The business(?) of internet radio

Back on December 15th, right above us, I posted a question on the internet/webcasting board asking about internet only radio stations that are enjoying ad agency business. There were no responses. So, either they don't want to share (why not?), no station that is having sales success happened to have seen the post, or they don't exist. If it's the latter, then how can it be that, as you hear over and over again, that "all radio is going to the internet", and "we won't need transmitter's anymore"?

Today is an interesting day to ask that question..

SPECTRUM BRIDGE, INC. Granted Spectrum Bridge, Inc. approval to operate its "TV bands database system" to provide service to the public on or after January 26, 2012. (Dkt No. 04-186 ). Action by: Chief, Office of Engineering and Technology by LETTER. (DA No. 11-2044). OET http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-11-2044A1.doc
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-11-2044A1.pdf
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-11-2044A1.txt

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johnbasalla said:

If it's the latter, then how can it be that, as you hear over and over again, that "all radio is going to the internet", and "we won't need transmitter's anymore"?

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Even if those two statements are true, and they are actually disputed, that "all radio is going to the Internet" and "we won't need transmitters anymore", those are both statements about the future. It does not follow that Internet-only radio stations are therefore having current success in selling advertising to agencies. And we'd have to define success. Some people might be satisfied with what I would consider very small dollar amounts of advertising and consider it a success. If I were trying to sell advertising on an Internet-only radio station, I wouldn't waste my time on agencies.

Since posting this question, there have been some responses on the Internet/Webcasting board. One indicates that he has been stiffed by a couple of local businesses, thus making him wary of trying for more. The incentive for local businesses to buy ad time on internet-only stations can't be about the world-wide reach of the internet. A car dealership in, let's say, Elyria Ohio isn't going to care if a listener in Brazil hears the ad. They aren't going to be flying up here to buy a car. Now, businesses like McDonalds may see some value in that if there are enough listeners on that particular station to warrant a buy.

Agency business requires tonnage. That means the "M" word: Million. If you can't deliver millions of page-views, no one cares.

You might as well do Google Adsense, but a typical internet station will probably get $100 a month if they're lucky.

Thinking forward (assuming you buy into the idea that eventually most everything is going to be on the internet),
1. What kind of rating service would need to be built to measure on-line listenership of stations that are only on the internet? Or does the current PPM system work for internet-only stations if they sign up?

2. What future business models might work or are at least worth trying? Could a company with deep pockets set up advertizer friendly stations, and with a huge, and I mean HUGE - probably nationwide - promotional blitz get enough people to listen, love their station(s), and have a large enough core audience to make the ROI worth it.
Clear Channel with that big IHeart radio concert was certainly a big-budget effort, but that was to increase the visibility and viability of their OTA stations on the internet. It also could be a "hedging-their-bets" on the future move.

Tell me if I'm right about the following or not?... One of the biggest problems in getting an internet-only station to be a good revenue generator is the fact that since there is no need for an FCC to license stations, almost everybody can have their own station if they want to. This means that you have way more supply then demand for it. So, individually, each station ends up with miniscule audience numbers because there are up to tons of stations also doing close to the same things.

I can't remember who once said: "When everyone has a voice, no one does."

johnbasalla said:

Tell me if I'm right about the following or not?... One of the biggest problems in getting an internet-only station to be a good revenue generator is the fact that since there is no need for an FCC to license stations, almost everybody can have their own station if they want to. This means that you have way more supply then demand for it. So, individually, each station ends up with miniscule audience numbers because there are up to tons of stations also doing close to the same things.

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Through the ages it has been hard for people to wrap their mind around "the new"... the future. I ponder the same questions you ask.

There may be simple answers that we are overlooking.

Various search mechanisms populated the Internet... who expected any of them to gain critical mass? And then came Google!

I'm sure Pandora thought (still thinks?) they would "own the world".

Then again, maybe "audio programming" will be like Blogs. You can operate a small audience blog. There are big blogs that enable some folks to generate respectable revenues though books, etc. But a blog can be a once a week essay. The audio equivalent would be a Podcast.

