Paid Terrestrial Radio

Just because satellite radio's business model is having a hard time finding profitability doesn't mean that paid terrestrial radio content can't be viable.

This space is all about ideas and one that I'd like you to consider is the possibility of offering radio content -- or streaming/podcasting content -- for a price.

There is precedent for this micro payment approach.

It is called Apple apps.

And there is a company called Peepcode that sells $9 screen casts and even more expensive subscriptions to people who want to learn website development.

You can also get a paid subscription to the site that earns discounts but the important note is that there is a change taking place -- a change that the radio and record industry is not tracking.

That change: paid content.

We're going to be seeing it in the newspaper business because publishers cannot afford to give away the content of their printed papers for nothing. It is becoming apparent that despite Google's success selling search to advertisers, there is a limit to what advertising can monetize.

The New York Times
will soon announce that it is going to charge for online content.

Two potential models are under consideration. A straight subscription and a metered system where the more you access and read, the more you pay. The New York Times has outstanding reporting that bloggers cannot duplicate so if you want to read The New York Times content online, you'll probably have to pay in the near future.

As it turns out Mel Karmazin, the former Infinity, CBS and now Sirius XM CEO probably had it right when he did not offer terrestrial radio online. Many thought he was nuts -- I was one of them -- but online access to terrestrial radio is not a growth business, sorry. It's a cottage industry.

Charging micro payments for content that audiences want to access may be a model going forward.

For those of you who have Apple iPhones, hazard a guess as to how much you've spent on the icons you display on your phone. Even this early, the market is showing a willingness to pay for play -- so to speak.

For example, if I charged 38 cents a day for what I write here at Inside Music Media, many readers would probably say -- I'm not paying it. I want it free. That's fine. But a percentage of readers who really value it would say, sure -- I'll pay $99 a year especially if I can get some other benefits thrown in. Someday this will be my model.

Hearst is one of the few magazine publishers that does not give content away for free. And they use their successful TV operations such as The Food Network to attract 900,000 subscribers to Food Network Magazine and that figure is growing every month.

Hearst is very different with the capable publisher Cathie Black at the helm.

They don't give away their magazine content for free on the web but they use the web to create new revenue streams. Contrast this to Newsweek, US News and Time -- all of which are in trouble -- so you can see that giving away content has not been the answer for these magazines.

By extension, radio -- not necessarily the free version on-air -- but the custom streams and podcasts that can be developed separate and apart from the station format -- could be a great source of income if they are priced right using the Apple app or micro payment method.

Therefore, want smooth jazz?

Here's an app that costs $1.99 per month and Fagreed Suleman can never take it away from you. The app on your phone or computer could still be monetized with banner ads, but the programming is by subscription. The more fans, the more money.

The benefit to the station or entrepreneur wanting to get into this business is the prospect of earning stable income without depending on the ad market. You connect with your audience in a direct way as you promote a content model.

Your paid audience will not have to be bombarded with ads. They happily pay for the content they crave. They can contribute to helping you build your content model and they have a sense of ownership in your product.

I know what you're thinking.

If satellite radio isn't working, why would micro payments work?

Satellite radio is just terrestrial radio without commercials (on some channels). There is not much differentiation between satellite content and terrestrial content. In fact, many terrestrial stations are better than their competitors on satellite.

Another reason is that satellite radio is overpriced. I say that full well knowing that satellite operators need $12.95 a month to offset the high cost of maintaining satellites in orbit, but the audience doesn't need $12.95 as an expense. They sure don't need it in a recession.

But 99 cents a month for a format or $1.99 for, say, the 50's, 60's and 70's package would work all day and night especially if you could access it on any device not just in the car or on a phone.

In all fairness, the advent of the Internet took a lot of media businesses by surprise. Initially, the ones that tried subscription models failed and eventually joined the others in giving it away for free online.

That's just plain silly now.

I'm writing this as a heads up that we are just now entering an era of reconciliation -- a time where media businesses are going to have to withdraw valuable content from the Internet or make it available for a fair subscription price.

Vanity Fair, one of the best magazines out there as far as I am concerned, costs about $15 for a one-year mail subscription. I'd pay that to get it online if I wanted it. That price would also have to be Kindle inclusive, iPhone ready and so on.

As previously mentioned, my New York Times subscription is now $796 a year for seven-day printed service but I get the entire paper for free online. They've blown it. Because no matter what their online price may be, it won't be $796 a year so I'm not going to pay it anymore.

However, I'd pay $99 a year for it.

I get The Wall Street Journal online for less than $100 and I'm happy to pay it.

I spend under $100 a year for my favorite trade publication News Blues and as far as I'm concerned I'd pay more -- it's for TV people and it satisfies my TV background. Well written and edgy.

Back to radio.

Give me WCBS-FM with all the enhancements it had before the format was scrapped and I -- along with other fans -- would pay 99 cents a month --- maybe more. And for those who want 80's music mixed in with the 60's -- no problem -- $1.99.

Want a stream with only new music? Price it reasonably. Maybe 99 cents for the year.

CBS has two million People Meter listeners to Amp in LA listening for free. Of course, when I say listening I mean The People Meter is picking up listening. The station is not about music discovery. It's about playing the hits. If each listener paid 99 cents a month for it, look at that business model.

They wouldn't because young people don't want broadcasting. They want podcasting. Content they can consume on-demand.

Yet that model will also work.

How about KYW Newsradio in Philadelphia charging me 99 cents a month for a "911 Philly" news app where I can hear radio news, see it, get traffic, hear narrated breaking news updates, choose the stories I want, get sports, let me connect with the station to report news and communicate with other news junkies, etc. Now that's taking a news brand and making it a growth industry again.

I mention paid content at this point in time because I can the sense that the radio industry is hard up enough to finally seriously look to the Internet as its future.

Regent's Bill Stakelin quoted in R&R recently said the company’s net broadcast revenue decreased only 12.3% in the first quarter compared to the overall 24% radio revenue drop as reported by the RAB. That's nice, but it's not a growth business.

Putting formats on the Internet that must compete for ad traffic is a tough road ahead.

There is no doubt that broadcasters are forced to take another look at the Internet and mobile -- you know, the stuff we write about every day.

And what I'm saying is -- rethink "radio".

The "radio" that will work doesn't even resemble the radio we now broadcast.

"Radio" will be creating local pods of entertainment, information and social networking -- and charging a fair and reasonable price for it.

Micro payments equal maximum profits.

I am convinced that if the Internet were invented before radio, content would never have been given away for free.

Today, because of new technology and changing sociology, broadcasting is not necessary.

On-demand is a requirement with the next generation.

And, consumers will soon be getting accustomed to paying for the content to which they subscribe.

That is the future.

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