BY PAUL MALONEY
This past week, streaming provider StreamAudio announced that they had signed on their 600th client station -- Wilkes-Barre/Scranton, Pennsylvania oldies WQFM. A company press release also revealed that they had provided over 860,000 hours of streaming radio in October with the average listener spending 55 minutes per user session.

The Tacoma-based company, which provides strictly broadcast radio stations (no "Internet-only's") no-cost streaming services, was founded in the summer of 1999. StreamAudio counts high profile radio companies like Clear Channel, Entercom, Infinity/CBS (archived material), Jefferson-Pilot, Hispanic Broadcasting, Saga, Zimmer, Sandusky, Mega, Big City Radio, Radio Unica, Delmarva, Midwest Television, and Sunburst among their over 130 clients.

In an exclusive interview with RAIN, cofounder and CEO Bob Case explained why he feels the company's been so successful up to this point; and described StreamAudio's goals for ad revenue (including their ad-insertion technology), the company's choice of streaming technology solutions, and audience measurement.

In an environment of prognostication and real events (Magnitude Network's absorption by Global Media -- read RAIN's report here) which point to the possibility that providing no-cost streaming may not be a vital business model, Case is confident his company's on the right path.

"We're a radio company operating in the Internet space," he explains. "Our company's run with a radio mindset. Just like a radio station, everyone around here wears a lot of hats." Case trusts that by keeping the company lean (13 employees) and versatile, concentrating on "guerilla marketing" tactics, and relying on the unique strengths of the management team (Bob's radio background is complemented by cofounder Darren Harle's technology expertise), StreamAudio can survive where others can't.

Since streaming is provided free of cost for client stations, revenue depends on advertising. Certainly this isn't a great day for banner ads, though the company takes advantage of higher click-through rates of streaming media users as compared to typical surfers. Case feels that the Internet environment, after a period of overvaluation by media buyers, is undervalued right now. But advertisers will return.

The advertising vehicle that's really paying off, says Case, is the rich media audio/video "gateway" ad -- the ad that runs before the user's chosen stream begins (which belongs to StreamAudio). Case claims those ads on the company's streams have a click-through rate of up to 5%.

StreamAudio is also ready to reap the windfall many believe targeted audio ad insertion will bring. Not only will the ads themselves (the revenue from which is shared with the client 70/30 to the favor of the seller) be a revenue source, but Case believes that the company can show stations how collecting audience data can be used for promotional purposes, and thus income opportunities. He says the "opt-in" rate (listeners who agree to allow their name and e-mail address to be given to third parties) is about 35%.

Case maintains that his company's strong partnerships with Microsoft and Intel play a huge role in StreamAudio's viability. Because there's no license fee or stream limits associated with WindowsMedia technology, and because there are advantages to being the Number One customer of the "largest and best streaming network in the world, the premiere facility for hosting (Intel)," even widespread use of broadband won't bloat the company's overhead. According to Case, the company may stream using the RealNetworks technology at some point as well.

Finally, when asked about audience measurement, Case was quick to stress, "The metrics side of the business is critical, the key to our success. We've been on the ground floor with (streaming audience measurement firm) MeasureCast since Day One. And we've been producing our own stat's package for some time." He's referring to the real time listener measurement available to client stations on the StreamAudio site. Clients can log on and enter a protected area to check how many streaming listeners that have at any given moment. The company is still in the testing stage with the MeasureCast software. They will also report to Arbitron Webcast Ratings in the next study.

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BY RALPH SLEDGE
Realizing the unprecedented wave of changes the technological revolution of the Internet will continue to bring, the music industry has busied itself for the last year and a half to come up with a solution for copyright protection of digital song files. With technology making it easier than ever to illegally copy -- and even distribute or sell -- copyrighted music, artist and record labels look to technology as well for security.

What is SDMI?
Those efforts have resulted in the formation of the SDMI, or "Secure Digital Music Initiative." It's a coalition of the RIAA, who's members make the music; and some 190 technology companies, who make the software and hardware required to play and distribute that music in digital form.

The goal of SDMI is to create a standardized specification for the technology used to secure digital music. They are not creating a new audio format (that would replace .mp3, Windows Media, etc.); rather, they are trying to develop an encryption method that can be integrated into current forms of digital music.

How exactly does this protection work? Well, it's fairly complicated. You can go to the SDMI web page (here) and read through the current specifications, but you'll be in for a few hours of looking at labyrinthine flowcharts and memorizing obscure acronyms before you get a good idea of what's going on.

To try and put it simply, however, the SDMI is developing digital watermarks that will be embedded into music files. A watermark is an inaudible message that is encrypted, making it very hard to remove by hacking. This message is what will protect the file: an SDMI-compliant player will "hear" the message, and do a series of checks to see whether or not the file is legitimate or stolen. Illegitimate files will simply be inaccessible to the user -- they cannot be moved to other devices, or listened to.

