After more than a decade of radio streaming, many people still are wondering whether the phenomenon can actually provide real profits. The answer depends on whom you ask, according to Skip Pizzi, director of digital strategies at the NAB.
“There (is) a wide variety of business models that folks are using … particularly in the new media space, where people are still trying things out.”
This graphic from AdsWizz demonstrates how listener evolution can be followed on a quarter-hour as well as daily basis. This image shows average quarter hour evolution for a pure-play streaming client throughout each day (upper) and throughout one week (lower).
As radio stations seeking to increase listenership strive to become ubiquitous, Pizzi encourages managers to experiment with online content, not just copy their on-air programming onto the Web.
He used the analogy of broadcast television. “They do some news, some soap operas, some movies, some sports.” However, the advent of cable created “channels that were just one of those things all the time.” Then you’ve also got “on demand” offerings, streams that appeal to newer audiences who are selectively interested in just bits and pieces of a channel’s regular programming.
A real game changer in streaming radio has been the smart phone, says Jennifer Ferro, general manager of streaming radio pioneer KCRW(FM) in Santa Monica. When the iPod was introduced, it offered music portability but eliminated radio from the equation. Now, however, though a smartphone can be used like an iPod, allowing the user to listen to his or her own music, it can also easily access the Internet for streaming content.
Ferro cites a lack of trustworthy audience measurement systems as a hindrance to Internet radio’s profitability. “I really believe the current metrics that everyone uses in radio are not at all capable of reflecting our audience usage,” she says.
Though her station is noncommercial, Ferro believes the same rules apply to the radio industry in general when it comes to integrating online features.
“Any sort of … audio content provider cannot afford not to be streaming, not to be podcasting, not to be making their content available for on-demand listening on any device possible.”
She believes that when commercial radio managers hesitate about jumping feet-first into the world of streaming, it’s because of these limitations in quantifying non-broadcast audiences. “All of your advertisers are looking at that [on-air] metric, but that metric only focuses on one aspect of the way people consume media.”
Go beyond copying yourself
Alexis van de Wyer, president of AdsWizz Americas, encourages radio stations to look beyond simply duplicating their on-air ad delivery strategy.
“What we found is that there is actually a pretty big difference between the broadcasters that try to reproduce what they used to do over the air, and the ones that truly embrace digital advertising,” he says. Utilizing the multimedia capability of Internet streams “allows you to have much more targeted ads, allows you to combine display with audio and streamed video, and allows you to track your ads and really report your performance.”
Noncom KCRW has been active in the new media space.
Van de Wyer can even put a number on how much per-spot revenue a station misses out on by not taking advantage of what can be done with Internet optimization. “The money (these stations) get is roughly five times less than the money that (stations get) … when they target by device, when they target by location. All those elements will allow broadcasters to get much more money out of each impression, which allows them to get more revenue.”
Getting more money per spot is important, he says, because Internet stream listeners may not put up with as many ads as on-air listeners will. Charging more per spot “allows them to play fewer ads, which is very important online, because listeners online actually come to expect a slightly different experience.” Van de Wyer adds that listeners seem happier hearing ads for products that are of actually of interest to them.
Because profit loosely is defined as what’s left of your revenues after you subtract your expenses, it’s important to focus on the costs of streaming. Whereas the on-air broadcasting operation stays about the same regardless of how many are listening, costs for Internet bandwidth and copyright royalties increase and decrease in sync with number of listeners.
Zackary Lewis, CEO of Liquid Compass, a content delivery network or CDN, has made the argument that outsourcing streaming to companies like his is the smartest way to keep these incremental costs at bay.
“If you have a T1 connection at your studio and you have a 64 k stream, the equivalent of an FM-quality radio, you would only have the capability of having 15 [online] listeners to your station at any point in time,” he says. And that would preclude any other uses the station might want to make of its Internet connection.
iHeartRadio is an online network best known as a mobile app, though it can be accessed on various platforms including video game consoles.
As Lewis explains, CDNs buy Internet bandwidth in such massive quantities that the economies of scale, along with the efficiencies of their own IT infrastructure, allow them to pass along some of the savings to their customers and still make money themselves.
A plan with a CDN can include “lots of different options as far as enhancement playing, social media integration, ad replacement software and other services, [along with the bandwidth],” he says, adding that for qualifying stations, ad spots can replace cash payments.
Clear Channel’s iHeartRadio is an online network of stations best known as a mobile application, though it can be accessed on various video game consoles, too.
Brian Lakamp, president of Clear Channel Digital, declined to discuss profit specifics, but says that iHeartRadio encompasses “900 of the nation’s most popular live broadcast and digital-only stations from 150 cities, plus user-created custom stations, delivering everything listeners want, in one free, fully-integrated digital listening service.”
While unfortunately there are no industry-wide figures on the profitability of streaming radio, the fourth quarter 2011 financial filing from Salem Communications provides an example worth mulling. Overall broadcast revenue at Salem increased 2.8 percent compared to the same period a year earlier, but the Internet revenue portion increased 37.1 percent. Internet operating income nearly doubled. (Salem owns or operates 96 stations; it calls itself the largest commercial U.S. radio broadcasting company that provides programming for audiences interested in Christian and conservative opinion radio content.)
At the 2012 NAB Show, a day-and-a-half track of the Broadcast Management Conference titled “Digital Strategies Exchange” promises a non-technical look at technical innovations for radio, including Internet radio streaming, mobile devices and social media. The Digital Strategies Exchange track will run Tuesday afternoon and all day Wednesday.