Terrestrial Radio Stations Still Dark

Joshua Woodward, an architecture graduate student at the University of Nebraska-Lincoln, prefers listening to streaming radio rather than MP3s or CDs. He used to listen to streaming radio stations all the time when at work or in his studio, but lately that’s changed. Radio stations have been dropping their online streams.

"I have the damnedest time trying to find anything good to listen to," he said.

A lot of streaming radio listeners like Woodward wonder when they’ll get their stations back. Disagreements over advertising rates, royalty payments, and terrestrial versus online rights resulted in the pulling of hundreds of streaming radio sites from the Net in April (http://content.clearchannel.com/streamingstatus/). And it looks like it’ll take further compromises between everyone from advertisers to radio stations (and the corporations that own them) to the unions before many terrestrial stations stream again.

Steve Vonder Haar, director of media and entertainment strategy practice at the research firm The Yankee Group, calls it the growing pains of evolution. "In every evolving market, you’re going to have bumps on the road as you create new business models. The cake is not going to come out of the oven fully baked if you leave it in there for two minutes," he says.

Contractual Advertising

The dispute — that many thought had long been settled — that drove the final nail in the coffin (or coffers) of streaming stations was over who should pay for terrestrial commercials rebroadcast over the Internet.

"We set rates for the use of commercials moved over to the Internet and for commercials made directly for the Internet," says Mathis L. Dunn, Jr., assistant national executive director of AFTRA (www.aftra.org), the American Federation of Television & Radio Artists.

The unions had set high session fees (300 percent of normal) for actors used in both terrestrial and online commercials, but hadn’t set any minimums for streaming radio-only ads. "Our future hopes were that commercials made directly for the Internet would be a new fertile field for advertisers to plow," Dunn says.

Some terrestrial ads had been showing up online without authorization; so national advertisers sent letters to radio stations and corporate parents asking them not to do so. In response, companies pulled many or all of their stations.

"It has been alleged that AFTRA has caused the sudden demise of Internet streaming," says Dunn. "We are a scapegoat for an industry that was ill prepared to deal with the technology of the future. There was no appropriate business model created by broadcasters for commercials over the Internet."

Dubbed Commercials

Many of the stations that are still online have turned to companies that use technology to scrub offending commercials from their broadcasts. "It’s essentially created a market that might have been slower to develop," says Vonder Haar. "If you’re at Hiwire and Lightningcast, you’re probably pretty happy."

Chuck Dickemann, director of product management at Lightningcast, definitely didn’t sound displeased. "It opens up yet one more window," he says. "Our technology was developed long before AFTRA and terrestrial broadcasters started realizing that they had a tiger by the tail. Once everyone realized the potential for expanding their audience, everyone wanted to protect their interests."

Dickemann speaks of using technology to insert local weather broadcasts or traffic reports based on a user’s zip code. "Our product is designed to be like a jungle gym at the playground — you can use it in a lot of different ways," he says.

But not everyone’s enjoying the new format. "I do still listen to [San Francisco-based] KFOG sometimes, but it gets to be really annoying as well," said grad-student Woodward. "Instead of shutting down over the rights issue, they just block stuff out. So instead of getting to hear Bay Area commercials, you get to hear dead air. Even better is when they play content-less soundtracks on a loop during the commercials until they remember to switch back to the radio, which is between two to five minutes after the program is back on the air."

Is Terrestrial Radio's Doom, Internet Radio's Gain?

After the initial wallop of getting hit by terrestrial stations yanking their streaming broadcasts, Internet radio has been growing steadily. This past week, it surpassed its previous high, according to streaming measurement firm MeasureCast (www.measurecast.com).

"The listeners are there and the audience continues to grow," says Bill Piwonka, VP of marketing for MeasureCast. "We are at a point higher than anything we have ever seen." MeasureCast's Internet Radio index rose 18.6 percent this week from 152 to 180, meaning the total number of hours streamed by online broadcasters has increased 80 percent since January 2001. In fact, 16 of the week's top 25 finishers were Internet-only stations.

One Internet-only station that has benefited is AOL's Spinner.com, which broadcasts its own channels of music online.

"We’ve had consistent growth all along with the popularity of our diverse selection of original programming," says Ann Burkart, a spokesperson for Spinner.com. "But certainly we’ve been fortunate to not have experienced some of the difficulties facing terrestrial stations."

Of course, another challenge facing streaming radio is the ongoing dispute over copyright rates. Differing rates offered by the Recording Industry Association of America (RIAA) and the Digital Music Association (DiMA) have lead to an official hearing by the U.S. Copyright Office at the end of July. Once those rates are set, webcasters will finally be able to know how much to pay.

"Certainty always helps," says Jack Swarbrick, CEO of LMiV, Local Media Internet Venue, a network of radio station Web sites. "People can assess clearly what their financial cost is." Unfortunately, the rates will be retroactive, so webcasters might be paying a bundle.

Back on the AFTRA front, recent news reports indicate that Clear Channel, owner of hundreds of radio stations, will be making an announcement soon regarding a test of in-stream advertising. If true, that would mean the company would bring back stations that have been completely down for the last two months. With no existing industry-wide solution, the AFTRA/webcasting debate may linger for a while.