02/12

Is there a Business Model for Streaming?

Mike Agovino is COO of Triton Digital, the company at the leading edge of audio’s digital transformation and monetization. The digital audio space is changing fast, as is its relationship to advertisers. And nobody is closer to the action than Triton. So what’s new? And what does that mean for broadcasters in particular?

This is the last of a two-part conversation. In Part 1 yesterday, we focused on what’s new in the digital audio monetization space and what that means for broadcasters in particular. In this part, we focus on the wisdom (or lack thereof) of simulcasting ads between over-the-air and online and whether or not there really is a business model for online radio.

I don’t need to tell you that there’s a lot of chatter in the radio industry about the notion of simulcasting ads between over-the-air and online so as to roll them up into one Arbitron number. My first question is, from your perspective and based on your research, is this even possible given existing AFTRA rules? Then, how much sense does that make in the context of these new announcements we have discussed?

There’s a set of union rules that remain in place, nothing has changed. I think on an agency-by-agency basis, most agencies are not paying “move-over” rights for union members that have produced the ads. I think it is worth noting for the broadcasters who are simulcasting that unless they have a clear understanding that the agency has paid those move-over rights, they’re really operating outside of the union rules and that’s going to be problematic at some point. While ultimately it’s up to the agency to police things, and I doubt many will, I wouldn’t want to be the guy responsible for dragging a big agency into a union dispute. Just sayin’!

I’ve had some conversations with agency friends on the “move-over” issue and most I talk to see it as a pretty moot point. They don’t believe 60 or 30 second “flat” creative produced for radio is ripe for repurposing to digital audio. They preach the virtues of shorter 10-30 second creative units that leverage the interactivity and social capabilities of digital. Most assume radio companies know they can’t simulcast these ads. It seems like a pretty large disconnect to me.

Having said that, it’s 2013 and about time we all got past this stuff. We are focused on opening up all potential revenue streams so whether it’s local, regional, agency, ad exchange, third party ad network, local aggregation, local DIY or self-serve, all of these channels are available for publishers to optimize their digital audio inventory. With this in full swing nobody is going to want to simulcast for the hope of catching some stray panelist who loves to listen online. Not even the traditional buy side is going to buy this inventory that way.

My experience thus far has been that most of the stations that have explored a simulcast were primarily driven by the fact that their digital audiences are too small to occupy the mindshare of local staffs. I wouldn’t want a six figure salesperson who brings me $200 over-the-air rates selling fifty in-stream listeners either, but I know enough about the existing and trending technology to know there are better solutions to this problem and I’m confidant the market will discover them soon.

I truly believe we will be at a point within the next eighteen months where an online listener is worth more to broadcasters than an estimated over-the-air listener. Broadcasters are going to want and need to actually migrate listenership and want to drive overall digital listenership. They’re going to see this as a primary pathway to a profitable future business model.

The statistics are undeniable – an audience migration is underway. It’s being powered by the proliferation of smart mobile technology, and nothing is going to get in the way of that. Strategies deployed in defense of the status quo will prove futile.

Currently the greatest traction exists on the pure-play side, most notably with Pandora, but with others as well. The broadcast side is going to want to have that audience and need to have that audience and not want to see them leave. The value of a listener on the digital side is only going to increase.

Offline media in total have lost 15 share points to digital over the last five years. While newspapers have taken the brunt of this, radio has lost share as well. Advertising strategy and media decisions are increasingly being put in the hands of digital natives. The average CMO tenure is less than 2 years and these positions have evolved to be like playing Moneyball with marketing dollars. An estimate based upon a very small sample that turns five-plus minutes into a proxy for an ad impression and an affidavit from your traffic system as accountability are unlikely to satisfy these types for much longer.

At Triton Digital we are focused on delivering the innovation that lights up new channels and allows publishers to get the highest possible price for every available impression. As the audience is valued more and more by advertisers, the desire to build audience will increase on the publisher side. I think that’s when the publishers will desire more innovation around what they are doing and how they are delivering things. It’s a story for another day but we are investing heavily in the digital pieces that propel engagement levels and time spent as well because we know there will soon come a day when you’ll want to compete for audience.

