August 16, 1999 -- Newsletter #41

By Joe Burns

August 16, 1999 -- Newsletter #41
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Greetings, Weekend Silicon Warriors...

Did you hear...

>...about Bill 602P? This is, supposedly, a bill put before the U.S. Government by Congressman Schnell. It would allow a five-cent surcharge on all e-mail messages sent over the Internet with the money being sent to the U.S. Post Office. I have received numerous e-mails asking about it. People are outraged! Well, calm down. The U.S. Postal Service announced at that the whole thing is another Internet myth and is not true. The first tip-off should have been that there is no Congressman Schnell.

>Ever heard of Phoenix Technologies? You may not know the name, but you know their software. Over 70% of all household computers use their start-up software to boot computers. It acts as a bridge between the computer's hardware and operating system. Apparently Phoenix isn't making enough money. They are now thinking of embedding advertising into their software that would create a desktop icon you couldn't kill. As far as I could find, nothing was in stone yet, but stay tuned.

>The small-town business that seemed to have a chance on the Internet is running into problems now. Currently only 9% of Web commerce is "local" business. That number is expected to drop to 6% by 2003. Darn. I don't like that trend.

Now onto today's topic...

Here's a bit of information you probably didn't know about me. I was a disc jockey for eleven years before I got my Ph.D. I did radio in Oklahoma, Alabama (twice), New York, and Pennsylvania. I was pretty good, if I do say so myself. I won three radio market's rating periods and was fired once (getting fired in radio is a badge of honor).

I tell you that not to brag (well, maybe a little), but to illustrate the soft spot in my heart for the business of radio, the forgotten stepchild of television. Radio bugs me a bit these days. The era of the local jock is going away. Radio laws have allowed large conglomerates to own multiple stations in the same market. The choice of music has become so research-oriented that only a few popular artists bubble to the top. With the possible exception of the Country radio format, new artists and new music is hard to find. If it is new, it's new by popular artists.

Now, I know this isn't the way with all stations, but it's the general trend. So, you can probably guess that I am a great fan of Internet radio. All of a sudden, thanks to streaming data, anyone can program their own radio station. I often listen to a station that plays only one group, but they play old demos and live concert footage, and it's just great. That's what Internet radio can do. Little niches can be grabbed all over the place.

In addition, the signal is no longer local... but global. Maybe someone in Kentucky would like to listen to a progressive rock station in Colorado. There's no way in the world with the FM dial, but on Internet radio... yep! Ever been to There are over 125 different streams of radio audio. Want to hear it? It's there. Also try or NetRadio.

I'm not the only one yelling Hooray! for Internet radio. At the last Plug-In, a conference created to discuss music and the Web, Internet radio was lauded as a new "inflection point." That's a fancy term for something that could create a "radical change" in an existing marketplace.

But there's a problem. I'll illustrate it by returning to one of the radio stations I jocked for. Near the studios, out of any visitor's view, was a large wooden sign that read:

Q: Why are we here?

A: To make money!

Yep, once again money is the root of it all. You can proclaim you play what the "thinking" listener wants to hear, but if that only represents 1% of the total audience, you're done.

Internet radio is facing that concern right now. It's not that people aren't listening. They are, in droves! But the Internet radio market has become absolutely flooded with competition. At first, Internet stations made pretty good cash by running spots that reached a global market. Now the money is being spent elsewhere.

A plan was discussed at Plug-In for helping Internet radio succeed by bringing in funds:

1. Offer links to sites that sell the music currently playing.

2. Sell the music on the site.

3. Sell subscriptions. You pay to listen.

4. Advertise. Not just banner ads, but ads in the music stream.

5. Pay for "awareness" and "consideration."

Awareness and consideration are a little tough to explain. The concept is that people will purchase if they are made aware of a product. Right now, only the company that gets the actual purchase transaction gets the profit. Under the awareness and consideration model, the person who bought might be tracked to learn where they were made aware of the product and those who assisted in the awareness would share in the profit of the sale.

How's that for a rough idea?

What about that third one? Pay Per Listen! Would you pay to listen to a station? How about if that station was running a concert? What if the Internet station ran Stern in the evening, so you weren't rushed to catch him in the morning? Would you pay to hear traffic reports right when you wanted to hear them instead of half past and a quarter till the hour? This certainly has possibilities, but I fear that radio has been perceived as the "free" medium for so long that it might be a hard sell to run an entire Internet radio station in this manner. Special event, yes. The entire station? No.

I like the first two best. Anything to cut down on the number of radio spots. How many times have you listened to the radio and wondered what a song's name and artist were? I'll tell you why you don't usually hear it. Past a radio station's desire to lower the amount of talk, most radio programmers (me included) want a feeling of forward momentum. Everything must be "coming up" to instill a sense of progression in the listener's mind. Backselling, announcing a song's title and artist after it has played, can kill that momentum. Announce the song before you play it.

On the Internet, as the song streams over WinAmp or RealAudio, the song's title and artist is there to see. You could make that title and artist a link and it could be purchased before the song was through. Good idea.

I think the audience is geared to this type of profit-making formula anyway. It is my opinion that where most Internet radio stations want to grab audience is in the office at work. Radio programmers (me included) have always had to deal with an easy-listening station in their market. Some of you might refer to these as "elevator music" stations. You know them: They play long, dramatic versions of your favorite popular songs (very popular in dentist's offices). I ask you... does anyone really listen to those stations? I know they're on, but does anyone really listen? When the radio ratings come out, the easy listening stations always do well. Here's why:

Someone who works in an office listens to WDUL Easy Listening from 8 in the morning until 5 in the afternoon. On the drive home she listens to WROK with Fred and Joe in the afternoon. Which station did she listen to? I would argue it was WROK. Yes, she had WDUL on her office radio, but she was a passive member of the audience. When she popped on Fred and Joe, she became what's known as an active listener. She might have played the contest. She probably heard an advertiser. She laughed at one of Fred's dumb jokes.

When the rating numbers come out, WDUL succeeds with a higher rating than WROK because of the hours spent listening, but which station was actually listened to?

Internet radio would combine the two stations. Someone in an office would actively listen to a station in the office for those long periods of time. A format you like all day. That's a winner!

But the Internet itself is holding Internet radio back. It is estimated that only a million people can use Internet radio at one time. The bandwidth of the service simply won't support more than that. But that will change as the technology moves forward.

Profit has hit, and hurt, through-the-ether radio. Playing Imus or Stern and not hiring a local jock makes higher profits. Running the same signal over multiple radio stations creates a higher profit because only one set of announcers is required to keep the signal going. News staff is being depleted in favor of services. The local aspect of radio is dying.

Hooray for Internet radio. I want them to find a method of financial survival. If they do, then maybe Internet radio will affect real radio to the point where they will have to cater to their local audience rather than simply doing their own form of streaming over a satellite dish.

It makes an old radio jock proud.


And that's that. I write. You read. It's a nice little set-up we have here.

Joe Burns, Ph.D.

And Remember: You've heard of blackmail, but did you know there was also whitemail? In 16th century England, "mail" was a tax. If you paid it in whitemail, that meant you paid with silver, a substance with a set price. If you paid your tax with a crop or other item, the value could easily be disputed and the tax collector could demand more or send you to debtor's prison.

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