I love a bargain and I’ve got one for you right now.

This is Curry’s own-brand FM/DAB radio and on the shelf at Curry’s across Ireland for just €30. I’ve also seen some nice cheap sets at Tesco’s too.

At this price, I’m guessing these radio’s are surplus stock from the UK and most likely not capable/upgradable to DAB+. However, for €30 just to check out DAB here in Ireland, how can you go wrong?

Last week a general email discussion has been going on talking about the costs of broadcasting online versus one-to-many broadcasting with FM or DAB.

JP Coakley, Director of Operations at RTÉ Radio made some very good points which I’m sharing with his permission. Please note these are JP’s personal thoughts and not necessarily those of RTÉ.

First things first. Let’s not demonise either side. This is neither a question of New Media refuseniks who are unable to see the tidal wave of the web coming toward them as they hold to a dying past, nor is it a question of New Media fanatics who are incapable of understanding the value of FM as a universally available and free to air platform. This is purely and simply a strategic dilemma that requires thought, discussion and critically, decisive positioning.

Costs of transmission.

Right now, we estimate the relative costs per listener per hour of the web versus FM is 2000 to 1. The web is 2,000 times more expensive per listener per hour than FM. Part of this is explained by the fact that the FM network is expensive to build but, once built, is very efficient at serving large audiences. The web is not. The unit cost to serve the millionth web user is exactly the same as the first. If we had a situation where 50% of our audience was on the web, we would be forced to reduce other activities to pay for it. Also, there would be a punitive charge to popularity, i.e. if a programme gained more listeners than it was expected to, the cost of transmitting that programme would rise.

We are in the very early days of internet traffic. What we can see is, in the UK, there are very real threats from ISPs to “throttle” the BBC iPlayer on the basis that it now constitutes nearly 10% of total online traffic. It is highly likely that the BBC will be obliged eventually to pay for the distribution of the iPlayer. Of course you will hear a lot about next generation networks but there is a real question over who will pay for them.

The problem with the web business model is that the people who make the networks are not the people profiting. There are five main businesses in net use, shopping, gaming, pornography, gambling and media. None of these returns money to the people who build networks, and of these, media (including social media) consumes most bandwidth yet delivers least return, both to the ISPs and, critically, to the businesses themselves. I really don’t see how this model will work in the future without businesses being charged by ISPs, according to use, or governments deciding to build the network. If the charge for the new networks is to be passed to the broadband subscriber we will see a very significant jump in tariffs.

Costs of content.

The web favours aggregators over originators. The most successful business model on the web, is Google. Ironically that’s our business model; charging advertisers for access to audiences rather than charging audiences for access to content (telco model). Google do this by aggregating content – they do not create anything – and bringing it to a single place where advertisers may also live. Where there are propositions that involve a mixture of aggregation and origination, such as YouTube and Twitter, money is not being made. Why? Because good stuff – veracity, reliability, creativity – costs money. So we see YouTube acknowledging that it will pay or share revenue to get the “good stuff” from established media. At the same time we see Rupert Murdoch, and many other papers, testing the idea of pay walls around their business. Why? Because as things stand they will have no business if they don’t. It is reasonable to suggest that they should adapt to this new reality but a “crowd in the cloud” remains an elusive way to ensure revenue.

The most successful media website in the country, RTÉ.ie makes approximately one twentieth of the total commercial revenue made by Radio (RTÉ Annual Report 2008). What all “traditional” media are facing is a situation where they cannot afford to be on the web on a free model and still, they cannot afford not to be there. Literally thousands of businesses have tried to find alternative methods to fund their activities online. Very few have survived without subscription models. Yet, as Liam O’Brien has pointed out, RTÉ is rightly obliged to avoid charging the domestic user on the basis that they pay a licence fee.

Rights – Intellectual Property.

