CBS Is Quietly Building An Internet Radio Powerhouse

Comments (Archived):

1. And don’t forget that they own Last.fm as well. They do a fair bit of audio streaming as well.

   1. I was just about to make the same point :)I don’t think CBS has interfered with Last.fm so much to date–the original team is still there and I’ve heard they are largely still calling the shots. The monetization for Last.fm comes from referring people to Amazon and iTunes, so it will be interesting to see if they add audio ads as well. I think there’s an inherent problem with sending traffic to iTunes too–there’s a chance they won’t come back! Apple’s Genius Playlist currently only plays content from your own library, but this could easily change.

2. It will definitely be interesting to watch. I liken this to the Internet video industry: it wasn’t until YouTube proved that online video could be a commercial enterprise did the media companies become interested in working with the trend (Hulu) instead of against it.I’d bet that the success of streaming radio via Yahoo and AOL (and Pandora and Last.fm) has shown the media companies that it’s possible to work with this audio trend rather than against it.

   1. This is interesting – internet radio has been a large and growing sector for years, well before YT came along a couple of years ago. The biggest problem has been an expensive royalty rates ($0.0014 per stream in 2008). While still far cheaper (than the on-demand rates that imeem and others are paying (by 3.5 to 1), the rates make it difficult to achieve marginal profitability (revenue – [royalties + bandwidth]). As a result, I believe both AOL and Yahoo have seen declines in listenership as those services pushed traffic elsewhere. I suspect their willingness to let CBS run those operations reflects these difficulties.However, pursuant to the Webcaster Settlement Act (passed in Sep), a new, cheaper royalty rate supposedly is close to being / has been negotiated b/n DiMA (which represents webcasters) and Soundexchange (which collects webcaster royalties). So CBS’s moves may well prove savvy given a new set of economics.

   2. On that note, just saw this, form RAIN (http://bit.ly/IZ0N):Yahoo! will hand over the reins of its webcasting pioneer property LAUNCHcast Radio to CBS Radio next year, the companies announced today. The reason, according to Yahoo! Music chief Michael Spiegelman: royalties.“Because of the unfavorable rates, we didn’t think it made sense to invest in the product,” he told the Associated Press.

3. Interesting. I was just thinking about this because I realized that everyone in my office, excepting myself and the sales people, are listening all day. I assumed they were listening to iPods but most are listening to streaming radio. None, however, are listening to channels with ads. I don’t listen because a lot of my work is writing and I can’t write when listening to music.

   1. i am loving the zemanta links fred – really helps with context when learning about a topic.

4. Just curious, what is so appealing about the streaming audio experience vs. on-demand audio (a la iTunes)?In video, we’re seeing a clear trend from streaming video (television programming) to on-demand, presumably because viewers want to choose exactly what they watch, when. Why would it be different for audio?(I suspect this might have to do with the fact that there is a discrete amount of videos we want to watch at any given time, while musical tastes are much more open/dynamic and people are always willing to listen to new music that fits in with their preferences).

   1. I think the main rationale here is that most folks tire of listening to iTunes or their iPod on shuffle (or their albums or playlists). Further, how would you ever find new music unless you’re able to check it out new stuff, which generally you don’t know you like til you hear it? Radio lends itself to both these circumstances.And if playlists are sufficiently niche or personalized, streaming audio is prob preferable to having to go hunt-and-peck for a new track or album every X minutes; you can just sit back, be lazy and be programmed to.

   2. Streaming audio, particularly music, is a “put it on and let it play in thebackground” experience. It’s great to have someone else play the music foryou

5. Terrestrial radio – fighting a decade of declining revenues from the “Song, Song, WAL-MART COMMERICAL, Repeat” method of radio monetizing – now want to do essentially the same thing to online radio. Awesome.In this new interview with radio research consultant Mark Ramsey – Seth Godin expresses that he thinks that method is old, tired and doomed.http://tinyurl.com/6z4oqpAs a guy who works in broadcasting – I believe far more in Seth’s vision.But, I also know the Radio Industry. Our leader’s obsession with the :60 spot mirrors the Record Label’s obsession with the CD.

