BY KURT HANSON WITH PAUL MALONEY
In the first Arbitron Webcast Ratings study in which Chicago-based RadioWave.com participated, its February report (released May 22), the company scored a nice victory, scoring seven of the top 75 slots -- with one of the MSN Chat Radio channels that it programs, the top-40 "Hits Happen" channel, easily breaking into the top ten.

However, despite RadioWave's nice showing, the crack team of interns at RAIN has discovered an interesting angle on the story: The numbers are quite different than you'd expect from looking at the number of people chatting in the MSN chat rooms.

Last September, we reported (here) that MSN was planning to add Internet radio stations to each of its hundreds of chat rooms, with RadioWave providing the programming. In each radio-enabled chat room, a preselected MSN radio station launches immediately, with a small integrated player in the bottom half-inch of the page.

The MSN Chat Radio feature was designed so that all individuals in the room are hearing the same station -- and the same songs -- at the same time. The table on the left indicates specific music formats that have been pre-assigned to specific chat rooms, although it's an incomplete list. For example, the "Pop/Top 40" channel, "Hits Happen," is also assigned to the Los Angeles and Cincinnati chat rooms; and the 80's channel, "Mondo Retro," is also assigned to to the Asian-American chat room. For user-created chat rooms, "hosts" of each room determine which channel of music their room listens to.

Because thousands upon thousands of people are chatting in the MSN chat rooms at any given moment, and because MSN Chat Radio launches automatically when one enters a chat room, we speculated that this deal was going to be a major coup for RadioWave -- and perhaps even
a turning point in the evolution of Internet radio. After all, thousands and thousands of chatters listening to well-programmed Internet radio implies the potential for millions and millions of new ATH hours of listening to the medium.

Last week, RAIN's crack team of interns did a manual count of the number of people in MSN's "Hits Happen"-enabled chat rooms on an early Wednesday afternoon (not a heavy time for chatting), and found the following number of chatters chatting:

Note that although we found "Hits Happen" being played in the Cincinnati and Los Angeles chats, there might have been a few other cities' chats that were also assigned to that music channel. In addition, we haven't added in the number of user-created chat rooms in which the creator selected "Hits Happen," nor the listening that "Hits Happen" gets from people coming in via RadioFreeCash.com or RollingStone.com, where that channel is also available.

At any rate, it seems reasonable that there were pretty close to 3,000 people one might reasonably expect were listening to "Hits Happen" in early afternoon -- implying that it might be more like 6,000 or even 10,000 people during peak chatting hours, and thus, on average, perhaps 4,000 or 5,000 people at the average moment during the month.

But, in fact, how many people are listening to "Hits Happen"? According to Arbitron's report, based on the fact that "Hits Happen" apparently got 198,400 "Aggregate Tuning Hours" in the month of February, the channel seems to have had an average listenership at the average moment of 295 people. (In Internet terms, this is how many "simultaneous streams" "Hits Happen" seems to have been serving at the average moment.)

That's a huge dropoff! How did thousands of chatters become only 295 radio listeners? Several hypotheses come to mind:

Hypothesis #1: The vast majority of chatters are turning off MSN Chat Radio for technical reasons. This could be because they feel it slows down their computer, because they don't have Windows Media Player installed, or because they don't even have a sound card (or speakers).

Hypothesis #2: The vast majority of chatters are turning off MSN Chat Radio for reasons involving their musical tastes. After all, those of us who are in radio professionally know that not all teens prefer CHR; not all people in their 20s prefer college/indie rock, etc.

Hypothesis #3: Somehow server logs -- the logs that Arbitron uses to determine its ratings -- may not be capturing all Internet radio listening. Is it possible that some Internet service providers (ISPs) somewhere are "caching" audio streams, taking one stream from RadioWave and serving it to more than one user?

Hypothesis #4: It's a fact that MSN allows users to participate in multiple chats simultaneously, in multiple windows. Thus, it's possible that "3,000 people chatting" could really be 1,000 actual human beings, each of whom is carrying on three simultaneous conversations.

Hypothesis #5: Weak spot sales may be hurting the quality of the programming. In all of our listening last week, we heard exactly one spot -- an Office Depot spot that excerpted B.T.O.'s "Takin' Care of Business." And we heard it over and over and over again. How many times will a person listen to the Office Depot "Takin' Care of Business" spot before it becomes a tune-out?

Hypothesis #6: Internet radio may just not be relevant to the needs of chat room participants. MSN probably envisioned thousands of happy people chatting about the songs that are playing on the radio they're all listening to ("Yesfan47: Hey, I love this 'Lucky Man' song! What album is it from?") But they're actually saying something more like: "Kicker 1165: any laides wanna chat with a 20/m from NC?......5' 9 brown hair blue eyes.....whisper me."

CONCLUSION:
Overall, the six MSN Chat Radio channels that made the Arbitron top 75 got a total of 550,000 hours of listening and it's statistically improbable that MSN's other 15 music channels (i.e., those that scored lower on the chart) could have received more than another 450,000 or so hours combined. That suggests that MSN Chat Radio probably received no more than a total of about a million hours of listening.

In fact, according to Arbitron Network numbers just released today, RadioWave's ATH for February of 975,100 places them in fifth behind NetRadio, Live365, ABC Radio Networks, and StreamAudio. Again, a very commendable debut.

Not bad, but given that 1 million hours of listening breaks down to an AQH audience size of about 1,500 people* (1 million hours divided by (24 hours x 28 days) or an AQH of about 70 people per channel), it's understandable (see RAIN story here) that RadioWave feels it can't support a large staff of full-time programmers.

But there is, as the saying goes, still plenty of headroom for growth!

