ASMALL RUT GROWING group
of FM broadcasters are becoming aware that there can be
more money in what the public
doesn't hear .than what they do
hear! The key to more profit for
an FM operation may be the addition of subcarrier services.
In subcarrier broadcasting, a special subcarrier is generated The subcarrier receiver detects
only the program information contained on the subcarrier. To the
subcarrier receiver, the "main"
program channel does not exist!
In reality, this permits the FM
broadcaster, with subcarrier
equipment, to broadcast two (or
more) separate and (if desired)
distinctly different programs at
the same time. (Fig. 2).
What Can You Do With It?
OK, so you have the legal basis
for subcarrier service and the
technique whereby it can be accomplished. Now what do you do
with it? There may be a few exceptions in the industry, but the
majority of FM broadcasters utilizing subcarrier rights do so for
the transmission of continuous
background music.
Background music in the
United States is a multi-million
dollar industry. One background
music service operator in a large
Texas city grossed over $4,000,000
last year. Another in a midwest
city of around a half million residents grossed over $2,000,000.
The FM subcarrier background
music service is the FM operator's
passport to just this kind of potential income.
There are, at the present time,
three variations in the technique
of providing background music on a commercial basis. The FM operator anticipating subcarrier background music service should
know just how each type is operated to be competitive.
Leased Line Service
The leased line approach to
background music is probably the
best established technique in the
industry. Fig. 3 shows how this
type of system is set up. The
background music company sets
up a master tape deck machine
in the heart of the market to be
served. The tape equipment is
loaded with long playing reels of
prerecorded background music,
which is distributed to commercial customers on lines leased
from the local telephone company. In the actual building or
office of the client the leased line
is terminated in an audio amplifier, which in turn distributes
music throughout the building on
wiring installed by the background music company.
Charges (see table) are reflected as a function of how many speakers are tied to the system
on the customer's premises. In
addition to the actual background
music charges, the customer also
pays the cost of the leased telephone line. The cost of such a
line varies from state to state and
from one telephone company to
another, but $2.40 per month per
mile is typical.
Leased Machine Service
A competitive service to the
leased-line approach is the leased
machine. or in-plant, service. In
this operation the background
service operator actually places an
individual tape deck (or decks1
on the premises of each customer.
Music is distributed throughout
the building or offices on wiring
installed by the operator and terminated in the appropriate number of speakers. The charge is
basic—so much per month for the
service plus so much per month
for each speaker. This type of
operator services the machines, supplies new tapes at regular intervals, and maintains equipment.
Frequently, the operator offering this type of service also supplies a juke box. One marketing
approach used by this operator
is to reduce the apparent charges
for the background service
for permission to install the juke
box. In many locations (especially commercial bars and clubs) the
income from the juke box is better than the income from the
background service, in which case
the background service becomes a
"price leader."
Charges and Market Size
The leased-line service seems
to be confined (generally) to
larger metropolitan areas, say the
top 200 markets. Charges are pretty standard throughout the
country, although the individual
operator, of course, runs his own
business and sets his own rates.
The on-premise tape-deck operator tends to be a local operator
in smaller markets where leasedline service does not operate, or in
a small portion of a larger market. Because maintenance costs,
the actual distribution of tapes,
and other factors increase the
cost of doing business in this
type of operation, his charges tend to be higher than the leasedline service. However, this is
where the juke box operator
comes in. He, too, is in a very
competitive business, and he can
lower his costs of maintaining
and supplying music to his juke
boxes by also adding the tapedeck background service. The
same man, truck, etc., handles
both. Here, in many cases, the
tape deck operator receives his
music from companies offering
prerecorded tapes.
The FM subcarrier operator
has problems of a slightly different hue. This background service
operator can cover his transmission costs (maintenance on the
subcarrier generator and loading unloading of the tape machine)
with his regular personnel. He
must buy or lease the receivers,
service and install them and the
associated audio amplifiers, and
install wiring and speakers.
