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Caught up in a Web
Is there a future for Internet radio? It depends on whom you ask. The news in mid-April certainly put a damper on all things audio on the Internet.
First, stations were faced with impending fees for simulcasting their on-air program. While stations are already paying fees for on-air play, these additional costs made many stations reconsider the value of the online service. For many stations, these costs easily outweigh any income potential.
The next blow came from AFTRA, who wants stations to pay talent fees that are up to 300 times the standard radio rate for spots played over the Internet. I'm all for fair compensation, but this is extreme. After the AFTRA announcement was made, a new push for ad insertion technology and products began in a classic action/reaction fashion.
In a move that seemed to seal the fate of Internet radio, 3Com pulled the plug on the Kerbango Internet radio appliance. I was surprised by this, considering how much attention and interest the product has already received. I guess that 3Com decided to cut its losses on a project that was likely becoming a significant money pit.
It seems like almost every station has shut down its online stream until the royalty and payment situation is resolved. Since no one knows how it will end or if retroactive fees will be imposed, this is a smart action for stations to simply cover themselves.
Is Internet radio finished? I don't think so. While everyone is pointing at the failure of the dot-bombs, it just goes to show that old methods don't always work for new technologies. In the end, I expect stations will pay additional monies to play music online even if it is simulcast on air. The rates will be negotiated and a satisfactory solution will be reached. The same is true for AFTRA. Contracts will be written that automatically cover the rights for Internet play. A higher talent fee may be the result, but fair compensation is warranted.
What we have seen is a growing phase for Internet radio. A recent Consumer Electronics Association study showed that consumers want free content. We all know that nothing in radio is really free. Whether it's commercials, underwriting or subscription, money is changing hands. I'll modify the statement above and say that consumers want the perception of free content. If they don't know they're paying for it, they will accept it as free. Like the business end on webcasting, the listener side needs to grow as well.
If you're a baseball fan, you have likely seen that this is changing already. Major League Baseball has changed how it provides game broadcasts online. To listen, you must now subscribe to listen. The fee is not excessive — $10 for the season to listen to any game. Some may see this as greedy, but subscription services do succeed. If you wonder who will pay to hear something that has traditionally been free, look at the satellite radio services coming from XM and Sirius.
I doubt that many stations are generating any revenue from webcasts. The cost of business is too high for the current technology to show more than break-even results. Multicast and other streaming advances, ad insertion and targeted ad insertion are all part of the evolution of Internet radio's forthcoming success and advancement.
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