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The Technology Problem is on Your Side, Not Ours.

8-29-2012

Ad-Insertion technology has been in the news quite a bit lately after Saga Executive Vice President Warren Lada voiced his disappointment with the technology. He points out that not only is the ad revenue not there, the technology radio has to work with degrades their product. Levels are off, and transitions from spots to music are poorly timed. He says, its a product that broadcasters would never put out over the air so why should they stream it. Today we hear from Tritons Mike Agovino who, as you would imagine, has a different take on the issue.

So, you probably disagree with Warren Lada
Agovino: I have always had a healthy respect for SAGA. They have certainly been consistent winners in their markets over the years and have some great brands. But, they have definitely been outspoken in trying to recruit others into their way of thinking on this. To me, the only logic behind trying to recruit anyone else into this kind of thinking is so that you've got some company when people start pointing fingers down the road a bit about antiquated thinking.

I just don't understand. If they had done a legitimate analysis and come up with the findings they say they came up with, why it would matter to them whether or not anyone else joined their cause. It seems to have become a cause, and they are out doing a bit of politicking about it. It's just strange to me that this is a strategy for a broadcaster. I don't know why you would be propagandizing it.

RI: There is something to be said about the transitions. It's not real clean.
Agovino: It depends on a number of things. I can tell you that our solution is very clean. It's very clean when it's being utilized the right way. The very first noise was made on this maybe 8 weeks ago. I had a rather exhaustive internal analysis done where we listen to a bunch of different client streams. Im not going to tell you we didn't find instances where there were clunky transitions or where there were different audio levels. But what we did find was 100% of those issues were correctable with proper attention to detail on how the audio and data are getting to the stream. In other words, those were issues on the broadcast side, not issues on the technology side.

From their side, they really wanted this to be a "set it and forget it" kind of technology where you don't put any thought into it. There is just not a lot of technology our there that you are going to optimize it's value by putting no time and attention towards learning how to use it, no effort towards becoming an internal expert on it. If you don't pay attention to it, well then of course, especially over a period of time, it is not going to sound the way that it certainly can sound if it is properly administered. My position to you would be speaking for Triton, but I think I am speaking for a broader cross-section of the vendors in this space that without the broadcaster taking an active role, being a participant, understanding how to administer the technology the right way and to devote some resources, the quality is going to suffer. My position on that would be that in 100% of the instances that we have examined over the last 6 to 8 weeks, the problem has been on the broadcast side, administering, not on the technology not doing what it's supposed to.

RI: Part of what Waren is saying, when you add it all up the cost is too high.
Agovino
: The fact of the matter is, the average radio station, and I will give you the high side,  all-in on license and ad serving technology, is looking at a few hundred dollar per month. Even a top ten market station delivering a meaningful audience online is maybe running into a couple thousand dollars a month in cost for that individual station. Your costs are variable based upon advertising. So, they are not incurring variable costs unless selling ads. By definition you are monetizing or you wouldn't have that expense. The whole idea of this having to do with expense associated with the technology is just plain ridiculous.

RI: Are broadcasters making their money back through sales?

Agovino: Of course they are. The thing they are not making back and what this is mainly all about is the royalty payments. The royalty payments are at the very heart of all issues associated with online audio. The fact of the matter is, the artists and the labels are not going to flinch unless they get some movement on the over the air side. The broadcasters aren't going to flinch on the on-air side, until they are so fearful of their futures that they finally have to flinch. I don't know which will come first. That's what is at the core of things. The cost to stream and exert advertising are hard to manage in the equation. The overwhelming majority of the expense of streaming is the royalty aspect. That is the battle that is going on.

I assure you, that none of this is about the cost of our technology or any other vendors in the space. It may have a little bit more to do with costs that they would see themselves incurring to execute with excellence. That's possible. But, that's the same thing as saying, "I could have a great morning show, but Im going to choose not to. I'm going to take this show out of syndication because it's cheap and I can get 50% of the ratings." It's all short-sighted decision making. In the online model, there is only one economic deterrent. That is the oppressive royalty circumstance. 

RI: So you think Saga is wrong for streaming its on-air signal
Agovio: Saga is short-sighted. If they did any sort of deeper analysis of where the advertising market was going, and what the Fortune 1000 are expecting, the last thing it would've told them is that they should walk away from distribution and platforms where they learn more about their audience and are able to target across a broad section of attributes and able to join aggregation plays that democratize audience size. It would all point to not investing less here but investing more here. Its disappointing that any broadcaster operating in 2012 could believe this was the right strategy. Despite the propaganda, I have strong faith that very few are going to follow despite all of the economic challenges that exist today. I expect very few people to follow this line of thinking.

RI: So, you are not worried that somebody is going to call you up and cancel plans to ad insert?
Agovino: Im not going to tell you that I don't think theres a possibility that some other folks would join Saga, because Im not going to tell you that Saga is the only company in the industry that doesn't get it. But, I know that there are a lot of companies that do get it and a lot of companies that are forward thinking and a lot of companies that understand the transitions that are going on in consumer behavior and the advertising marketplace. What I am very confident in is that there will not be a lot of companies that go down the road that they are going down and you are not going to see many of the real market leading companies do it.




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