteristics: minority-oriented, independent, and explicitly social mission-focused.
While the Public Radio Fund does not explicitly embrace this definition of stations to support,
PRC's client list largely fits this definition. For example, PRC provided $50,000 in financing to
Radio BilingŁe, a Latino-led Spanish
and English public radio outlet, to acquire KVFR-FM in Laytonville, California. This particular
transaction demonstrates a specific advantage of the Public Radio Fund in providing financing below
the $1 million mark, a threshold below which media financing becomes much more difficult.
"Most radio financing is national in scope," Mr. Hand explained. "What makes the Public Radio
Fund unique is that we're trying to create a mechanism for doing national acquisitions and
financing but retain local ownership and control of stations."
Financing will focus on
acquisitions as well as preservation of public radio stations on the left-hand side of the FM band
reserved for non-commercial stations. Public radio will compete some with commercial outfits for
stations on the AM band, but the primary focus is providing capital very quickly, as opportunities
arise in the reserve part of the band with very little notice, catching public radio organizations
flat-footed in the past.
Mr. Hand identifies three major divisions of the 2,900
non-commercial stations operating in the reserve part of the band. These three categories include:
public radio stations affiliated with National Public Radio (NPR), Public Radio International (PRI), or funded by the Corporation for Public Broadcasting (CPB); non-commercial religious broadcasters; and
everything else, including community-based radio stations. While PRC primarily works with stations
in the first category, it also works with stations in the third.
For example, PRC provided
a $15,000 grant to Boulder-based community station KGNU to explore the purchase of a signal in Denver, and helped with
the 2004 purchase of KJME at 1390 on the AM band for $4.1 million--considered a bargain in the
Denver market. PRC is also working with two national organizations, the Prometheus Radio Project (which promotes the
proliferation of community radio) and the National Federation of Community Broadcasters (NFCB), on a joint project to map out available
Communications Commission plans to open a window to submit applications for vacant
non-commercial frequencies sometime next year (though it hasn't set a specific date)," said Mr.
Hand. "The joint mapping project will identify what those potential frequencies might be so we can
work with public broadcasters and get them prepared for filing applications."
"I think it
is great that there is a loan fund to help public and community radio get more frequencies," NFCB
President and CEO Carol Pierson told SocialFunds.com. "We need more local, diverse voices on the
radio in this country."