RAIN Guest Essay: "Song 2" by Andy Lipset

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Issue Date: 
Oct 9 2012 - 11:30am

 

 

Earlier in the year, I wrote an article for RAIN entitled "The Song Remains the Same" (here) which discussed how the noise around the subject of streaming was hurting potential dollars to come into the marketplace for all players in the space -- be it pureplay companies or broadcasters. 

Today, there is another wrinkle that has appeared in the space that could start to hamper dollar flow and that is one around technology. So, I have titled this article "Song 2," a follow up to my original article in January. ("Song 2" was also a big alternative rock hit in the 90’s and - somewhat appropriate to what’s happening in the marketplace -was recorded by the band Blur.)

I want to center on the debate whether or not broadcasters should stream separate commercials in their online versus over-the-air product.

There is a lot of discussion around this primarily because the ad breaks in the streams of many broadcasters sound terrible. Spots run over one another. Some spots don’t start on time. Some of the breaks finish when the over the air broadcast has already started, and spots may finish 20 seconds into the start of a song. While some have categorized the decision to discontinue running separate breaks as a royalty issue — at the heart of it, this is more of a product and, specifically, a technology, issue—and it’s one that will put a cap on money that flows into the market.

Personally, I do not believe that the broadcasters should pull their ability to insert ads into their streams. That said, the issue is an understandable one from the broadcaster’s perspective. To keep your current listeners engaged, and to attract new listeners, the stream has to sound good.

But rather than run away from the problem, I would rather see the broadcasters say “I need to fix it.” This is 2012, and the problem of in-stream ad-syncing should be a very addressable issue at this point of the evolution of the medium and the technology that supports it. Talk to your vendors and work with them to fix the issue. If they point to the ad network, the insertion company, the CDN, or any other vendor in the chain as being the problem, ask them all to jump on the phone together and work it out until they find the problem. If they say the issue is on your side, ask them to help you to work it out. If they can’t work it out, it may be time to look at other vendors. Your product's sound and potential revenue should not be hurt because a technology vendor cannot service and stand behind their own product.

I see advertising revenue getting hurt from several different buckets because of this issue:

  1. Advertisers who have streaming dollars to invest today pull their budgets. We know that advertisers are hesitant to invest in products that sound bad, or worse, where they are unsure of how their spots will run. If you haven’t listened to the focus groups that Edison Research did around digital advertising (in RAIN here), you should do it (here). Current streaming advertisers have a lot to say about product quality and how it relates to investment in dollars. There are several national agencies that have pulled dollars from broadcaster’s streams because of break quality issues.
     
  2. New revenue to the station gets hurt dramatically : Let’s be honest, advertisers are looking for elements in their spend such as better accountability, better targeting, tracking, geo-location, frequency capping, engagement and better post-campaign reporting. And let’s face it, most of this can’t be done with a station’s over-the-air inventory. One of the few elements that a station has in its wheelhouse that allows them to participate in the new world of advertising is the inventory in the stream. It has all of the ability to help stations take part in new dollars and make the medium more relevant and robust. The concept of killing this inventory makes very little sense for where the advertising marketplace has shifted and where advertisers will continue to look at to invest.
     
  3. The overall streaming marketplace gets hurt: If you are a pureplay company, the lack of broadcaster participation in the streaming marketplace, could actually hurt -– not help -- your revenue picture. This is because the more sellers that are in the market telling the streaming story, the faster the market actually grows. This is especially true in nascent markets, and I saw this first-hand from our early days at Ronning Lipset Radio and TargetSpot.

    Fred Wilson, one of our board members at TargetSpot, reinforced to me the point that being one of the only players in the streaming space wasn’t the best thing for the company. He believed "there could be more than one winner in the streaming space" and having more competitors on the street would actually "rise the tide" for more dollars to be driven into the market. While initially I was skeptical, he was absolutely correct. When our sales team was the only unit talking to clients about the streaming marketplace, we grew the marketplace quickly. But when players such as Pandora, Katz360, and Clear Channel entered the arena, the market grew even faster. The same is true today: the more people that are selling the concept of streaming, the more overall heat and share of voice it will get from the advertising community.

Every broadcaster -– let alone media company -– is looking to drive additional advertising dollars into their revenue mix. I am not sure why streaming would be left out of the revenue equation for a broadcaster. There are those that will say the investment of dollars into streaming infrastructure isn’t worth the effort because revenues are not there because the market is still "young." I don’t see it that way--there are many players in streaming writing significant dollars in the space. I think the real question to ask is this: are your revenues not there because the quality of the product is hurting efforts to drive additional dollars to your stations and to the marketplace?

Andy Lipset is the former Chief Revenue Officer at TargetSpot, and prior to that he was Co-Founder and Managing Partner at Ronning Lipset Radio. He has also served as AOL Music's Director of Sales and VP at ValueClick and Interep.

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