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Emmis Internet club

Five radio firms put $6 million into new indie Web venture 9/24/2000 08:00:00 PM Eastern

Five radio companies have pledged $6 million to create an Internet network that they say already has a potential audience of about 37.5 million.

The network, dubbed LMiV for Local Media Internet Venture, will be an independent, broadcaster-owned company chaired by Jeffrey Smulyan. Smulyan also chairs Indianapolis-based Emmis Communications, which owns 23 radio stations. He has spent the past 16 months pulling together the broadcasters for what he says is an unprecedented common effort.

Besides Emmis, LMiV's founding members are Bonneville International, Entercom, Jefferson Pilot Communications and Corus Entertainment, the largest radio broadcaster in Canada. Several other groups that earlier had expressed interest dropped out. "Discussing it is one thing," Smulyan said. "Really writing a multimillion-dollar check is very different."

But broadcasters will have to pay up if they want to succeed on the Internet. That was one of the themes heard by the 7,200 attendees at last week's NAB Radio Show in San Francisco, where Smulyan introduced plans for LMiV.

With its 1,000-plus radio stations, Clear Channel Communications has "a tremendous potential opportunity to drive people to these Web sites and try to focus them on doing commerce on those Web sites," Clear Channel Chairman Lowry Mays said during a Q & A with Chairman Lou Dobbs. But getting there is "a huge challenge. We don't want to hemorrhage money."

Caution may be wise. "Frankly, the economics of Internet radio are broken" right now, Peter H. Gardner, a general partner in Media Technology Ventures, said during a panel of investors. He estimated it would take three to five years for a "significant reallocation of advertising dollars and listeners' time" away from traditional radio.

While Clear Channel, the nation's largest radio group, and No. 2 Infinity Broadcasting work out their own Internet strategies, LMiV is aiming to serve smaller groups. It will design unique Web sites for the participating companies' stations, then coordinate content-sharing, sign up e-commerce partners, provide technological support and sell national advertising. Since the participating broadcasters will own LMiV, they will keep any profits. But they will also have to absorb the losses, which are projected for the first three years.

Each broadcaster's share of the venture will depend on reach, with each listener, for now, valued at $1. For example, Emmis, which counts 10.5 million listeners, will contribute $10.5 million to the venture. The five founders currently reach about 37 million people and so far have committed a total of $6 million to set up the network by the end of the year. Beta testing will take place in the first quarter of 2001. Then, Web sites will be rolled out "at a rapid pace throughout the rest of 2001," said Jack Swarbrick, the Indiana businessman who will serve as the venture's CEO.

By the end of next year, users are expected to number 70 million as other companies sign on. If 10% of those 70 million become "occasional users," LMiV will be "one of the largest players in the [Internet] space," Swarbrick noted. Unlike the biggest Internet firm, AOL, access to LMiV will be free.

Attracting national advertising will be the key to LMiV's success, Swarbrick explained. "That alone is reason enough to launch this venture."

To encourage national deals, broadcasters will use their promotion power to drive listeners to the new Web sites. By working together they can create better offerings, thus keeping users onsite longer, Swarbrick said.

Break it down/Here's what the first five members of the Local Media Internet Venture have to offer.

Company* No. radio stations (biggest markets) Number of listeners

Bonneville (12)

18 (Chicago, San Francisco, Washington)

6.0 million

Corus Entertainment

11 (Calgary/Edmonton, Alberta; Vancouver, B.C.)

6.0 million

Emmis (7)

23 (New York, Los Angeles, Chicago)

10.5 million

Entercom (5)

98 (Boston, Seattle)

11.0 million

Jefferson-Pilot (14)

17 (Atlanta, Miami)

40 million



37.5 million*

(rank on B & C's Top 25 Radio Groups [Sept. 18])

Source: Broadcasting & Cable
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