Maybe one or two monsters will dominate on-line programming much as Google dominates search engines... while podcasts can thrive on small circulation much as blogs do.

Some good comments. Since most of my revenue is derived from local businesses, I can say accurately that the furniture store down the street does not care if someone in upstate New York loves my station and listens 24/7. At the same time, the few agency accounts we have won't even permit us to air their messages on a stream, due to AFTRA.

Even in a small market, I can show that x number of local residents listen, therefore, may possibly respond to the local store's advertising If I stream, I can show another y number of listeners, but a large percentage of them don't count. The upside for the local merchant is minimal, and the cost per qualified listener, when you factor in the cost of streaming per song, becomes quite high.

Internet-only stations have a must more difficult uphill battle for revenue, especially because there is not the terrestrial platfom to use as a base. Until (and unless) one of the major sales organizations can develop a model for marketing internet-only radio stations, this will remain a problem.

The only way that Pandora, Spotify, or other providers will be able to create enough value for advertisers is to target ads very precisely. They'll need to deliver those ads to precise demographic and geographic targets, independent of the stream. In other words, not matter what music you listen to, you'll get ads based on you user profile, not the content. This is VERY different than radio. It also discounts the fact that others might be listening via your account. It's also going to be a tough sell to local advertisers.

johnbasalla said:

Tell me if I'm right about the following or not?... One of the biggest problems in getting an internet-only station to be a good revenue generator is the fact that since there is no need for an FCC to license stations, almost everybody can have their own station if they want to. This means that you have way more supply then demand for it. So, individually, each station ends up with miniscule audience numbers because there are up to tons of stations also doing close to the same things.

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The missing ingredient right now is that the number of people listening to Internet radio hasn't reached critical mass. I believe it will when it's as easy to listen to Internet radio in your car as it is regular radio. There are no technological hurdles but the loss of unlimited data plans is a temporary setback. But let's imagine a world where cars are routinely outfitted with Internet radios that are as easy to use as terrestrial and satellite radios today. Everybody can have their own station so the audience for any one station is miniscule. Now imagine I go out and raise some serious capital and invest in, instead of FCC licenses and transmitters, content. I hire known talent from local radio and TV stations, buy billboards and Internet ads, and launch an online radio station with significant financial barriers to competition. I am sure we will get to this point, I just don't know when.

Right now, anyone can launch a website but do all website have similar numbers of unique viewers? Of course not, to name my favorite example, ESPN.com has massive traffic to its website not only because it has its cable channels to promote it but because they have hired the best sportswriters in the country and many have been lured away from traditional print media companies. When distribution platforms are cheap and plentiful, content is all that matters.

It will take a while for this to play out but I believe its inevitable. Historically, radio and TV have relied on the barriers to entry provided by the relative scarcity of FCC licenses. Eventually, the rebels will crash the wall.

Salty Dog said:

Now imagine I go out and raise some serious capital and invest in, instead of FCC licenses and transmitters, content. I hire known talent from local radio and TV stations, buy billboards and Internet ads, and launch an online radio station with significant financial barriers to competition. I am sure we will get to this point, I just don't know when.

Right now, anyone can launch a website but do all website have similar numbers of unique viewers? Of course not, to name my favorite example, ESPN.com has massive traffic to its website not only because it has its cable channels to promote it but because they have hired the best sportswriters in the country and many have been lured away from traditional print media companies. When distribution platforms are cheap and plentiful, content is all that matters.

It will take a while for this to play out but I believe its inevitable. Historically, radio and TV have relied on the barriers to entry provided by the relative scarcity of FCC licenses. Eventually, the rebels will crash the wall.

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I can't argue against any of the mechanics, the logic you have proposed. It could happen that way.

But, here is where the argument comes in. Many of us believe that a healthy and free-to-roam-and-wander "press" is essential to maintaining some reasonable form of government and a coherent society.

If the system you have described comes to be, and it may happen, I suggest that it will KILL journalism as we have known it. True journalism will disappear. Pep Rallies such as Fox News, MSNBC, etc. will survive.

Will our concept of civilization survive?

