NY Times CEO Says Pay Model is Working

5-21-13

In a commencement address to business students at Columbia University, New York Times CEO Mark Thompson (pictured) told graduating students companies like the New York Times can be reinvented. The Times uses a metered paywall for online content to try to make up lost advertising dollars that has plagued the newspaper industry for years. Thompson says, "The launch of the pay model is the most important and most successful business decision made by The New York Times in many years. We have around 700,000 paid digital subscribers across the company?s products so far and a new nine-figure revenue-stream which is still growing."

Thompson said taking risks is part of being successful. "We will not secure the future of The Times without the kind of bold innovation ? in products and services, in business-model ? which is intrinsically and necessarily risky. The consensus among the experts was that it wouldn?t work, was foolhardy in fact and not needed. People just weren?t prepared to pay for high quality content on the internet and, besides, wasn?t digital advertising enough ? wouldn?t it grow until, just as with print advertising in the golden age of physical newspapers, it alone was enough to support America?s newsrooms? Much of the rest of the US newspaper industry is now following suit. And developing this pay model, launching a suite of new subscription products to attract additional new subscribers, is central to our plans for the future."

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Borchetta: Pandora's Business Model is Not My Problem

2-15-2013

The Country Radio Seminar is less than two weeks away, and on our special CRS cover will be Big Machine Label Group CEO Scott Borchetta. Borchetta has been signing deals left and right with radio companies to share in revenue both over the air and online. With an artist roster boasting Taylor Swift, Tim McGraw, Rascal Flats (pictured here) and others, even though Borchetta will tell you he's a small independent label, what he says makes big news in Nashville. When it comes to Pandora's claim they pay too much for content, Borchetta says, "I didn't ask them to take my content and build a new business model with it." Here's more from our interview with Borchetta that comes out on Monday.

"As far as Pandora and all that, I didn?t ask them to take my content and build a new business model with it. They chose that route, not me. If Pandora went away tomorrow, if they went out of business, it?s not my fault. They chose that route. Did you see Mel Karmazin, when he was running SiriusXM, going, ?Man, you know what? We are going to go out of business.? No. He found ways to keep building that thing and turned it into a winner."

Borchetta also thinks radio can pay artists a little bit more thanks to the money they were given back by BMI and ASCAP. "No one ever thinks they make enough money, and rates are going to change. Hopefully, the economy gets better, but over the last couple of years at radio, BMI and ASCAP gave a couple of points back. It?s time to give those points to the artists, to the labels. Radio is no more important a partner than we are. We are not even asking for more. We are saying, ?What you?ve got on the table: Share it. Bring it back.?

To subscribe to Radio Ink in time to receive our CRS issue featuring Scott Borchetta on the cover, GO HERE or call 561-655-8778. To order Radio Ink and have it download instantly to your mobile device GO HERE. Our February 4th issue features 10 extra pages of editorial that can only be found in our digital edition. Our digital issue is only $49, perfect for salespeople, PD's and managers constantly on the go. And, it's only $49.00 per year which includes all 20 issues.

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Dickey: "We Don't See a Business Model For Streaming."

2-8-2013

Lew Dickey appeared on Bloomberg Thursday where he spoke about a number of topics including the launch of NASH in New York, how he's building the programming side of Cumulus and if there's a financial future in streaming. Dickey said Cumulus, without much effort, has become the third largest streaming platform in the country behind Pandora and Clear Channel. However, he added, that has not translated into revenue. He explains why...

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Dickey said, "Radio is an in car medium and that really has not changed. On the Streaming side, Dickey added, "we don't yet see a business model behind streaming." He says the reason for that is the consumer is shifting to mobile and mobile is good at search and commerce. "It's not conducive for advertising. Mobile is a remote control for commerce. It's not particularly good for displaying ads."

On the programming side, Dickey says Cumulus is organizing around key content verticals. "Country is one, talk is one, sports is another and rock. "Those are the content verticals we're focusing on. We're investing in talk and sports. We're seeing a shift from political based talk over to sports because people are tired of partisan bickering. We see ratings declining in talk and ratings increasing in sports. We're up to about 300 affiliates with CBS Sports Radio."