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From the LA Times: "From 1932 until long after the sun set on the British empire, the BBC World Service -- with its sonorous and reassuring 'This is London' at the top of each hour -- was heard around the globe via shortwave radio.

"June 30 will bring the end of that era in North America when the grand dame of international broadcasting shuts down its shortwave transmitters serving the United States and Canada as well as vast areas of the Pacific. Instead, the venerable broadcaster will distribute its 24-hour service online...

"Shortwave radio -- the once ubiquitous voice of colonial empire, international intrigue and Cold War propaganda -- is falling victim to the rise of the Internet, a medium that's cheaper to run and often more convenient for listeners.

"In the last year, the number of people accessing the World Service online doubled, according to a BBC study, helping the service reach an all-time high of 153 million weekly listeners. The Voice of America Web site includes not only continuous streaming of its broadcasts, but also video of its announcers...

"And the model is practical only in places such as the U.S. where Internet access is cheap and reliable. In many countries -- even developed nations -- unlimited service for a flat monthly fee is unavailable."

Read the entire LA Times story here. Thanks to RAIN Reader Pat Clawson for pointing this piece out to us. His commentary is below in Reader Feedback.

Have an opinion on this story? Drop us a note! (Or, to use your own e-mail software, click here.)   Your e-mail address:   Your name (if not obvious from your e-mail address):     Kurt, this is deep background -- don't quote me!         Thanks!

"The real story is the emergence of Internet radio as a contender..."

Ever since I jumped into the Internet media business back in '93, I've driven some of you nuts with my predictions that the 'Net would cause a sea change in the radio business.

The Los Angeles Times report documents what I believe is the first really huge wave -- that the BBC World Service will pull the plug on its shortwave transmissions to North America in favor of Internet streaming.

The L.A. Times report focuses on the demise of shortwave, but the real story is the emergence of Internet radio as a viable contender in the media marketplace.

Pat Clawson

"The best source of hauling down music in the industry..."

Anyone try this? Take your PVR, Tivo/Replay whatever, and set it to one of the digital music stations and hit record...

Guess what? Works like a champ. Beautiful top quality audio, WITH all the info, right there. Connect it to your PC and kaboom, the best source of hauling down music in the industry.

How dare they do that to the artists of this world. Don't they know about the DMCA?! Where is the RIAA when you need them?!

Mark Cuban Dallas Mavericks

"Sell sponsorship of the stream..."

Great suggestions offered by StreamAudio for what to do to fill the "AFTRA Hole!" (in RAIN here) Here's another one: Instead of trying to sell typical 60-second Internet-only spots, sell an Internet Stream sponsorship - a la public radio underwriting - to a single, exclusive sponsor.

The sponsor gets some occasional on-air plugs "KSBR's live Internet Stream is provided by Pete's Patio shop...." and exclusive spots, promos or mentions in-stream at the start of whatever "filler" you're using to cover the spots.

The sponsor gets to be the hero that keeps the station streaming and gets exclusive on-air and on-line exposure. You could also tie in online contesting for the client as Tom (O'Connor of StreamAudio) suggested ("we'll have a weekly drawing for a BBQ grill from Pete's from all e-mails received...")

The key? Don't sell spots - sell sponsorship of the Stream for a flat sponsorship fee. Depending on how it's bundled with on-air promos, online exposure, etc., most stations could get at least $1000 a month in sponsorship. It won't make your year, but it will cover your streaming costs and you could be the first on your block to be streaming "profitably."

David Rahn, Co-President, SBR Creative Media

This RAIN reader's supposed e-mail address indicated he/she is a former MP3.com employee, and not happy about the experience...

"I'm disappointed you ran the article about MP3.com..."

I am disappointed you ran the article about MP3.com and their radio service (in RAIN here)!! This article is most likely paid for advertising by MP3.com and is untrue.

Nearly two thirds of the stations signed with MP3.com have canceled their contracts after the initial year (including their old partner Cox), and the only remaining stations are owned by Citadel, who received a cash upfront payment to add the services to their sites (MUCH to the annoyance of most Citadel PD's).

This site has a reputation for not running blatant ads like this one -- don't ruin it.

Deep background only

Editor's response: The story in question (in RAIN here) was merely an excerpt from a press release about the company's services. In no way was it a paid advertisement of any sort. --PM

"Put the listener in control..."

William Goldsmith makes some excellent points about both satellite radio and Internet radio (in RAIN here).

He is correct in his assertion that satellite radio as presently configured does not have a chance. However, one of the satellite companies is much much closer to "getting it" than the other one and, in my opinion, has a chance to actually make a go of it. The other one is a prime take over target.

At this point, the only things we know for sure are that these guys can raise a ton of money and launch rockets. We don't yet know whether they've figured out something that has escaped the rest of us.

However, Internet radio is certainly also a long way from being a significant player. Solve the bandwidth problem and put it in the car and maybe it'll amount to something, but there's little anyone can do to combat the awful fragmentation that takes place when that many media outlets become ubiquitous.

One of the prime elements that's missing from all three models (traditional radio, satellite, Internet) is control. Find an easy, convenient way to put the listener in control of this environment, and then we've really got something.

It's like any other business: without a clear path to profitability, it's just a hobby.

Al Brady Law, Vice President, Content Vialta, Inc.

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June 14-16, 2001	R&R Convention 2001: Los Angeles, CA
June 20-22, 2001	Streaming Media West 2001: Long Beach, CA
July 19-22, 2001	The Conclave Learning Conference: Minneapolis
Sept. 5-7, 2001	XStream: Broadcasting on the Internet at the NAB Radio Show: New Orleans, LA