Defining the Music Industry Crisis

“Internet radio is the future yet providers can not sustain growth due to growing taxes on streaming music and a lack of clear revenue models.” –Chris Purifoy @ MusicThinkTank.

What if radio stations accepted the web as their new model and took full advantage of revenue opportunities there? I don’t think that’s happened yet (I’m aware of a handful of stations working towards this, but they’re in large markets and also enjoy steady listenership on the dial). Let’s find the clear revenue models, radio needs us.

Clearly a station needs to do more than play music on the internet to be successful fiscally, who does a good job of this?

Update: Purifoy follows up on the specific challenges of internet radio on his site.

“So what are the most prevalent revenue options for Internet radio providers so far?

1. Subscription fees
2. Banner Ads
3. Revenue share from digital music sales
4. Audio Ads

So with so many options why can’t Internet radio survive the new policies? Well first of all, subscriptions are very limited. Some providers, like Pandora, offer a subscription service that eliminates banner ads. But the truth is, no one minds banner ads being displayed so subscriptions result in little to no revenue. Banner ads by far bring in the majority of revenue for providers. The problem is that listeners tend to play the station in the background, therefore the ads go unnoticed and therefore unclicked. This greatly reduces the amount of revenue providers bring in.

Allowing listeners to purchase songs from partner companies like Amazon and iTunes generates some revenue, however keep in mind that buying music is at an all time low. With that in mind, no company can sustain themselves purely on music sales. Lastly, audio ads offer a great way to bring in revenue. The problem is that the Internet radio model up until now has been free of audio ads, which has been part of the charm. Some stations have adopted the audio ad model or at least have run trials to see what the listener reaction would be, and it does not look good. Bringing on an audio ad model has proved to greatly decrease the number of listeners.”