HD Radio money-maker.

[radionekkid]

HD radio largely discussed here from programming perspective and a little technical here and there, but nothing of any real substance, only useless claims and counter claims. Where the rubber meets the pavement is in ad sales or how the money comes in the door verses how much goes out the door, very simple cash flow concept. A lot of money has gone out the door on capital cost in a few of the larger companies, but very few smaller ones. Radio ad revenues are trending down and this looks to be the case for some time as it has been in that direction for many quarters now. About right now, the folks who have put the money in are starting to press for the ROI. This has to come from either new business or expanded existing business. Based on the ongoing downtrend in ad revenues on the existing stations, it does not bode well for suddenly finding new revenue streams to feed the new HD-2 offerings. The rest is just a swap unless you can convince some time buyer that the new digital audio is considerably better than the current analog or they are just plain generous. In any case, that’s not likely given all the competition for those much sought after ad budgets. It can’t be compared to the early days of television or FM, simply not the same playing field. Hell! People would compromise their standard of living just to pay for a TV set in those days no competition either. Today, I am glad I don’t have a dog in that fight. It would have had to be successful right out of the gate almost and all tangible facts indicate that has not happened. FM might hang on as novelty as these investors aren’t going to be too quick to write off the capital cost. The AM product will have to find another platform away from the hybrid concept to be viable, but still the question remains, where will the additional revenue come from?
Those who have profited to date, equipment manufacturers.

 

[Radioman100]

Radio went into this knowing HD wouldn't be profitable for many years. In fact, Alliance stations are just now thinking about monetizing HD in some small ways like "this hour brought to you by" with no commercials.

It's radio's one discernable nod to the future. Everything else is today, today, today with no thought given to tomorrow.

 

[Chuck]

Hmmm. The part that doesn't make sense, any technical issues aside, is how you are going to make money out of it? Back in the "good old days" when radio could be profitable even to small operators, there were a limited number of stations on the air. Because there was a finite amount of inventory, it was possible to sell most of it. Radio prospered.

Now, thanks to events in the 1990's (and even later), there are three or four times as many stations in a given market. Hopefully, that market has grown, but has it quadrupled? Probably not. In the interim, there have become many new, and sometimes effective, ways to promote your business. The pie has become more divided, each slice getting smaller and smaller. There are only so many listeners to go around.

Meanwhile factors like the Internet, cell phones and ipods have made some inroads into that same pie. Now someone tells us that we need to double or triple the number of radio outlets by adding HD. I can see that working for a few large broadcasters in the very long term. From a strictly business point of view, how does that make sense for most “normal” stations? It looks like we are just diluting our product even more than it already is.

 

[Dighton Rockhead]

The only logical conclusion I can draw from all this (claims to the contrary from the Alliance and/or member stations notwithstanding)......Is that most, if not all of the FM multicast channels will have to end up as over-the-air pay services offering niche programming for specialized audiences (24 hour traffic, Beautiful Music, etc.)

All fine and dandy by me......IF you happen to be an FM broadcaster with the means to implement this.

But......What if you're an FM broadcaster not seated "in the front row", or an AM broadcaster without even the ability to multicast?

The HD train may be steaming away from the station (slowly, but MOVING), and a whole lot of folks are going to get left standing at the platform.

 

[KB1OKL]

The only logical conclusion I can draw from all this (claims to the contrary from the Alliance and/or member stations notwithstanding)......Is that most, if not all of the FM multicast channels will have to end up as over-the-air pay services offering niche programming for specialized audiences (24 hour traffic, Beautiful Music, etc.)

All fine and dandy by me......IF you happen to be an FM broadcaster with the means to implement this.

But......What if you're an FM broadcaster not seated "in the front row", or an AM broadcaster without even the ability to multicast?

The HD train may be steaming away from the station (slowly, but MOVING), and a whole lot of folks are going to get left standing at the platform.

Yes, but radio is going to stay at the platform too.

