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Tom Leykis on the Economics of Internet Radio (Q&A)

Tom Leykis phone P
Twitter.com/tomleykis

After a nearly three-year hibernation, the popular call-in talk show host and self-described "big-balled bastard" chose the DIY route over podcasting, satellite and terrestrial broadcast.

Tom Leykis has been called a lot of things: a misogynist, a woman-hater, a showboat and an egomaniac. He wouldn’t deny many of them. As the host of his own radio call-in show, the 58-year-old self-described "big-balled bastard" has doled out advice on dating (via his Leykis 101 rules for men -- i.e. never spend more than $40 in a night) and parenting (don’t do it), offered his opinions on politics and business, and raised the blood pressure of millions in the process.

So when The Tom Leykis Show went dark on Feb 20, 2009, 12 years after it first started airing on Los Angeles’ KLSX, scores of loyalists from SoCal and around the world directed their anger at CBS Radio's decision to switch formats (it's now KAMP, a pop hits station), while internally, some pointed their finger at Leykis himself for taking down an entire talk station in his wake (according to reports, voluntary salary cuts were asked of KLSX radio personalities -- Leykis, earning around $2 million per year, however, wouldn’t budge). Still, few thought Leykis, a known name in radio whose show was aired on 25 different affiliates with a devoted audience of several hundred thousand, would abandon terrestrial radio forever.

Yet that’s exactly what the shock jock did, opting not to turn to satellite, as did Jim Ladd, recently yanked from KLOS’ lineup, or to podcasting as so many comedians have adopted. Never one to think small, his paycheck being a prime example, Leykis lauched his own online radio network. Appropriately dubbed “The New Normal” (time will soon tell how that goes over with the new NBC show of the same name), it went on air the day after his contract with CBS lapsed. Not that he was complaining about the forced sabbatical -- the company had to pay out what was left of his $20 million deal while Leykis stayed home.

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In the time he was off, Leykis had devised the ideal content-casting scenario -- fully licensed radio stations streaming some 50,000 songs at a cost of under $7,000 per month and the free drive-time reincarnated version of The Tom Leykis Show, which drew 400,000 listeners in its first week alone. For the diehards, on demand seekers or a la carte shoppers, a podcast version is available via subscription, at $99 per year. And it’s all streamable on your phone, no matter what the device.

“Why are people spending $100 million to buy a frequency when most people over 40 years old are getting their content on iPhones or listening to their iPods,” he says in The Hollywood Reporter’s recent story, “How Radio Will Kill the Radio Star.” “You have to find another way to send your curated content out there.”

Leykis explains more of his present-day philosophies on the radio business in a bonus Q&A with THR.com.

The Hollywood Reporter: How did you come to the decision to take this DIY route? Did you deliberate or was it a no-brainer?

Tom Leykis: To be honest, I spent the first nine months of the first year exiled doing absolutely nothing. I never had a break before in all of my adult life, so I debated whether I wanted to do anything at all. Financially, I didn't need to. I could just retire or do other things. Then I had an epiphany. I was wondering if it was possible to create a full-fledged 24/7 radio station without a transmitter or a satellite dish? I had to spend time educating myself about how digital content is transmitted, what the limitations are, what opportunities exist that may not have been exploited. I had the time and the luxury to be able to do that. So we began experimenting and found a way to create a radio station without a parking lot or a human resources department, without cubicles, towers or a dish. It's a radio station in your mind because really with the technology that exists today nobody knows where you are, nobody know if you're live or if you're on tape; if one guy is on this side of the country and the other somewhere else. Everybody sounds equally good so there's no such thing as bad reception.

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THR: How do you make money? 

Leykis: We have not made substantial revenues at this point, but the whole purpose was to build up to the ultimate goal -- taking my own show, the thing of most value that I have, and there was a huge demand to have me back to do a show -- and monetizing it. In week one, my show drew over 400,00 listeners, which was more than the cumulative audiences of 14 L.A. radio stations. In the first month of business, we had over 1.7 million listeners. So now, we have revenue coming in. We're on pace to bring in about $180,000 $190,000 just selling podcasts shows that have already run.

