The Cost to Stream Internet Radio
Ever Wonder What the Costs Are To Stream Internet Radio?
Are you currently or thinking about working up a business plan that includes streaming music?
Although he offers that this is a work in progress, Steve Burgess has done an excellent job presenting the related costs you should expect to pay if you plan on starting an internet radio stream of licensed music.
His information is available for review here.
Assuming most of his costs and calculations are accurate, key figures to look at is that even with a $3 CPM, which I can tell you is about the average you should expect to get for a 30-sec ad, assuming that 50% of your inventory is sold to agencies at an average $5 CPM per :30 and the unsold inventory is sold as remnant for $1-$2 CPMs, you will still need to run eight (8) units per hour in order to even see a 12% Gross Margin.
Now project his figures over the next five years based on the music royalty rate increases scheduled to be paid to Sound Exchange.
So here in lies your problem and the same one that most internet radio stations are facing: listeners are migrating to the web for streaming because they get features unavailable from terrestrial radio.
These features include song skipping, custom playlists, social networking, mobile, at work listening, and more.
Listeners also expect a much lower commercial load. Somewhere in the range of two units per hour, not eight. So sooner or later internet only radio stations are going to have to figure out different ways to supplement their revenue stream beyond audio ad insertion.
This is also why AOL Radio and Yahoo Launchcast basically handed their operation over to CBS Radio to manage. They couldn’t figure out how to make a profit.
Other well known “internet only” music stream providers are still in their funding stages and not yet running as a stand alone, successful i.e. profitable, business.
Part II: How To Make A Profit Streaming Audio (coming soon!)