 

[Mike Walker]

HD Radio, multicast or not, is RADIO, Guys. The business model is rather simple.

a)-Programming gathers "warm bodies" around the box.

b)-Sales sells sh@t to 'em!

Of course, this formula is new, only eight decades old, so who knows if it'll prove successful?

 

[RoscoeBrowning]

Meanwhile factors like the Internet, cell phones and ipods have made some inroads into that same pie. Now someone tells us that we need to double or triple the number of radio outlets by adding HD. I can see that working for a few large broadcasters in the very long term. From a strictly business point of view, how does that make sense for most “normal” stations? It looks like we are just diluting our product even more than it already is.

Excellent point. Radio isn't the be-all, end-all. You can't dilute a product when there are already more delivery portals for alternative audio sources as compared to just a year or so ago. Radio needs to focus on programming. That will be its only salvation. 3 times 0 still equals 0.

 

[Radioman100]

Excellent point. Radio isn't the be-all, end-all. You can't dilute a product when there are already more delivery portals for alternative audio sources as compared to just a year or so ago. Radio needs to focus on programming. That will be its only salvation. 3 times 0 still equals 0.

I'm glad the LPFM king of Longview, Texas and the internet gossip mogul are finally teaming up and creating a real game plan to save radio!

 

[clouseau]

Excellent point. Radio isn't the be-all, end-all. You can't dilute a product when there are already more delivery portals for alternative audio sources as compared to just a year or so ago. Radio needs to focus on programming. That will be its only salvation. 3 times 0 still equals 0.

I'm glad the LPFM king of Longview, Texas and the internet gossip mogul are finally teaming up and creating a real game plan to save radio!

C'mon RM, That's not really fair. While I understand your frustration, Chuck come from a different perspective. Fact is, I don't believe he's really anti HD at all. It just doesn't really help his situation. I agree.

Roscoe is approaching this from his perspective. A part time weekend jock. He has no concept of station sale, profitability and the like. It's not like he's working a budget, conducting a sales meeting or trying to decide when it's time to replace that equipment.



Chucks point is a valid one about dilution. However if we stick our head in the sand and hope we don't get diluted, that's silly. Follow the Fox TV plan. Buy the stations, develope a bunch of cable channels and buy a couple and BE the dilution.

Despite the Titanic naysayers, radio is operating from a position of strength. We need to continue to expand.

Clouseau

 

[Chuck]

C'mon RM, That's not really fair. While I understand your frustration, Chuck come from a different perspective. Fact is, I don't believe he's really anti HD at all. It just doesn't really help his situation. I agree.

I'm not at all against digital broadcasting. I'd just like a system that is viable for all stations, not just big ones. The current system will do very little for smaller stations. If someone can show me how it would help me, then I’m eager to learn about it. Right now, it would be silly to put it on LPFM or translators, unless you want to pay a lot of money for an incredibly limited service area. There is a point of diminishing returns.

My guess is that most class A's will find it isn't worth the bother either. I know in Dallas that is not a real issue, but out here in the sticks, there are a lot of them.

Chucks point is a valid one about dilution. However if we stick our head in the sand and hope we don't get diluted, that's silly. Follow the Fox TV plan. Buy the stations, develope a bunch of cable channels and buy a couple and BE the dilution.

Despite the Titanic naysayers, radio is operating from a position of strength. We need to continue to expand.

Clouseau

The funny thing about dilution (and it has already happened in spades) is the new stations usually do more or less the same thing as the older stations they are competing with. I don’t see how that really benefits anyone.

In my early days in Dallas, there were only a little over a dozen FM's on the air. Now I’ll bet that there are 60 signals vying for the listener's attention. Most of them sound pretty much the same. There are a few notable exceptions like WRR, KERA, KNTU and even KEOM, but they are unusual. Coincidentally, they all work on a different business model. Very likely they are the same stations that could benefit most from HD’s ability to multicast. Otherwise most other stations are fairly well homogenized. Tripling the number of available channels will simply confuse listeners even more resulting in lower listener-ship per station. The bottom line is can you sell “more of same”? I guess that remains to be seen.

