The Wireless Wave of the Future
Internet radio's promise is in personalized programming, but will anyone pay for it?
By Carl Lindemann -- Broadcasting & Cable, 12/10/2000 7:00:00 PM
In the future-according to the most fervent Internet aficionados-wireless Webcasting will quickly and irrevocably displace traditional radio. In only a few years, the next-generation cell-phone network will take the Internet into one of the few places currently beyond its reach. Cars equipped with in-dash minicomputers will be able to tap into narrowcast-interactive audio experiences, transforming drive-time listening habits. As Internet radio fans see it, the FCC may as well begin scheduling auctions for the AM/FM bandwidth to feed this wireless world.
Sounds futuristic? Well, that scenario isn't so far off. The wireless Webcast is already more than fantasy. One of the highlights at last September's NAB Radio Show in San Francisco was a demonstration of in-car Internet audio by Live365.com, a Web-based audio-content portal. The hardware used was strictly off the shelf: a Sprint PCS cell phone and a Hewlett Packard Pocket PC connected to a car stereo's auxiliary input.
Live365.com's custom-software tuner tapped into their online inventory of music. The audio streams were limited by the slow speed of the current cell-phone network. Though not "CD quality," the sound was at least as good as AM radio. Of course, listening in the parking lot of the Moscone Center is not the same as traveling from cell-to-cell down the highway.
But today's limits don't dampen Alan Wallace's enthusiasm for what is to come. As vice president of marketing for Live365.com, he anticipates that wireless Webcasts will exceed expectations. "I think it's really going to be the next big wave in radio-a broadcast entity that goes beyond AM/FM," he says.
For all the impact the soon-to-arrive satellite services are supposed to have, this will render the new service largely irrelevant. "It gives every radio station, large and small, all the functions satellite radio offers. It will have the same incredible digital sound. But it will come through one standardized system-not two competing ones [from XM Radio and Sirius Radio]. Better than that, it allows two-way communication. Listeners can talk one-on-one to the deejay through e-mail and instant messaging."
For Juan Esteban, founder of La Musica.com, a Latin music and entertainment portal recently purchased by Spanish Broadcasting System, wireless Webcasting will play to radio's traditional strength, localism.
"For Webcasting to be really successful, it will have to strip out the local elements [from the content provided by the signal's station of origin] and put in what's appropriate to the market the listener is in. Even if we're side-by-side on the road, we have different likes and dislikes, and so we can be served by totally different advertising. This is mind-boggling."
Ad insertion marks a quantum leap past today's media marketing. Unlike the present hit-or-miss approach, such targeted advertising zeros in on interested and attentive ears. These capabilities come from several converging technologies. "Take Webcasting, ad insertion technology and put GPS [Global Positioning System] in the mix. With this, we can broadcast to you anywhere on the planet, but also give that local-radio feel," Esteban says.
But the real promise is to go beyond mere localism and into personalized programming. Ads are just one of many programming elements that can be custom tailored. Today, a commuter might switch between a music and news/talk format to find out about traffic conditions. The wireless Webcaster can sidestep this tune-out with intelligent systems that learn personal preferences. Traffic updates can be inserted as desired. On days when it isn't a concern, the listener gets the music uninterrupted.
Sandy Cohen, president and founder of Savos, a wireless technology company enabling streaming Internet audio to cell phones, sees this as creating a new depth to radio. "It's going to change the world of listening," he predicts. "In the long-term, programming is going to change with this kind of interactivity. News and entertainment will be packaged for this kind of use."
Beyond the need for increased bandwidth, another issue for in-car Internet access is ease of use. Harry Edison, a founder and board member of SurferNetwork, the Webcasting company that recently acquired controlling interest in leading radio Webcaster BroadcastAmerica.com, sees simplicity of operation as key. "The devices are very important here. Everyone knows how to work a radio. Internet radios need to be as simple. That is crucial for making this a legit consumer medium. Inside, sure, it's a computer. But the box should have the familiar radio interface," says Edison.
To meet this requirement, Pat Kerrigan, marketing manager for Intel's in-car computing operation, is developing voice-control interfaces with major auto-electronics manufacturers like Visteon Corp. "The devices we're advocating allow you to talk to the machine. If you've programmed it properly, you'll be able to keep your hands on the wheel and your eyes straight ahead. That's tantamount to success in this," he says.
Initially, these kinds of devices are usually priced beyond the mass market. But what Kerrigan calls the Personal Vehicle Assistant (PVA) will be cheap from the outset. "If the PVA sounds like a Personal Digital Assistant [PDA], there's a good reason for it. If you look at the guts, they're identical. The PVA will enjoy the same economy-of-scale of these other common devices. The automobile manufacturers say they'll have the PVA as a standard offering in the next few years."
Live365.com plans to release the service demonstrated at NAB by the third quarter 2001. By that time, a crucial technological leap should be within sight-the next-generation "G3" high-speed cell-phone network, capable of 384 Kb/s data speeds.
According to AT&T's Tom Trinneer, vice president of wireless-portal strategy, the end of 2001 will see the first release of G3. Nationwide deployment will be complete by 2003. But the availability of broadband cell communications will not be the defining issue for wireless Webcasts.