What this means is that record labels or musicians who distribute music in digital form can control the spread of the files themselves. A person can pay for a track on-line and download onto their computer, and they can put it on an SDMI-compliant portable device such as a Sony Music Clip: they will not, however, be able to make copies for friends, or redistribute the music via a file-sharing utility like Nastier.

The Controversies
SDMI is a technology that has received a fair amount of press recently due to an ongoing disagreement between the SDMI organization itself, and the hackers they invited to try and break their digital encryption schemes. Some hackers say they broke them all: the SDMI claims that only one technology was successfully hacked (reported in RAIN here). And, as far as most listeners are concerned, there's no way to know who's right and who's wrong.

On September 6, 2000, Leonardo Chiariglione, executive director of the SDMI, posted an open letter asking would-be hackers to participate in a contest to try and hack the encryption technologies that were being considered for use by the SDMI. Six technologies were presented, and $10,000 per successful hack was at stake.

Even before this challenge was issued, people had problems with what the SDMI represented. Many in the hacker community didn't like the idea of digital controls on music or on anything else; so, shortly after the contest proposal, Don Marti, the technical editor for Linux Journal, called for a boycott of the contest. "I won't do your dirty work for you," he said in an open letter to Chiariglione. "I insist on my right to use copyrighted material I buy in accordance with the traditional rights of a music customer."

The contest went on, however. On October 12, five days after the contest ended, Salon.com ran a story claiming that all of the encryption technologies had been hacked. The SDMI -- who stood to lose not only their credibility but also $60,000 -- immediately denied the claim, saying that they hadn't even had time to look over the results yet, and that nothing was official. They are currently still in the process of testing the hacks, and currently claim that only one technology has truly been compromised.

As far as most people are concerned, they're still so way to substantiate the claim. Salon.com's sources were anonymous, no one can look inside the SDMI to see whether or not they're telling the truth, and the technology isn't out there and public to be checked by third party sources.

So what's really going on? If you believe that the SDMI has "snake eyes," then maybe their technology was indeed hacked, and now they're trying to change and strengthen it while telling the public that it is and always has been strong and "unhackable."

Or, one might think that certain "anonymous" hackers are simply trying to get the best of SDMI, making allegations true or false, because they don't have to take the responsibility either way.

More information
It's difficult to get a good idea of what SDMI will mean for users and the industry, because it effectively doesn't exist yet. You can get a good simulation of the effect by using either Liquid Audio or Windows Media: both of these formats, while proprietary, offer many of the same protections and restrictions that SDMI will have. Windows Media, for example, allows companies to release tracks that will expire after a certain length of time, and which cannot be redistributed.

There are also two ways to get a clearer picture of what SDMI will and won't do. The first is to go to the SDMI web site and read their press releases and specifications. They've done a fairly good job of responding to many of the criticisms leveled at them, and they're generally open about who they are and what they're trying to do. A company can also get most of the information they need to apply for membership to SDMI straight from their site.

The other way to is to go to web sites such as Salon.com, who have a wealth of articles and information about the goings-on of SDMI. Slashdot is another site that carries a somewhat more amateurish, though informative, view of ongoing SDMI debates.

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From Inside.com: "In a move that signals the emergence of a major new power seat in the music business, former SFX Entertainment chairman Robert Sillerman, backed by the deep pockets of webcasting billionaire Mark Cuban, has made the first in what is expected to be a series of acquisitions in the talent-management field, purchasing highly influential music-management company The Firm.

"Although figures on the deal were not announced, a source close to the situation suggests that Cuban has contributed approximately $50 million for this and future acquisitions...

"Cuban, the boisterous owner of the Dallas Mavericks NBA franchise, sold his Broadcast.com webcasting company to Yahoo in 1999 for $4.9 billion. He has already talked publicly of his desire to start a new record label, and has held discussions with Courtney Love to become his flagship artist. (Love has declared her contractual independence from her label, Interscope Records; Interscope's parent company, Universal Music Group, has in turn filed suit against Love.)

"Cuban has also stated that he was seeking a partnership with a major radio group in order to gain access to the promotional opportunities afforded by such an alliance. Sources placed Clear Channel at the top of Cuban's wish list. In an e-mail to Inside in July, Cuban noted that 'radio generates more than 80 percent of demand for music in the U.S. By including the major radio groups, we can tilt demand toward our artists and put a hurt on traditional label economics.'"

Read the entire story here.

November 12-14	Canadian Association of Broadcasters (CAB) "Broadcasting 2000: On-air / On-line," Calgary
Nov. 28-Dec. 1	Radio Ink Internet Conference, Santa Clara, CA,
February 1-4, 2001	RAB 2001. Details coming soon.