On launching NASH in New York, Dickey said, "The City has not had a country station in 20 years. The time was right. 85 million passionate loyal fans listen to Country Music. There's a big thirst for Country music in New York."

Watch the interview on Bloomberg TV HERE

(2/8/2013 9:26:17 AM)
I do agree with Mr. Dickey when he says, ""we don't yet see a business model behind streaming."

Am I to conclude that Mr. Dickey has concluded that there is no financial future for streaming radio due to no current model ?

Or am I to understand that Mr. Dickey recognizes this void in streaming and plans to actually do what he is hired there to do and BUILD and implement the model ?

I hope it's the latter.

I am amazed but thankful that the brains behind the corporate machines such as Mr. Dickey haven't figured out how to make money streaming online because I sure have.

And I solved Mr. Dickey's excuse of "the consumer is shifting to mobile and mobile is good at search and commerce."

The consumer has already shifted to moblie and mobile is great for audio listening in addition to "search and commerce."

With all due respect, Mr. Dickey seems out of touch with internet radio and doesn't see seem to see the potential.

(2/8/2013 8:58:44 AM)
Waytago, Charlie (and Lew).
What some of the Big Brains have failed to acknowledge is that radio works best and is most enjoyable when accessed as a "passive" medium. That is, turn it on; enjoy it and do something else meanwhile.

To be successful, a station's online presentation requires that a listener get "active" and start participating with more clicks that lead the user to meander off the site and go elsewhere.

Whaddya say, kids. Let's just concentrate on making better Radio. Dunno. Might work!

(2/8/2013 8:48:34 AM)
Lew is absolutely on target - and joins the ranks of those who've seen thru the emperor's clothes on this for several years. And when it's online, it's audio NOT Radio!

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Perhaps The Current Radio Model is Outdated

by Ed Ryan

Pandora founder Tim Westergren strolled into the RAIN conference yesterday and could have easily been mistaken for any college kid looking for a Starbucks to plop down his backpack, flip open his MacBook and slide in his earbuds. Instead the former musician who couldn't get his songs played on the radio has developed a plan to make sure all performers have a place to be heard and get compensated for it. Westegren also had a quietly delivered message that landed like a hammer aimed at the people who will walk the floors of the Hyatt Hotel in Chicago today. That message; your advertisers are starting to drift our way and we plan to keep them. He makes a good argument. And he makes it with an air of confidence absent cockiness.

It does make you wonder. Well it should make you wonder. Westergren says "there is no doubt the future of radio is Internet radio." And, this time he gave some very specific details on how Pandora is having success taking revenue from radio. Westergren - who spends a lot of his time hosting town hall meetings with listeners - says "advertisers are flocking to this space and Pandora is experiencing a growing demand from them." He touted success from a car dealer in Dallas, Whole Foods in San Francisco and the hospitality category. Westergren said "we have visibility on the advertiser side and we are seeing a shift of money from broadcast to the Internet.

The question that remains is whether or not Pandora can bring in enough advertiser revenue to pay the bills and satisfy shareholders over time. What is that hourly spot load count that will turn listeners off? It's clear Westergren believes Pandora will grow and prospe. "We run over 500 simultaneous campaigns which allow us to target. Advertisers recognize this is a good place to spend money. There is a growing demand from local advertisers. He added traditional radio "is approximate and will not survive in an age of data. Accuracy is in demand." Westergren says Internet radio is drawing ad dollars because it offers site, sound, motion and data.

Maybe, just maybe, Clear Channel's John Hogan has it backwards. Maybe Pandora is much more than a playlist on shuffle. Maybe it is a viable business model that offers consumers a radio experience they love without unbearable interruption. Maybe it offers advertisers geo-targeted ads using site, sound and motion but more importantly provides them with accurate and specific user numbers not AQH, rating and share projections.

feedback edryan@radioink.com or leave comments below.

(9/14/2011 6:19:28 AM)
The Radio Industy Executive's Perspective: "Maybe it offers advertisers geo-targeted ads using site, sound and motion but more importantly provides them with accurate and specific user numbers not AQH, rating and share projections."

The Internet Radio Executive's Perspective: "It offers advertisers geo-targeted ads using site, sound and motion but more importantly provides them with accurate and specific user numbers not AQH, rating and share projections."

