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.
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 lala.com 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.