BY KURT HANSON
In yesterday's issue of RAIN (here), we reported on the launch of a new, 950-station Internet-only operation called FMCities.com by San Francisco-based Canadian-American entrepreneur Tim Martz (pictured, left).

Yesterday afternoon, Tim talked with RAIN and explained the origin of this business venture, his business model, and his future plans for his new "broadcast group."

Martz holds joint U.S.-Canadian citizenship, attended Northwestern University's Kellogg MBA program in Chicago, and for 15 years his Martz Communications Group has owned radio station clusters in Michigan, Maine, Wisconsin, and New York state.

"About a year ago," he explained, "I went to the NAB in Orlando and the Radio Ink conference in Santa Clara to work on our stations' web presence" -- Martz owns a nine-station group in upstate New York along the Canadian border -- "because we really didn't have one.

"Like a lot of people, I went with some trepidation -- seeing the Internet as more of a threat than an opportunity. But I developed some contacts, including the First Internet people who've designed the FMCities.com websites, and I eventually saw it as an opportunity to be seized -- both for my own stations and for this new venture."

The launch that Martz announced yesterday involves offering 50 channels of Everstream music in each of 19 different markets. "Let me tell you where we're headed in the next six months," Martz offered.

"It's a phased roll-out. Soon we'll be adding on-demand audio -- news, weather, traffic, and sports -- in each market. We'll be adding local band channels in various markets in late September." Currently, the only localization that Martz adds to the basic Everstream audio product is sweepers and liners. However, he says, "By October or November, we'll be adding brief weather and traffic snippets, to give more of a traditional radio feel."

Initially, all of that localization will be added from Martz's current facilities in New York and Ontario and Everstream's facility in Cleveland, but "once we have achieved a critical mass, I see offices, studios, and staff in every city," Martz says.

What's the business model?
I asked Martz if he would be willing to give RAIN readers a glimpse of his business model.

In terms of who will sell his spots, Martz said, "We're working on that." Everstream has already partnered with Katz Interactive for national spots, and Martz says he's looking at possibly partnering with local content providers -- e.g., a TV station -- in each market that could conceivably handle local sales.

"Since visuals and animations and click-through capabilities will accompany every spot," he noted, "the CPMs we can get should be significantly higher than traditional radio."

Small AQHs add up
Martz's FMCanada.com actually launched in Canada's seven biggest markets earlier this summer. I asked Martz if he was willing to discuss its current audience sizes, and he was refreshingly candid:

"So far, it's been a three-week rollout, and we've been growing all the time. Right now we've got an AQH of around 200 in the aggregate. It's a small number, but it's only going to grow.

"If I can be in 50 cities by the end of October with an AQH of 100 in each market, which I think is reasonable based on what we're seeing in Canada, I'll have an AQH of 5,000 for the whole company. So if I can sell it at a $30 or $40 a thousand... Hell, I'll take a couple hundred bucks a spot!

"If I can run four or six of those an hour, then it starts to become attractive in terms of the revenue stream. And if the audience grows from 5, to 10 to 50 thousand, that's where it starts to become a very attractive, very profitable business."

To experience one of Martz's sites for yourself, visit FMCities.com here.

...

... I've taken a lot of heat from some RAIN readers for pointing out the actual AQH audience sizes of webcasts. (Those audiences are currently small compared to those of terrestrial stations. See chart here.) But Martz understands: Even if he has an AQH of only a few dozen listeners at a time in a given city right now, that's nonetheless an audience that could soon be worth having. ...

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From Upside Today: "Yahoo announced a landmark deal with the Recording Industry Association of America today (9/6), saying the two sides have come to terms on how much Yahoo will pay record companies to webcast copyrighted tunes...

"While it negotiated a music royalty on its own, Yahoo is officially a member of a broad coalition of dotcoms known as the Digital Media Association, which has been conducting its own talks with the record labels...

"Most recently, members of the group have been plotting how to approach binding arbitration with the record industry, a process that will begin in about a month and a half. The two sides will argue over how much online companies should have to pay the record industry for songs played during radio-style webcasts. The rate is set by a government-appointed panel under the 1998 Digital Millennium Copyright Act.

"Online firms have said they want to pay a few percentage points of their gross revenues, while the record companies are believed to want as much as 15 percent of gross revenues. (Neither side will comment officially.)

"But Yahoo has been conspicuously absent from the strategizing, according to DiMA Executive Director Jon Potter, who says that Yahoo is the 'only DiMA member over the course of the last two years that has not worked with other members on' discussions about how to handle licensing disputes with the record industry...

"At the same time, Potter concedes that Yahoo has a 'very different business model' compared with other DiMA members -- a difference Yahoo execs insist is key to understanding their decision to pursue a bilateral deal..."

Read the full story in Upside Today here.

"They don't realize that they...just gave away millions in revenue..."

Kurt: We love your site and visit twice daily for the am and pm updates.