There is a difference!

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Jerry Lee: "Streaming Your Station Is A Bad Business Model"

Jerry Lee may go down in history as one of the most successful independent broadcasters in the history of radio. Operating in the 7th largest market in the country, Lee's WBEB dominates. He credits a lot of his success to spending tons of money or research. Lee will research and test anything that moves to get a real time feel for whether or not something will work. How many radio stations can say they test morning show bits before putting them on the air? What Lee does not care too much for is streaming. He says his view on whether stations should stream is different than everybody else.

WBEB stopped streaming its signal over two years ago, according to Lee. "First of all we are one of the few stations in the country that doesn?t stream. The reason we stopped streaming is that it?s a bad business model."  Lee says eventually royalties will kill streaming. "Right now it?s a bad model without that.  If you take the combination of the cost of streaming and the royalties you are paying now, it is a stiff dollar.  You are paying a lot of money versus, roughly, 3% on terrestrial radio to BMI and ASCAP. The problem is going to get worse, because the royalty tribunal, has no incentive to do anything but raise rates.  They can do anything they want.  As an industry, we have absolutely no negotiating power.  Theoretically, you get to the point where they want 90% of the money.  Why go that direction?  It?s bad now, it?s only going to get worse."

Lee says "the chip" in the phone - and elsewhere - is the next big thing, not streaming your over-the-air signal. "One of the things that is going to happen to streaming, is a company called SiPort, who has developed an HD chip that is incredibly small, that will fit into a smart phone or a car radio or anything else. It will sell to the manufacturer for about $2.  You will have HD on it.  With HD you will be able to do things like couponing and you will have interaction between the listener and the station. The beautiful thing about this is, it?s not taking up any bandwidth.  All of the major carriers are doing away with bandwidth or they are starting to charge for bandwidth. That?s where it?s going to go.  In my opinion, streaming is going to fade out.  There will still be some niches like the Pandora?s of the world. I don?t think terrestrial radio, in the long run, will continue to embrace streaming, when they can have this great signal on their cell phone with HD radio."

Lee goes on to say that radio stations should focus on selling over-the-air advertising. "The other thing about digital is that you should use your website in combination with your advertising to make everything you do at your station more valuable.  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. Put all of your energy there. The Internet does not create desire. Radio and television create a desire. The internet is a great fulfillment mechanism. The Internet is a great information mechanism, to get more data on what you want to buy.  It performs a great role.  It does not create a desire for the product.  We work very closely with the advertiser to help them take advantage of our website to move product."

(6/13/2011 1:49:19 PM)
Yes, terrestrial broadcasters. This is 100% correct. Please continue to do exactly what you are doing. Pay no attention to us or to the technology that your listeners are already adopting en masse. Thank you!
- Pandora, Slacker, and all internet radio business(6/13/2011 12:44:10 PM)
Both streaming and HD have their business model problems. We can't disregard the simple fact that the internet is fragile. Oh so fragile. Ask the people in Joplin or Tuscaloosa. See what happens when yet-uncreated viruses target online streams and wreak havoc. Ibiquity's venture capitalist model of the license fees and annual payments fits only the large markets and the people who want to pay $100 for a small clock radio. Terrestrial is the only solid, reliable medium. (6/13/2011 12:33:03 PM)

The most powerful message in this article is buried in the final paragraph. It has nothing to do with streaming and everything to do with what's wrong in the radio industry today! The interactive revenue stream is a pipe dream. And the longer we search for it, the farther we stray from the REVENUE RIVER! Jerry is right and we should all take his advice!
(6/13/2011 11:13:36 AM)
Jerry presumes it's not possible to sell enough advertising to support the platform, and I would have to ask, "why not?"

There's a real and growing audience in streaming, so to feign failure in digital is to fail in sales. Radio is a culture that refuses to graduate to modern CRM facilities, so with virtually no order automation, $10 spots carry hefty cost of sales; our sale-by-appointment mentality cannot sustain digital.

