The sound of music

Today the radio producer UBC Media Group announced it would start trials of its digital radio downloading service in the first quarter of 2007 in the UK. The company says it has the endorsement of all of the country’s major radio stations as well as three of the big labels, Universal Music, EMI and Warner Music. (Presumably it’s in the process to trying to secure agreement from the other major recording companies.) The first stations to offer the service will be Heart FM (the UK’s most popular radio station, according to RAJAR), Classic Gold Digital and Smash Hits.

UBC is marketing its digital downloading service as a way for radio stations to offset declines in advertising revenues. In this vein, this is yet another example of how, in the digital world, old-guard media companies will need to look less at advertising, and more at ARPU from different services. In the words of UBC’s CEO Simon Cole, speaking to Dow Jones, "Radio needs to shift from concentrating on advertising to concentrating on monetizing its listeners and increasing average revenue per user."

UBC has not revealed what the revenue splits will be from the downloading service. But I’m not sure that downloading will replace advertising that soon: Chrysalis, which owns Heart FM, this month reported radio revenues of £65.6million in FY2006. (That number was flat compared to 2005, by the way.) iTunes is charging 79p for a song, so if Chrysalis got a crazy deal in which it kept all the revenue from the downloads, and it priced the tracks to compete with iTunes, Chrysalis would need to sell 83,037,975 songs every year just to keep revenues flat.

Still, given how popular music downloading has proven to be, radio stations have come late to the game. Now, on top of competing against other purveyors of legit online music downloads—sites like iTunes, Zune and Napster, and the labels’ own ventures among them--the radio stations will still face the same hurdles that all of these commercial music downloading services have—namely how to get listeners to pay for their services rather than use one of the illegal free sites to get their music onto their players.

Of course the success of iTunes demonstrates that it is indeed possible to get people to pay if you sell it to them the right way. It also indicates to me that maybe the radio stations—and the middlemen peddling downloading services to them—will need to think about what form their killer device will take so that people actually use the service.