Start-ups blur lines between radio, music swapping

A new generation of start-ups is taking a page from Apple Computer's iTunes playbook, allowing Net radio listeners to draw their programming at will from one another's hard drives.

At the head of a movement that could transform online radio, Live365 and start-up Grouper are the latest to blur these lines between Internet radio and online song-swapping, with an alliance aimed at turning the older companies' stable of amateur broadcasters into the hubs of peer-to-peer communities.

The model looks to Apple's iTunes software, which lets people on the same network, such as in a dorm or office building, listen to songs from one another's music collections. Grouper's peer-to-peer service lets people stream songs at will to one another over the open Internet.

The company's alliance with Live365 is helping extend an advanced vision of Net radio already being pioneered by Mercora, another peer-to-peer radio service. By letting groups of listeners tap into one another's music collections, the companies hope to come close to providing on-demand radio services, while abiding by the strict legal rules governing online broadcasting.

"It wasn't first thing on our mind, but we saw a way to enable the relationships between audiences and broadcasters to go beyond just the broadcast stations," said Grouper CEO Josh Felser.

The Live365 deal and others like it are signs that the Net radio business is shaking off the gloom of the dot-com crash and pushing strongly ahead. Innovation and investment is finally coming from the start-up level and from giants such as Clear Channel and Yahoo.

In part, that's an indication that digital music in general is booming, led by Apple's success with its iPod music player and iTunes digital song store. Online radio advertising is also finally taking off, following the decision of AOL, MSN, Yahoo and Live365 to sell advertising on their radio networks collectively.

Those successes have drawn the attention of giant companies that

have stayed away from Net broadcasting for years. Clear Channel has hired America Online Webcasting guru Evan Harrison, who is in the midst of launching an ambitious Net radio push for the broadcast giant. Rival Infinity Broadcasting also said this week that it would put much of its talk-radio programming online.

But as in the late 1990s, new companies are increasingly beginning to seek ways around the restrictive rules that govern Net radio playlists. According to current copyright law, Net radio services are allowed to play any songs without getting permission first, but they can't let listeners choose when they want to hear a specific song, and they can't play songs by the same artist back-to-back.

Enter peer-to-peer. By allowing songs to be streamed from other listeners' hard drives, companies like Grouper and Mercora hope to work within the rules but still provide something close to an on-demand experience.

On-demandish
In Mercora's case, every person in the network streams a list of songs, and listeners can search across the network to find a specific tune or artist at any given moment.

In Grouper's case, listeners can search for specific songs on the hard drives of a group no larger than 30 people. By keeping the communities small, Grouper executives say, providing access to the music is more like playing a song for a friend than like true Net broadcasting, and is thus allowable by law.

Grouper's software goes further, allowing people to download photos, video files or documents off the hard drives of people in their small group. The company has blocked downloads of songs, hoping to avoid the ire of record labels.

The company's software is available freely online. Live365 executives say they see the groups as a way for their network of thousands of amateur broadcasters to extend their reach, and the company has now built the Grouper software into its service.

"It is another way our broadcasters can share their tastes and talents with their audience," said Dave Porter, Live365's director of business development.

Record labels have so far taken a hands-off approach to these new services. A representative for the Recording Industry Association of America declined to comment specifically on the Grouper model.

Certainly, music labels have not been shy about suing Webcast services they believe are crossing legal lines. Several years ago, they filed suit against a handful of services they said were giving listeners too much control over the choice of music.

Digital Media Association, or DiMA, Executive Director Jon Potter, who represents Webcasters in Washington, D.C., said the emergence of the new services is a sign that his industry is rebounding after a long dry spell.

"There's a lot of innovation going on that we're just beginning to see that's going to make this a fun industry again," Potter said.