THE EXTRATERRESTRIALS
INTERNET RADIO IS HERE -- WHETHER CONVENTIONAL BROADCASTERS LIKE IT OR NOT

by Jason Bracelin
Published May 10 - 16, 2000  Cleveland Free Times © 2000

http://www.freetimes.com/features/

Not many radio moguls work with nude toes. And rarely is their sole office mate a hiss-prone feline. But Cornelius Gould is no ordinary radio honcho, and his temperamental tortoise-shell companion Shalla is no friend to strangers.

This becomes evident as Gould, casually dressed in khakis and a navy shirt -- feet accoutrement-free -- gives a tour of his East Side apartment, which doubles as the headquarters of local adult contemporary online radio station TheCityRadio.com. Gould is founder and program director; Shalla radiates suspicion.

A smorgasbord of blinking gadgetry, Gould's home looks as if a queasy Radio Shack ralphed all over his living space. His foyer is a mess of machines, with a threesome of computers engaged in an electronic ménage á trois and a copy machine fighting for space among CDs, speakers and scant furniture. Cables snake every which way throughout the place, with the dining room table a chaotic mess of computer doodads. A small hall gives way to a back room housing TheCityRadio's studio, complete with three more computers, microphones and stacks of high-tech equipment. It's a radio fanatic's dream realized.

"In all my little kid pictures I had these 45s in my hand -- they couldn't get me away from the 45s, I'd sit there and cry, and they'd give them back to me. I was just fascinated by records," Gould says with a smile. "At some point I got fascinated over how radio worked. Later on I'd find all my Wonderful World of Disney books that mom bought me and she said, 'You drew in all of them.' I'd open them up and there's all these cars and each one had a little antenna on it so that the driver can listen to the radio. So radio's always been a fascination to me."

Up until a few years ago, however, Gould's fascination with radio would translate into little more than an engineering job at WJCU, which he still holds. Unfortunately, his bank account was just a bit short of the fee required to purchase a broadcasting license (give or take $20 million). With the recent emergence of Internet radio, though, all this has changed. The door has been opened for Gould -- and virtually anyone else with the bare essentials of a mixing board, a computer, a CD player and an Internet connection -- to enter into the heretofore highly restricted world of radio.

It's not just aspiring broadcasters for whom the Internet has opened doors, however; it's also for the dwindling number of radio listeners, whose ranks have dropped by as much as 25 percent in the past five years. With over 10,000 Internet radio sites currently online, radio listeners now have something that they haven't had in years: choice. This includes sites like Sonicnet.com, which allows listeners to custom-tailor their own radio station based on their tastes in music, whether it be death metal or disco -- or stations created by artists ranging from Static-X to Dwight Yoakam.

The 1996 Telecommunications Reform Act changed federal law that had in the past restricted companies to owning a single AM-FM pairing per city, allowing corporations to own up to eight stations in a given town. As a result, one out of every five radio station owners has disappeared at the same time as the number of stations has increased. At the locus of this centralization is broadcasting behemoth Clear Channel, which owns 874 radio stations in the U.S., including six in Cleveland. It has adopted the practice of broadcasting the same programs simultaneously in several markets throughout the country, greatly homogenizing radio nationwide with little worry of any threat from the competition, which it has largely gobbled up.

"Once the Telecommunications Bill was passed and you could have unlimited ownership and the smaller guys cashed out and the bigger guys overpaid, [terrestrial broadcast owners] reached the point where they felt, 'Look, if we own all the radio stations they're going to have to listen to us,'" says John Gorman, founder of Cleveland's The Crow Web portal, which provides links to close to a thousand Internet radio and television sites.

"It is no different than the automobile manufacturers in Detroit in the late '60s saying, 'Hey, why are we using such expensive metal in our cars, why can't we cut back?'" continues Gorman. "And all of a sudden they started using a cheaper grade of steel. If you remember the cars coming out of Detroit in the late '60s, early '70s, they were terrible. The feeling that Detroit had was, 'They have to buy our cars' and they laughed when Honda came over with their little box, and at the early Toyotas. But three years later, all of a sudden everyone is buying Toyotas and Hondas and we know what happened to the American automobile industry. A fairly large number of owners today -- and there aren't that many left -- have the same feeling, that they have to listen to us, there's no place else they can go, and the fact is none of that is true."

Yet it appears that Clear Channel ascribed to this very theory. The company repeatedly paid exorbitant amounts for stations -- reportedly 18 to 20 times the stations' cash flow, in certain instances -- presumably in the belief that acquiring such a large share of the market would pay dividends no matter the cost. The problem with that line of reasoning is that by spending so much money, the company has had to respond by boosting the time allotted for advertising. This has resulted in some stations having six- to 10-minute commercial blocks that have sent audiences channel-surfing in record numbers, frustrating both listeners and advertisers whose commercials aren't getting heard.

