IQ Interactive Special Report: NET RADIO DAZE

In the brief history of streaming media on the Internet, it's likely that no other offline medium has been as greatly affected by the recent advances in technology as traditional broadcast radio. With last year's to-do about MP3 hogging so much media attention, many mousepad pundits were quick to herald the end of radio as we know it. After all, if consumers can download any kind of music they want at any time and for free, why would anyone bother listening to advertising-supported radio? The notion that MP3 would gobble up radio altogether, however, proved short-lived. After all, giving away the goods turned out to be a fundamentally flawed business model, since offering up content for free equaled zero revenue. Thus, advertising-supported Web sites delivering either streaming or downloadable music rebounded as a sound business plan. Strangely, while the major recording labels eventually conceded that they'd have to deal with what was happening with music online, radio networks seemed less inclined to join in on the revolution. Until recently, traditional radio stations have shied away from the Internet due to a variety of factors including denial, resources and air space, say experts. Whereas TV, print media and the film industry have been quick to join the cyber bandwagon, traditional radio has looked the other way. Of the 600 terrestrial radio stations that have an online presence, only 30 have streaming audio content, according to a 1999 study by New York-based Jupiter Communications. So why have traditional radio stations been slow in bringing programming from the airwaves onto the Internet? The short answer might be chalked up to ignorance or misunderstanding. However, crossing the divide that separates traditional radio from its Web counterpart is more than educating station managers on ways to exploit the capabilities and benefits of the Internet. From a programming standpoint, cybercasting a terrestrial radio signal would not only increase audience reach but also offer advertisers a way to target their advertising in more innovative ways. For radio stations, the additional outlet for their signal would allow station suits to increase ad inventory, since on-air commercials could be replaced with Net-only spots. While many traditional radio stations have been reluctant to build their presences online, a crop of nothing-but-Net radio sites have capitalized on the dearth of Web radio networks. The current genre of Web-specific radio stations offer hundreds of channels of customized music options, streaming music videos, original editorial content, e-commerce and interactive DJs. In addition, many sites, through so-called "smart" software, automatically program content and advertising based on a user's preference and listening habits. Meanwhile, traditional radio stations use their Web sites as little more than dot-billboards highlighting on-air events, offering nothing in the way of customized music playlists, e-commerce or interactivity. Despite the slow progression of traditional radio to the Web, the demand for Internet radio continues to grow apace. In a study conducted by New York-based Arbitron NewMedia, more than 30 percent of avid radio listeners complained that their favorite stations' signals didn't come in clearly at work, and welcomed Webcasts as an alternative. The study also found that 50 percent of online browsers go to a Web site to see products advertised on the radio, making this audience an attractive target for advertisers. Arbitron also found that 30 percent of Web radio listeners prefer listening to out-of-market stations, forcing traditional stations to rethink their marketing plans for these listeners. Finally, the Internet is used more than 50 percent of the time in conjunction with radio and TV, which translates into greater marketing opportunities for advertisers, say experts. "Web marketers should continue to take advantage of the cross-media synergies to efficiently promote their sites, reinforce Internet brands and drive Web traffic," says Dr. Roberta McConochie, director of research for Arbitron NewMedia. "At the same time, traditional media should continue to extend their brands and franchises into cyberspace." According to the Jupiter Communications study, radio has failed to "impact sales of music online the way the medium does offline." The study suggests radio seek to use its on-air personalities to capitalize on potential online commerce possibilities and develop synergies with cross-media programming. "Radio's business is to sell air," says Scott Zafran, director of marketing for Los Angeles-based WebRadio.com, which offers Webcasting solutions to traditional radio stations seeking to establish an Internet presence. "Over the last year, they've begun to realize that they need an online presence. They realize the need to stream [video and audio] as their best vehicles for promotion." Now, says Zafran, the stations are starting to "open their eyes and their pockets to bring on the dedicated technological people." One of those is KIIS-FMi, the stand-alone Net counterpart to top-rated Los Angeles station KIIS-FM. Launched last October, the site embraces new technology, including broadband and streaming video. "We realize that radio stations have to become visual and interactive mediums," says Chris Peaslee, executive vice president of operations for KIIS-FMi. "We're preparing ourselves for that." While the Internet site's content is compiled by KIIS-FM programmers, Peaslee says the music focus is on new music, a new identity and streaming audio and visual content. "We want to be like Yahoo!, which created a national brand first, and then went back into the local communities and created Yahoo! L.A. and Yahoo! Japan," says Peaslee. "We're going to New York to launch a hip-hop station and another in Nashville." An additional impetus for change in the way traditional radio stations do business is on the horizon. Some even say it may mean the end of terrestrial radio stations. While the Internet has challenged traditional radio in the home and at the office, radio has maintained its dominance in the car due to technological limitations. That is expected to change by 2004 when car-based Web receivers incorporating Global Positioning Satellite technology bring Net radio into the automobile--in effect eliminating terrestrial radio's last stronghold. More than 26 percent of the consumers queried by Arbitron said they would welcome direct-to-car digital satellite radio. When given the option, a majority said they would prefer Internet radio stations with some commercials and lower monthly fees compared to no advertising and higher fees. To David Goldberg, chairman and CEO of Launch.com, a Santa Monica, Calif.-based Internet music site, satellite-direct radio will be the final nail in traditional radio's coffin. "The only advantage [traditional] radio stations have is their licenses to a piece of spectrum, which doesn't have any value on the Internet," says Goldberg. "I don't see why traditional radio stations would be successful on the Internet. It's all about the end-user having more control through customization of the experience, which is completely counter to what traditional radio does." Launch.com claims a registered membership base of 250,000, which Goldberg says represent 250,000 individually programmed sites. "That kind of power completely changes the user's experience," says Goldberg. "It's going to be very difficult for traditional radio to compete with that."

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IQ Interactive Special Report: NET RADIO DAZE

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