The title of today’s post may end being thought of us as famous last words, right alongside “The Internet is a fad” and “Why would I want to check email on my cell phone?”
I can think of three big reasons to believe that things are going to be changing in the streaming revenue department – and soon.
That’s because Apple’s new iTunes Radio will apparently launch with mega sponsorship support from P&G, Pepsi, and McDonald’s.
What does that tell us about the opportunity for local radio streams in search of revenue for big hometown brands that provide a great streaming experience?
We can debate whether pure-plays hurt broadcast radio listening, but the reality that streaming is a bona fide audio entertainment platform is not debatable. And the concept of Internet radio as a viable advertising medium is an opportunity that should be discussed at every station and cluster in the industry.
Apple jumping in with both feet – powered by great global advertising brands – is a game-changer for streaming audio.
And all of us in radio.
Thanks to Pierre Bouvard for making me aware of this story via Twitter.
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There is still no business model for streaming IMO. Yes, advertisers are available and willing, but the numbers can’t add up to a meaningful profit when you pay out 60+% of revenue.
Perhaps Apple sees that and expects that Pandora/Spotify, et all will eventually run out of money with no royalty reduction forthcoming from the record biz. What if one day, the only way you could get a Pandora type service was from an Apple device and they were willing to subsidize it to promote those device sales? THAT is a business model that works while pure play on its own doesn’t.
Most people don’t realize that iTunes makes so little profit that by itself it wouldn’t make sense for Apple to continue with it.- clearly there are other considerations. That would well be the case for iTunes radio.
iTunes Radio can afford to operate at a loss given Apple’s other mega business silos. Pandora – not so much. Maybe that’s why they’re units.
But the rush to be a part of Apple’s streaming business speaks to the power of their brand, but also the legitimacy of streaming as a way to reach music-hungry listeners. There will be a there there for broadcast radio, too. For a streaming-only business model, it will be a challenge until that royalty issue is addressed.
Thanks, Bob, as always.
I sold streaming radio for a local broadcaster in Portland, OR and we made the math work. I signed off on the royalties, bandwidth and ad insertion invoices, and it can be profitable. Yes the royalties keep going up. The problem is that most terrestrial radio executives and gm’s do not understand how to price if effectively or bundle it into truly integrated packages with terrestrial spots, landing pages, text messaging, etc. They are scared to change the traditional business model, and it’s sad.
Royle, thanks yet more evidence that streaming can be profitable especially as radio has so many other weapons and assets.
Glad I didn’t know there wasn’t any money in streaming before we started making a nice profit at it. The math works…you just have to be a bit creative.
Exactly, Norm. As they say, right on the money.
Exactly Fred! … Couldn’t help but smile the other day, when I caught the huge dollar commitment major corporate advertiser take-up for a yet to be launched “on-line/on-cell” stream myself.
Having said that, it helps when the name APPLE is attached to the pitch. For radio, it leaves no excuse re the capability to monetize the streaming environment that is already today’s reality; particularly when APPLE is essentially re-purposing a “radio spot” and “video” model.
ITUNES RADIO is the game-changer for “internet radio”…. And as you noted, will be the “rising tide that will float all boats” and validate internet radio and it’s monetization going forward. How this might impact budget and media buys for traditional media where big brand PEPSI’s, McDONALDS etc are concerned going forward, will also be interesting to watch. As importantly, it also brings into play for the entire radio industry, the position of being bound to simulcast on-line in order to qualify for Arbitron in-market measurement etc. The whole point of the on-line/on-cell and on-demand environment is to customize and “brand extend”, in both linear and non-linear ways; and build-out new audience and client relationships as a result. And of course that environment comes with it’s own metrics and non-estimate analytics anyway.
That oft-quoted radio “92% of listening” number has potential beyond traditional analogue for the listener and client alike, and always did.
Lee, good points that frame some of the big issues and challenges facing radio. The Apple news could legitimize the space for radio. As you note, there are lots of complications. Appreciate to taking the time.
Lee, you raise some good points and some questions. Apple’s quick acquisition of major sponsors opens doors but also complicates radio’s ability to fully take advantage of different audio environments. The conversation continues – thanks for taking the time to weigh in.
People that still argue that “there is no money in streaming” remind me of the people who deny the moon landing actually happened. If you are not making money, its because you don’t know how to operate a streaming business. I personally wrote most of the software radio stations use today to measure and manage audio [ads and content]. I assure you, there is indeed “money in streaming”.
Pandora just announced they’re removing the 40 hrs/month listening cap due to the strength of advertising revenues. https://www.nytimes.com/2013/08/23/business/media/ad-revenue-from-mobile-for-pandora-increases.html
Dick, good omen – that’s the topic of tomorrow’s post. Thanks for weighing in.