- I N D U S T R Y
November 11, 1998
NetRadio wants you to whistle while you work
Matthew Broersma - ZDNN
Back in November of 1995, NetRadio Network was one of the first companies to found a business plan on an emerging technology called streaming media -- quick audio, and even video, over the Internet.
Today, as NetRadio makes plans for a public offering of stock, it has plenty of company in the streaming-media market. More than 1,700 ordinary radio stations are streaming their music live over the Net, according to Broadcast.com, which aggregates audio and video content.
A number of companies are also, like NetRadio, putting together their own custom Internet radio networks -- the most recent being Rolling Stone Network.
So what's the outlook for such Internet radio stations, which depend on advertising and e-commerce to support their free music and information?
NetRadio's point of view is, understandably perhaps, that the Internet is going to put the "old media" of radio broadcasters out to pasture.
"1999 is going to be the year when Internet radio emerges from the shadows into the mainstream," said NetRadio spokesman Jan Andersen. "This could become a truly mass medium ... and when that happens, radio as we know it will cease to exist."
Services such as NetRadio, Imagine Radio, Rolling Stone Radio, Broadcast.com and Spinner.com offer a selection of genre-oriented stations available over a streaming-media player, which is now included with most new PCs and browsers.
Some also let users "program" their own stations by entering their favorite artists. This practice has come under attack by the recording industry, however, which charges the practice imitates a jukebox full of pirated recordings.
On the one hand, the audience for Internet radio is growing -- though mostly in the workplace. (Who wants to turn on a computer to listen to music at home?)
Andersen, like most Internet radio executives, allows that the work audience is "the biggest market, definitely ... the bulk of our traffic is from 9 to 5."
Industry analysts point out that the work audience can't be reached by any conventional audiovisual medium, which could make streaming media valuable to advertisers.
New demographic
"This is a completely new demographic," said analyst Seema Williams of Forrester Research, speaking at the Streaming Media '98 conference this week. "Before, audiences went completely dark from 9 to 5."
Virtual radio ads could be an attractive buy in other ways, as well. Andersen points out that the ads inserted into NetRadio programming are linked to a "buy" function on NetRadio's site, letting users pick up the CD they've been listening to. NetRadio runs its own stores selling CDs and software.
"The difference is immediacy," Andersen said. "It's mind-boggling to me that advertisers pay billions of dollars a year to local radio stations without the listeners being able to do anything to respond. It's all based on the customer going into a grocery store next week and buying a six-pack of Coke instead of Pepsi."
On the other hand, there's no guarantee advertisers will flock to pay for airtime on an upstart medium such as Internet radio. NetRadio claims near 1 million for its monthly listener base, but that's spread over more than 100 "channels".
And while the Internet's greatest asset is its global availability, analysts say one of the draws of local-radio advertising is its geographic specificity, with the implied demographic information.
Web radio a mass medium
Andersen could not discuss the company's financial information while the company is in the "quiet period" it legally must observe before going public.
The dependency on the workplace audience could also turn into a problem if Internet tunes do, as NetRadio hopes, become a mass medium.
Corporate IT officers are already complaining about the bandwidth being used up by streaming media, and the productivity lost as workers tune into the latest video of the Clinton scandal.
In the mean time, all the interest in Internet audio seems to be a harbinger of good things for RealNetworks. The Seattle, Wash.-based company, headed by former Microsoft executive Rob Glaser, makes the industry-leading streaming media platform, RealMedia.
Andersen said that upwards of 85 percent of his company's audience uses RealMedia players, rather than the competing Windows Media Player from Microsoft Corp. That figure is in line with RealNetworks' estimates of its own market share in the streaming media player business.
NetShow gaining?
He shrugged off studies that show NetShow servers gaining market share from RealMedia servers, pointing out that most of the NetShow servers are being used to stream the RealMedia format.
Microsoft licensed an older version of RealMedia for its servers.
"Where it comes to the streaming media platform that will dominate, I've got news for you," Andersen said. "It sits in Seattle and it's called Rob Glaser."
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