BY KURT HANSON
Two or three years ago, at the start of the Internet era as we know it, you supposedly laid down the law: "No Infinity stations are allowed to stream their audio on the Internet."

After all, you make your money when people listen to your broadcast signal... and since you can serve any number of listeners at no incremental cost, it's logical that you wouldn't want to pay extra bandwidth costs per listener to have them listen on the Internet.

Furthermore, one might think, you absolutely wouldn't want one of your rock listeners in New York listening to one of your stations in Los Angeles! After all, (A) you'd lose money by losing the New York listener, (B) you'd have to pay for the streaming costs, and (C) you'd get no revenues for the Los Angeles station!

Well, as it turned out, that's been a pretty good law that you laid down.

Your managers and programmers have spent the last few years concentrating on making money for you. Internet audience sizes for terrestrial radio stations, as it turns out, haven't gotten huge yet. And all those people who signed deals with Broadcast.com feel like fools because Mark Cuban made so much money off of them...and you avoided that scenario.

However, we're now well into the second quarter of the year 2000, and I believe that times have changed. Consumers are getting smarter, bandwidth is getting cheaper, and new revenue opportunities are falling into place.

So forgive me if I'm being too bold, but I believe it's time for you to reevaluate your decision. Here's why:

Issue #1:

The first problem that your stations face nowadays is that consumers have become aware of the capabilities of the Internet.

Perhaps not all of your listeners know this, but virtually all of your listeners who are Internet users now realize that radio stations can stream their audio on the Internet.

So if you've got a 50-year-old Internet-using listener in New York City who goes to the WINS/New York City website, or perhaps a 20-year-old listener who goes to the WBBM-FM/Chicago website, or a 35-year-old who goes to KCBS-FM/Los Angeles website, they are going there with specific knowledge and experience and expectations about the Internet.

Specifically, they know that such a thing called Internet radio (a/k/a webcasting) exists.

When they go to your station's website, they may find some valuable information (your playlist, jock bios, etc.) and some reasonably-decent entertainment (trivia contests, animated versions of your DJs, etc.) there, but whether you like it or not, they're probably, more than anything else, going to be looking for the link to your webcast!

A useful analogy: Newspapers' sites As a pretty typical consumer, I know that most U.S. newspapers put most of today's issue onto their Internet sites. Of course, I generally prefer the pleasure of reading the paper version of my favorite newspaper at a Starbucks while drinking a latte, but there are occasions when it's convenient for me to look at the Internet version. Now suppose I were to go to the Chicago Sun-Times website, looking for today's news (which I know I can get at other newspaper websites), and all I saw were reporter bios and a contest and a "This Day in History" feature and a photo album...but no news headlines. How would I feel? I'll tell you how I'd feel: I'd be peeved! Would that encourage me to run out and buy a Sun-Times? No! I'm using the Internet at the moment because it's convenient for me to use the Internet. The Sun-Times's decision would encourage me (A) to visit the Chicago Tribune's website today, and (B) to become more loyal to the Tribune and less loyal to the Sun-Times. And I believe that's what happening with your listeners today: Your policy isn't driving Internet-using Infinity listeners to their stereos; it's driving them to other Internet audio options.

Issue #2:

When you issued the "no streaming" edict a couple of years ago, bandwidth was expensive. You were probably looking at a cost of thousands of dollars a month just to move a small percentage of your AQH to the Internet.

(That sentence, of course, contains a mischaracterization. The issue isn't about moving your audience to the Internet. The issue is this: For those listeners of yours who are on the Internet, do you want to prevent them from being able to listen to you?)

In any case, my point is that in the past couple of years, streaming costs have gone down dramatically.

As I understand it, the high-end players in the streaming field are asking about $.18/hour per stream served -- and I believe that for a major group deal like yours, you might be able to negotiate a deal that's maybe only 25% or 30% of that price.

Better yet, at least one major vendor to the radio industry is currently offering unlimited streaming for $500/month per station. And perhaps better yet, another vendor will give you free streaming (as long as they can have rights to a tiny little window on the audio player, where they sell banner ads).

So costs are coming down. Meanwhile...


Issue #3:

Let's assume your costs per hour to stream audio to a listener are somewhere in the $.06/hour range (but possibly approaching zero). Now, can you make money?

From banner ads alone, the answer is, "Probably not."

Targeted banner ads sell for CPM's of no more than about $10 to $20, which means a penny or two per viewer. As shown in the chart below, if each person who comes to your website sees two banner ads and listens for an hour, you'll spend more money on streaming than you make in banner ad revenues:

	REVENUES:
	Banner ad CPM (typ.)	$15.00
	Banner ad revenue per listener ($15/1000=)	$.015
	Number of banner ads seen by listener	2
	Revenues per listener ($.015 x 2=)	$.03
	EXPENSES:
	Streaming cost per hour	about $.06

But audio ads are different.

Let's look at two scenarios: One in which the Internet listener lives in your market, and one in which he or she is thousands of miles away.

If the listener lives in your market...
It's a no-brainer. In radio, we're used to dealing in CPP (Cost Per Point), but if you take your average unit rate and divide by your average AQH audience size (in thousands), you'll get your station's CPM.

Surprisingly, it won't be a lot higher than the CPMs I mentioned above for banner ads! (I think that means either banner ads are wildly overpriced or radio spots are significantly underpriced.)

Still, if you run 12 units an hour, that's at least $.18/hour in revenues against streaming costs of $.06. Therefore, you should do it. It makes sense to stream.

