A Dam in the Stream

If Clear Channel can't afford Internet radio, who can?

In a relatively short period of time, Internet audio streaming of traditional radio broadcasts has found a sizable audience. And why not? The technology allows folks who work in office buildings in which radio reception is iffy to keep up with their favorite signals on the job, even as it lets individuals who live elsewhere sample faraway sounds. Notes Scott Arbough, program director for Clear Channel-owned KBCO, "The majority of people listening to our audio stream are from out of state or out of the country. We have a worldwide listener base."

Sorry, world. KBCO and the other seven Denver-area stations under the Clear Channel umbrella have reluctantly discontinued their Web-streaming operations. "It's a shame," says Lee Larsen, regional vice president of Clear Channel's Rocky Mountain region properties, who ordered the end of streaming as we know it. "But it's something that, at least temporarily, we felt we had to do."

Larsen calls the causes behind this decision "extremely complicated," and he's right. But, as usual, expenses are the bottom line, and they're impacting every Internet-radio operator -- even Clear Channel, the nation's largest owner of radio outlets, with more than 1,200 properties. As of last year, about 200 of the conglomerate's stations offered real-time Internet streaming. But on January 1, this total instantly shrank to about fifty, and the numbers are expected to keep falling.

Immediately after its plug was pulled, KBCO posted the following message on its Web site, www.KBCO.com: "Due to various issues, including music and commercial rights issues, bandwidth costs and other factors, we have stopped the streaming rebroadcast of our stations on the Internet." This notice remains accessible on the sites of several other Clear Channel stations in Denver, such as talk purveyor KHOW (www.KHOW.com).

Granted, this isn't the first time Clear Channel stations have quit streaming. The flow was also squeezed off in April 2001, after the American Association of Advertising Agencies asked stations to stop simulcasting commercials over the Web in the wake of an agreement between the Screen Actors Guild and the American Federation of Television and Radio Artists. Dollars motivated this request: A provision of the pact required that AFTRA members be paid 300 percent of their session fees if the advertisements were streamed ("Radio Rumble," June 21, 2001). In an attempt to solve this problem, says Brian Parsons, vice president of technology for Clear Channel Radio Interactive, Clear Channel stations began "taking all the commercials out and replacing them with Internet-only commercials or commercials that had been cleared to use on the Internet."

But this fix brought with it a new set of difficulties. Not only was it laborious and time-consuming to sift through commercials in search of participants from AFTRA, but the sale of Internet-only ads seldom kept pace with those intended for standard airing. Because local spots created even more uncertainty, they were routinely blocked, leading to unwanted moments of silence.

Complicating things further were attempts to implement the Digital Millennium Copyright Act, a measure passed by Congress in 1998. Musicians have long resented the royalty structure that applies to traditional radio, and with good reason: Composers are paid each time one of their tunes is aired, but the non-writing instrumentalists and vocalists who appear on such recordings receive zip. That explains why the latter were cheered by the DMCA. Although the legislation didn't change the rules governing old-school radio, it cleared the way for performance royalties on material streamed over the Web, including simulcasts of standard radio broadcasts.

Internet-radio types were less than thrilled by this turn of events, especially when a Copyright Arbitration Royalty Panel, or CARP, recommended that Web radio types pay royalties on a per-song/per-listener basis. In an interview last year on this topic ("Digital Dilemma," May 2, 2002), Howard Michalski of radio.wazee (at www.wazee.org), a modern-rock Internet station based in Denver, said, "This is a fledgling industry. You would think the recording industry would want to help it grow, especially since we're all up for paying some kind of performance fee. But they're never going to get the fees the way they've set them up, because none of us will be left."

After Librarian of Congress James Billington set Internet-radio royalty rates that many deemed too high (despite their being lower in some respects than what the CARP recommended), Web-radio supporters like Michalski asked legislators for relief. Their efforts produced the Small Webcaster Settlement Act, which lowered the royalties further. But these additional expenditures remained substantial, particularly in an industry that was not yet profitable. This was the case even for Clear Channel, which, according to the Arbitron ratings service, streamed nearly six million hours of programming last November, more than any other network Webcaster during the same period. Clear Channel technology veep Parsons puts it simply: "At the national level, we were just not seeing enough revenue to make it a sound business."

Other provisions of the Small Webcasters Settlement Act promised to make matters worse. Pam Taylor, the spokesperson for Clear Channel Radio, makes particular note of "the reporting requirements that are part of the legislation. The regulations require us to report the number of times an artist is played, the time slot and a lot of other things. Somebody's got to sit down and figure all that out, which makes for a very labor-intensive situation."

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