They say give up on terrestrial broadcast. That’s history. Focus all your energies on a digital future.
Despite their confidence that digital will save radio, the opposite is true.
If radio shuts down its transmitters and broadcast competes head to head with pure-play Internet services, radio revenue will plummet.
That’s the implication of recent reports contrasting broadcast and streaming cost-per-thousands (CPM).
In other words, a radio station makes three times the money running a terrestrial spot as it would running a streaming spot.
That means every spot that runs on the Internet rather than over-the-air will generate one third the revenue. Something like $9 billion in spot revenue will evaporate when radio turns off the transmitters.
It’s even worse than it appears, because Agovino points out that radio won’t be able to compete with pure-plays running the same commercial loads. He suggests that radio will have to run as few as 6 spots an hour.
One third the CPM and lighter commercial loads. Does that sound like a bright future?
Neal Schore, Triton’s CEO, recently tried to put a happy face on things by declaring a $10-$20 CPM achievable. Maybe, maybe not.
Even if Schore is right, lighter loads and music royalty costs make it nearly impossible for radio to avoid a big financial hit.
Any scenario that focuses on streaming is going to lead to dramatic declines in revenue. The only question is by how much.
If broadcast radio wants to keep revenues at current levels, then the terrestrial product must continue to be the focus of radio groups. It is radio's golden goose.
That's why terrestrial radio has to continue to improve and innovate.
Streaming radio’s most valuable franchises is not the solution. The products that radio groups stream have to be low-cost products that compete directly against match pure-plays.
In the digital future AM and FM will have to become premium services that provide unique products found no other place.
Otherwise, digital will be a financial disaster for radio.