“Streaming is a bad business model. If you take the combination of the cost of streaming and the royalties you are paying now, it is a stiff dollar, (and) the problem is going to get worse.”
Are these the words of a mad man? Are these the words of a digital luddite, oblivious to radio’s inevitable future, unaware that the light ahead is actually a digital train hurtling radio’s way?
Or is Jerry Lee, owner of Philadelphia’s highly successful WBEB, simply saying out loud what every radio station owner has discovered, that streaming revenue doesn’t even cover its costs, and may not in the future?
Last year we pointed out that newspapers were well ahead of radio in developing a digital strategy, and yet only 12¢ of revenue came from digital. The vast majority of newspaper’s revenues were still from print.
Even if we use the most optimistic newspaper numbers to estimate radio's future digital revenue outlook, there's still a good chance that local radio, once a $20 billion industry, will become a $6 billion industry.
In another post we pointed out that BIA/Kelsey’s estimates put digital revenue at 5% three years from now, growing at something like 15% a year. We noted that:
The disparity between broadcast and digital revenue is so great that for digital to make up for a broadcast decline of just 1%, digital has to grow 33%.
Growing broadcast revenue by less than 4% generates more revenue than all the money radio makes on digital.
Is it any wonder that Lee declares:
“For me to go out and sell digital, my website, etc, is playing with pennies against the dollars I could make by becoming sharper at selling my product. The money comes from selling commercials.”
While critics attack digital skeptics like Lee, even radio’s harshest critics turn silent when the conversation turns to revenue.
No traditional medium has found a digital strategy that pays its way. Not a one.
So broadcast profits are funding money-losing digital initiatives. Lee is echoing a point we made some time ago that needed money should not be diverted into digital, but rather put into growing the broadcast product:
Listeners have been very patient with radio as it has cut back on local programming. They have continued to listen while radio becomes homogenized and nationalized. There is a limit to their patience, however.
The industry should pay more attention to successful broadcasters like Jerry Lee, and less attention to self-serving new-media pundits and stakeholders.
Radio needs to adequately invest in the present before it can afford to invest in the future. That means putting more money into the product and less money into new platforms.