   1. Jeff, you’re right. I just listened to Seth Godin’s interview, and he has nailed it. I’d take it a step further and say that terrestrial radio to a large degree has really abandoned its listeners. Years of cost-cutting, consolidation and shockingly poor business decisions have led to a handful of bland, homogenized formats that are so predictable it’s sickening. Add in voice-tracked segments by equally bland personalities, stupid “morning zoo” radio shows, redundant playlists and larger blocks of commercials, and it’s no wonder listeners have fled to the internet to seek something fresh.As for the CBS owned and operated stations (or those of any other radio company) migrating online: if listeners feel this way about radio, why would they want to listen to a stream of the same crap on the internet? Outside of the constantly changing content of news/talk radio, there seems little reason to listen to the same product merely moved to a new medium.So then have they at least hit paydirt by acquiring these online services? Doubtful. It’s not enough to buy up a bunch of internet infrastructure and set your sales force loose like a pack of rabid dogs. Listeners aren’t dumb — they demand content…good content. And as Godin says, they want to feel wanted again, not yelled at and interrupted by commercials and traffic reports.I sense that terrestrial radio won’t know what to do with internet radio, they won’t give it the creative energy necessary to win listeners, and they won’t know how to monetize it correctly.

6. This is definitely a big trend and I have seen the same as another commenter below – that many people are listening to streaming radio versus their iPod collection and I am sure there is a reason for that. Having said that though, the advertising on radio needs to become a lot more easier. It just doesn’t feel as simple as Google Adwords right now and the players who bring forth that simplicity will win. Ofcourse figuring out a non-intrusive ad model is a bigger challenge.

7. Building on David Porter’s comments (loved the parenthetical formula), I wish we had the “Jonathan Potter View” on this trend and the consolidation of “poorly-monetized streams” under the CBS umbrella. Jonathan is Exec. Dir. of DiMA, negotiating with SoundExchange. If Y!/LaunhCAST throws in the towel to a cash-richer CBS, what smaller webcasters are going to be able to overcome the “royalties + bandwidth” COGS of audio streaming? I sense these COGS total $2.00 – $2.50 CPMs all-in — David likely has the figures, as he needs them to run 8tracks (which rocks).If TargetSpot is positioned to thrive in this environment, is it able to fill 100% of its partners’ inventory at an eCPM (to the streaming provider) that exceeds $2.00? This may be “someday scenario,” but it strikes me as a propos of this comment thread to “show the math” on how a mid-sized or large (non CBS-subsidized) streaming audio provider can actually recoup — affiliate links to Amazon (a shiny nickel per-track sold) and Amazon CDs (small dollars on each CD sale) will not back into a meaningful eCPM, and “sit back and let it play” makes display ads a tough sell. If TargetSpot is yielding in excess of $2.00 CPMs for its partners, then great and streamed audio will flourish.Note that “eCPM” is actually an inadequate metric, since it better-reflects page view-like impressions. Streams can last for hours, and mercilessly demand royalties regardless of true user engagement (unlike page views, where one page can sit open for an hour and register one impression, by comparison).If there is definitive math that shows how [revenue – (royalties + bandwidth)] > $0, that would say to me that streaming audio has “turned a corner” and an ecosystem of many participants can thrive. If the aforementioned equation still produces a negative number, then CBS’ assumption of others’ streams is like the Fed assuming banks’ debt until “the market works itself out,” and that’s not a self-sufficient model.

   1. CPMs are in the mid single digit range at the low end (national untargeted advertisers) and up to about $30 on the high end (geo/demo targeted). And these are for 30 – 60 second ads. Some pure play webcasters cringe at the thought of a :30 (much less a :60), but the reality is that this ad unit is well tolerated if it is relevant and frequency capped. In time, there will be a market for shorter length ads, but for right now, the :30 rules. Sell through rate varies by partner depending on a bunch of variables, but a high quality web only service running an ad every 4 songs should approach a 100% sell out rate in 2009. As for total monetization – it’s up to the broadcaster to decide how many ads they want to run. The good news is there are a lot of options and it is relatively easy to measure how your listenership tolerates them – and adjust accordingly.

8. The best way to prepare for the convergence from traditional radio to online radio, is to position your business to converge in the same way, which is exactly what CBS are doing, from ad sales to property.