BY PAUL MALONEY
Aside from what the industry has been dealing with in the last week (and month, and year), there is actually reason to believe that some of the conditions are good (and improving) for establishing an online streaming brand and attracting and maintaining an audience.

Regardless, Arbitron suggests, based on the results of a study out today, that a lot more work needs to be done on the part of streaming entertainment outlets to make that a reality.

Arbitron and Edison Media Research conducted a webcast today to release the results of their joint study "Internet 8: Advertising vs. Subscription -- Which Streaming Model Will Win?"

The study was conducted with just over 2500 telephone respondents last month. Positive signs from the research indicate that more Americans than ever are online, more are checking out streaming audio (and video), the use of broadband continues to grow, and a significant number of consumers are willing to pay, accept ads, and/or reveal some personal information to get the content they want.

Arbitron Webcast Services vice president/general manager Bill Rose told RAIN yesterday that despite the flurry of issues that have made operating in the webcast industry more difficult in the past year, the audience for streaming continues to grow. (Rose is pictured above in RAIN's oft-used "cloudburst" photo).

"The industry has had to face digital rights issues, AFTRA, the economy, and September 11th," Rose said. "But we're still seeing consumers tuning in at record numbers."

According to the study in fact, 80 million Americans age 12 and up have listened to or watched streaming media online -- a 30 percent increase just over the past year. The number of Americans who regularly use (have viewed or listened online in the past month and in the past week) also continues to grow, as does the number of Americans with Internet access.

Yet, more Americans still see the Internet as a tool for communication (7.8 percent), and a source of news (7.4 percent), than as a worthwhile destination for entertainment (6.1 percent).

"Internet entertainment, and streamers in particular, still have a lot of work to do in cutting through to the minds of consumers that the Web is a place to go for content," Rose commented. "Where's the 'must-have' content? Maybe the time has come to realize that just re-purposing your traditional content is not enough to get the job done." He compared how "I Love Lucy," high-quality audio, and HBO drove consumers to adopt the new technologies of television, FM radio, and cable television (respectively).

A specific opportunity for improvement here can be seen in the diminishing "digital divide." African Americans' access to the Internet has grown to an all-time high of 67 percent, the study found (Hispanics' is somewhat lower at 57 percent, yet growing as well). Thus conditions seem right for companies and advertisers looking for this audience.

The ethnic marketplace is a new frontier for growth online, according to Rose. "Marketers looking to reach these segments should establish themselves now, while this audience's online habits are forming," he suggested.

Yet the question remains: even if consumers want streaming media, and are willing to seek it out, will the recent CARP decision on webcast royalties (should it be officially adopted) make it impossible for webcasters to sustain a business model in order to meet that demand? Under current circumstances, the future appears grim.

While it appears that ad revenues (at current rates) won't support the royalty liability, their may be hope in the subscription model. Rose contends that enough consumers are willing to pay for "must-have" content to make the subscription route worthwhile for some companies -- what he calls the "HBO model."

From the study results, Arbitron and Edison estimate that nine million people (one in five) who've listened to online audio recently are willing to pay for what they're getting now. Moreover, Rose contends, "four in ten are willing to pay for commercial-free, high-quality audio and content they can't get anywhere else."

(Interestingly enough, the study also indicates that five percent of respondents said they are "very interested" in satellite radio services such as XM and Sirius. While not a huge percentage, five percent of 12+ America is 12 million people. If just half of that number actually subscribe at $10 per month, Rose suggests, you've got a $720 million-a-year business model.)

With the future of the industry cast into uncertainty yet again by the recent CARP recommendations for royalties, perhaps webcasters aren't feeling the motivation and enthusiasm to "plant the flag" of their brand out there.