It's extremely disheartening to see that Yahoo has headed down their own path. Perhaps since there obviously isn't a broadcaster in the building at Yahoo, they don't realize that they just sold out and gave away millions of revenue to the RIAA.

Based on the fact that every song played and title displayed is an average 4.5 minute commercial for sales of that title, you can see the angle I'm looking at this situation from. Yahoo and the RIAA must not realize that it takes exposure on radio...be it over-the-air, cable, or internet...to get the word out and help create a buzz on their artist releases, regardless if it's a new "baby band" or an established artist. Do any other media pay the advertiser to run their ads?

Another factor is that with sufficient station reach, at least now in over-the-air radio, is that the promotion departments of these very same RIAA labels will *pay* to have their music played.

Yahoo definitely missed the boat on this one. I can only hope that the rest of us who know who and what actually sells music through exposure can stay the course.

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Earlier this week, we wrote about the excellent audio quality at a low bitrate (due to good audio processing?) of London Unlimited, about RAIN's Summer interns' "class project" to build an Internet-only station, and about Tim Martz's FMCities.com venture. RAIN readers commented...

"This ain't radio and it ain't local..."

Just a minute. Let's check the math.

If you launch the same 50 stations 19 times, how does that qualify as 950 stations? There is no local content. Zero. Zip. Nada. (Nor is there any original content. The so-called "News," "Weather" and "Traffic" are nothing but Internet links--no audio and nothing proprietary.) This ain't radio and it ain't local. It's just another dull, boring Internet jukebox. 50 channels of nothing worth listening to.

Launch them 1,000 times, call it 50,000 stations and it's still crap.

"We have been playing by the rules..."

Hello, Kurt. Long time, no correspondance.

We are aggressively hammering out deals with ISPs to supply them with our DMCA-compliant streaming technology and RIAA-accepted reporting technology so today's article on FMcities.com raised my eyebrow.

It is our understanding through our conversations with the RIAA attorneys in the past that allowing "pause" and "skip" functionality is a violation of the DMCA. Do you know if this has changed? If not, how are stations like these allowed to offer these functionalities without reprecussions? Do you think the RIAA will soon go after all the webcasters who do not possess and RIAA license and pay royalities?

If not, we have been playing by the rules and paying royalties for over a year, all for nothing.

Thank you kindly, O' wise man.

"Three of the functions you mentioned are prohibitied..."

"Usually the processing is done in the middle..."

Usually the processing is done in the middle...the audio is played on whatever system they use, into the limiting/compression gear, then out to the encoders....it's still the same as terrestrial, just encoders instead of transmitters...

As a former martz communication employee (built WCRQ for tim, among other things), hats off to tim on his joining the net. a lot reside on the lesser used .net extension...oh, and the availability of the next title, as well as the ability to skip to it, violate the DMCA...

Keep it up kurt, we check every day, and sometimes more than once, to catch the latest from you!...and good luck to the interns, i hope they know just how valuable their time there is!

"I think you idea to set up a RAIN station is right on track..."

Hi, Kurt. I think your idea to set up a RAIN station is right on track. I like the proposed content and agree that it will fill a vacant gap for my listening which, as you correctly say, takes place mostly in my office. Incidentally, I also like the California Rock Weekend format. Thanks by the way for introducing me to the most enjoyable waby.com which I have added to my list of favourites.

Keep up the good work. I really look forward to receiving your excellent information.

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New RAIN feature:
	Scanwave.com "Have hours of fun in this browser friendly 3D world of fun games and wild interactive exhibits. Over 4000 items..." Visit the site here.
	The National Hollerin' Contest "Hollers exist for virtually any communicative purpose imaginable -- greetings, general information, pleasure, work, etc. The hollers featured at the National Hollerin’ Contest typically fall into one of four categories: distress, functional, communicative or pleasure." Whoop it up on your lunch break! Go here.
Both of these came from Netsurfer Digest here. Do you know of a website that you believe other RAIN readers would enjoy visiting? Recommend it here.

September 12-14	Digital Coast 2000, Los Angeles, featuring a panel on Internet radio moderated by RAIN's Kurt Hanson
September 20-22	Gavin.com: Music on the Net, San Francisco
September 20-23	NAB Radio Show, San Francisco
Sept. 29-Oct. 1	MOBE/Internet & Technology, Chicago
October 5-7	Billboard/Airplay Monitor Seminar, New York
October 9-12	QuickTime Live! Conference, Beverly Hills
October 10-12	Streaming Media Europe 2000, London (NEW!)
November 5-7	NAB European Radio Conference, Berlin
November 12-14	Canadian Association of Broadcasters (CAB) "Broadcasting 2000: On-air / On-line," Calgary (NEW!)
Nov. 28-Dec. 1	Radio Ink Internet Conference, Santa Clara, CA, featuring a brand-new national study on Internet radio usage presented by Eric Rhoads & Kurt Hanson

xxx

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