BY BOB BELLIN
There was a recurring character named Joe Bfstplk in the Lil' Abner comic strip that lived with a perpetual dark cloud over his head. Internet radio is the Joe Bfstplk of 2001.

I wrote a column about 18 months ago (here) predicting the death of Internet radio because, quoting my delicate and diplomatic terminology, "they all suck…" They still do, but what has become apparent is that there's something of a conspiracy afoot to ensure that the medium continues to suck. Consider that secret number one revealed, with details to follow.

Before I speculate on Internet radio's future, let's look at its present. In one of his recent columns, Kurt Hanson equated the size of Internet radio's audience to that of KOIT A/F in San Francisco. In the latest Arbitrend, KOIT had a 4.0 share, placing it 5th 12+ and very likely 1st or 2nd 25-54. KOIT is one of the top billing radio stations in San Francisco, and as Kurt pointed out, it has no trouble attracting the attention of San Francisco media buyers nationally and locally.

The problem with Internet radio, even completely aggregated, is that its total listenership expressed as a share of the national radio audience isn't very impressive.

San Francisco's 12+ audience is about 5.5 million, but America's 12+ population is at least 250 million. Thus, 'Net radio's (and KOIT's) AQH expressed as a percentage of the national pie rounds UP to a whopping 0.1.

No rep is going to have much success interesting a national buyer in a network with a 0.1 share of their market. For that matter, no sales rep would have much luck marketing a 0.1 in San Francisco to a San Francisco buyer either. San Francisco's piece (theoretically 2.2% of the total all other things being equal) of the entire Internet radio pie (as measured by Arbitron) breaks down to a theoretical AQH of roughly 800.

You could read an ad over a Karaoke machine on a well placed street corner in San Francisco and reach more than 800 people. No wonder advertisers aren't lining up to buy Internet radio. Granted, the true total aggregate Internet radio audience is probably several times what is voluntarily submitted to Arbitron, but change that national 0.1 to a 0.3, or even a 0.5, and Webcasting's position isn't meaningfully strengthened.

So why is no one listening? My opinion, in no particular order:

1) Lack of personalization options 2) Lack of portability -- you have to listen at your PC 3) Too many formats that mirror terrestrial radio, but aren't programmed as well 4) Lousy sound 5) Expense (listeners must have $40/month broadband connection to get even passable sound quality, providers must spend accordingly to provide it) 6) Reception difficulties (cumbersome registration process, sound cut-outs, number of different players required, etc.)

The technical issues aren't going away any time soon. Broadband ISPs are losing money at current price points ($40/month), so don't look for the price to come down even if their costs do. Wireless broadband will be expensive when introduced (a long way down the road), and will suffer from spotty reception long after that.

Programming enhancements and makeshift portability fixes could make people more inclined to jump the technological hurdles, but neither will happen -- which brings us back to Internet radio secret #1: My conspiracy theory.

Any Internet radio outlet that streams (plays) music must have a license to do so. Congress passed a law authored almost word for word by the music industry in 1998, called the Digital Millennium Copyright Act, or the DMCA.

The DMCA designated webcasting as different from broadcasting, thus requiring a separate performance license for music. This law forces webcasters to negotiate with each record company and the music publishers trade association (National Music Publishers Association) for a special license, a cumbersome and lengthy process that can take years.

The DMCA does provide an alternative -- a statutory, standard license for webcasters that circumvents individual licensing, but it's very restrictive. In fact, under the statutory license, Internet radio sites aren't even free to do what terrestrial radio can. The DMCA limits webcasters to 3 songs every four hours by the same artist and forbids any effective customization features. The DMCA doesn't even allow for promotion of upcoming songs.

Complicating matters further, while the music industry got Congress to legislate how many U2 songs per 4 hour period an Internet radio station can play, they also got them (Congress) to leave out how much the licensing fee should be, and when that decision should be made. What that means is that the restrictions on netcasters are in place, and they're incurring licensing fees retroactively to 1998...but no one knows how long it will take to arrive at a decision for those fees or what they'll be. And there's nothing in the DMCA that forces any resolution.
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It's ironic that the music industry faces similar unresolved licensing issues with the NMPA regarding their "high-hype, low demand" "Napster-replacement" digital music services. In fact, those issues may very well hold up their respective launches.

