RAIN 9/24: The four words holding back Net radio: "Willing buyer, willing seller"

Paul Maloney
September 24, 2012 - 12:25pm

The webcasting industry-backed Internet Radio Fairness Act, introduced to both chambers of Congress on Friday (see RAIN here), made The New York Times this morning, and journalist Ben Sisario presented the complicated manner in as clear and straightforward a way as we've seen.

"Willing buyer, willing seller. Those four words would seem innocuous, but in the world of Internet radio nothing is more contentious," read the opening paragraph.

As we reported, the bill would move noninteractive webcast services from the "willing buyer, willing seller" standard to the one used to determine rates for SiriusXM Radio and cable radio like Music Choice (known as 801(b), which is also the standard that record labels are happy is used when the rates for royalty rates they pay to songwriters and publishers are determined).

"That model would let the panel of federal judges that set the rates consider evidence both on the value of the music and on the effect the royalty rate would have on the industry overall. Pandora and its supporters believe that standard would yield lower rates," according to The Times. "Record labels and artists... believe that the existing rates are fair and accuse Pandora and others of wanting to deprive copyright holders of the income they deserve."

Congress will likely wait to deliberate the issue until after the national elections in November ("and probably into the spring," wrote Sisario).

We highly recommend Sisario's concise and even-handed treatment of the matter, and recommend you share it with listeners and clients. You can see it in The New York Times here. Finally, for a clear and entertaining analogy that demonstrates why "willing buyer, willing seller" can't work, please see RAIN publisher Kurt Hanson's "State of the Industry Address" from last week's RAIN Summit Dallas here (you can also launch the audio from the box in the right-hand margin of RAIN) -- scroll ahead, it's near the end (about 20 minutes in) of the speech.

Paul Maloney
September 24, 2012 - 12:25pm

In his opening remarks at Tuesday's RAIN Summit Dallas, consultant Walter Sabo emphasized the need for radio to develop "original, exclusive content" to weather the transition to the digital medium (see coverage of, and listen to, Sabo's opening remarks here), and even made a point that he was looking forward to the afternoon's "Innovating Online Content" panel (which immediately followed his opening).

Moderator Sean Ross (right, himself VP/Music & Programming at Edison Research) deftly led the conversation among four leading programming executives through what they're currently developing, what's working, and the staffing and monetization challenges of financing the production of compelling content.

And one could sense the sincerity of Ross, lifelong radio devotee himself, when he implored his panel for a strategy to "repatriate" today's 22 year-old to radio. To that last concern, ESPN Radio Director of Digital & Print Media Revenue & Operations Cory Smith (left, with the two RAIN Internet Radio Awards won by ESPN Audio) suggested that maybe getting young people to actually listen to the AM/FM broadcast wasn't the point. We "give content to listeners in the format they prefer," whether on-demand, video, blogs, SMS..."let the user decide," he said. "Pushing everyone to radio might be a real challenge."

"We're moving to a world of 'segments' and less a world of 'streams,'" Bob Kempf, NPR Digital Services VP, agreed. What could be of interest to a new generation of young listeners would be what he called "algorithmically-driven segments" -- think content delivered based on that listener's preferences.

TuneIn Programming Senior Manager Scott Fleischer said it's as simple as understanding the content priorities of our hypothetical 22 year-old; restated simply by UK Radioplayer Managing Director Michael Hill as "fish where the fish are."

Hill and Kempf concluded (and often agreed while at it) by passing along some programming wisdom. On the perennial issue of understaffing at programming departments, Hill make an unconventional point: "Radio has always been, and we should keep it, a 'lightweight' medium," he said. There's a danger in "becoming the incumbent" -- that is, slow and inflexible and stifling innovation. "Keep on the lookout for disruptors" on your staff, he suggested, "those willing to experiment." He and Kempf agreed that partnering outside your department (or company, even) can help lighten the load.

"Yes," continued Kempf, "experiment, keep development lightweight," and makes sure and test and assess what's working and what's not as often as possible. "Measure, measure, measure."

But how do you finance all that experimentation? How do you get the best ROI when you come upon something that does work?

"Stop underselling your digital assets," Hill stressed. "Put a good, solid price-tag on them." Kempf added, "Be patient." The transition to digital will happen, "the audience is going to be there, the revenue will follow."

Please listen to the entire "Innovating Online Content" panel via SoundCloud below, and watch for more coverage from RAIN Summit Dallas this week.

Paul Maloney
September 24, 2012 - 12:25pm

Most analysis following the leaked word that Apple might enter the Internet radio industry focused on what a move would mean for Pandora and all its established Net radio competition. One stock analyst, Jeremy Bowman, writing for The Motley Fool, examines the issue from Apple's (and its stockholders') point of view, and concludes that such a move wouldn't likely be good for Apple.

First, he reasons, it's an ad-supported game, something Apple's not done much of (especially in local markets, where the company would have to build sales staffs... in which Pandora has a head-start). And there's the fact that while Pandora and Spotify are (near-)household names, neither is profitable, due mostly to the high cost of licensing music. And Bowman doesn't think Apple would stand to get any better of a royalty deal than the others, as the labels want competition, not an Apple-dominated space (like in download sales).

Spotify and Pandora users have spent hours and days (even years) perfecting their listening profiles (to a point they'd be pretty unwilling to walk away from those sunk costs to start fresh on another service).

Anyway, reasons Bowman, Apple's strength is its hardware, not "mere pennies" services like Internet radio.

Read his article here.