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GlobalMedia.com Gets Big Into the Streaming Radio Biz

GlobalMedia.com (http://www.globalmedia.com) is in a hot space. Not only is it a provider of revenue and streaming services for traditional broadcasters, but they are heavily involved in designing rich, interactive media players as well. With RealNetworks making its RealPlayer look more like a browser GlobalMedia seems to be on the right track.

Although GlobalMedia has always served radio stations, it made an interesting deal on June 8th to purchase 212 "assignable contracts" from streaming provider OnRadio for $9 million. In effect, OnRadio sold itself out of the streaming radio provider space.

This was great news for GlobalMedia. It gained 144 non-streaming stations (doing services like hosting and advertising) and 68 stations with streaming services. That means new customers and more opportunities to generate and share in revenues. With all those stations, GlobalMedia instantly became a major streaming and hosting provider. President Jeff Mandelbaum says the company's goal now is to create branded, interactive players for all those stations. Unlike Yahoo! Broadcast or BroadcastAmerica, GlobalMedia doesn't have a portal play.

Customers of GlobalMedia include AccuWeather, FashionTV and Classic Movies. Vancouver, Canada-based GlobalMedia has over 110 employees and trades on the NASDAQ market.

Q: Start out with a quick summary of the company.

A: GlobalMedia provides an end to end solution that provides branding, streaming media and ultimately (and most importantly) revenue generation for major broadcasters around the world.

Q: You partner with content providers, then? Give me an example.

A: Sure I can give you an example. With AccuWeather who is producing a video program specifically for the Internet. We've partnered with them to deliver that content over the Internet through a private branded AccuWeather player. It offers the content in a rich multimedia experience and interactivity like shopping email and chat, so the user is interacting with the media and has the opportunity for advertising and e-commerce through revenue generation in a revenue share model we have with AccuWeather.

Q: You mentioned chat as well. That's all built into the RealPlayer, isn't it?

A: Yes, the Global Media player extends the functionality of the RealPlayer and provides a very rich interactive experience with the media. We use the Real G2 codecs and find they offer superior audio and video quality including SureStream and we extend that by offering advanced applications like email, shopping and chat that tightly integrate with the media experience. That rich functionality increases the viewing and listening time and results in revenue being generated through advertising and e-commerce—all within the player.

Q: So there's no plans for Windows Media?

A: No, we support the Real G2 format and we'll consider opportunities in the future, but RealNetworks is the standard in the industry--they have 85% market share.

Q: Has RealNetworks come to you with work?

A: Well certainly, we do work closely with Real and a number of different applications that sit on top that G2 player and there's ongoing discussion on how to work closer together in the future.

Q: Can you talk about the deal you had with OnRadio? It seems OnRadio is getting off that track and not hosting radio stations anymore.

A: Yes, OnRadio has exited the ‘bringing terrestrial radio stations on the Internet" space. The basic reason for that is that their radio broadcasters were saying they wanted to generate top line revenue growth through the broadcasting of their signal on the Internet. OnRadio found that GlobalMedia.com was best positioned in the industry to actually write broadcaster's checks. That's the main differentiator for us; we write broadcaster's checks—they like that.

And as part of the deal, we acquired 212 assignable contracts from OnRadio. They will all be integrated into the GlobalMedia network. Our integration plans are well defined and running ahead of schedule. We have many stations that are already signed up and are looking forward to becoming part of the GlobalMedia family. The total size of the contract, the total terrestrial cume (audience) for number of stations was in excess of 50 million . So the actual price to acquire each terrestrial listener was 18 cents. So we think that this is a very attractive opportunity for us to scale our business. The radio space will go through a period of rapid consolidation and the fact that we're NASDAQ nationally market traded, have a very valuable currency and will greatly benefit from consolidation through proven revenue techniques have resulted in us being a prime candidates to be an acquirer of great assets. I will say also that this will not be the last acquisition the company does. We continue to see numerous opportunities to grow our base and expect Global Media to be very active in the acquisition front going forward.

Q: When you say "assignable contracts" does that mean that some radio stations can say, "Hey we don't want to go with you"?

A: Yes, that actually can happen. There's attrition assumptions built into the pricing of the transaction. And there's also upside for both parties; as more stations than not come online. So far reaction has been incredibly positive from the OnRadio base; we have a full time team dedicate to working with them and are very pleased with the results we've seen so far.

Q: What's the plan for them? I can envision you creating individual players for 212 stations, or creating one player where you can pick and choose stations, something like Yahoo did recently with its Yahoo! Player.

A: No, we will be creating private-branded players. That's very different from Yahoo's strategy or other people in the portal business. We're not in the portal business; broadcasters really care about extending their brand and not positioning themselves next to all their direct competitors. By doing that, we're creating private-branded players and e-commerce storefronts for all 212 contracts. We think that's critically important; extending their brand and promoting their great content. Private branding of our clients, leveraging off their brand and not competing with them is why we haven't adopted the portal strategy.

