756 internet radio Internet Radio Delivering Radio Programs Online Internet radio involves the delivery of audio programming via Today, technological improvements and new broadband digital means from one computer to other computers over the connections allow better streams and near-CD-quality sound. internet. It involves both simulcasts of existing over-the-air Listeners with cable modems or telephone DSL (digital sub- radio stations and content from internet-only stations. Internet scriber line) services are the biggest beneficiaries. The adoption radio was made possible by the 1995 arrival of streaming. Pre- of these faster broadband connections is rising sharply. In an viously, users had to download an entire audio file before being 18-month period between January 2001 and July 2002, the able to listen to it. Even audio clips of short duration could percentage of Americans with residential broadband internet take hours to download. Streaming allows the user to listen to access surged from 13 percent to 28 percent. As that number the audio programming as it arrives in real time. This means continues to grow, the audience for internet radio services will users do not have to wait for a complete audio file to down- build as well. load before listening to it. Internet radio streaming can involve both live material and archived clips of audio content recorded Radio Stations on the Internet earlier. In either case, the user must have special software that matches the software used by the station to encode and trans- Studies show that internet usage is cutting into time people mit the data. would otherwise spend listening to broadcast radio. For tradi- Internet radio was a booming enterprise into the late 1990s, tional broadcast stations, delivery of programming on the but legal decisions and a downturn in internet advertising have internet may help recapture some of these listeners and may effectively shut down many stations today. In 2002, a dispute even generate new listeners in distant locations. Even small- between internet broadcasters and the music industry came to market radio stations can reach the same international audi- a head when a copyright appeals board required internet radio ences as stations in larger markets. The concept of signal stations to pay a per-song, per-listener fee that was prohibi- strength does not apply in the on-line world, and all stations tively expensive for many stations. The fee was an especially start out on equal footing. Location is no barrier, either. It great hardship for small operations, such as religious broad- costs no more to send an internet radio program 1,000 miles casters and college radio stations, and amounted to thousands than it does to send it 10 miles. On-line radio listeners say they of dollars more than they made. This led to hundreds of inter- listen more to radio stations outside their local market than net-based radio stations shutting down. they do to stations in their own locale. By late 2002, a compromise was worked out whereby inter- One Arbitron and Edison Media Research study showed net broadcasters could pay royalty fees on a percentage of their that by the middle of 2002, 35 percent of Americans had lis- revenue instead of on a per-song, per-listener basis. The Small tened to internet radio, compared with 19 percent in 1998. Webcaster Settlement Act of 2002 was seen as a big victory by This growth has given traditional radio broadcasters cause for small webcasters and by early 2003 many small internet concern because radio listeners now have a much greater num- broadcasters were beginning to reappear. ber of listening choices on-line than they do on the radio dial. The three leading technologies for delivering internet radio Internet radio listeners are sometimes referred to as “strea- are the RealOne Player, Microsoft Windows Media, and MP3 mies.” As a group, streamies represent a very desirable demo- streaming. Internet radio stations will often select one of the graphic for advertisers. Streamies are among the most active technologies for the delivery of their content. In some cases, group of internet users, spending more time on-line than the stations choose to make their audio stream available in more average internet user. Streamies are twice as likely to click on than one of these formats, allowing listeners to choose the way web ads and to make on-line purchases and are very interested they want to listen. in new devices to enable even more convenient listening. Inter- Streaming generally sacrifices audio quality because of the net radio listeners tend to be better educated and come from need to compress the data for delivery via narrowband (56k) homes with higher incomes than regular internet users. telephone line modems still used by most households. Early Capturing the internet audience and persuading listeners to internet radio quality was very poor, and many listeners revisit, however, is made more difficult with such a range of became discouraged by the poor audio quality and problems choices. Developing content worthy of repeat visits is one of maintaining a continuous stream. The stream would often stop the biggest challenges for internet broadcasters. Merely having and buffer (download data before it was used), inhibiting con- a web presence to promote a station’s broadcast operation is tinuous delivery of the program. not enough. Internet broadcasters are using interactive features internet radio 757 such as contests and live chat rooms to gain and hold on to the through graphic advertising banners and pop-up ads as well. elusive internet audience. Concert information, celebrity inter- The “banner ad” is an easy and effective way to display adver- views, and fashion information are also important content cat- tising on a station’s website. Stations charge different amounts, egories for the young internet radio audience. depending on banner size, placement, and duration on a page. Broadcast radio stations have traditionally had strong local The banner ad may be placed on the same page listeners go to identities. On the internet, some stations may decide to adopt a when they want to listen to the station on-line. A greater more national identity. Far-flung listeners with ties to a com- amount can be charged for what are called “click-throughs” munity can stay up to date with “local” news, sports, and (money earned when users click the banner ad and go to the community events from anywhere in the world. advertiser’s site). Stations looking for a national audience may develop niche Other sources of revenue can be generated through classi- programming such as specific music genres or sports. Certain fied ads and direct sales or transactions. For example, many music formats may be more popular than others in the on-line internet radio listeners say that they would like to be able to world. A 1999 Arbitron and Edison Media Research study buy music on a station’s site. Advertising on internet radio sta- showed that 91 percent of radio listeners who have internet tions can be tied directly to transactions conducted on-line. access prefer alternative rock. The next highest categories were Whereas broadcast radio commercials depend on delayed grat- Top 40 (68 percent), classical (68 percent), religious (54 per- ification (listeners hear a commercial and will ideally buy cent), adult contemporary (52 percent), and news/talk (50 per- something later), internet radio is more interactive and allows cent). The top-rated internet radio stations tend to be eclectic the user to go immediately from the desire to buy directly to a and unique-sounding outlets not commonly found on the air. page where a purchase can take place. This immediacy in the Some broadcasters remain unconvinced of the value of on-line world changes the very nature and approach of adver- internet radio. For one thing, there are far fewer internet-con- tising for the new medium. nected computers than there are available radio sets. Internet Many internet radio stations have moved away from being radio also lacks the portability of broadcast radio and is not a free service and are now charging a subscription fee. KPIG in generally available in cars, at the beach, a picnic, or other gath- California was the first commercial broadcaster to use the ering places outside the home or workplace. Sound quality of internet back in 1995. Because of copyright fees and dwindling internet radio varies greatly, and listeners with low-speed advertising revenue, KPIG is now charging a per month fee for modem connections or slow computers are often disappointed listeners to access their content. with the overall quality. Furthermore, studies have shown that many people sample on-line stations but don’t return regularly. Internet-Only Radio Stations Many broadcasters are still waiting to see a return on their investment in internet radio. In many cases, internet radio stations exist only on the inter- net. Often referred to as music “channels,” these ventures Making Money on Internet Radio often play lesser-known groups and alternative music formats. In many cases, internet-only sites are providing original con- Although broadcast radio is an audio-only medium, internet tent, multiple channels, and fewer commercials. For artists and radio stations are free to offer interactive programming and labels finding it difficult to get playtime on traditional stations, can include images, animation, and even video. Whereas internet radio provides a viable option for exposure of new broadcast radio relies on estimating the size of audiences via music. ratings, internet radio can measure each time a user accesses a The cost for starting up an internet radio station is far less particular page or program and in many cases can provide than the cost of building or buying a broadcast station.