"You know the old saying, 'Be careful what you wish for, you may get it'? Radio wanted monopoly and the government's turned their back and said, 'Go ahead, do what you want, boys.' And the fact that they're as strong as they are, that you can have a company like Clear Channel owning 800 radio stations, is going to be their blind spot," says Jerry Del Colliano, publisher of the Inside Radio trade publication, who also lectures on the topic of Internet radio at the University of Southern California. "Clear Channel's supposed to reveal their Internet strategy in a couple of weeks, and I'm told from the inside that there's nothing exciting. They're clueless. They can't compete against themselves and that's where they're going to be taken to the cleaners. I think radio as we know it today is going to be as antiquated as AM radio is to FM."

But while industry speculators may be predicting tough times ahead for terrestrial broadcasters, the fact remains that at this point numerous roadblocks hinder the further development of Internet radio. The prime obstacle is technology. Currently, the majority of the people who are online have low-speed 28.8K modems, which makes smoothly accessing Internet radio much more difficult than the higher speed connection that best suits Internet radio. And even those individuals who do have faster, 56K modems are often hindered by the telephone companies, many of whom still only deliver 28.8K access at best.

Moreover, unlike terrestrial radio, where after the initial investment costs generally remain constant despite the audience size, with Internet radio additional listeners increase the stations' cost. This is because a larger audience requires a larger bandwidth, the pipeline with which one reaches people, and this carries a considerable expense. Thus, Internet radio can quickly bring about diminishing returns if strong advertising revenue isn't in place, and at this point advertisers are just starting to really warm up to the new medium.

Another potential landmine for Internet radio is the 1998 Digital Millenium Copyright Act. Originally, this act was intended to reasonably regulate airing copyrighted material online. But since its inception, it has been largely crippled by hotly contested legal actions. At the center of the debate is the royalty rate at which Internet stations will have to pay for broadcasting songs. Publishing companies ASCAP and BMI charge 1 to 2 percent of gross revenue. With Internet radio, the Recording Institute Association of America (RIAA) -- which currently receives no royalties from terrestrial broadcasters who are exempted by law -- has also been granted a cut, and has reportedly asked for exceptionally high percentages of gross revenue. The RIAA is in arbitration to determine what rate it will receive, while Internet broadcasters will be held accountable for the fees retroactively from the date the act was passed.

"For the most part, it's keeping Internet radio from happening in a lot of ways because it's so confusing and because there are so many limitations," says Robin Gross, staff attorney for the Electronic Frontier Foundation, which was organized to protect rights in the electronic domain. "If you go through the list of what you have to do in order to qualify for the statutory webcasting rate, you can only play X number of songs in a row and only for this many hours and you can't repeat and just all of the ridiculous hoops and red tape that you have to go through -- it's keeping a lot of people from going there, and I think we haven't really seen that revolution yet, in large part because that act is keeping musicians and webcasters from going online."

"It is an absolute legal nightmare," says Ashley Farr, CEO of L.A.-based SpikeRadio.Com, recently named the best online radio site by new media publication Shift. "And I think that because some of the results and some of the bodies that have put motions forward have been so ridiculous that common sense has prevailed, and essentially no decisions have been made, so we've just gone about our business. I mean the Association was originally supporting either 50 percent of total revenue or something like $2 per song played. Well, that renders the business just unfeasible."

With these considerable hurdles in Internet radio's way, the terrestrial broadcast community doesn't yet seem at all fazed by the threat the Net may pose, seemingly trusting their expansive resources to allow them to control the Internet the same way they control the airwaves.

"I think the advantage we're going to have is the fact that our owner, Clear Channel, does own so many stations and so many other things that they're going to have the ability to create a universal website, where they're going to be able offer all of these formats," says Matt Wardlaw, webmaster for all of Clear Channel's Cleveland stations. "Once they have all these stations streaming online, they're going to be able to compete with everybody else out there that's offering all these formats, whether you like jazz or polka. Having all these stations, they're going to be able to put together the same sort of website where you're going to be able to go there and say, 'OK, this is what I like,' and here's what they're going to offer you, so the fact that they have so much is really going to help them out in this whole fight."

Gould, who continues to work in both the terrestrial and online broadcasting arenas, agrees that traditional broadcasters will likely withstand any challenge from Web radio.

"A lot of people are saying 'Oh, the sky's falling, Internet radio is going to kill broadcast radio,' and it's not going to kill broadcast radio," Gould says. "That's the same argument that people gave that TV was going to kill radio and it never did, it just changed radio. Radio is no longer doing the Flash Gordon hour and stuff. The most Internet radio is going to do is force radio to focus a little differently. It'll be a short-term threat at times, but I think radio will change just like it's always changed, adapt and carry on."

Perhaps the biggest question, then, is with Clear Channel beefing up their presence online by streaming their broadcasts on the Web, and with many corporations already dumping millions into online ventures, won't Internet radio become as corrupted by the same monied influence that critics contend has sullied terrestrial radio?

"Will the result be that the bad guys win in the end? Well, maybe," Gorman says.

"But it's quite a few years down the road and by that time there will be another technology to replace this one. At the turn of the century you had these livery stables and the people that made horseshoes, blacksmiths, saying nobody's ever going to buy a car, a combustible engine. They're noisy, they're dirty, you have to put this fluid in to keep them running; and within a few years, these same blacksmiths were trying to shoot the tires out of cars. The way I looked at it in my career is that I'd rather be opening a company that makes combustible engines than horseshoes. And I look at radio today as they're in the horseshoe business."