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BY MARK CUBAN
Here is another RIAA-induced fun fact that everyone is missing:
The current DMCA (Digital Millenium Copyright Act) 
requires
that once a license amount is settled on, webcasters owe for all
those songs streamed since the DMCA turned
on!
This is from the RIAA website: "A rate is expected to be
set by early 2001 for all transmissions from 10/28/98 through
12/31/00." So for the sake of example, let's say the average music
webcast has 100 users 24x7.. I know this could be argued, but
for the sake of numbers, let's use it.. And let's use 18 songs
per hour, 1/2 cent per song..
That means for every music webcast station, the webcaster
owes 9 dollars for every hour they have
been webcasting 
music
since October 28, 1998...
That's right, since 1998!!! Almost 2 years. So, that's
$9x24=$216 per day, $6,480 per month or $77,600 per year for 2
years. That's basically $155,200 per station... So if you have
had 10 channels up for 2 years, you owe $1.55MM. 100 channels,
that's $15.5MM dollars...ALL TO THE RECORD
LABELS.
Of course that is more than the total
in-stream advertising of the entire industry for that
period -- probably times 5 or more -- but what does the RIAA care?
That's a death certificate for 95% of the industry.
What's the best business in the webcasting industry? Prepackaged
bankruptcies to avoid the RIAA fees!
=================
Mark Cuban (pictured above with Silicon
Alley Daily publisher Jason Calacanis) is the owner
of the Dallas Mavericks and was the founder of Broadcast.com
(now Yahoo! Broadcast).
Cuban's earlier observations on this topic were quoted recently
in Wired News and are excerpted in RAIN here.
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BY MICHAEL "MIKE ROBERTS"
FERBRACHE
I was among those "let go" during the first wave of firings
at
FastBand in June,
and I would like to contribute comments re: your story of October
4 (
here)...
FastBand did lack discipline in spending, having built overly
elaborate studios for a "start-up", on ridiculously expensive
real
estate on Bourbon Street in New Orleans. It was pretty much like
trying to build a house, and worrying about the wall paper before
the walls were up.
Outgoing expenses included seven well-paid "e-j"s, 3 fulltime
producers with an executive producer, PD, MD and a succession of
assistant MDs, in addition to HR staff and web team. And, in addition
to studios in a building in the French Quarter, the gruop occupied
the
entire 15th floor of one
of the largest office buildings in downtown New Orleans.
(CONTINUED
BELOW)
(CONTINUED
FROM ABOVE)
There was no incoming revenue, save penny royalties from Liquid
Audio downloads of select artists discovered and pushed by the capable
MD Christian Unruh, in co-ordination with LA producer Paul Fox in
hopes of starting a companion record label.
There was never one spot aired on FastBand, and only until
recently, no banner ads. The sales staff
consisted
of two consecutive sales managers who quit without results, one
of them after only a week or two on the job.
The PD, Grant Morris, did have a unique vision of creating
a new worldwide format consisting of music and news. The idea was
to rest somewhere between CNN and MTV. How much music, what kind,
and how much talking was the subject of much debate by the on-air
staff, who had previous experience in the business. Morris did not.
The MD, assisted by Fitz Madrid (K-Whale/Anchorage), Lou
Stadler (www.morfeo.com), and currently Brian Danos, struck an excellent
balance between new rock and world pop, but it was
difficult
to hold an audience when breaking from a 20 minute dissertation
on Chechnya into the new Blur song.
But in the end, FastBand befell the same fate as others seen
in the news recently: Great new idea, no more money. Investors have
wisened up to the fact that there is no profit in webcasting, and
in the long run, their investment had better buy more than bragging
rights to a piece of the latest pie. Too bad.
...
 |
...
Thanks, Mike, for an excellent insider's perspective.
The only qualification I'd note is to amend your conclusion
to the following: "There is no profit in webcasting if
you do NO marketing and you never air a SINGLE SPOT."
-- KH
... |
Two other alert RAIN readers also contribute related thoughts:
 |
"To
all future webcasters: Learn from these mistakes!"
|
I used to work for FastBand GlobalCast in New Orleans...and
I do agree with
RAIN's analysis. Having seen it first hand,
there were many mistakes made from the beginning.
| Too much money spent on "cool" and "hip" things.
Our studio had the best broadcast equipment in New Orleans.
