Monday, August 23, 2010

A Few Thoughts on KTRU

A week ago, news of the pending sale of KTRU to the University of Houston was leaked to the news media. I heard about it first from The Houston Press blog. The Chronicle had apparently known about it for quite a while, but in exchange for some exclusive information embargoed the story until Tuesday. The point is that this was a done deal before any students, faculty, staff, or alumni heard about it.

The timing was quite perfect, too. Classes start today (August 23), so when the sale was announced, the only serious on-campus student presence were freshmen here for O-week. So no pesky students were about to be stirred from their apathy and say, hey, wait a minute! KTRU is a student organization!

Tuesday afternoon (August 17), President Leebron finally issued a statement to students and alumni. He barely even tried to justify the sale of KTRU's broadcasting license and tower. He basically simply dismissed KTRU as marginal, said times were tough, and said that he was doing this in everyone's best interests. The must stunning bit of hypocrisy in the letter is this paragraph:
I also know that some may wonder why they were not included in the decision.  As much as I prefer to consult widely and involve all stakeholders in important decisions, this sale required months of complicated and, by necessity, confidential negotiations.  My management team and I approached those discussions always with the best interests of our students, faculty and alumni and the future of our university as our highest priorities.
The negotiations were necessarily confidential because if he had conducted this in the open, many students and alumni would have raised holy hell. Not to mention the fact that there might have been efforts to make counter-offers. (WFMU was a university-associated station that became an independent non-profit station, so there would have been a precedent.) Leebron had to do it in secret because if he hadn't, it might not have been done.

The sale price was $9.8 million, which is significant. I am going to assume that in the course of pricing this deal, Leebron factored in the loss of income from disgusted alum withholding contributions and bequests. How much would that loss be? This would be interesting to estimate (sorry, the finance guy in my always comes out). Let's assume that every former DJ gives an average amount of money to Rice over his or her lifetime. Now at any given time, some of the DJs are already alumni, so we count them out. Some are not students, so let's exclude them. So let's say that at any given time, 75% of the DJs are students. Let's also assume that KTRU DJs are DJs for 3 years as students. A DJ shift is 3 hours. That makes 42 student DJs per year. The station has been going for 40 years. Let's knock off the last three years (since those DJs are, on average, not yet alumni), and we have 37 years, which means 518 alumni DJs. (I hope KTRU has a better idea of how many alumni DJs--and who they are--than I do.) Now some of these DJs have died since KTRU was founded and aren't going to give any more money. Let's say 15% are dead. So we have a total of 440 living alumni DJs. For their post-graduation contributions to equal what Leebron is getting, the present value of their contributions starting now has to be $22,273 per person. That's quite a lot, and I am sure Leebron is assuming he will not lose that much money from disgruntled ex-DJs (not to mention other alumni KTRU fans, like me).

But he will lose some. Since this was all about the money, he must have calculated a loss of future income from withheld donations and bequests. On the other hand, he might have just dismissed that. After all, it will be some future president who has to deal with most of that lost income--Leebron will be gone before then. Even if the NPV of the deal is less than zero (the worst case scenario), the negative effects are well into the future, when DJs from the past 20-odd years start writing their wills.

(Which makes me wonder--how did Leebron present the financial cost when he presented this deal to the Rice trustees. Was there any potential downside presented. How about it trustees? What was the NPV of the sale when it was presented to you? If it was $9.8 million, then you didn't get the whole picture.Did he give you detailed financial projections, including a reduction in donations from alumni? If so, did you have these projections independently analyzed? Were you suckered? Think about it.)

There was a protest yesterday at Willie's statue (which is where I took all these photos). A Chronicle reporter and photographer were on the scene (I lent the photographer some sunscreen). The speakers were passionate. Some spoke of how they chose to come from Rice because they had been lonely nerdy high-schoolers out in the suburbs and found KTRU while searching the radio dial for something, anything that spoke to them. They made good arguments for keeping KTRU a student-run terrestrial station.

One of the best speakers, however, was a faculty member, Steve Cox.

He's a computer science professor and the Master of Brown College (which for all you non-Rice people, being Master of a College is a big deal and a possible prerequisite for becoming a Dean). He spoke of how Rice was selling off and outsourcing its uniqueness. He spoke of selling the campus bookstore to Barnes & Noble--at which point it stopped being a bookstore and instead became a place to sell Rice-branded tchotchkes and clothes--as well as the required textbooks for each semester. That really spoke to me. He gave other examples as well. I really admired his bravery, because he was bucking the philosophy of the administration--and possibly hurting his chances to move into the administration (I have no idea if he has even entertained such a move). But I think there are many faculty who think Leebron has taken a wrong turn.

Leebron insulted students and alumni and apparently even faculty when he pulled this deal off in total secrecy. He is an empire builder--always has been. And I have been supportive of many of his moves--more undergrads? Great! More research in new branches of chemistry and physics and biology and engineering? Absolutely! Greater collaboration with the Medical Center? For sure! I even initially supported the merger with BCM until the financial picture clouded it. But empire builders become arrogant. Leebron is out of control--secretive, paranoid, paternalistic. I assume by this point in his career as President, he is surrounded by loyal yes-men who tell him what he wants to hear.

Leebron needs to go.

Or, let me put it this way:

Leebron must go!

It's a choice between Rice as a distinct, unique institution and Leebron. Easy choice for me, an alumnus who donates money to the university every year, to make. Rice won't get anything from me until Leebron is gone.

Update:  Here's another good post about the KTRU deal that looks at the finances of the deal in a somewhat different way than I did.

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Anonymous curlydan said...

they sold the bookstore to Barnes & Noble?!?

here's an idea for Leebron: just turn Rice into a for-profit corporation (ticker symbol: RICE) and do an IPO. That'll raise $9.5M easy.

Geez, is the IT department at Rice fully off-shored now? When do McD's, Subway, and Quiznos start running the cafeterias?

I'm sick of all these asset sales and contractor B.S.! And it's in Iraq, it's in Afghanistan. It's everywhere and the latest, biggest case of group think. This is the most disturbing trend in the U.S. for the last ten years.

I suspect a financial analysis was done along what you've done, too. And in a corporation's world (which Rice now appears to be), everything has a price. But Rice should remember, financial analyses are full of assumptions, assumptions that are never fully right. And DJ's whose parents or kids went to or are going to Rice can also stop giving. I think I've convinced by alum mother to pull the plug for a few years, and she'll send my PO'ed email to all her Rice buddies, and maybe I can convince them as well.

Leebron may regret (if not already)putting a price on something that may not be so easy to price.

11:50 AM  
Blogger  Robert Boyd said...

They didn't exactly sell the bookstore--they just let B&N run it. (See: This is a really common arrangement among university bookstores--almost no university runs its own bookstore anymore. Barnes & Noble and library distributor Follett are the big players here. I have no particular objection to this, if the bookstore remains a bookstore. But as Cox pointed out, Rice's bookstore was converted by B&N into a store fro Rice-branded merchandise. But I'm sure it is returning a predictable stream of cash flows to Rice, which seems to be all that Leebron & Co. care about.

12:01 PM  
Anonymous Meg Smith said...

You neglected to dis-include those alumni who refused to donate after the administration shut the station down in 2000 :)

10:55 PM  

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