Yup

Salty Dog said:

If over-the-air broadband Internet becomes ubiquitous, and I believe that's a when, not an if, a local group of investors could launch a local Internet radio station on equal footing with traditional broadcasters.

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Meanwhile, unless something is done about digital royalties, there's no way for internet radio to make enough money to cover its costs. And as I mentioned with the Pink Floyd example, there's no willingness on the part of musicians or the record industry to compromise to help internet radio. So regardless of whether or not broadband internet becomes ubiquitous, online distribution of music is impractical for companies that aren't already distributiong that content on air. That's why Pandora bought an FM radio station.

Salty Dog said:

landtuna said:

Salty Dog said:

Even the Yellow Page industry has statistics that say that 2 out of 3 consumers still use Yellow Pages.

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Of course they do. What else would they say - "Oh, don't buy advertising in our product because the only readers are canaries"?

We continue to receive two YP-type publications every year. And they go right into the recycle bin.

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Exactly. So you understand how advertisers look at radio usage studies and say - "Of course your studies say that. What else would they say - "Oh, don't buy radio advertising because the only listeners are old people"? And then they go on advertising the way they want to.

I just think people in radio look at their own studies and accuse advertisers of being stupid when they themselves behave the same way when statistics and studies conflict with closely held beliefs.

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Can't argue with that logic.

This whole discussion is somewhat null and void.

Listening to radio you are predisposed to hearing (if not paying attention to) commercials because the only alternatives are (1) hitting the pre-set or (2) hitting the off-button. So agencies splatter the spectrum with commercials hoping you will (1) accidentally hear one or (2) get tired of button pushing. OTA and Internet radio are pretty much identical here.

Viewing Internet pages has much easier bypasses as there are multiple ad blockers which work very well and don't expose the viewer to a significant number of online commercial banners. It is the online equivalent of a DVR.

Viewing either cable or OTA TV is equally easy to bypass commercials by recording the shows and skipping the commercials with the push of a button or by downloading where the commercials have been redacted (sometimes because the ad talent wasn't paid for the additional exposure - how dumb is that?).

Commercials have become ubiquitous in our culture in my lifetime so as a defense I have learned to quickly detect and ignore the vast majority (leaving the truly 'great' commercials for me to enjoy whether I actually buy the product or not). Recent technology allows me to not even become exposed to the majority of ads in the first place.

All the foregoing means is most of the money spent on ads, at least certain kinds of ads, is wasted on people who don't pay attention, hear but don't buy or purposely ignore no matter what is being advertised. Advertisers tend to be a huge crowd (think of the floor of the commodities exchange) where everyone is yelling at the top of their lungs and all they can do is throw more money to try to be the loudest.

TheBigA said:

So regardless of whether or not broadband internet becomes ubiquitous, online distribution of music is impractical for companies that aren't already distributiong that content on air. That's why Pandora bought an FM radio station.

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Yeah, interesting play by Pandora. I am inclined to think that over time, technology drives a political solution to the royalty issue if necessary and a slew of Internet radio stations take off. It's an easy prediction to make, but when it happens obviously matters a lot and of course I have no idea.

It's an interesting thought, that the value in FCC licences lies partly in their ability to carry with them lower online royalties, and partly in that online Internet is not yet widespread enough and radio remains easier to listen to. Whereas the value in FCC licences used to lie entirely in the scarcity of music-delivery mechanisms.

So let's say we're 10 years away from Internet radio that is as equally as available and usable as terrestrial radio. The value of the licenses is then the present value of their 10 year cash flow, if it goes to zero at ten years. And if you pay that price, and it turns out to be 5 years, well that didn't work out so well. Technologically, it's probably only 5, but yeah, the music royalty situation is tougher to forecast.

landtuna said:

All the foregoing means is most of the money spent on ads, at least certain kinds of ads, is wasted on people who don't pay attention, hear but don't buy or purposely ignore no matter what is being advertised. Advertisers tend to be a huge crowd (think of the floor of the commodities exchange) where everyone is yelling at the top of their lungs and all they can do is throw more money to try to be the loudest.

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I forget the numbers, but I've taken the annual radio revenues of the U.S. and divided it by the cume audience to figure out how much revenue each listener yields. Not much. Subtract the high cost of sales the stations pay and a commercial-free subscription model makes perfect sense. But then, I'm back to my original premise, that logic and numbers don't always carry the day. People are emotionally invested in supposedly "free" radio, because they aren't valuing their time.

Affordable wireless broadband nationwide is more than five years out.

There's no way to pay for that level of infrastructure without high costs to the customers. You're not going to be able to drive from NY to LA listening to Pandora the whole way anytime soon.

Free to air radio is still very efficient as a content distribution mechanism.

stevensonair said:

Affordable wireless broadband nationwide is more than five years out.

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You might be right. This is all a fun thought experiment. What would be your best estimate?

Salty Dog said:

I am inclined to think that over time, technology drives a political solution to the royalty issue if necessary and a slew of Internet radio stations take off.

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Technology really hasn't driven a political solution for ten years. That's how long this debate has been going on. If the past is an indication of the future, I'd say there will be no political solution. You will see companies like Clear Channel leveraging their on air revenues for discounts online. Apple leverages their iTunes power. Pandora doesn't have that power, so they're screwed. In any case, the music industry just collects the money, and isn't favoring anyone except themselves. If internet radio continues to grow, the royalty rate will just continue to increase, putting more of these internet only radio companies in trouble.

