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WOXY Abruptly Goes Offline; Streaming Ain't Cheap

I–along with many other online radio fans–was surprised to learn this morning that online indie rock station WOXY abruptly shut down its live stream this morning. The only explanation was a short blurb on their website blaming “current economic realities and the lack of ongoing funding” for the closure. The situation was all the more surprising given the station’s intensive participation in SXSW just last week.

WOXY website's farewell message

Pop Candy received some information directly from WOXY music director Matt Shiv who said the staff knew there were financial troubles, but maintained operations last week at SXSW because “a deal was ‘in motion’ to continue funding.” The staff only received notice of the closure from owner Future Sounds on Monday and were given no opportunity to say goodbye to listeners.

WOXY has certainly had a bumpy ride going from being a commercial FM station in Oxford, OH, going online-only in 2004, being bought by in 2006, and then being being sold to Future Sounds and moving operations to Austin last year. As I wrote last month, WOXY was one of my favorite commercial broadcast stations and I continued to be an online listener.

Unfortunately the closure of WOXY only reminds me that online streaming radio is not necessarily an inexpensive enterprise. By comparison traditional broadcast has higher fixed costs. A station must have a real brick-and-mortar studio and a transmitter with tower, and must maintain these technical operations in accordance with federal laws and regulations. Without even accounting for staffing, and depending on location, these base costs easily start at the low six figures annually.

Streaming stations don’t require much in the way of a physical studio–though certainly some of the best ones, like WOXY, have them. They also don’t require transmitters and the power to run them, nor compliance with FCC rules. But while free of these liabilities, streaming stations do have other significant costs to bare.

First, streaming music stations must pay royalties for the right to play music online, which scale up in cost as listenership increases. Second, and most significantly, streaming stations have to buy bandwidth to deliver their streams. And here’s where popularity can become a double-edged sword. Unlike broadcast, each additional listener requires additional bandwidth, which in turn costs more money. If your listenership grows, so does your bandwidth bill.

On the one hand streaming online has been such a boon for small niche stations because it can be relatively inexpensive to reach a small number of simultaneous listeners. For instance, the streaming radio host Live365 charges $112 a month for a plan that accommodates up to 25 simultaneous listeners using a stereo 128 kbps stream (not including any royalty charges). While 25 listeners doesn’t sound like a lot, remember that listeners tune in and out of online radio, and so a station with only that many listeners at any given time may still have an entire listenership of hundreds or thousands.

But when you scale up to broadcast-level audiences the costs also scale up. Back in WOXY’s old home broadcast market of Cincinnati even the lowest rated stations have an average simultaneous audience of about 7000 people. Using Live365’s published rates as a guide, it would cost $26,000 a month to reach this many simultaneous internet listeners. Now, I’m certain that a station with that many listeners can negotiate a better deal, but even extrapolating from a smaller, lower-cost company’s published rates would set the cost at $13,300. That’s a big difference from $26k, however it demonstrates that reaching the same number of listeners online as a small, low-rated broadcast station in large radio market will run at least $10,000 a month.

At that point a streaming station looks like less of a bargain, even if it is less expensive and complex than operating a broadcast station. But then my argument isn’t that a streaming station is more expensive or more of a hassle than a broadcast station. Rather, I’m pointing out that operating a live streaming music station can still be expensive, with costs getting higher as listenership goes up. One advantage of a broadcast station is that additional listeners don’t cost a thing — the costs of running the station are much more fixed as long as the price of rent, power and such remain relatively constant. Reaching 70,000 listeners costs the same as 7,000, provided that many people live in your listening area. Obviously, in broadcast it’s not economically advantageous to have 25 simultaneous listeners like it is online.

I honestly do not know what WOXY’s revenue model was. I know the station ran ads on its website but I don’t recall hearing ads on its live stream. I think the station had show sponsorships that sounded more like underwriting on public radio. WOXY was also being broadcast on the HD2 channel of Cincinnati public station WXVU, which would have prohibited regular ads being run. (As a side note, one has to guess that the HD channel is now silent, too.)

Given that the station had a studio and staff of six, in addition to bandwidth costs, my conservative guess is that WOXY operations ran at least $300,000 annually, and likely closer to $500,000. That’s a fraction of a top station in a major market, but it’s still not chicken feed, either.

