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AG News: Tuesday - 2/17/2009

"Local" Covers Larger Area in Radio Today

If there's anything good to come out of the NAB agreement with SoundExchange for local broadcasters, it's that the radio industry will soon understand it must stretch its concept of the term "local" to survive after paying those streaming rates.

Let's quickly go over the terms: from $0.0015, a gradual increase to $0.0025 for each listener for each recording by 2015. It starts at 16% less than what is being demanded of pure-play internet radio stations. If you are interested in seeing what was offered to small webcasters, the agreement is here and the agreement term sheet is here.

There are two thoughts about NAB signing this deal:
1) Radio won't make it work without reconstructing how it sells its online audience.
2) The streaming fee will go up as each station builds its audience online.

Let's take the second point first because it's far from anything the radio industry has ever had to deal with: an escalating expense associated with extending audience reach. This brings a new metric to radio, "Revenue Per Visitor." It's a mathematically certain way to show whether each audience member makes you money, or costs you. The formula is Revenue Generated/Visitors = Revenue Per Visitor.

With server log analytics, you'll see how minor adjustments in web site programming elements add to your revenue or cause people to leave.

Revenue Per Visitor was never considered in a radio station's programming cost before because you could never track audience size. At $0.0025 for each listener, for each recording, you now know that it's technically possible to count an online audience accurately. You may also begin to see the granularity of measurements a radio sales staff can offer in its web site ad package.

It's no secret that HOW radio sells itself is antiquated. So, reconstructing your sales plan is useful if moving this old approach online.

As the NAB and SoundExchange agreement proves, accounting of an online audience is accurate enough to base your costs on it. The natural extension, then, is to offer clients this same granular accountability as a premium service attached to an advertising campaign. You can establish separate revenue streams for a variety of reports you are now able to provide advertisers.

Now about those advertisers, and getting back to our mention of stretching the concept of "local." Anyone listening to your radio station online, who lives in your ADI, helps represent approximately 40% of your web site's total visitors. (That's a very general/generous estimate based on years of watching data like this.) 60% of your web site traffic will come from outside of your market.

Focus selling to the 60% of outsiders by targeting (as advertisers) your town's businesses which have web sites offering online transactions.

If the radio industry is going to sign agreements to pay by audience numbers, it needs to establish methods of charging advertisers using the same audience numbers. (BTW: $0.0025 per listener for each recording may not sound like much until you extrapolate that over an AQH of 15,000.)

By setting up to pay these very high copyright royalty fees, NAB may have just pushed its radio members into tomorrow. Radio industry executives must now look at audience numbers on a much more molecular scale - where most in-the-know ad buyers are starting to settle.

When these execs look, their eyes will open wide; only we won't be able to tell if it's from an amazement at what stands before them, or the amount of money they will need to pay for streaming to an online audience.

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President, Audio Graphics
Ken Dardis
Online Since January 1997

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