Pandora, Last FM and Spotify are examples of organisations that started brightly but tripped badly on rights. All of them have had to confine and/or charge for their services in the past two years. Anyone who works in a web business that involves IP will tell you that this is the most troublesome and expensive element of their business. This is and was true also of “traditional” media, the difference being that they have learned to deal with it and have business models that incorporate these costs. Typically also, their rights are for limited territories, not the worldwide audience that the web offers. This time last year, Last FM were in negotiation with literally hundreds of separate rights organisations to try to secure rights for their service worldwide. They have not succeeded. Colleagues involved in internet only radio stations will tell you that the new cost models proposed by the record industry will simply close them down. However in tune or out of tune we are with the prevailing zeitgeist, if no one pays, then no one gets paid. Simple.

Overall

The theme is of money, investment and control re-asserting itself – to a certain extent. If the story of the web from 2004 to 2010 was real expansion post the dotcom bubble, it is likely that the next five years will see retrenchment as an unlikely combination of authors, artists, record labels, press companies, broadcasters and others try to make people pay for their content. For example, few musicians have the courage to publicly disapprove of file sharing but a Swedish 2008 poll of musicians (when Pirate Bay was at its height) found that 38% wanted to legalise file sharing – or to put it another way, 62% don’t. Ironically 59% admitted to using file sharing.

The good news is that RTÉ can provide the best of both. We are obliged, where possible, to avoid subscription and we can also provide quality content and access on the web. The warning is that, like many others, we don’t yet have a way to make this pay to the scale needed to sustain quality and diverse output.

In the meantime it’s about trial and error to a certain extent. Pre-rolls, mid rolls, dynamic ads (multiplatform) and yes, subscription for value add services, are things we should look at, try and learn from.

FM is still a strong proposition. However, it needs a face lift. This is why many broadcasters advocate digital radio. It is mobile, simple and free yet offers additional content and services more akin to the net. Of course there are huge obstacles and many problems associated with making digital radio as attractive, popular and ubiquitous as FM, but Dusty comments, and figures from other digital radio countries show, that if you get it right people like it – and not only that, they actually favour it over web radio.

One thing, unfortunately, we can say with certainty. If our audience is largely online in 5 years, based on current trends, we will be compelled to be a drastically smaller industry than we are today.

Key to our future (as we said in 2004) are digital radio and the internet. We will now live on two platforms, whether FM or digital radio is the first. We are actually not doing a bad job so far, but our next decisions on new web services must take into account that we are funded and paid to be RTÉ Radio, not RTÉ “Lost” FM.

One thing I hear over and over is that internet radio is the future. Radio broadcasters will leapfrog DAB by going straight from FM to streaming online.

Bull. If you believe that … consider this;

After at least 10 years of radios availability online, RAJAR the UK radio ratings company, report only 2% of people listen to radio online. This morning Irish station Today FM has a reported JNLR 1/4 hour audience of 150,000. A quick check of their Shoutcast servers shows 2,000 people, or 1.3% of the current audience, are listening to online. See for yourself.

In the world of television, Nielsen, the American TV ratings company, report the average American watches 140 hours of TV a month. Of this time 2.5% is spent watching TV online.

These and many other examples show the trend of consumer demand for online radio and television is very low.

Streaming is hugely expensive for broadcasters. For example Dublin’s FM104 have an AQH of 30,000. To serve these exclusively online at a cost of just 50 cent per listener per month equals an annual “transmission” cost of €180,000. The current FM option is a hell of lot less!

You also have a problem of bandwidth. Spotify, the Swedish online music service, uses more bandwidth than all of Sweden. This is a single service. It’s only available in a handful of countries, not including the USA, and already they use that much bandwidth. How would it be if every radio station in Sweden broadcast solely online? It would crash the ‘net. And that’s just Sweden!

Online is important and a great addition to a radio service for both listener and broadcaster. However technically and financially it just cannot compete with the simplicity or cost effectivness of FM or DAB one-to-many broadcasting.

If I’m wrong do add a comment below or contact me directly.

Another big advantage of DAB+ is the Slideshow feature which allows broadcasters to display colour images on the listeners radio.

This brings radio kicking and screaming into the multimedia age allowing stations to show useful information such as now playing, weather, news etc as well as station promotions and, yes, even advertising!