Lease or Operate
The question now becomes:
Should you operate the subcarrier
service through the FM station,
and run the background music
operation, or should you lease the subcarrier to another individual
or firm and let them run the background music service? Either approach is legal, and both are being
done.
Let's assume that you go the
way of the majority and lease out
the subcarrier. You install the
subcarrier generator, but you
may or may not install the tapedeck machine. You probably will
not provide the audio source
(music).
All right, what can you charge
for the subcarrier? This is a difficult question to answer unless
you are willing to assume the responsibility of accepting what
follows as representative only.
The exact rate you might charge in your own market will be dictated by your own individual economic situation.
In San Francisco, the seventh
largest marketing area in the
country, the rate for leased subcarriers varies from $750 to $1,-
000 per month. In Los Angeles,the second largest marketing
area, the rate runs up to $1,250
per month. In two smaller markets (150,000 population), the
rate runs $400 to $500 per
month.
The $400 to $500 per month
fee seems to be as low as the subcarrier operator can drop without going into the red ink column.
In your case even this may be
too low.
Operating Considerations
Let's consider what you have
to do before you can lease (or
operate your own) subcarrier
service. First you will need subcarrier generating equipment.
Prices for this vary with manufacturers. You probably will also
need a tape deck, and if you
operate your own service, you
will need taped music.
There is another factor to be
considered. Time. Billing and
other office functions probably
can be assimilated very nicely by
existing office personnel. But,
what about your hours of operation? Are they long enough?
Bars, restaurants, and businesses stay opm until midnight,
2 AM, 3 AM, etc., depending upon
the market and state laws. If you
sign up these establishments, you
must provide the background
service at least up to their closing time. Yet, you may be now
signing off at 11 PM, or midnight.
Obviously, your main carrier is
going to have to stay on the air,
in some form, until you can afford to shut down the subcarrier
also. This may be a tailwagging-the-dog situation, but it
is a point due serious consideration; extra air time is extra expense.
Assuming that you decide to
lease out the service, keep in
mind that while you may not be
directly involved in the actual operation of the service, you are
still responsible to the FCC for
what goes on the subcarrier
channel, and the technical quality
of what is transmitted.
Now what about the reverse
side of the coin—the FM operator who handles the entire operation himself? It is no particular secret that background music
oriented businessmen have, in
many locations across the country, installed medium to high
power FM outlets merely for the
purpose of developing a means of
transmitting the subcarrier service. This fact alone should suggest that perhaps there is good
money in such an operation.
For example, a very successful
operation works this way. The
broadcaster has a maximum power Class B outlet in a market of
over 100,000. His service area
covers a radius of approximately
75 miles, over 200,000 people.
The regular FM programming is
multiplex stereo, and every attention is given to radiating a
clean, multiplex signal.
Advertising on the stereo channels is light by comparison to
other stations. The community
regards the operation as a backbone of public service due to the
great number of local sports and
community interest broadcasts.
In the rear of the same modern plant are separate offices for
the background music company.
As a separate corporation, it
leases the subcarrier rights from
the parent FM operation. The income passing from the background service company to the
FM operation keeps the FM station in the black.
Music is leased from taped
music service. The receivers are
purchased from a supplier by
the background music company
and leased out to local clients.
The lease is carried by a third
corporation, the leasing company. All three corporations are
owned essentially by the same operation.
The background music service
company employs four youthful,
aggressive salesmen who ply the
coverage area selling accounts.
Within a week of the sale, a
service and installation truck
manned by two installation technicians arrives at the client's
premises and installs the subcarrier receiver and the associated wiring and speakers.
The same operator is considering joining forces with one or
more other similar operators and
manufacturing their own background (subcarrier) receivers.
There can be little doubt that
there is good income to be had
in subcarrier background operation, if the initial operation of
the plant is set up in such a way
as to spread overhead between
the necessary operations.