(6/13/2011 10:47:24 AM)
If you look at the Arbitron Edison Infinite Dial study it shows that radio and streaming can be complimentary. I don't believe it's one or another. However streaming when compared to HD radio is a much better investment because it puts you into the path of the quickly growing internet and mobile device markets and reaches beyond your signal footprint. Also it can be very profitable if you know how to use it. There's more ways to use streaming than just simulcasting 24/7.

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Viewpoint: "Pandora Business Model is Suicide Pact"

by Ed Ryan

You'd be hard-pressed to find too many people not on the Pandora bandwagon these days. The music service is all the rage on Wall Street as every Tom, Dick and Harry investor hangs on every word written in every SEC filing just waiting to dump their money. Bloggers, even former radio people, write about how great Pandora is and how not-so-great Radio is. Even at Radio Ink's Convergence, we stopped counting how many times the word Pandora was used, most of the time it followed a giddy adjective. The only guy stepping out on a limb is Bob Pittman who called Pandora nothing more than a playlist on shuffle. Well, we found someone else. You need to hear how he lays out the numbers on the Pandora Phenomenon.

Jim Edwards is a former managing editor of Adweek. He's also covered marketing at Brandweek for four years and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. He now works at BNET, a division of CBS Interactive. Edwards recently penned a piece entitled "Pandora's Business Model Looks Like A Suicide Pact." He believes Pandora is just a hobby, not a business. A headline like that deserves some explaining. After all 98% of the people with a pulse see Pandora in a completely different light. So we got in touch with Edwards and asked him for some details. 

RI: You are one of about 5 people who are not on the Pandora bandwagon. How is that?
I love Pandora. I just don't see how it can become profitable.

RI: Suicide is a very strong word?
Pandora's damages are self-inflicted. It might die. You figure it out.

RI: You've done the math with very impressive graphs detailing how this is not going to work. Can you talk about your data?
Pandora's expenses (music license fees) are directly related to its revenues (the ads it sells against people listening to those songs) and those expenses are greater than its revenues. Further, if someone subscribes to Pandora they get the service without ads, so ad revenue and subs revenue constantly cannibalize one another. Lastly, its music fees are set to rise through 2015. The company has yet to describe how it believes it will become profitable. Right now, Pandora is someone's interesting hobby. It's not a business. I've looked at Pandora four different ways (see chart), and it never comes out in the black.

RI: The "set" annual increase in music fees expires in 2015. One could argue that those receiving the money from Pandora would not want to lose this massive revenue dump and will come up with some sort of sustaining agreement. What are your thoughts on that?
The music business will have to do some hard thinking about whether it wants Pandora to survive. Sirius XM profits quite nicely on the same licensing scheme that Pandora is subject to. The music business may choose just to live without Pandora, or it may lower its fees and allow Pandora to live. It's hard to see Pandora getting a "special" deal that no one else gets simply because we all like Pandora.

Alternatively, Pandora may have changed its business model by then and found a way to make a profit. At which point, the music business might want to lock in its fee level for the next period. It's free money, after all, and the more services that can make money playing it the more money artists and labels will get. They should consider lowering the fees, frankly. But I suspect the music business will see Sirius' and Pandora's profits (if there are any) and try to kill the goose.

How long do you think Pandora lasts?
No clue. When it makes its IPO that will inject some cash. It may get loans or float some debt. It may place private sales of new stock. There are endless ways for nonprofitable businesses to raise new money.

What is the formula they need to succeed?
They need to charge advertisers more per listener. Or they need to run ads more frequently. Or they need to make the "Are you still listening?" button pop up more frequently. Or they need to raise subscription rates. Or they need to take a greater cut of any music sales generated by clickthroughs from Pandora. Or perhaps they should do product placement and take payola from music labels to play certain songs in appropriate channels more often. It's legal if it's disclosed.

Why do you believe there is so much support from people, even people with money, for a business model that never has seemed to prove it can make a profit?

Because Pandora is really awesome to listen to. For listeners it works really, really well. You get the music you want with no annoying DJ. You get all the info you need about the songs -- far more than a DJ will give you. Your readers should check outBeep-Thump Express, my techno channel on Pandora.

Jim Edwards now works at BNET. He can be reached via e-mail HERE.
You can read additional blogs Edwards has written about Pandora HERE and HERE

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