I do know that in a retail environment, giving a potential customer too many choices actually hurts sales. It is well proven. People tend get confused when given too many choices. Rather than making a decision to purchase, they choose to continue shopping, or don't buy at all. It is possible that the same thing could happen to radio. Sometimes you have to be very careful what you wish for.

As for Radioman's "King of LPFM" comment, even though I know it was meant sarcastically, maybe I should accept the title. One day a couple of years ago Arbitron phoned to let me know that we were the first LPFM station to ever "make the book." I was quite surprised. The fact of the matter is quite a few LPFM stations have "made the book." They do it by offering something that is not available in their area. The numbers aren't huge - how could they be - but considering the size of our monthly electric bill, we must be doing something right. There are plenty of stations in my area that are not rated at all.

 

[Mike Walker]

LPFMs are cool! TRUE LOCAL RADIO! A breath of fresh air. In theory, at least. The ones I have actually heard (Lenoir and Hickory, NC) "suck like a Hoover". But the concept is beyond (legitimate) reproach!

 

[Chuck]

LPFMs are cool! TRUE LOCAL RADIO! A breath of fresh air. In theory, at least. The ones I have actually heard (Lenoir and Hickory, NC) "suck like a Hoover". But the concept is beyond (legitimate) reproach!

Some are pretty good and many try very hard to super-serve their communities. That’s what the idea was. Unfortunately there are a lot of them that get the "Eureka, it's a Hoover Award." They are usually the ones that are actually "satillators" disguised as a LPFM. There is a difference.

 

[RoscoeBrowning]

Roscoe is approaching this from his perspective. A part time weekend jock. He has no concept of station sale, profitability and the like. It's not like he's working a budget, conducting a sales meeting or trying to decide when it's time to replace that equipment.

Well, speaking as someone who has three college degress, two of them being in business, and also speaking as someone who does have a financial acumen as I have worked in finance full time for years.... I wouldn't have been dumb enough to buy the equipment in the first place.

If more and more stations are installing HD equipment as you stated, and if I inherited a station that was already installed with it, surely there would be resale value. I would deinstall the equipment and sell it to one of the very many station owners that are just clammoring to light up HD on their stations. Whatever the difference is, I would consider it a sunk cost. Either that or I would broker it out... let someone else promote it.

 

[clouseau]

Well, speaking as someone who has three college degress, two of them being in business, and also speaking as someone who does have a financial acumen as I have worked in finance full time for years.... I wouldn't have been dumb enough to buy the equipment in the first place.

If more and more stations are installing HD equipment as you stated, and if I inherited a station that was already installed with it, surely there would be resale value. I would deinstall the equipment and sell it to one of the very many station owners that are just clammoring to light up HD on their stations. Whatever the difference is, I would consider it a sunk cost. Either that or I would broker it out... let someone else promote it.

Wow, Roscoe. Broker it out. Lets say you could get $2k a month for a channel plus expenses for your Philly station from the Reverand Billy Sol Hargus. Assume a potential audience of 1 million with the HD coverage area. Great fidelity compared to SCA. Shouldn't be a problem. With 2 subs that's $48K a year less the $2K minimum royalty each is $44K a year profit. 3 Years and you've paid off the $100 in licenses and equipment and pocketed $20K.

Damn, Roscoe. Even a committed bean counter such as yourself would see that "Inheriting" the equipment and license isn't the least bit necessary from a finacial standpoint. It pays for itself nicely and in record time, investment wise. And you wouldn't even be "Dumb".

Then all you would need to do is find a way to get around the embarrasement of actually running HD radio while being with the Radio Racket.

Clouseau

PS: Better not show this post to George. I don't think he'd like the idea that maybe there is a way to make money with HD.