In yesterday’s post, we talked about the growing pains that Pandora is enduring as they successfully build audience and platforms, while lagging behind in selling mobile advertising. While they may be growing listeners, they're now measured by Wall Street, and those of us in radio know all about those pressures.
Generating streaming income is challenging, period, even with the aura of newness and coolness Pandora exudes. Many in broadcast radio feel that pain, too. Most radio companies have also been hard-pressed to crank streaming revenue, often just selling dirt cheap spots at best, or using streaming as “value added” at worst. The good news is that radio has an entire on-air inventory that is part of the advertising menu mainstream. Rates may go up and down, but the ad world views radio as a viable marketing medium and always has.
For Pandora, making money with their stream is essentially their only revenue source. It’s their inventory, their bread and butter, the only viable way they can ever make good on their IPO. And as we have learned in radio since Gary Stevens took the commercial-free route with Doubleday rock stations back in the ‘80s, adding spots to a commercial-free value proposition can be fatal.
In Pandora’s case, while user control and customization are part of their value proposition, so is the lack of commercials. The more they add, the more they’re going to end up sounding like…us.
So what options do broadcast companies have with their streams? Well, making money on the stream would be optimal, but in the big picture, it’s more like icing on the revenue cake.
Unlike Pandora, the real money-maker for radio has always been the on-air spotload. While it has become bloated and abused over the past decade, it is those 10+ commercials radio plays every hour of every day that pays the bills.
So, in its effort to out-Pandora Pandora, why doesn’t radio consider simply taking all its streams commercial-free?
(Did he just suggest jettisoning all the commercials from the main streaming channel for broadcast radio?)
Yup, kill them all, clean up the streams, and offer an online commercial-free radio experience. Instead of filling up those “holes” with a handful of commercials that make trickles of dollars, why not offer something that Pandora can’t?
A streaming experience that is cleaner and crisper than Pandora's.
Replace those spots (and annoying PSAs, out of context comedy tracks, and lame sound effects) with…another great song. If you can insert ads, you can insert songs. And in the process, provide a stream that has your great brand, your strong music, your local personalities – in a clean, uncluttered environment. At the very least, try it for one year.
And all the while, continue to sell those terrestrial :30s and :60s, as well as your podcasts, web ads, banners, skyscrapers, mobile sponsorships, and NTR events - because you can. Of course, you could and should sell gateway ads to kick off the streams, as well as ads that live on the player. But keep the streams devoid of commercials, which sets up a cleaner experience than most of the pure-plays out there who finally have to get serious and make some money. Radio has lots of assets in its arsenal, some more mature than others, but lots of commercial vehicles from which to generate revenue.
Obey the “Law of Sacrifice,” walk away from those el cheapo streaming spots, and get serious about competing in this space.
In other words, use the strength of your brands, your sales history and relationships, to frankly put the squeeze on pure-plays that try to out-commercial-free and "out cool" broadcast radio. To compete in this new arena, radio needs to re-examine its model and adapt. Bob Pittman, quoted recently in Fortune, noted that "you can't maintain the status quo. The world will walk away from you if you don't catch up."
Go ahead - tell me I’m crazy.