BY
BOB BELLIN
FOR RAIN: RADIO AND INTERNET NEWSLETTER
That's what webcasters are facing at the CARP hearings,
which began Monday (coverage in
RAIN here).
Does that sound extreme? Alarmist? You bet, but it's also almost
inevitable.
Let's compare the operating results of a fictitious webcaster
to the operating results of a fictitious radio station.
We'll assume that this station is a mid-pack player in
market 10-20, that it bills around $15 million/year and returns
about 50% of net revenues in operating profit (possibly more if
the station has recently slaughtered any wild animals on-air).
The net on the $15 million revenue number (after agency
commissions) would be around $13 million, making the station's
operating profit roughly $6.5 million. We can reasonably assume
that the overall operating cost of running a webcast operation
is roughly the same as running a radio station, plus the additional
licensing fees and bandwidth costs.
Back to the numbers. Let's subtract the proposed royalty
payments and bandwidth costs from that $6.5
million profit number. First, subtract 15% of the revenue number
($15 million) for royalties, which comes to $3 million. Now, let's
look at the bandwidth costs.
Rather than try to estimate it, let's take Hilary Rosen
(pictured, speaking with
RAIN publisher
Kurt
Hanson) at her word. In the article reprinted in Monday's
RAIN (
here),
she was quoted as saying, "Bandwidth fees cost far more than the
licenses…"
How much is "far more?" Let's assume 20% more. That puts
the number at $3.6 million. Thus, the total cost of licensing
and bandwidth would come out to
$6.6
million, which transforms the $6.5 million in cash
flow to a
$100,000 loss. Even
the VC firm that signed off on the sock puppet wouldn't be foolish
enough to invest in a business with numbers like that.
What's even scarier is that if you lower the revenue number,
which usually lowers the margins, or if streaming costs are actually
higher than I estimated (which is likely), the loss gets
even
bigger -- and such a scenario is more likely for webcasters,
given size of the current web radio audience.
Is the RIAA's proposed rate structure just an attempt to get
webcasters "to pay for the supplies for their
businesses" as Hilary Rosen suggests in the CNET piece? If there's
no way under that structure to turn a profit, its adoption will
mean there won't be any webcasters to pay for anything. No webcasters,
no royalties.
Surely the RIAA must know this (if I can run these numbers,
so can they). If so, why are they pushing a rights structure that
is designed to bring them no revenue?
The answer lies in a comment made in that same article
by DiMA Executive Director John Potter (pictured). "If they get
the prices they're asking for, there's not an economic business
model here
unless you own the rights…"
And who owns the copyrights? The RIAA members, of course!
The true agenda behind the RIAA's CARP proposal is for the
labels to become the webcasters,
they would be the only ones who can afford to do it. Because they
own the licenses, they don't have to pay license fees to themselves.
(I first made that suggestion almost a year ago in a column that
appeared in
RAIN last September 21 (
here),
stating that webcasting would become "nothing more than a promotional
tool for the music industry.")
It's clear to me that's what the RIAA has in mind -- and the
DMCA makes it legal. The question is, is there anything anyone
can do about it?
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From the press release: "
MobileBriefs,
the industry pioneer in Personalized Audio Broadcasting
(PAB),
announced today it has officially launched its customized business
audio service where individuals create their own business news
show which they can listen to on the go via most mobile devices...
"MobileBriefs' PAB product enables users to create
a personalized audio business 'news show' which can be
downloaded
to most mobile devices and listened to anytime, anywhere. Users
not only control how long the show lasts based on their commute
time, but also the exact topics of interest their show will cover...The
service is compatible with the major audio capable mobile devices
and can speak to multiple device platforms...
"The service is currently available through direct
subscription for an annual subscription price of $195, which gives
users unlimited access to the news that matters to them. The service
is also available through group subscriptions."
RAIN first covered the introduction of MobileBriefs in
March (
here).
, your site looks like an amazing
resource for information. I only wish I knew about it sooner, and
under better circumstances.
about their
current situation. We are clients of theirs. They suggested we reference
your site for information on a new company to help our small school
continue to stream our Internet-only radio station.
be able to suggest a couple.
However, we are a very small school with limited funds, so we need
to choose the best possible solution within our budget. Any ideas?
you make a valid point that terrestrial radio stations should look
at the real reasons why they are simulcasting on the 'Net (is it
really all about selling banner ads and insertions?), your comments
contradict themselves with respect to streaming companies "preying"
on those radio stations and the "shanty towns" those companies have
left.
preying on anyone, wouldn't
they still be here? I would hardly categorize these companies as
predators when they repeatedly try to build creative, although ill-fated,
business models to provide their thrifty client bases with costly
and seemingly-vital services.
only been one company I can think
of that truly "preyed" on anyone in this space, and only inflated
public perception of value at the time they sold out led to anyone
making money. Without that, their value would be tanking right along
with that of their new parent company. You call them predators,
and I see it quite the other way.
way affiliated with any of the
companies you either refer to directly or indirectly with your comments.
We have purposefully remained on the sideline to wait and see if
a profitable business model emerges. But until the industry we mutually
cater to realizes that these services cannot be provided at little
or no charge, the predators will continue to become prey. Of course,
that probably won't happen until broadcast companies decide to fork
over the real cash needed to buy their own boxes, bandwidth, and
related technologies to deliver a comparable service.
.
Word we get is they are trying to eliminate some
stations
they picked up from Broadcast America, only wanting to keep the
barter arrangement with stations pulling certain amounts of Internet
listeners. This, of course, is not the agreement they offered us
and other stations. There were no minimums or other qualifications.
me SurferNETWORK is behind on ISDN
charges they are supposed to be paying on our behalf. If we lose
another streaming audio provider I will probably pull the plug on
Internet broadcasting for the foreseeable future.
stations
they picked up from Broadcast America, only wanting to keep the
barter arrangement with stations pulling certain amounts of Internet
listeners. This, of course, is not the agreement they offered us
and other stations. There were no minimums or other qualifications.