Objections

Yes, but I don't want to drive my listeners to the Internet! Fine. Then don't mention it on the air. But in the long run, you're not going to be able to stop people from going to the Internet. And once they're there, if they're looking for your stream, you should give it to them. (Particularly if you can make money doing so.) (Fifteen years ago, TV broadcasters didn't want their audiences going to cable...but they wanted to be available on the cable box! This is a perfect analogy.)

But the numbers are so small -- I've read in RAIN that I might have an Internet AQH of only a couple of hundred people! This is nonetheless an opportunity to you to make some nice incremental profit. Even with an AQH of only 100 people, it seems as if streaming is worth it:   REVENUES:   AQH 100   Revenues per spot (at $15 CPM) x $.015   Spots per hour x 12   Hours per day (6A-12M) x 18   Days per year x 365   Potential annual revenues = $118,260         EXPENSES:   12 months of the $500/month deal = $6,000 And if not now, when? When Internet audience sizes are five times as big? Ten times as big? If you wait too long, your most-loyal Internet-using P1's are going to have already found other Internet audio alternatives. They won't need you at that point.

But I make more money off website sponsorships! I honestly don't believe that you will be able to get much long-term repeat traffic to a radio station website that offers only games and trivia and a concert calendar. If you want regular customers, I believe you need to offer desirable, fresh content -- i.e., your audio stream.

But Arbitron will never pick up such a small change in my audience size! But sometime this year, one of your P1s is going to have an Arbitron diary, will look for you on the Internet, will not find you, and will listen to something else instead. In the Arbitron diary system, you won't lose 100 listeners every hour all year long -- you'll lose a huge number of people in a couple of chunks instead.

All right. If my thinking above is correct, then if an Internet listener lives in the same market as your station, streaming to that individual seems to make sense.


And if the Internet listener
DOESN'T live in your market...
there are now ways you can make money from that listener, too!

Several companies are in the process of debuting technology that will let you stream different ads to your Internet listeners than to your broadcast listeners. (This technique is called "ad insertion.")

Internet-delivered audio ads are being listened to by upscale people (Internet users), are completely documented in terms of the number of listeners who hear each one, and can be accompanied by synchronized banner ads and/or a link to the advertiser. Therefore, they can probably be sold for higher CPMs than traditional radio ads.

Some of the best-known firms that are debuting this technology this spring are RadioWave, Hiwire, and Lightningcast. All three have working demos that theoretically will be up and running in radio stations this quarter.

What's the difference between the three firms? (1) RadioWave offers a server-side approach, meaning that Internet listeners can hear a different spot than broadcast listeners, but all Internet listeners hear the same spot. (2) Hiwire offers a client-side approach, which means that different listeners hear different spots based on their age, sex, or location. (Remember that listener of yours in New York who is listening to your L.A. station? You'll be able to feed him New York spots.) (3) Lightningcast says they plan to do server-side now and client-side in the future. And both Hiwire and Lightningcast are planning to build sales staffs to sell the aggregated avails, so your local salespeople can concentrate on local sales. Watch future issues of RAIN for other firms who are also planning to offer ad insertion.

If Internet-only ads do sell for higher CPMs, then the math in favor of streaming looks even better than it did earlier.




Mel, as you know, you've assembled a fine collection of radio stations. And quite a few of them have excellent websites.

Unfortunately, you're not giving Internet users what they are primarily coming to your websites for -- which is a chance to hear your fine radio stations!

If streaming was still a money-losing proposition, it would make sense for you to take a wait-and-see attitude.

But if it's good customer service, if it's embracing the future, and if it's a potential (albeit small at first) profit center, then doesn't it make sense to get started?



What do you think? Particularly if you're an Infinity manager (GM, PD, GSM, or another position), I'd like to know what you think of this argument. (Everyone's opinions are of course welcome.)

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Virus alert: "If you see 'I LOVE YOU' as an e-mail's subject, DELETE it fast! Don't open it. This one orginated in the Phillipines...it takes that handy outlook contacts lists and then kills your mail servers dead. Far worse than the Melissa virus, this one is an IT nightmare because it spreads so fast. NT is very vulnerable. "One nasty little bug... If you have NT web servers and you're sharing over a network, it will take them out...by replicated and wiping every jpg, mov, mp3 file you have. It also travels via mirc (chat) and icq." -- Lou Josephs

Lots of RAIN readers had opinions regarding Tuesday's story on a new startup's plans to bring Internet radio to cell phones next month (click screenshot at right to read the original story), and most of the opinions printed yesterday were pretty negative. Then came Taz...

"Technology wins"

All those folks who ridicule the cellphone/radio innovation are the same people, who in an earlier time, would have said "Get a horse," "If God meant for man to fly . . ." and "The world is flat." Technology wins.                                            -- Jim Taszarek , TazMedia, Inc.

Contribute your opinions here.

If you're hiring for a position that's radio- and Internet-related this week, we'll post it -- free! Simply e-mail the job description here. If you're looking for new opportunities that involve the Internet, you can take a look at the first three available positions here.

May 15-18	Radio Ink Internet Conference, Boston
May 22-26	Real [Networks] Conference 2000, San Jose
June 12-14	Streaming Media East 2000, New York City
June 14-17	R&R Convention 2000, Los Angeles
June 14-17	PROMAX & BDA, New Orleans
July 13-16	Upper Midwest Conclave, Minneapolis
August 3-5	Morning Show Bootcamp, New Orelans
September 20-23	NAB Radio Show, San Francisco
October 5-7	Billboard/Airplay Monitor Seminar, New York
November 5-7	NAB European Radio Conference, Berlin
Did we miss a major conference? E-mail us here.

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