Oh, CARP, Congress just killed Internet Radio!
Lots of reports everywhere. But one from Doc caught my eye.
Not sure how they came up with that, but the way I read the CARP/LOC table, a station with 2000 listeners playing 18 songs in an hour, at 0.07¢ ($0.0007) per song per listener per hour, woud pay $604.80 per day, or $220,903.20 per year.
The math seems right. The piece that is missing is- what is the revenue model for a streaming media firm that wants to have the 2000 listeners??
Check my math: 2000/listeners and $604 a day is a Cost Per Thousand of about $330.00
SUPERBOWL Cost per thousand = $10 . (A large audience, undifferentiated, but a good bargain).
According to this written on March 25th of this year:
the usual CPM for banner ads in 1999 and 2000 varied from $30 to $40. Today, the average CPM has dropped to the $7 to $15 range, which puts online advertising on a more even financial footing with other marketing options.
So in a market where banners are $7 to $15, and we assume that Radio would command a premium, it would have to command a 20 TIMES Multiple premium to match the costs of that station.
Food for thought. (An update - this only counts costs for the songs, not bandwidth, computers, salary, etc.)
I thought about this as I walked past Time Warner and then the NY Times on my way to the bus tonight. This is a Linear cost model. For every listener, each song or stream generates a cost. So the more popular you are, the higher your costs. Even adding Ad revenue doesn't offset this - you have to get higher ad rates or more ads. So, really you're forced into a subscription model.
The AOL and NY Times connection is this: They have subscribers too. Their costs must go up for each issue they print. Why aren't they out of business too? Pass-Along rates.
This note explains pass-along nicely. This small journal gets 1626 readers. But many readers pass it along to others, and their subscriber base is actually closer to 3800. Print 1626, charge for 3800. Media business 101. Except where is the pass-along for radio? Can you count extra people listening in the next cube? They can't click on simultaneous ads, or click a buy button. So again, you're back to a (difficult) subscription model.
I was at one of the first Internet Radio stations. I don't think we would have created the business if this had been in place.
It also is a stupid thing on the part of the Record Companies. But I was thinking. Does "Radio Warner Records" (should it exist) have to pay this fee to their own artists? I don't know. But if they don't - that's fascinating and is a major bonus to a record company. In fact, it's an incentive to stream their own artists only. Hmmmm....