It should be noted that listenership to Internet-only webcasters, though higher than a year ago, has actually dropped in the last six months, according to the study. Perhaps this is due to the fact that some higher profile webcasters have left the business in the last year. But with the findings that even the "portal" or "major" webcasters (Real.com, Yahoo/Launch, MSN Music, and Radio@AOL) haven't yet achieved 50 percent familiarity with consumers, there may still be plenty of room to make this a business.

A summary of the study results, and a presentation of the study, can both be downloaded from the Arbitron site (in Adobe Acrobat format) here.

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From StreamingMedia.com: "After the U.S. Copyright Office released proposed rates for webcasters last week, the industry reacted strongly, with some claiming that the rates will put them out of business, or force them to change their business plans. Here’s how some streaming companies reacted to the news, in their own words.

"SoundExchange: 'This policy ensures that all artists will receive their royalties, whether or not their labels have signed with SoundExchange. It was also gratifying that we were awarded the right to collect for ‘non-members’ as we have put extraordinary effort into locating rights owners and artists whose music has been performed on the Internet...' -- John Simson, executive director, SoundExchange.

"Beethoven.com: 'The recent rulings by CARP, which we feel equate to no less than a complete capitulation to the demands of the egregiously powerful RIAA, will eradicate any possibility of a profitable future for us and the vast majority of other webcasters. By dismissing the vastly more equitable solution of basing royalties on a reasonable percentage of revenue in line with other traditional media, the CARP ruling slams the door on the possibility of opening new markets to not only webcasters, but to the RIAA itself. It has created an impermeable and unsurpassable barrier to entry for only but the largest corporations to enter or operate in the webcasting domain...' -- Kevin Shively, Director of Interactive Media, Marlin Broadcasting/Beethoven.com.

"Listen.com: 'The panel's recommendation is within the range of what Listen prepared for in long-term projections for our business. We will continue to offer free Internet radio as one part of our Rhapsody music service, and in the future may also introduce paid subscription radio..' -- Listen.com CEO, Sean Ryan.

"MeasureCast: 'It is clear that the RIAA and the U.S. Copyright office don't understand the traditional radio business, or the streaming media business...It's time for the RIAA and the U.S. Copyright Office to get real, and to understand that putting streaming broadcasters out of business will put zero dollars in their royalty coffers. But then maybe that's their end game; making certain that only major record labels control every piece of music streamed on the Internet. Perhaps it's time for the Department of Justice to look into this issue.' -- Ed Hardy, CEO, MeasureCast."

Read this entire article here. We'd like to add to this the thoughts of David Frerichs, Founder, President and Chief Technology Officer of iM Networks:

"If adopted, the CARP recommendations play right into the hands of the corporate giants...Had similar rates been imposed in the early days of radio, we would not have the $20 billion dollar marketplace that we have today. These rates hamper the Internet broadcasting marketplace, and this kind of near sighted approach is just going to drive people back into the loving arms of illegal alternatives..."

For an opinion on SoundExchange and their right to collect for "non-members," please see Reader Feedback below.

From Radio Ink: A Los Angeles Times story focuses on deregulation and voicetracking. And, of course, Clear Channel is the company taken to the woodshed by the paper.

"The paper quotes Jay Schwartzman from the Media Access Project as saying, 'Our worst fears have been realized. A lot of the things Clear Channel is doing are the traditionally questionable industry practices, now on steroids.' Schwartzman doesn't mention that the company is simply following the rules set forth by the government. Nor did he specify his definition of 'questionable industry practices.'

"Voicetracking was also part of the article; however, the paper made it appear as though the company was using voicetracking to save expenses during these rough economic times. For the most part, our industry has been going to voicetracking to save money ever since the technology was discovered. So it's really nothing new...

"The article made us wonder that, if voicetracking is so bad for Radio, why will satelite radio be so good for consumers? The press, including Fortune magazine, is practically fawning over this new radio service, which touts the same sound from coast to coast. This next paragraph from the article is exactly what made us wonder."

Read the Radio Ink editorial by Ed Ryan here. To read yesterday's article from the LA Times, click here.