WOXY was often mentioned in the same breath as other indie rock online stations like Seattle’s KEXP, Jersey City’s WFMU or Minneapolis’ The Current. But the difference is that that those other stations are also non-commerical broadcast stations that rely on a listener-supported revenue model to fund operations. So, I will be surprised if we see the resurrection of WOXY, at least in a form that sounds anything like it was. The brand may rise again, but it’s unclear if the funding and revenue is there to bring the spirit back to life.

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0 Responses to WOXY Abruptly Goes Offline; Streaming Ain't Cheap

  1. Terry Purvis March 24, 2010 at 12:43 am #

    Your maths are really wrong here. A dedicated server server for around $200.00 a month would handle the streaming for @7,000 listeners without blinking.

  2. Heather March 24, 2010 at 5:36 am #

    Terry – I work in IT for a commercial radio broadcasting company with more than 60 terrestrial stations that also stream online. These cost estimates are not unreasonable. There is a reason why terrestrial stations don’t push listeners to stream – the costs rise with listener count. There is definitely a sweet spot where the royalties on the number of listeners does not outweigh the ad revenue, yet the listener count is high enough to sell ad spots.

    My experience is in commercial radio alone – I don’t know what WOXY’s business model was, but I can only imagine it was that much more difficult to cover their expenses without ad revenue. However, I can say that WOXY was my station of choice and I will miss them dearly.

  3. Paul Riismandel March 24, 2010 at 7:16 am #

    Terry: 7,000 listeners to a 128kps stream would require a constant 875 megabits of bandwidth. I would really like a referral to a host who would provide that kind of bandwidth for $200 a month. I know you can find a colo for that, but I seriously doubt a colo would support that kind of bandwidth without a hefty additional fee.

    Heather: thanks for the confirmation based on your experience. Do you know what kind of money royalties are costing stations these days?

  4. kerry brewer March 24, 2010 at 11:10 am #

    i work for and stream for a couple thou radio cust around the globe. who did the numbers for your post? they are way out of whack, not only on your listener guesstimates, but on your cost assumptions as well. we have stations with 9000 simul listeners paying a fraction of what you are talking about here.

  5. Ike March 24, 2010 at 11:31 am #

    During their pledge drives, WFMU usually says their bandwidth costs are about $50,000/year. I’m surprised they’re not higher. I’m sure that’s just an estimate. They’ve got more online listeners all the time.

    I love WOXY and I was worried this would happen eventually, but not so soon after SXSW! They needed to do pledge drives or something.

  6. Paul Riismandel March 24, 2010 at 11:40 am #

    Ike: My guess is that $50,000 is about right for WFMU’s annual streaming costs. I’d be surprised if they have anything like 7,000 simultaneous online listeners — that’s a very big audience for an online station. Plus, not all of WFMU’s listeners are tuned in at the top 128kbps bit rate.

    I was using the 7,000 listener number as a good point of comparison between broadcast and streaming. At a lot of community radio stations I’ve talked with their online listenership is more like 100 – 500 simultaneous, which costs a lot less.

    One thing about WFMU is that the station has archives of its programs, and on demand streaming is more efficient than live streaming, and therefore more cost-effective.

  7. Paul Riismandel March 24, 2010 at 11:46 am #

    Kerry: I worked up my estimates based upon published pricing. A lot of services don’t publish their pricing. Perhaps you’d be willing to tell us what your company would charge for 7000 simultaneous 128kbps streams? That would certainly help me to correct my numbers.

  8. Tom Cheney March 24, 2010 at 8:45 pm #

    The industry average is between $1.50-$4/simultaneous listener at 128kbps. I run idobi Radio and we’ve been able to stay on the air for the past 10 years by negotiating better rates. When we started we paid $3/listeners back in 1999. Today, we’re paying $0.50/listeners (12k listeners). For large stations, they have better leeway by buying bandwidth in bulk.

  9. Tom Cheney March 24, 2010 at 8:47 pm #

    For clarity, that’s the cost per simultaneous listeners per month

  10. Paul Riismandel March 25, 2010 at 6:36 pm #

    Tom: Thanks for the additional data. My experience with streaming hosting is that prices vary widely and are generally not published. This goes for both audio and video. As I said in my post, I figured that better rates can be negotiated for large listener loads, but that probably varies widely.

    So given this data, I think it’s still fair to say that $10,000 a month is in the ballpark for around 7,000 simultaneous listeners, understanding that rates may vary as much as +/-25%.

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