The Rebound of Internet Radio

To ears tuned to the big media, satellite ventures like Sirius and XM sound like the future of radio. But while those companies have loudly spent buttloads for marquee names like Howard Stern and Jimmy Buffett, another sector of the industry has been quietly gathering strength: Web radio. Basement hobbyists and semi-pros alike are developing a business model from the bottom up, and although you won't hear it from any celebrity spokespeople, those quaint little webcasts are beginning to usurp power effectively from the Clear Channels of the world, and evolve into a solvent media movement.

Last week's Streaming Media East conference at the New York Hilton was Internet radio's state-of-the-union address. Though SME hasn't fully rebounded from its halcyon turn-of-the-millennium era—booths numbered only about 40, and most focused on hardware and software, as opposed to content—the event carried an optimistic vibe. This is thanks in no small part to the iPod. Apple didn't just re-energize the singles market, it provided a new outlet for the digital radio industry via online music's latest wrinkle, podcasting. Podcasts—words or music recorded as discrete programs and made available for download—allow the user to not only time-shift, but also space-shift and media-shift content, liberating web radio streams from the tether of real-time broadcast.

But even old-fashioned, non-podcast web radio has plenty going for it. Kurt Hanson, whose "RAIN: Radio and Internet Newsletter" is a must-read, brought slides and data points to illustrate everything net broadcast has going for it. Here are the broad strokes:

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  • You no longer need a desk to access the Internet. Wi-fi is fast becoming a way of life in urban areas—notably in Philadelphia, where it's being rapidly deployed publicly, and will soon approach ubiquity. And content is now easily transferred to portable playback devices.
  • Web radio is free. Sirius and XM subscriptions both run $12.95 a month and upwards, in addition to the hardware investment of $100-plus.
  • It plays big artists shunned on the airwaves. Adult-contemporary crooners Michael Buble and Josh Groban and classical-opera modernizers Il Divo have best-selling albums on the charts, but as they're outside the rock-pop-hip-hop spectrum, trad radio gives them no love.
  • It's not a bubble. Clayton Christensen, author of the award-winning best-seller The Innovator's Dilemma, outlined a theory of "disruptive technology" that suggested what makes some innovations succeed better than others. Web radio is a such a technology: Rather than outpacing customer needs, it started out below expectations and has since risen to meet and subsequently guide its market. This gradual success also stands in sharp contrast to the hundreds of millions of dollars hemorrhaged to date by Wall Street darlings XM and Sirius.
  • There's money in it, now. With the cost of bandwidth declining, professional webcasters are beginning to turn a profit. As Kevin Shively, East Coast account manager for Net Radio sales, notes, this has encouraged Fortune 500 companies to incorporate net radio advertising into their business plans.
  • The Sirius business model, observed Drew Robertson of PhoneRanger Wireless Solutions, aims for penetration in 10 percent of cars in the next five years. According to Hanson, though, "the vast majority of in-car listening is not on the interstates," but rather, in urban areas (i.e., during commute time), so there aren't long stretches of tune-in time—resulting in poor audience numbers outside drive-time, which is sure to scare off advertisers. Oldies DJ Barry Scott adds: "A lot of people got [satellite radio] free with their cars. It just came with the car as-is—I don't think [the car owners] even listen." (A point also made during Hanson's panel.) In other words, satellite radio is relying on a health-club model in which money is made off those who subscribe to a product without using it—which only works until that wave of subscribers cancels en masse.

    Scott, a longtime radio veteran who works in Internet broadcasting, makes another point. His Boston-based show, "The Lost 45s" was once syndicated to trad radio. But program directors took umbrage with him playing forgotten chart hits: "What they wanted was, every time someone punched in their radio station, they got the same old song that they always play, so that you knew instantly what their station was about." His show has nevertheless been number one in its market for several years. But only on the Internet can he easily expand beyond that market without being subject to narrow format rules.

    As webcast personalization has improved, audiences have demonstrated that they care less about celeb DJs than getting the music they want. Meanwhile, even the perennially out-of-step Rolling Stone has cited RAIN publisher Kurt Hanson's own AccuRadio as one of radio's "best and most adventurous" properties. As hype goes, it ain't much. But at least web radio has earned it.

     
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