Q: In effect having 212 stations makes you a pretty big player in the radio business.

A: We actually a very large player. As a result of these contracts we already have over 300 e-commerce store fronts and over 250 radio stations.

Q: Is it fair to say you've been concentrating on radio, then?

A: We have historically been concentrating on radio and we'll continue to focus on the space but our major efforts here are in the consolidation area because we see terrific opportunities to take people that have acquired great numbers of clients and being in a great opportunity as a second generation streaming solution to provide the revenues that broadcasters are looking for. And by second generation, I mean that streaming has been around for 5 years and a lot of the experience that people have had is experimentation. They put stuff on the Internet seeing what traffic they acquire and testing quality and technical aspects. Where I see us being positioned as a second generation provider is one that is extremely experienced in the space and provides and integrated revenue model out of the box. Now major broadcasters are going from the experimental stage to where they're betting a substantial parts of their future revenue stream on streaming. Audience sizes are growing very rapidly. So we're being sought out by a lot of broadcasters that have had experience with streaming for many years with other providers but are now looking for a solution that actually generates revenue.

Q: I've heard from some radio stations say that they just aren't making any money selling CDs from their sites. So just what exactly are you providing them to make money?

A: All electronic sales are a lower margin business; the substantial part of our business is advertising based. Because our player has personalization capabilities where we can target audiences and we have an expert sales force to sell advertising, we're finding very rich opportunities in sponsorships, promotions and advertising as being a substantial part of the revenue model. E-commerce is continuing to emerge, but we're finding that there are goods and services to be sold over the Internet that are much higher margin properties such as travel, fragrance, apparel, jewelry, that are leveraging the content. Therefore, these are going to generate much higher margins than we're experiencing today with CDS, books and videos. Although that is a good margin business, there are much higher margins in other types of business and that's what we're focusing on. The ability to target a large audience for advertisers is resulting in a growing CPM. In fact, over the last three months alone, our CPM rates have risen substantially because of our ability to target and gather larger audiences.

Q: Will you essentially act as a provider of streaming services for new radio stations getting on the Internet?

A: Oh yes. We are and that continues to be an area we're focusing on. However, the largest part of our business going forward will be in video-based content. Some recent examples include AccuWeather, FashionTV.com and many other major broadcasters coming to us from leveraging video assets.

Q: Like the recently announced Jerry Lewis Telethon coverage?

A: Yes, that another fabulous example. We're going to partner with them to deliver the first web-enhanced television viewing experience on the Internet. This is a great example of how you can leverage the power of the Internet and help convergence happen.

Q: Let me talk about the player a little. It seems you're elevating the player into almost a stand-alone application. What's behind this move? Are you looking to turn the player into a mini-browser?

A: I would not call it a browser because it's not really based upon of HTML. I would say that the player we're offering is the richest and most interactive and we're focusing on leveraging many different types of data (text, audio, video, JPEG, HTML)—synchronizing all those types of data and also adding advanced appliac9tions that extend the functionality of the media in a single unified interface. We're building that in the player, our strategy is to keep them on the player as long as possible. The longer they're on; the longer they view more advertising and e-commerce opportunities for us, and our broadcasters. So we do look at interactivity and rich content to be a competitive advantage.

Q: When you build these interactive players do you build it inside web page with the RealPlayer embedded or completely inside the RealPlayer?

A: We do it inside the RealPlayer.

Q: That's a big distinction.

A: Yes that's definitely a big distinction. We do that to tightly integrate synchronization and functionality of streaming media by doing it inside the player. WE build upon the SMIL standard within the G2 player and we find it to be a rich development environment. We do a lot of programming in HTML—our private branded storefronts are in HTML.

Q: RealNetworks seems to be building its own player, too. You can click on things, see graphics inside the player and it has a forward and back button—it seems that's something they're moving to--

A: They definitely are improving the functionality of the RealPlayer. I still would not call it a browser--it does offer more enhanced capabilities that leverage audio and video.

Q: So you talked about advertising earlier. What was your biggest revenue generator? Did you say it was advertising?

A: It's advertising.

Q: Is that banner advertising?

A: It's banner, and quickly gravitating into rich media ads, with audio/video enhancements. That's an area we're focused on—it can offer much higher revenues.

Q: I've often wondered, though, why companies put banners and buttons on a player. Because most listeners just minimize it and don't see the ads.

A: That's correct.

Q: Some companies are looking to strip audio ads and insert new ads inside a stream. Is that something you're looking at?

A: Definitely, oh yes.

Q: What's it like up there in Vancouver?

A: I love Vancouver, I'm finding it a great place to run and manage an Internet business. Its close proximity to Seattle is very attractive, we benefit greatly from the Canadian dollar and have a much lower cash burn rate. So we're finding it a terrific place to run an Internet business.

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