In an article in Fortune magazine, Steven Marks (pictured), the senior vice president of business affairs for the RIAA, explains the lack of a start date with the following, "You could launch the service…the problem is, you are launching a service without knowing how much it's going to cost."

It's interesting that the RIAA has portrayed the music publishers as the bogeyman for holding up their business efforts with retroactive licensing issues, but seem unwilling to acknowledge that they're causing an identical hardship to Internet radio. "Do as I say, not as I do."

The terms of the statutory license for webcasting are supposed to be determined by collective bargaining, but don't hold your breath. It's been nearly three years and counting.

What you're left with is a medium that's tied to the PC, more cumbersome and not as reliable as radio, but with less programming flexibility and a significant undefined expense that keeps growing at an unknown rate. It shouldn't be a shock that neither listeners nor investors are flocking to Internet radio.

And, if a webcasting model has any real appeal, it's darned near impossible to get licensed. In other words, if it doesn't suck, you can't do it. By the way, that was secret number two revealed. In fact, that could well be the music industry's slogan for all digital music.

The recording industry's latest tactic, through its trade and lobbying organization the RIAA, is to sue webcasters whom they think are trying too hard not to suck. The RIAA's lawsuit against Launch.com (a webcaster with significant investment from the recording industry no less) was the lead story in a recent issue of RAIN and explains this issue in detail (here).

The premise of the suit is that Launch's webcasts are too "interactive" to qualify under the restrictive DMCA statutory license. So both sides will square off in court to see if Launch.com "sucks enough" to be legal.

I can see it now…

RIAA Attorney: "Your honor, we intend to prove categorically, that despite their transparent claims to the contrary, Launch.com does not, in fact, suck…"

Launch.com attorney: "This lawsuit, your honor, suggesting that Launch.com doesn't suck is groundless and without merit. We intend to offer evidence that proves that we've gone to great lengths to make our service suck and that we do, in fact, suck just as much as any other webcaster."

What's more, all of this will take place before a judge who's more likely to think that streaming issues relate to his/her uncle's overactive bladder condition than Internet radio.

If you thought that webcasting and digital music created opportunities for computer and music programmers, engineers, web designers, and the like; think again. Lawyers are the only ones making any money from webcasting and digital music. Launch and others have countersued the RIAA, generating even more billable hours for attorneys. Is this a great country or what?

The bottom line is the RIAA won't license any aspect or feature that could make Internet radio more attractive. Want an all Garth, Elvis, Frank Sinatra, or Mary J. Blige channel? Forget it. Want to download it and play it back on a portable device? Not on your life! All-request net radio? Nope!

If you're guessing that the RIAA is trying to kill Internet radio, you're guessing right. That's secret number three.

Can they do it? You bet they can. This inequity could get fixed if Congress amended or killed the DMCA. But with suicide bombers in the Middle East, regular power outages in California, and gas prices approaching $2/gallon almost everywhere, it's hard to imagine that webcasting will make it to the front burner.

Beyond that, there is no comparably powerful industry lobbying against the RIAA, which only lessens the incentive for Congress to rethink the DMCA.

Let's review the three secrets I've revealed about Internet radio:

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From the press release: "Nearly one-third (31 percent) of American Internet users have broadband access at home, work or school according to a new study by Arbitron Inc. and Coleman...

"Broadband Revolution 2: The Media World of Speedies found nearly two-thirds (64 percent) of Internet users who have broadband access ('speedies') are connected through their workplace and more than one-third (37 percent) have access at home...

"Speedies spend as much time online as they do with radio or TV. On average, speedies report using the Internet for two hours and 16 minutes in a typical day. Radio is the most heavily used traditional broadcast medium among speedies, with an average two hours and 28 minutes daily listening, followed by television viewing with two hours and 11 minutes daily and pre-recorded music listening with one hour and 25 minutes."

Read the entire release here.

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July 19-22, 2001	The Conclave Learning Conference: Minneapolis
Aug. 15-18, 2001	Gavin Summit IX: Boulder, CO
Sept. 5-7, 2001	XStream: Broadcasting on the Internet at the NAB Radio Show: New Orleans, LA