THR: Is it a freemium model? How do you describe the business plan?

Leykis: It's a different model from what everyone else is doing. The live stream is free if you listen to it within 24 hours of its first airing, but you can also choose a premium podcast subscription, which gives you the capability if to go to a particular segment of the show or a date. The live stream is the platform for which we sell everything else we do.   

THR: And there are ads?

Leykis: There are, yes, but limited commercials compared to radio -- in an hour, we have about 7 minutes of ads. When I was at KLSX, it got up to 28 minutes an hour. So I was on only 32 minutes of every 60 minutes. We also have access to metrics for internet listening so we're be able to go to media buyers and ad agencies and say 'Here, we've got accredited numbers.' Unlike Arbitron, which engages in estimated audiences -- because radios aren't wired, you have no idea when someone turns on a radio.

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THR: Why was creating music streams so important that you gave it equal attention?

Leykis: The music formats were important to us to show another side of what we do. They’re all locked down with ASCAP, BMI, SESAC and Sound Exchange. We are fully paid up and advocates for the concept of making sure our streams are street legal, which is more than I can say for 99 percent of these people who have streams. They have not gone the extra mile. We have. We're in the entertainment capital of the world. We can't put on a station without proper relationships with all the agencies, and we have that.

THR: One of the biggest complaints about streaming and satellite is the audio quality when compressed.

Leykis: Pure Pop Hits is at 64k bps. We were at 128k for the first year and upon consulting with people in the industry, we found out that most people listen on a smart phone that dumbs it down to 64k for memory usage. So there's no point in being more than 64k because it just gets lost. On the other hand, New Normal Rock, the active rock station we do, it's 128k.

THR: You decided not to censor lyrics on Pure Pop Hits. Why was that important?

Leykis: It's the other way around: why is it important to censor lyrics? We're not doing it to attract an audience, we're doing it because we don't have to censor the lyrics. We don't have to play radio edits of songs -- so we don't. Think about it: Pink cannot release a single record without cursing, every single one is full of vulgarity. If that's what she intended to show the audience, and that track is selling like crazy, we're going to play it. Who are we protecting here?

THR: Well if you have an audience of 12 year-olds listening in, as has been reported...

Leykis: That's an artist’s issue and not my problem. There was one point last year where we were playing three songs in our top 10 A-rotation that had the F word in the title: "F--k You" by Cee-Lo Green, "Tonight I'm F--king You" by Enrique Iglesias and "F--kin' Perfect" by Pink.

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THR: Why is The Tom Leykis Show not available on iTunes?

Leykis: Here's the problem with iTunes: if you want to listen to the live stream, we tell you how to do it on our website and it can be done. But, Apple has all kinds of limitations to what they list in their directory -- vulgarity and content restrictions, we're not getting involved with that. And as far as a podcast is concerned, they make it very difficult for you to have a paid podcast, they want podcasts to be free. And we're not giving our podcasts away.

THR: Marc Maron, Adam Carolla, Greg Proops have been able to tap into their audiences via podcast, why didn’t you want to go that route?

Leykis: Because I interact with callers. Greg is a comedian. Maron is a humorist. Adam Carolla was never a talk show host, he took calls, but that's not the same. I'm trying to provide the same experience that people had listening on the way home from work where I would get into it with callers or guests, and you can’t do that with a podcast. We don't compare ourselves to Carolla or anyone else because we don't do what they do. Our podcast is an afterthought. Our primary goal is to get people to be part of a live experience everyday.

THR: What kind of financial outlays are you making to keep The New Normal on the air?

Leykis: My investments by the end of the year will be approximately a million dollars since we started in 2010. I have 5 employees who all get paid. I have a space in Burbank, we spent approximately $150,000 dollars on gear. We have a very large insurance policy for slander and liability of other kinds, that’s a substantial investment. And our legal bill is quite high because we have intellectual property that we create and we have to protect. For example, this TV show coming on NBC, called The New Normal, which I learned about from The Hollywood Reporter. So my attorney is looking at that right now. And licenses for the music cost about $6,000 a month. Still, if you think about it, it's cheaper than running a radio station by a mile.

Twitter: @shirleyhalperin