Slideshow is a great way of constantly making available information you don’t want repeating over and over and over on-air. One of the biggest listener complaints on music radio is that the DJ’s don’t say the names of the songs. It might be a bit repetitive to do this for every single song on-air but as a Slideshow feature, brilliant! Equally you don’t need to call the weather every 10 minutes on-air but it makes a brilliant Slideshow feature. Station promotions, much as we plug them on-air, doing so every 10 minutes is annoyingly repetitive. On Slideshow, it’s there every 30 seconds. Brilliant!

My good radio friend James Cridland is currently travelling the world finding out more about radio around the globe. This week he is in Sydney and has posted pictures of Slideshow in action in Australia. Though I think the stations could be doing more with Slideshow, it’s a bloody great start.

Check out James’ pictures on Flickr.

Good old FM has been knocking around since the 40′s and RTE have been broadcasting on it since the 60′s, However it didn’t become popular in Ireland for another 20 years.

That’s when, in 1981, an entrepreneur called Chris Carey made a decision to base pirate station Radio Nova firmly on FM. He sold the advantages of “clutter free” stereo FM and it was a huge success. So much so that in 1988 the government, when establishing the new legal independent radio sector, made a very big decision to go FM only. Such was the impact of this decision that RTE pre-emtively re-branded its pop music station from Radio 2 to 2FM.

In just seven years Irelands radio industry moved from AM to FM.

Now we are well into the new millennium with a new medium capable of advancing radio as much as FM did all those years ago. Question is: who will have the balls to make the big decision?

In reply to my last post Is Radio Screwed? my answer is a resounding NO.

The world is changing but it’s changed before. Marconi himself never envisaged radio as a medium for speech or music. It was other inventors who changed radio to the more human friendly sound medium we know today.

In the 50s and 60s television took much of radios golden content and radio once again adapted to the changing times. Now as the internet threatens our advertising lifeblood, radio must adapt once more.

Radio has some evergreen advantages over television and the internet. It’s simple, portable and free. You only need ears to enjoy it, and with a hundred year heritage, radio is an accepted part of everyday life.

It’s not without its faults. Irish station formats are largely based on age profile rather than actual interest. DJ’s still never announce the name of the song that’s just pricked your interest. Radio receivers themselves just aren’t “sexy”.

New digital radios and DAB offer a very bright new future. Building on all the advantages we’ve loved for years digital radios can give you stations based on your interest be it news, jazz, oldies and so on. Most digital radios display the name of the song playing now on the station. Newer digital radios feature a very sexy colour touchscreen. Broadcasters are beginning to use “Slideshow” to display a full colour representation of what’s on air now. That can be anything from artist pictures, station logos, weather maps or God forbid the DJ photo!

Radio as a medium is strong. Digital radio like DAB makes it stronger. It brings our medium into the 21st century with features that people are beginning to expect on electronic devices from televisons to telephones.

Growing and adapting to changing times is a cornerstone of any long-term business. If radio does this we have a future. If we don’t …

Ten years ago there was no online music business. Broadband was fantasy. Your mobile phone was for calls and (maybe) text. A tv was a big bulkly box and cable gave you a whole 17 stations (wow!).

Today people have nearly a hundred tv stations to choose from. With Sky+ and DVD box sets they choose what to watch and when to watch it. Today people carry around their entire music collections on their mobile phone. The explosion of laptops and 3G broadband gives high-speed broadband almost anywhere.

Here is the bit that scares me. In a decade of great change radio has stood. Entirely. Still.

Physically it is still just a box with a speaker that does what it did ten years ago. It’s advantage as a source of music has been overtaken by mp3 players and streaming services like Spotify. It’s advantage as a cheap mass-market advertising medium has been taken over by the internet. It’s this that scares me more.

Our whole radio industry is built on selling mass audience cheaply to advertisers. The internet beats us hands down at that game. Money previously going to radio is now starting to go online.

We can’t fight it. This is just the way it is. What we need to do is adapt. This is the bit that scares me the most. We’re not adapting.

If we don’t … we’re screwed.

Making no bones about it, last year was a dog. I’m glad to see the back of it. On the up-side I think the recession has been a good kick in the butt. It taught me what is really important, both professionally and personally, and has forced me to get the house in order.

Now all that is done I can move into 2010 in a postitive frame of mind predicting with all certainty that 2010 will be better than the last. Let’s face it, that won’t be hard to do!!