Internet radio's big flop

We’ve been listening to Christmas tunes this week in the office, primarily tuning into a local FM radio station’s online stream (Oldies 103.3). What plays is exactly the same thing that plays on the radio station, same music, same commentary, same ads. There is also a browser window that pops up with the radio player, and that window is surrounded by ads.

For anyone that listens to music online using some of the services that were created specifically for an Internet audience (Pandora, for example), where music streams continuously, is not interrupted by advertising and allows for greater control and customization over what plays, this type of online music experience is very rudimentary. The AM and FM stations that are broadcasting over the Internet (at least the ones that I have experienced) have not done anything to adopt any Internet or performance-based revenue models. And in this, they have missed a huge opportunity.

Pandora and other Internet-only radio services are burdened by a royalty structure that, until earlier this year, AM and FM stations didn’t face. According to an article from the Washington Post:

“Royalties for Internet radio differ greatly from its satellite and terrestrial counterparts. Internet companies 0.000762 of a cent per song, per listener. Satellite radio companies pay a percentage of their revenue. Under copyright laws, land-based radio stations, traditional AM and FM radio, pay nothing.”

But the radio stations, even with this freedom, did not take advantage of the shift in media dollars to performance-based models. Now that they will also have to pay royalties for online play, I believe that they will live to regret their lack of innovation when they had the chance.

Internet radio window

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