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Giants' new plans for Net radio

Clear Channel is playing catch-up in an Internet radio business that is finally finding its feet.

It didn't make as many headlines as iTunes or the iPod, but 2004 was the year that Internet radio was reborn.

Ask Evan Harrison, the new head of the Internet business at Clear Channel Communications, the broadcast radio giant that owns 1,200 stations around the United States. After several years of scattershot Web strategies, the conglomerate hired Harrison away from America Online's entertainment business in November, with an eye to creating an Internet powerhouse.

"I've always felt that no medium is more powerful on a local level, or brings as much emotion to music fans, as radio," Harrison said. "Now is the time to get aggressive...I want to compete with everything else, but use the stronghold that our brands have already formed."

Why now for Clear Channel? It's partly the fact that more than half of the Web surfers in the United States are now on broadband, making multimedia and streaming audio a more attractive proposition. But it hasn't hurt that a quiet coalition welding together the AOL, Yahoo and MSN Net radio services for advertising purposes now rivals the size of a major broadcast network.

This has largely been the work of a pair of New York radio consultants, Eric Ronning and Andy Lipset. By convincing those big three giants--along with Internet radio company Live365--to pool their advertising space, and by using Arbitron figures to establish listenership, they convinced large companies that Internet radio advertising was worthwhile.

And that, say Net radio companies, has been a quiet revolution for the business.

"That's legitimized us in the eyes of the music business as well as for the advertisers," said Charlene English, a spokeswoman for Yahoo's Launch service. "We're finally reaching the scale and reaching the users so that people are sitting up and taking notice."

Switching channels
Clear Channel's entry could help shake up a market that has been relatively static since the dot-com implosion.

The Internet crash, along with the imposition of online music royalty payments after years of legal wrangling, effectively scooped out the middle of the Net market. Left behind were the big three--AOL, MSN and Yahoo--which collectively reach about 4.1 million people a week, according to the Arbitron ratings service. Also still around were thousands of tiny stations that reach at most a few thousand people.

The big stations have gained advertisers in the past year by trading on their national or international audience, appealing to big brands. The local advertising that drives terrestrial radio is a difficult proposition online, since people listening to a given stream are rarely congregated around from a single geographic market, Ronning said.

Even online versions of offline radio stations have had trouble attracting Web-specific advertisers, he noted. Research has shown that a large proportion of listeners to online versions of broadcast stations are actually expatriates now living in a different city.

"Local advertising is worthless to that person," Ronning said.

By contrast, Clear Channel can take advantage of both the national and the local strengths of offline and online radio, Harrison said. The 1,200 radio stations owned by the company will serve as independent gateways into a network of online services, each with their own identity and "attitude," he said.

But once inside the Clear Channel network, visitors to different radio sites could have access to an array of content. Harrison is eager to extend the experience beyond simple radio streams, offering music videos and Internet radio channels customizable to the a visitor's tastes.

Advertising could be sold across the entire network, with the ability to target local ads at local markets.

This will be a substantial transformation for the network, which currently has about 200 stations Webcasting fairly independently of each other. Harrison said people would start to see changes, including new content, likely beginning in the second quarter of this year.

Radio analysts say Clear Channel, along with other broadcast radio stations, is being pushed online and toward new technologies by a fragmentation of its own market and by growing competition from satellite radio. Mix the power of Internet radio with those new delivery tools, and terrestrial radio begins to look increasingly fragile, unless it's online too, some observers worry.

"What changes radio isn't necessarily the incursions made by Internet radio now; it's what happens if there is wireless broadband," said Sean Ross, a radio analyst at Edison Group. "There will be a day when every radio station can be on the car via the Internet, instead of via signal. That's making radio stations that pulled off the Web four years ago come back on."