Live365: "We're Not Closed"

If you believed the rumors coming out of the streaming community this week, you would have thought that Live365.com was closing down.

In an e-mail sent by John Schenk, VP of strategic development and label relations at Live365, he stated that the company was closing down because investors have stopped its funding. "Because of grim market conditions," he wrote, "and negative stereotypes affecting online music companies, the possibilities for attaining funding from elsewhere have also proved fruitless. (Not a big surprise to most)."

But Alan Wallace, senior VP of communications said that the company is not closing down. He called Schenk "laid off and disgruntled," saying it was very unfortunate that his e-mail was taken for the truth.

"I don’t know what John was thinking," said Wallace. "It's not a career positive thing to do. Wallace did say that the company laid off about 22 employees. "We're hoping to hire at least 21 of them back," he quipped.

Schenk, who in May was promoted to VP of strategic development, was formerly a senior director of strategic development and worked for Epic Records. He could not be reached for comment regarding his now widely-circulated e-mail.

Wallace admitted that Live365 is indeed looking for additional funding, and that its current series A round of funding has kept them alive for two years. But he reiterated that the company is not in trouble. Recently, Live365 has started implementing a variety of new technology and revenue-generating tactics. It recently started implementing Web pop-up ads on its home page, as well as creating software that lets users tune into pre-set stations on their computers. "We're doing various things to monetize the site differently," said Wallace.

In a slight diversion for the company, it created its own streaming MP3 player for the Pocket PC platform last year. And just last week, Live365 announced that it created "Sugar Ray Radio," an official streaming station of the band Sugar Ray.

Live365, which was founded in 1999, often boasts that it has more stations online than there are terrestrial radio stations in the U.S.

Challenges for Internet Radio

Among the people laid off at Live365 was CTO Peter Rothman, who said he was one of the originators of the company's core Web radio concept. Although he wouldn't comment on Live356 specifically, he did talk about the challenges of Internet radio, most notably the tiny audience size. "It's a challenge to get media buyers interested in Internet radio because of the [small] size of the audience," said Rothman. Demographically targeted or geo-targeted advertising splits the online radio pie that much thinner, he explained.

Just this week, another Internet radio company, WebRadio.com said it was looking to close up. Israel-based Emblaze, which owns WebRadio.com said it would look to divest itself from the radio business to continue to focus on its wireless strategy instead. WebRadio.com is one of the oldest and largest remaining radio streamers, claiming to have over "200 radio stations under contract." It streams stations from Westwood One (a part owner of WebRadio.com), AMFM, and Citadel, plus MediaNet Communications, a Canadian broadcast company.

When called for comment, WebRadio.com said that no clear decision had yet been made, so stations are still online and streaming. Still, Internet radio is facing multiple challenges: Lack of advertisers, the drying up of venture capital, and low audience size are all stalling the growth of this sub-sector.

Rothman, however, is confident that Internet radio will prevail in the long term. "There's no example where digital technology went up against analog and lost," he said. "It took FM radio 20 years to be a viable business."