The Real Cost of Sprint FM Chips

RADIO ONLINE | Monday, February 4, 2013 | 6:01pm CT

While the radio industry initially applauded Sprint's decision to include the coveted FM chip in at least 30 million cell phones, the true cost of the move is only now being revealed. Radio is pledging $15 million in advertising trade over the next three years to Sprint to make the FM chip a reality. In theory that translates to an estimated $10,000 in inventory for every station. Details are still being ironed out but Emmis CEO Jeff Smulyan, who has led the charge, indicates a positive response from the industry and hopes to have signed commitments from the various radio groups over the next 30 days.

An initial idea is to have the $15 million divided by market size. Smulyan says, "We're going to try to make it as fair as is humanly possible." One interesting aspect is that Sprint will not necessarily have to use the advertising time to promote their products. In fact there is discussion about Sprint selling the ad time for cash via their own ad reps. A big concern here is the possibility that Sprint could sell its inventory to national advertisers that already purchases time on a given station, thus cutting into that station's national revenue.

Of course is Sprint fails to follow through on the pledged 30 million FM-equipped cell phones, broadcasters could reduce the $15 million amount. However Smulyan doesn't see that happening saying Sprint has been "wonderful partners" thus far.