TheBigA said:

Technology really hasn't driven a political solution for ten years. That's how long this debate has been going on. If the past is an indication of the future, I'd say there will be no political solution. You will see companies like Clear Channel leveraging their on air revenues for discounts online. Apple leverages their iTunes power. Pandora doesn't have that power, so they're screwed. In any case, the music industry just collects the money, and isn't favoring anyone except themselves. If internet radio continues to grow, the royalty rate will just continue to increase, putting more of these internet only radio companies in trouble.

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I have been listening to Pandora since the beginning so I knew it how long the problem has existed, but the future is tougher.

I am an admitted geek and early adopter of all things technical so I do tend to get things wrong by being too early. [There were people who sold real estate in 2005 because they saw the coming collapse. A bit early though to really make it work as an investment.] It doesn't mean I am saying I'm wrong only that I fully admit I don't know. If I knew, investing would be a snap.

So your view is that the current marketplace for terrestrial and Internet staions looks the same for the foreseeable future even ten years out?

I'm an "early adopter" myself.

But as I was reminded in my early days of programming that by the time a jock is sick of a song, the audience is just becoming aware of it. It's a reminder to me to "slow my roll" when thinking of a "majority" or a "movement" that may just be my circle of co-workers or friends.

So when I think about a lot of the markets I've worked in that are smaller, blue collar markets, and the economic picture, I see a slow adoption of mobile internet radio outside of the most urbanized or educated & upper income markets.

We've seen a move by several wireless providers to charging for data past a certain cap. With all costs of living - fuel, food, etc. rising and a less than stellar job market - there will be fewer people who can afford to have it all - especially when there's only so much time to consume all of it. The budget has to be adjusted somewhere. That might be cable, that might be wireless data, or subscription music services.

There are huge portions of the country (I have personal experience with) that only have access to WIRED broadband in the past few years, and the speeds are less than ideal. To look at wireless coverage maps, there are huge areas where you can't listen to mobile radio reliably. You'd have to see a greater investment in an infrastructure that may reach relatively few paying customers - someone has to pay for that.

Now, if our nation developed a serious plan to invest in infrastructure - it's possible some of that cost would be shouldered by the government. I'm not seeing that happen in the current political climate, or until there's a significant economic improvement that would encourage more private investment in less than urbanized areas.

The ideal for internet radio is to be a push button appliance. You get in the car, you tap Pandora, or whatever "preset" stream you like, and it starts playing. For that to work from a hardware standpoint is getting better and in more autos every day. That's not the difficult part in the long run.

The difficult part is making it a service as easy to use for the "average listener" as Sirius/XM, or your local FM stations - achieving reasonable coverage across the country, and keeping that within a cost point that doesn't pressure the budget of the majority of the public.

I'm guessing the "stars won't align" for webcasting till the better part of a decade. This isn't even taking into account the royalty issues already raised.

Coming from the terrestrial side of things, I'm not scared of the advances, and I believe great local brands can survive on new platforms. My business plans definitely incorporate new media and streaming. But I'm not afraid my FM licenses will be worthless anytime soon.

Salty Dog said:

So your view is that the current marketplace for terrestrial and Internet staions looks the same for the foreseeable future even ten years out?

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I don't think you can generalize. All OTA and internet radio is not the same. AM radio was supposed to be dead 25 years ago, and somehow, a few AMs are still doing well. So some OTA radio will continue to thrive, and a lot will struggle. Internet radio that operates in partnership with other businesses (like Clear Channel, Google, and Apple) will thrive. Those that try to go it alone will struggle.

If your question is do I see a change in regulations, my answer is no. I think the only solution is direct negotiations, because there are just too many vested interests to reach a broader solution.

Thanks guys. It's fun to think and talk about the future of terrestrial radio. I have some other thoughts but that will be another day under another topic since we've drifted a bit.

Salty Dog said:

amfmxm said:

1. Radio is pervasive. Ninety-three (93) percent of Americans use radio every week, and 75% use it every day. We're just a hair behind TV in media usage--TV is at 96 percent--and no one is suggesting that it's even POSSIBLE for television to disappear. Hell, it's everywhere, now--on computers, cell phones... almost as omnipresent as radio. Almost.

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And yet, so many advertisers are unmoved by all the statistics.

Even the Yellow Page industry has statistics that say that 2 out of 3 consumers still use Yellow Pages. It's not even moving the needle. http://blog.theberrycompany.com/blog/berry-marketing/yellow-pages-myths-part-1-the-internet-is-all-you-need Maybe it's because people are skeptical about studies.

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I know that y'all have gone on to other aspects of this, but...

Yes, you CAN ignore research and live your life spouting your personal observations as though they're nuggets of wisdom worth hearing. But when you do, you can find yourself way the hell on the wrong side of reality.

It's a risk.

But in this arena, no one is going to do anything to make your life truly miserable. It is a very tolerant group.

Ninety-three percent? That is actually up a tad from 92% just a few years ago. But for conversation sake, let's say that only 90 percent of Americans actually use radio on a weekly basis. Or even 85 percent. Or 80 percent.

It's still huge. Huge.

And nothing to be apologetic about.