Mike, some broadcasters will tell me that their advertisers say they want “total audience measurement.”  They want all their metrics to appear in one place from one provider. This idea presumes simulcasting. But is that true? You have direct contact with these advertisers. What are they telling you that they want? Is it “total audience measurement?”

Everybody will interpret differently what they hear, but what we have heard loud and clear is that advertisers want a full view of the audio landscape, not that they want one provider and certainly not that they have identified that provider.

If you’re talking about someone from the traditional audio buying side of an agency, what is important to them is that they continue to establish themselves as the experts in the audio channel – that they remain indispensable within the agency as the audio expert. And so they want to have a view of the entire market. I don’t find a bias toward “estimates” – the type of data available from Arbitron. I find the actual bias is toward the GRP. Buyers simply want to be able to put digital and offline in a similar metric bucket so they can pull from both sides within one budget. This is no different from what is happening with the collision of TV and online video. The GRP is being adapted to let digital fit into a more traditional workflow, but that doesn’t mean the decision maker wants the primitive measurement form.

If there is a bias in how to measure, the bias is towards “census” – actual tracking of connections between consumers and publishers that can be expressed as ratings or GRP’s. And that is the kind of data that Triton provides.

Advertisers also tell us they want those metrics to reside in the systems they utilize every day to do their jobs to plan and buy advertising. We have listened and have focused on integrating our data into those systems and preparing our data for that integration. We have successfully done that with the primary players in that space. We have said on numerous occasions publicly and privately to publishers, we would be happy to feed your MRC-accredited webcast metrics data to third parties, whether it be stewardship systems that agencies utilize or Arbitron or any other third party. This method would deliver what you are talking about at scale quickly if publishers support it.

We are working hard to enable this commerce and help make the market flow for the publishers participating in it. As the technology opens up all these channels it enables competition for the right to message your audience, that will drive greater value and publishers are going to want to do that.

This past week Lew Dickey, Cumulus CEO and one of your larger clients, told Bloomberg that there was no business model for streaming. What’s your take on that?

Actually, I think what Lew was saying ties into everything I have been saying during this discussion.

He’s right, there has not been a viable business model for streaming up until now unless you are a spoken word publisher like ESPN or have lots of spoken word stations like CBS. The combination of music performance royalties on the expense side and low CPM’s on the monetization side have led Lew and others to this conclusion.

Triton’s focus is looking forward, and the consumer is not concerned with the complexities of publisher business models. They just want to engage when, where, and how they want to engage. The audience stats are overwhelming and so certain things are going to have to “give” inside the ecosystem.

Technology solves lots of problems and we believe the monetization challenge will dissipate over time and that these content acquisition costs will somehow be rationalized and the market will find its equilibrium.

We believe these are “when” not “if” questions, and the “when” on audience value is kicking in right now.

Miss Part 1 of this interview?  Find it here.

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  • Don Keith

    Frankly, I think the “Do we stream or not?” question is moot. Regardless the content of the Internet stream (Streams? Video AND audio?), 30s and 60s are not the long-term way to make money. Yes, you can simulcast the spots running on your air, but you can’t charge for share points or AQH persons. You will have to price your inventory based on pay-per-lead and pay-per-click.

    That scares the beJesus out of broadcasters because it is so different from pricing-by-share-point and AQH as estimated by Aribtron. And it is based on far more accountability by the station than anyone out there is comfortable with.

    “Arbitron says we have 30,000 listeners in an AQH during morning drive so the rate is $200 per spot for 20 spots per week.”

    “No, you only delivered five clicks to our fulfillment site at a cost of $10 per click. We owe you $50. Thank you for the truly interested buyers you sent our way, and we are happy to pay you for them…not for numbers on a Tapscan run. Had you sent us a thousand interested customers, we would have gladly paid you two-and-a-half times what the schedule you proposed would have cost.”

    Are broadcasters ready to negotiate this way? They better be.

    Don Keith

    http://www.donkeith.com

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