[BC] Fractionalized Audiences with IBUZ and Internet Radio

[Rich Wood]

------ At 11:15 PM 10/21/2007, Robert Orban wrote: -------

>If you complain (as you have in the past) that HD2 channels merely 
>dilute a station's potential revenue stream, I'd be curious to know 
>what your proposed business model would be when the potential number 
>of stations is virtually unlimited. How are broadcasters and content 
>providers going to get paid? Your post above indicates that you have 
>grave concerns about this. But it seems to me that the winners are 
>going to be the ones who figure out how to promote their streams 
>better than their rivals. Marketing 102 says that too much choice 
>tends to paralyze consumer decision making. (Although there are 
>hundreds of satellite radio streams, there are only two providers, 
>which makes it easy for consumers to choose.) So how are Internet 
>radio streams going to get promoted?

I think complain is the wrong word. I prefer to think about it as 
pointing out flaws, outright deception and aggressive apathy on the 
part of retailers and consumers. You're looking at IBUZ from a 
technical standpoint and don't seem to be concerned with the 
promotional lies running rampant around it. That's what sets me off. 
No other technology has been so thoroughly based on deception as this one.

I don't have an answer for the business model that'll be required 
when there are tens of thousands of options in even the remotest 
parts of the country. I don't think the advertising model will work 
when the audience is international and a product isn't sold in most 
of the covered areas. in addition, the same product has a different 
model or manufacturer name in other countries.

Radio stations are, historically, reluctant to promote themselves on 
a continuing basis, preferring to target important survey times. Even 
then it's often a trade with TV or print. In this country promotion 
can be done via networks, unwired networks and print agencies. Look 
at how abysmally IBUZ is being promoted with $630 million in 
distressed inventory. Not a penny that I can see is being spent on 
the mix of media required to launch a product.

Internet advertising has already overtaken radio. It's relatively 
cheap (smaller numbers of eyeballs and eardrums), easily tracked and 
easily targeted  We've already been told by major media buyers that 
there's no additional money set aside for the HD-2 "stations between 
the stations." I don't understand how we can listen to stations 
complain that Docket 80-90 badly hurt their business when new 
stations flooded in. The potential for IBUZ is, at least, 21,000 
stations, up from the current 14,000. They simply won't get bought. 
I'm not including HD-3.

Now add an unlimited number of competing program sources and even the 
most popular will get a fraction of the available money. This is a 
fragile advertising economy as stations in Philadelphia and Houston 
discovered when the PPM came in and changed the rating methodology. 
They suffered a major drop in income. Ad agencies always take 
advantage of uncertainty when it comes to negotiating rates. It's their job.

I don't ever recall a national advertising campaign for an Internet 
stream. Many for web sites, but no Internet "radio" stations. When 
there's virtually no advertising income (AFTRA has seen to that with 
large fees and ad agency prohibitions against running spots on 
streams). Those same restrictions apply to Internet-only sources.

Right now it's not an issue because there's very little mobile use. 
However, when broadband is reliably available in cars and portable 
devices the guano will hit the rotating blades. No longer will it be 
an attractive local advertising medium. The waste will be incredible 
as a local Akron furniture store reaches Zimbabwe. The programming 
model will have to change, too. Rush Limbaugh and other political 
hosts have no relevance anywhere but the US.

>This may all sort itself out automatically, particularly with the 
>performance royalty structure currently in place. The losers in the 
>promotion wars are going to want to "play radio" for just so long 
>before they realize that it doesn't pay their rent or put food on the table.

I believe it's not only going to be the "play radio" folks who will 
give up. Since each listener requires a dedicated stream, the more 
successful you are at attracting an audience, the more expensive the 
delivery system is. Is there a provider that can deliver enough 
streams to equal the audience of the #1 station in New York?

Since many of the providers are Telcos who are used to a 
pay-as-you-go system how will they deal with enormous demands placed 
on their systems? I believe they're going to want to meter consumer 
use. I've read of a wireless provider dropping customers who use too 
much of their "unlimited" service.

With little advertising money for individual streams I think some 
sort of subscription model will surface. As is, Internet "radio" 
isn't free. You pay for access. An additional fee will probably come 
from each source or to an integrator who will parcel out money based 
on data used. You know, an integrator like RIAA, ASCAP, BMI and 
SESAC. Just another lovable fee collector.

Rich