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Doing the Math

NMC/Radio and Records eChart main column as published in the 3/1/02 issue of R&R Not that there won't be major litigation, yammering, whining, crying, cajoling, backroom dealing and more on these recently released fees that webcasters are expected to pay to the labels, but let's assume that none of that will happen. Let's assume that the numbers are final.

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Someone in Washington can't use a calculator, or, at the very least, has never streamed content for the web and are not aware of the realities of the broadcast and advertising industries. If they had, they'd see what John Jeffries saw the moment the numbers were released. The lawyer and head of webcasting enabler Live365 took an average number of listener song hours for one of his channels and ran them against the cost schedule and looked at the results on the screen of his Bowmar Brain. Not pretty.

The cost for broadcasters are half of the fees required of those not simulcasting on the net, so let's look at a typical radio station that has their signal on the net, as well as a side channel you're running to steal psychographically adjacent listeners from your on-air competitor. Let's assume, for math purposes, 1000 listeners at any time on each channel. If you're playing 10 songs an hour (you'll need to drop from the 15 you've been playing commercial free so you can play...commercials), that's 20,000 listener-song performances per hour. 10,000 of those will be $.0014, and the rest will be $.0007. So, for that single hour, it will cost you $21 to pay for your RIAA fees. Go 24 by 7 with those numbers and you're looking at $183,456 per year plus a 9% premium for "ephemeral fees" - and that's just for your RIAA fees. Most of you are paying a few hundred dollars to ASCAP and BMI for performance rights, and your bandwidth costs are not counted here either.

Then, Thomas Edwards noted the potential upside to break even with all of this: if you're able to find an advertiser gullible enough to pay $10 CPM and you have those mythical 1000 listeners (anybody consistently have that many at a time on your station's website? I didn't think so.) The revenues to offset your licensing fees? Edwards figures $10 CPM implies $0.01 per ad impression, but prices are about 1/100 of that these days, "...so you'd need 14 ads per song to just break even."

Question: how many of those mythical 2000 listeners are going to stick around if you're going to play commercials at all on your side channels?

That's not going to work - and neither is this ruling. This will send some webcasters to the showers prematurely, as they anticipate these numbers setting themselves in stone.



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