By Sue Zeidler
LOS ANGELES (Reuters) - Like a sleeping giant, Internet radio is
quietly attracting more and more listeners and advertising dollars,
leading some experts to predict that some day soon it will eclipse the
popularity of satellite radio and iPods.
Already, ratings company Arbitron Inc. says, some 37 million Americans
tune into Internet radio at least once a month, up from 11 million
four years ago.
With its growing audience, it could start to take a bigger bite of the
$11 billion spent annually on online advertising. Nevertheless, But
Internet radio faces hurdles, say proponents, because digital
copyright laws make it less viable than rivals.
"The growth potential is huge but there are significant
challenges. The record industry is doing their best to keep Internet
radio in a box," said Jonathan Potter, executive director of the
Digital Media Association. Instead, he said, the music producers
"should be working on ways to enable it" to capture a paid audience
for recording artists.
Potter's group has been pressing Congress for years to update
copyright laws that require Web radio companies to pay royalties to
record labels.
But restrictions continue to hinder the growth of the
medium. Webcasters can only play four songs by any single artist in a
three-hour period and are restricted from promoting the recording of
their content, unlike, satellite operators which are free to do so.
"We need to clarify and simplify Internet radio laws to promote the
growth of these services," said Potter, whose group represents small
and large Webcasters like Time Warner Inc.'s (NYSE:TWX - news) AOL,
Yahoo Inc. (Nasdaq:YHOO - news) and RealNetworks (Nasdaq:RNWK -
news).
Potter says most Webcasts are still operated at a loss.
Steve Marks, general counsel of the Recording Industry Association of
America, says record companies have embraced Internet radio by
offering an easy way to get licenses to use its content.
But he said the trade group was disappointed that some Web radio
companies have failed to respect the rights of artists.
"Internet radio companies should stop facilitating piracy and adopt
secure streaming formats today," he said.
Still, entrepreneurs have found legitimate ways to overcome the
barriers, and are now moving Web radio forward, fueled by views that
wireless broadband will turn it into a "killer application." They are
set to put it onto cellphones, MP3 players and other devices beginning
as soon as late 2005.
"Once Internet radio's available everywhere and you'll have 'Internet
walkmen', it will be a watershed moment," said Bryan Miller, general
manager for alternative Cincinnati station (www.woxy.com), which aired
for 20 years as a traditional radio station before turning Web-only
about 9 months ago. Some Web radio operators, like Mercora, an
aggregator of 500,000 individual Internet stations, have already found
ways around
Digital Millennium Copyright Act (DMCA) restrictions.
"The DMCA puts a lot of restrictions on the industry. But when you
have as much content as we have, these things don't stop you," said
Srivats Sampath, chief executive officer of Mercora, which enables
listeners to "timeshift" or record streamed programming so they can
play it back later, which is prohibited on U.S. Webcasts.
"DMCA prohibits timeshifting of DMCA webcasts in the U.S., but you can
timeshift everything you hear from our Canadian networks, which are
registered in Canada where rules don't prevent listeners from
timeshifting," said Mercora.
Other companies are helping Internet operators generate cash for their
Webcasts. "We're good at offering alternative revenue models to
advertising for Internet radio stations," said Kurt Huang, co-founder
of Bitpass Inc., a Web-based payment service that helps online content
providers bundle, promote and sell content and collects payments for
them.
Ando Media provides a product called Webcast Metrics, which tracks Web
radio usage across 500 independent stations including
(www.accuradio.com), (www.airAmericaradio.com) and (www.radioio.com)
and then sells that data to advertisers.
"Internet radio represents one of the biggest untapped audiences --
daytime primetime," said Jordan Mendell, chief technology officer for
Ando, noting that most Web radio listening occurs during the workday
at offices.
"It's almost like a puzzle piece. Internet radio fills in the gap
between drop-off and the drive home," he said.
Mendell said his company's data has translated into ad buys and has
helped stations develop credibility. "We're seeing major ad buyers
like Toyota and Napster putting major campaigns on our stations," he
said.
Eileen Wolbert, director of advertising for Live365, a portal of
10,000 Web radio stations, also cited a huge upswing in advertising
interest this year.
As the medium gains traction, terrestrial broadcasters are embracing
it after pulling the plug on streamcasts a few years ago. Viacom Inc's
Infinity recently began streaming news/talk outlets and launched a
couple of Web-only stations, while Clear Channel Communications Inc
recently launched a new Web strategy.
Copyright 2005 Reuters Limited.
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[TELECOM Digest Editor's Note: In our Telecom Digest Extra pages, we
have various streaming audio programs of interest, including all
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Lisa Minter (lisa_minter2001@yahoo.com)