Subscription-based audio and video streaming services have flooded the market and there is even an app that offers subscribers the opportunity to listen to radio broadcasts and podcasts sans commercials.
The fact is that subscription-based services such as Netflix and Hulu have not forced broadcast TV to adopt a similar model. Actually, the opposite has happened as these video streaming platforms now see more value in plans with ads than relying exclusively on collecting a monthly fee for their premium, commercial-free services.
Third-quarter results revealed that Netflix’s “Basic with Ads” plan brings in more overall revenue per user than the company’s standard subscription plan, according to Indie Wire. This caught the attention of Coleman Insights Executive VP/Senior Consultant Sam Milkman who penned a blog post touting the importance of commercials on radio stations… and it’s not just for the revenue that the ads generate.
“We can argue another time about the legitimate issue regarding the quantity of commercials, but I have learned that commercials are expected on the radio—and maybe even quietly enjoyed by people like me,” Milkman writes.
Instead, Milkman suggests the radio industry has embraced commercials and “worked hard at making them a premium and recognize that they are more valuable than any ‘subscription fee’ we might someday be able to extract from an audience through our apps or other means.”
He recalls a mentor of his who when launching a new radio station or format would load “dummy commercials” into the log, mainly spots that highlighted local concerts or releases of artists in the new station’s format. This was done to give the station credibility and also to create an expectation for commercials.
While also being a revenue source, creative ads give station listeners something to talk about. The buzz about Super Bowl ads is a great example of that, as are audio commercials with memorable content, spokespersons, sonic branding, and jingles.
“There will always be advertising that radio stations are asked to run that is out of their control. But there are plenty that are within their control. Rather than focusing on how to not run them, maybe the focus should be on how to run and present them in a more appealing way,” Milkman suggests. “Ads can be great if we make them great. And, as streaming services have learned, with the right ad structure there is real value to the bottom line.”