No Sale 2

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.

Comments

[Tom Teuber]

You're not crazy. It's a great idea. It also solves the problem that the industry has been unwilling or unable to deal with...that because of the AFTRA contract, streaming stations have to cover their spots with all that cumbersome clutter you noted.

[Fred]

Thanks, Tom. Appreciate the perspective and you reading our blog. The streaming experience on many broadcast stations is sub-standard, creating more consumer barriers. Thanks again.

[Dan Kelley]

Fred...your thoughts make a lot of sense.

Listening to terrestrial radio streams is so fatiguing with repetitous promos and per-inquiry spots (which are quite often "buyer beware" propositions and an insult to your listeners).

Yes, make a SMOOTH transition to another song to cover that break - - or better yet, why not provide an "on-line version" of your station. Same playlist, same personalities. But put together to better adapt to the on-line experience. In this day and age of PCs and voice-tracking, that wouldn't be very hard to do with most formats.

[Fred]

Great ideas, Dan, and the kind of thinking that radio will need in order to adapt to new competitive landscapes. Thanks, as always, for taking the time & participating in the conversation.

[Randall]

It's an interesting take on competing with online radio pure plays. But I still beleive the majority of terrestrial radio streams are missing the point of the online streaming advantage offered by online radio products like Spotify, Pandora, etc. These products put the listener in control of their listening experience. It's interactive versus a passive stream. This is the power of the internet. Users are in control. I believe Clear Channel is moving in this direction with its i heart radio app with an algorithm behind it. It will be interesting to see how this plays out especially as wifi hits the dashboard.

[Fred]

There's no doubt that content and control play a major role in radio's ability to compete. Our post today is just a start in rethinking this new competitive media landscape. Clear Channel is most definitely rethinking everything, as is CBS Radio. It's a start. Thanks for chiming in.

[ANRshow]

problem is... most of the stopsets are about the same length of time. So, listeners would end up hearing the same songs over and over again (because they fit) and sometimes would hear off the wall songs that don't really work with the format. So, programming would have to be dilligent with their streams and with todays environment, I doubt that happens...

[Fred]

Pick your poison - a repetitive song or commercials, PSAs, dead air? And given that PPM tells us that most listening occasions are very short (under 10 minutes), another play of "Proud Mary" might not be so bad. But you are correct that programming diligence is critically important, and today, few PDs have the bandwidth to patrol their streams with the same vigilance they do their over the air product. That needs to change. Thanks for reading and commenting.

[Lorilewis]

Hi Fred, Your blog today has made me stop and re think the whole purpose of our station streams.

Clients for the most part don't see the value in this fragmented online streaming audience - they'd rather cast a broader net and buy on-air; not the online stream.

Makes sense to me to place a new, different focus on our streams rather than mimic what we're already doing on-air.

[Ric Hansen]

Michael Stelzner just wrote a book called Launch...his formula for building audience in the new world is Content+Other people-a marketing message=growth. He says its all about gifting content, what you are proposing is a perfect way for radio to gift its listeners and build a raving fan base. My guess is there are some "back channels" to that free stream that could provide a financial pay off to broadcast companies. Radio will either shift their paradigm to the new media world or will go the way of Newpapers and magazines.

[Scott]

I'm all for it, but I still think we need to make sure our on-air product is top notch. The streaming can be part of our brand - something you can tune into at the office, at home, put on for a party, etc. Reinforce that a professional is making the playlist. I'd much rather have a PD/MD program an 80's channel than go through my playlist in iTunes.

THEN - when you are in the car, taking a walk, etc you'll tune in the on-air product. The way things are going with data-caps online streaming could get expensive for the user, not just the company providing it.

It's just like Apple - they make iPod's, iPhone's, iPad's, iMac's, laptops and even servers. Each one of those products is excellent at what it does. They are part of the Apple family. Radio can do the same - our on-air product and our compliment of on-line streams.

Imagine if Apple put their server software on the iPad. Yeah, sounds funny, but that is just what a lot of stations do with their on-air and streaming.

[Justin Scheman]

I enjoy reading your blog it always gets my brain pumping. I think one thing that can add to the online stream and to the problem of grooming new talent is to let the up and coming talent at your station have their own shows exclusively on the online stream. Not eliminating your current talent but rather adding an hour show or whatever during the transition times. By doing that you give them their own platform in which they are going to put in as much effort(if not more because they are hungry) as the jocks on air. Let's face it if you voice track it becomes another chore the jocks don't want to do. Another advantage to an online only jock is they can tailor their shows for the online listening audience which tends to be a little different they your average P1. There are limitless possibilities if PDs really put the effort in and try something NEW and DIFFERENT. I have a page full of possible game changing ideas that I can't wait to try.

[Fred]

Lori, thanks for commenting. The challenge of now is forcing ourselves to rethink the givens, the way we've always done things. I'm glad today's post got things going. Thanks for all the comments.

