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BY PAUL MALONEY
In the ongoing discussion of the fate of Napster, there's the issue of just how active major label record companies have been in embracing the new technologies, and innovating new business models to take advantage of them. There has been much criticism, and many feel the labels are lumbering, greedy, "behemoths" of forces that resist moving onto new frontiers opened by the advances offered by computers and the Internet.

This criticism comes not only from the file-sharing community, but from the Internet radio industry. Webcasters have been frustrated by what they feel are unfair constraints under the DMCA -- a law passed with heavy support from the record industry. And many who come from the traditional broadcast radio world are finding that it can be difficult to establish the same goodwill relationships with record companies for service on new music and promotions that they had in the offline world.

For some time, it seemed no one was sure where Internet radio fit in to the labels' plans, or whose responsibility at the record companies it was to deal with webcasters.

James Schureck (pictured) is Director of New Media & Special Internet Projects for Jeff McClusky & Associates, an independent marketing and promotion company for the record industry. He says, "up until now, there just hasn't been an established process" at labels for dealing with 'Net radio. Many webcasters have never dealt with label representatives before, and don't have an established working relationship. And with record label consolidation, those label reps are covering more and more ground with larger territories and more stations than ever before, which leaves little time for new relationships. Yet at the same time, "the 'new media' departments (at the major labels) were afraid of stepping on (the promotion department's) toes," he adds. Result: Internet radio was banging on a lot of doors that weren't being answered.

In fact, Brian Cullinan has what is still a pretty unique job in the record industry. He is National Director of Promotion/Online Digital Technology at Sony's Columbia Records. He is his company's "point man" for promoting music outside of the traditional routes of radio and MTV.

The very fact that his position exists is a good sign that the labels are beginning to look at the Internet as a viable way to promote their product.
Cullinan also says it's a pretty good argument against what he calls the "misconception" that record labels fear the change brought about by new technology.

"We've always been proactive in finding opportunities to promote our music. We're making an attempt to be dominant in this space," he stresses. "If a new technology comes along that will help translate our artists' messages to the masses, we want to be a part of it." He bolsters his arguments by citing his 110-plus year-old company's involvement in the development of vinyl LPs, affordable turntable technology, and the advent of the compact disc.

One obstacle to developing label/webcaster relationships is shared by both sides: the legal implications. As handcuffed as webcasters feel by the Digital Millennium Copyright Act, labels feel that the pending arbitration and opacity of the law's finer points are stifling new promotional opportunities.

"The DiMA (Digital Media Association, the organization that represents the interests of webcasters) has been a positive force to address some of the issues (facing webcasters)," Cullinan concedes. But he thinks there are still some webcasters who aren't willing to compromise. "There are still some finer points that need to be cleared up, but the DMCA is a great platform. A lot of (webcasters) want to use it as an excuse" to be inflexible.

And because of this, Cullinan claims, his company has been unable to move forward with a lot of innovative initiatives that take advantage of the new digital frontier, a subscription model being just an example (Sony and Vivendi, which owns Universal Records, have announced a joint subscription venture called Duet. It was recently reported that a third party may join the effort, possibly Time Warner AOL. Read more here).

As the business and legal departments of record labels and webcasters hash out their differences, Sean Smyth is doing his part to "set up the system" on the music side. Smyth is Manager of Music Programming at Radiowave.com. He says his interaction with record companies these days is significantly different than when he was PD of KNRX/Kansas City or OM for Clear Channel in Fort Wayne, IN.

"Radio is a model that's understood. Labels know broadcast radio sells records. This is a whole new paradigm," he explains. But he says he feels empowered by the fact that with Internet radio, he can very accurately monitor audience dynamics. And he can deliver a very specific and concrete audience to the record companies. "And that's the value" that will solidify Internet radio's value in the eyes of labels.

And maybe that's beginning to happen. Columbia, along with McClusky and Aware Records, have organized an effort to establish the band Sparkledrive, exclusively on the Internet. Schureck says the record has been serviced exclusively to Internet radio, to be exposed to those audiences first. And if and when sufficient progress is made there, the promotional push will move to the offline world.

That may be the model webcasting follows as it evolves as a media. As an avenue for exposure to the "early adopters" of new music, "Internet radio could take the place of college radio," says Schureck.

Certainly there are webcasters with higher aspirations than this, who see Internet radio one day occupying a space side-by-side with traditional broadcasters. Nonetheless, any demonstrable progress in the reach and influence of Internet radio can only strengthen the industry's hand in dealing with the record community.

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MeasureCast's Internet radio report for the week of April 16-22 shows that many stations still streaming their content "continue to experience dramatic audience growth." These increases, however, weren't enough to reverse the MeasureCast Internet Radio Index's continued slide as a result of broadcasters pulling streams off the 'Net due to the AFTRA controversy.

Twenty-two of 24 comparable stations from last week's measurements showed in increase in total hours streamed. Fourteen outlets had bumps up in cume as well. The biggest gainers were Internet-only's ESPNRadio.com and Mediamazing; and KLTY-FM/Dallas, and London broadcaster Virgin Radio.

Meanwhile, the Index dropped another six percent -- from 141 to 132. The index measures weekly trends in overall listening across an industry sample.

See this week's ratings results from MeasureCast here.

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From the press release: "NetRadio Corporation announced first quarter net income of $3,138,366 or 31 cents per share including an extraordinary gain of $5.5 million or 54 cents per share related to the March forgiveness of debt by Navarre Corporation.

"Excluding the extraordinary gain, the net loss for the quarter improved to $2,361,634, or 23 cents per diluted share, compared with a net loss of $4,295,840, or 43 cents per diluted share in the same period last year. The first-quarter net loss, before the extraordinary gain, also reflected a 33% sequential improvement from the $3,520,899 net loss in the fourth quarter of last year...

"The Company reduced operating expenses in the first quarter ended March 31, 2001, by 47%, from $5,000,942 in the previous year to $2,664,152. The primary sources of savings were: the elimination of in-house e-commerce operations and outsourcing these functions to Amazon.com, Inc.; permanent reductions in bandwidth costs as a result of the negotiation of more favorable contracts; and cuts in advertising spending to promote the company's web site."

Read the entire release here.

April 21-26, 2001	NAB "The Convergence Marketplace": Las Vegas, NV
June 20-22, 2001	Streaming Media West 2001: Long Beach, CA