(Not really needed for a webcast) |
| Our production department was overworked (usually
on outside projects from the founder's own company) and the
most basic promos were either months late, or never done at
all. |
| Our music director would travel the world for new
"world" music and come back with whatever was #1 in Germany
(and a bunch of phone numbers from hot girls) and tell us,
"This is gonna be huge!" We had "Mambo #5" months
before anyone else. (Lucky us, we were already sick of it
before it hit the airwaves.) |
| They never tried to market the station
beause they were too worried about the look and feel, and
didn't even attempt to market the air personalities that they
spent good money to hire. |
What do they have to offer now? The name is nothing and there
is no content.
To all future webcasters...learn from these mistakes! These
were not stupid people, they just didn't know enough about the internet
or radio or marketing. If you can't do it in the real world, you
can't do it on the internet.
I am sure they all wish they could go back and do it again,
but after $6 million dollars of their own money, they should have
just kept running the ISP, web design and healthcare company that
they started with. You live and learn, and I would not ever give
up the time I spent there. I have learned a lot.
| |
--
"Deep background" only |
...
|
"This
is going to happen more often than not..."
|
I hate to see any company "go away" but at the same time
it is becoming very clear that this is going to happen more often
then not. The key to your story in RAIN is that none of their people
had broadcast backgrounds. Anyone that is doing a streaming format
without the benefit of radio pros I fear will be doomed from the
start.
True, the radio community as a whole has not grasped the
importance of streaming and that it will, I believe, take over in
the not-too-distant future like FM did to AM not so long ago. There
are lots of people with great ideas and technical skills to do really
nice web sites and streaming content but without the knowledge of
sales, marketing, and promotion it will be a short life with no
listeners, no sales, and no company.
| |
Tim
Johnston
The Network Group |
For a brief period yesterday morning, the stock price of
Minneapolis-based
NetRadio
Corporation briefly
dipped
below the $1.00 level, as a block of 3,000 shares traded at $.78,
followed moments later by a larger block at $1.00, another at $.93,
and another at $1.00 again. The rest of the day, the stock traded
in the $1.00 to $1.15 range.
At its current price at the time of this writing ($1.06),
the company has a market capitalization of
$10,600,000.
NetRadio streams 120 music channels with several experienced
radio professionals on its roster of programmers. Back in November
of last year, the company's market cap was briefly almost $150,000,000.
(See stock price chart from CNBC here.)
Read RAIN's latest news story about NetRadio here.
| If you follow Internet radio-related stocks, we'd
love to have you join our brand-new panel of RAIN Stock
Watch advisors. E-mail us here. |
Reprinted from yesterday's issue:
From The Internet Standard: "About 75 percent of companies
advertising on the Internet are dot-coms. So it would 
seem
that online ad revenues would be hit hard by Net business failures
and shrinking marketing budgets. But Net ad numbers are fairly rosy,
leaving offline dot-com advertising
to feel the cuts.
"Internet retailers increased online spending to 59
percent of the total of their average marketing budget – up 10 percent
from the first quarter, according to Shop.org
and the Boston Consulting Group...
"Internet
ads are expected to make up almost 10
percent of all U.S. advertising spending by 2004, according
to advertising industry analyst Veronis
Suhler. That's a big step up from the 4 percent of ad
spending for the Net anticipated this year."
Read the full Industry Standard
article here.
From John
Dvorak's column in this week's Forbes: "It's
hard to say how many people listen to streaming radio. I've heard
estimates that claim up to
45 million people are equipped to listen to streaming radio and
might have heard a broadcast. The numbers are unclear and hard
to prove.
"Whatever the case, I have listened to radio over
the Internet myself, but I noticed that I
have not made a habit of it. As this is written, I
probably have not listened to an Internet radio broadcast for
two or three months. I myself wonder
why...
"My
experience with specialized players is
that, with no exceptions, they have interfered
with the performance of my computer...
"It remains to be seen whether anyone can make money
with any of this. It's starting to look like the emergence of
a new popular hobby, not a new business opportunity. Take a listen
and see what you think."
You can read the entire column here.
...
|
...
If you click the link above, you'll see that Dvorak
writes primarily about the 18,000 "hobbyist" radio
stations on Live365.com
and the appeal of listening to air traffic control scanners.
In this particular column, notice that Dvorak doesn't
really spend any time examining
whether Internet radio is a good new business opportunity
or not. (He simply notes that he doesn't listen himself).
-- KH
... |
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