[Fred]

Ric, thanks for the story about "Launch" and gifting content. With other healthy revenue streams, radio is in a position to do just that. Thanks for taking the time and contributing to the conversation.

[Fred]

Scott, thanks for the comment. No doubt about it - the "mother ship" (as Lori Lewis calls it) is Job One. If the content's not there, the stream (and other components) are irrelevant. Thanks for reading our blog.

[Fred]

Justin, you're talking about the streams in the same way that we used to think about FM radio - a place to try new things and groom and discover new talent. You're most definitely on the right track, and there's no reason why stations and companies shouldn't think about multiple streams to build their brands - and their farm teams. Thanks a lot of commenting.

[BA]

RIGHT ON THE $! I utilized this concept with a newly launched station in 2007.....experienced a streaming TSL of 17-21 hour range on an average..... 2nd in a cluster of 5 stations with 2 100,000w heritage stations. There are a lot of small, basic items that can help radio compete with technology and other more immediate means of aquiring information and entertainment......but whose listening?

[Kurt Hanson]

Fred, I think Dan and Randall are on the right track above.

If you want to offer listeners "a streaming experience that is cleaner and crisper than Pandora's," which I think is a great goal, the fact that Pandora plays three :20s an hour and you play none is not going to be a meaningful difference in and of itself, in my opinion. (Although it's certainly better than playing fourteen McGruff the Crime Dog :60s.)

Just as the primary consumer benefit of music on FM was fidelty/stereo, the primary benefit of music on Internet radio is personalization. (Certainly that means a "skip" button; hopefully more.)

Without some form of personalization, I just don't think your online streams are in the game -- any more than mono would have worked for you in 1976.

[Bob Bellin]

And now a word from Commander Buzzkill. While Fred's idea is excellent in the abstract, in practical terms, the more successful it is, the more money it costs Terrestrial radio - not one way, but two.

First there's the royalties. If you generate statistically significant usage, you generate statistically significant expense. In addition to that, once you convert people from revenue generating streams to the ad free ones, they probably won't come back. Why should they? You get all of the benefits with no ads and better sound as a bonus.

So the result is, you exchange revenue for expense - not a good transaction in most cases.

If Pandora can't convert their large, growing, captive (much tougher to push a button when an ad comes on) audience to revenue, its probably more reflective of the effectiveness of their sales effort than the market viability of their media. And at some point, they will figure all of that out and make adjustments.

Loss leading ad free terrestrial streams is an interesting idea - but with the hard costs involved, if it was successful enough to really impact Pandora, many would balk at the lost revenue and hard costs.

What should radio do about Pandora?

1) Stop denying and disparaging it.
2) Develop a better version of the same thing (segues, customizable localism, better era and familiarity bell curves, etc.) and use its airwaves to promote it.
3) Most important, use its lobbying clout and airwaves to force the music industry to consent to royalties that will allow streaming to make a profit. This will probably require a real knife fight, IMO.

Commander Buzzkill, over and out!

[Mike Berlak]

Fred...exactly! With the technology available today, the "insertion" of extra songs/content doesn't have to be a choppy trainwreck. Many on-air systems can actually originate a second "station" using the same clocks and database as the on-air product while professionally mixing in an extra song or two an hour. Buffering will take care of any differences in time. And, even though non-commercial, along with gateway ads on the player, we might consider a non-intrusive, NPR-style, "this hour of the stream made possible by ______" announcement by the air talent to offset the loss of the 50-cent spots we'd lose.

[Michael J. Bell]

Fred, I think this is a great idea that, unfortunately, a large number of folks will rationalize a reason/s not to adopt.

But the pros outweigh the cons. The appeal of the "interactive" aspects of Pandora etc wear thin after awhile. As we radio people know, scheduling a day's worth of music is a chore. Most users simply do not have the time or the desire to be their own PD/MD. If we provide entertaining content, we satisfy their needs.

The goal is, as it's always been, to entertain. That's how we make money.

[Fred]

Thanks, BA. Appreciate you taking the time. As Kurt Hanson and Bob Bellin both point out, commercial-free alone isn't going to get us there. But as you note, sometimes small things can add up.

[Fred]

Kurt, thanks so much for checking into the conversation. You are correct that the appeal of pure-plays go well beyond how many commercials are sold. But broadcast radio has to start somewhere - cleaning up the stream isn't a steel sword, but it is a means toward creating a better listening environment. The other enhancements and features will (hopefully) come in time. Thanks again, Kurt, for contributing from your credible perspective.

[Fred]

Dear Cmdr. Buzzkill (Bob), let's not let the financial side blur our perspective on what's important. (Just joking.) Taking streams commercial-free isn't a long-term solution - for programming and certainly not for sales. It is a first step in recognizing the importance of the streaming product. Your 3-step plan is excellent, and I would love to read comments that address that strategic recipe. Thanks, as always, for ruining a perfectly good blog post with logic, and contributing to the dialogue.

[Fred]

Michael, realizing it's not perfect, cleaning up those streams (and the horrible commercial blocks) is a start. Thanks for taking the time.