"You have to look at business models. With G3, we will have sufficient bandwidth to do a credible job [of streaming audio]. The challenge is deciding whether we want to give all our bandwidth to a few customers to deliver the ultimate experience, or spread it out to a larger number of people with capacity constrained," says Trinneer.
The key factor will be price. Will listeners pay premium rates for the higher data rates? "Anything that costs several magnitudes greater than terrestrial delivery isn't likely to make it," he says. "Bandwidth is scarce. We may eventually change from an economy of scarcity to abundance, but we don't see that happening anytime soon."
Trinneer isn't the only one to doubt that wireless Webcasting will be an attractive alternative to free, over-the-airwaves broadcast. Rick Mandler, vice president of new media for ABC Broadcasting, doesn't see portable Internet streams as having much impact in the near term.
"Obviously, it's something we're keeping an eye on. But it is not part of our plans for the coming year. The car has been impervious to the Internet. But it's not going to stay that way forever."
For Mandler, the technological issues may be greater than some anticipate. "Wireless IP to a moving target is a real challenge. You can't go across town and even maintain a cell-phone conversation. With most kinds of data transmission, it's not an issue. But drop-outs are unacceptable for an audio product."
Even presuming that these are overcome, cost is critical.
"I don't think anyone is going to pay a premium for this. Flat-rate pricing is one model that would make people want to opt for this over free radio. Given the recent history of the Web, it seems that networks tend to go to flat-rate schemes. But if I were a service provider, wireless IP would scare me," says Mandler.
Emmis Broadcast Chairman and CEO Jeff Smulyan is confident that terrestrial radio can hold its own against new-media incursions. Smulyan is no stranger to the opportunities afforded by the Internet. Recently, he took on the role of chairing the Local Media Internet Venture (LMIV), a consortium of broadcasters that explores and exploits new-media opportunities.
"Obviously, we're going to take LMIV wherever the public leads us. If this [wireless Webcasting] is a business, we want to be there. But the idea that streaming wireless will replace terrestrial signals is a notion based on a view of the world quite different than mine," he says.
Smulyan has many bottom-line questions for proponents of the wireless worldview. "We don't have an answer yet as to whether this is really viable with the listeners paying for it. The problem with an advertiser-based business model is that it's hard to aggregate enough listeners to make it attractive to advertisers. It is hard to find advertisers for very small audiences." As for the possibility of wireless carriers offering a flat-rate service, that just begs the question. "Flat-rate service could come around. But if people use it 24/7, pretty soon the carriers find that they're losing money. There's a lot of technology out there that's attractive-until you have to pay for it."
Still, Savos' Cohen finds the cell-phone carriers receptive. "What we're going to market with now works for today's infrastructure on today's phones. The wireless carriers understand this as a new application for them, a new opportunity for customers to use their service. They are asking us to bring content to them to bring to their customers. At the same time, content providers are looking to connect with the carriers to reach those same customers," he says.
Even so, his average user is hardly average. In fact, the company has redirected initial efforts from the consumer to business-to-business markets. "At first, the customer base is the heavy cell-phone user. They might listen five to 10 minutes at a time [to an audio stream on a cell phone]. For example, a broker might listen to an analyst's report. If it's a strategic advantage to get this information early, it's worthwhile." But for now, Cohen expects to create a listener base using time leftover from calling plans. "There's a percentage of cell-phone users with a spare 100 to 200 minutes a month-about six or seven minutes a day. That's a foundation for building this business."
Besides bandwidth costs, Webcasters may face an additional expense. Terrestrial radio broadcasts are exempt from paying performance rights for recordings. Fees are paid to rights organizations to compensate authors. But performers and their record companies see a return in increased record sales instead. And the Recording Industry Association of America is seeking performance rights fees for Webcasts.
Dennis Wharton, the NAB's senior vice president of corporate communications, calls this an unreasonable demand that could cripple the entire nascent medium. "We obviously take great umbrage that we should be paying additional fees to the record companies. It's always been Congress' opinion that we're exempt from performance rights because on-air listening generates music sales. We already pay $300 million a year to rights organizations like BMI and ASCAP. That's right off the bottom line. Now, on top of that, they're asking us to pay millions and millions more."
Negotiations between the NAB and RIAA broke down last spring. "In mid 2000, the RIAA filed a request for a decision on this from the Copyright Office of the Library of Congress. As a preemptive action, we filed against the RIAA. Right now we're waiting for an opinion," he says.
Wharton believes the RIAA's actions are shortsighted and possibly self-defeating. "Initially, this could result in a huge amount of revenue. That's their game-take the money and run. But it could limit the amount of music you actually get to hear online."
Despite the many uncertainties, broadcasters ignore wireless Webcasting at their own risk. Live365.com's Wallace is sure the technical issues will be resolved.
"If there's one thing consistent here, it's that people underestimate how quickly things happen and forget the problems once they get fixed. It seems like yesterday we had 286 computers and wireless was a dream," he says.
That only leaves the doubters that consumers will pay for a service that's already free over the airwaves. Radio broadcasters putting faith in the fact that no one will pay for something that's free sounds uncomfortably familiar-like some network TV executives in the '70s who voiced the same objections to the viability of cable TV.
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