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How do internet radio stations make money?

They may make “revenue”…with click-bait kind of graphic ads…but REAL internet radio stations…from Pandora and Spotify to the hundreds or thousands of out-of-work radio personalities (dee-jays), are completely throttled due to the onerous responsibility to pay-per-play royalty fees to artists, whose music they are featuring.

The big guys like Pandora have millions of developmental dollars behind them, but are having terrible trouble getting to profitability due to such. That’s why Pandora, after a decade of spending tens of million’s in R&D has raised the “For Sale” sign and so far having trouble even achieving that.

For the little guys…as I said before, displaced radio pros who keep their skills honed by putting together an internet radio station on their spare bedroom…or the music-passion guys, who just like to experiment with a real (but microscopic) audience, its really a hobby level entity.

The same could be said for “Podcasting”…but that element of audio entertainment is mostly spoken word, not music based…does not have the blood-sucking rights-guys down their wallet. Podcasting, can produce a living for some, as the cost component is very small. However the ones that make real money are few and far between, as again, they need the listeners that few can afford attract via marketing or have the national “base” to support it.

Real, terrestrial radio stations have an almost 100 year head start and due to licensing by the FCC have the real “waterfront property” in mass media (though with the advent of the internet that property is growing a pretty good bunch of weeds now). But traditional radio (which is MY business for over 50 years) has elements that is allowing it to stay relevant in this digital world:

  1. It’s Free. OK so you need to put up with a few commercial…get over it <smile>
  2. It’s Easy. On button, dial, volume switch, off button. Simple, no tutorial needed.
  3. It’s been here since 1920…and every car is fitted with one and virtually every home has multiple receivers. And certainly that smart phone in your hand can either stream local (or national) terrestrial radio…or some have chips to receive over the air FM signals that do NOT mess with your data limits.
  4. It’s “curated” by pros who know how to schedule and flow music and information. I made my life doing it for decades. It works.
  5. It’s varied…if one station doesn’t serve up what you want there are another fifty or so choices on most AM and FM bands…or a bazillion choices via IP stream.

Internet radio does offer variety “to infinity and beyond!”. But that variety is what limits any of them from really being financially successful. It’s narrow-casting, not broadcasting. It’s micro-audio, not mass media. 25 listeners at any given time is Success! While with terrestrial radio 50,000 at any given time is “pretty decent”.

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