Goat Rodeo Cowboy said:

If the system you have described comes to be, and it may happen, I suggest that it will KILL journalism as we have known it. True journalism will disappear. Pep Rallies such as Fox News, MSNBC, etc. will survive.

Will our concept of civilization survive?

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I see your point. What allowed the creation of those cable TV channels is the creation of additional distribution capacity I was talking about, albeit via cable instead of Internet. I'm not a broadcast historian and I risk getting shot down here, but I believe I read that in the 50's and 60's, CBS, then the Tiffany Network, did not fund its news operation to maximize profits, although it may have been profitable, but as public service. And what made that possible? The gushing profits from the oligopoly created by scarcity of distribution channels and the high barriers to entry. So as the distribution channels become greater, there are more flavors of journalism, some reputable many others disreputable, but the traditional journalism outlets remain, albeit in diminished steature because of lesser financial resources. We are at a point where the public is so accustomed to news being free, that there continues to be resistance to pay anything. Obviously, this does not incent quality.

Quick example of how low the bar can be. Last week when Twitter was rife with rumors that Bon Jovi died, a news outlet I was following on Twitter (a micro and little known news outlet) tweeted his death. I immediately doubted it and Googled the news which by then had already been exposed as fraud. I replied to the news outlet that that this was fraud and unfollowed them. I was immediately blasted with "Anybody can make a mistake." Imagine that, an Internet news site that thinks it's too much trouble to do a quick Google search before reporting "News".

My best guess is that eventually, there may be so much unreliable news that people will come around to paying for reliable news. I already have. Plus, tablet PC's, of which iPad is only one, has made online subscription much more appealing.

Salty Dog said:

My best guess is that eventually, there may be so much unreliable news that people will come around to paying for reliable news. I already have. Plus, tablet PC's, of which iPad is only one, has made online subscription much more appealing.

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Many of us are going to find the transition painful.

In the "old system" of news, many of the owners of media were people who could sort out what constituted "valid" journalism views, and the good guys set about giving us credible journalism whether we wanted it or not, whether we recognized it or not. (Some owners of media obviously were NOT interested in valid journalism so we had grocery market tabloids and today we web-based "news sites" that are nothing more than propaganda mills.

The current mix, the "new media concepts" of our day are sorting themselves out... trying to find their place. We are currently in a mode where the "Joe Sixpacks" of the world are deciding which new media genres survive and prosper... not the seasoned and well-meaning and big-thinking sometimes benevolent investors in media.

People like me (a bit old and grouchy sometimes) are not going to enjoy watching the struggle as things sort themselves out. I have a MAIN mailbox, and I have a secondary mailbox which does not reveal my identity. The prefix is a bit non-sensical. Recently I began getting a scandalous bunch of messages. Some people who are obviously leftovers of the UNRECONSTRUCTED Ku Klux Klan have an online bookstore and about 6 or 8 websites and blogs. There is cross ownership of all this outlets. And I am getting bombarded with the most outrageous political tripe you can imagine. And when you read the REPLY posts that the Joe Sixpacks are posting, it makes me want to cry. People are really THAT warped? They buy the tripe being "published" as though it were classical journalism. And the cross-ownership founders of this fleet of verbal outhouses include ministers in a church group theologically kin to my own place of worship.

If seminary educated Rev. Dr. Sixpack can't rise to respectable journalism.... who is going to do it?

Other than that... I'm having a really fine day. ;D

I know. I could block these e-mails. I could click on the "remove me" link. Eventually I will. For now I will sit here and watch the parade of depravity as it marches down the street.

Bon Jovi died?

No... true journalism will die if replaced by lazy lumps behind a computer keyboard who won't want to fact-check anything but want to have their opinions codifyed as "news".

johnbasalla said:

No... true journalism will die if replaced by lazy lumps behind a computer keyboard who won't want to fact-check anything but want to have their opinions codifyed as "news".

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There are "lazy lumps" who don't fact check anything but they aren't replacing anyone, just providing background noise. They are not journalism's problem. Journalism's problem is the decline of print distribution and the high-margin ads they afforded, the relative cheapness of Internet advertising and primarily that their customers seem to think they shouldn't have to pay anything.