Internet radio holds a lot of promise, and, at last week's CES, there was much discussion over what type of Internet appliances will be needed to make computer-based listening an attractive offering beyond the PC.
There's no denying that the potential is there. A Consumer Electronics Association study shows that, as of early 2000, 63% of consumers with multimedia PCs had listened to online radio at home, up from 33% in 1999. But the continued growth and development of Internet listening depends on reaching past the confines of the computer.
Repackaging online audio for everyday use involves numerous technical and design challenges. What should an Internet radio "tuner" look like? How can connecting such devices to the Internet be simplified? Several manufacturers have set out to establish standards. The payoff could come by creating a booming new consumer-electronics category that reshapes radio listening.
"There are so many stations available online that a poor interface might be very difficult to use," says Kerbango Tuning Service Vice President Jim Gable. "We've made finding what you're looking for fairly simple. It looks like a traditional radio."
The Kerbango Internet Radio is a stand-alone device priced at $300. What's hidden inside is a broadband-connected computer dedicated to playing streaming audio. The unit is scheduled to ship shortly, and an analog modem version will follow. Other appliances, such as Akoo.com's Kima, are computer add-ons costing about $100.
"This points to a future where every home uses a PC as a server powering various tasks for various people," says Akoo CEO Niko Drakoulis. "We're developing wireless devices to take the music entertainment out of the PC." As yet, it's too early to tell whether either the stand-alone or the peripheral design will prove a winner.
Despite these differences, there seems to be a consensus among designers that the best way to ease consumer anxiety is to have the new devices emulate what's familiar. For years, knobs and dials have given way to digital tuning buttons and other changes. The "tuner" metaphor popping up in the Internet radio interface harks back to the analog era. "Tuning" here really means searching through online databases of Webcasts collected by the companies to support their devices. The goal is to license the interface and database to brand-name-manufacturers. iM Networks (formerly Sonicbox, Inc.) scored a coup at CES by announcing that Philips Consumer Electronics will integrate iM tuning in an mini audio system coming to market in the third quarter.
More important to broadcasters is how the company controlling the database becomes the go-between to their online audience. Since there is no "frequency" defining dial position, how this is organized affects listenership.
"Placement is key," says Penguin Radio President Andrew Leyden. "Our No. 2 spot is the U.S. Naval Observatory time signal. Because of this, it always ranks in our top 10." According to Edward T. Hardy, CEO of Measurecast, an online metrics agency, this could create a battle between broadcasters for preferred placement. "My guess is that we're going to see people vying for position on the various appliances, perhaps even paying for premium dial position."
Eventually, such payola for positioning could become a line item in the online-audio promotion budget. "We are looking at but haven't decided whether to charge premium fees for location," says iM Networks CEO Scott Smith. Akoo.com's Drakoulis plans to make this a key differentiator for its product. "We don't want to let people buy their way to the top. We're going to make this interactive for listeners: Before we designate a 'featured'station, the users are going to have to vote it as such."
Another essential issue for widespread adoption of Internet radios is ease of installation. For Leyden, this explains why most mainstream manufacturers are still on the sidelines. "Their forte is building boxes. Creating an Internet interface, becoming Internet service providers isn't really what they do," he notes. "If you buy a VCR, it snaps into almost any cable or TV connector. But with the Internet, there are various protocols-for example, DSL or ISDN."
Thus, 3Com's purchase of Kerbango last year makes sense given the technology giant's expertise in networking and broadband. A consumer craze for Internet radio would also help 3Com by driving broadband adoption. "3Com is a major broadband provider," says Kerbango's Gable. "When people try broadband, they love it. They can't go back. Broadband in the home is going to be a utility like cable and electricity".
Is the overall dotcom devaluation causing turmoil for these upstarts? Those competing in the Internet-radio-appliance space feel insulated from the imploding market. "When most dotcoms make a presentation to investors, all they have to offer is a Powerpoint presentation," says Leyden. "We put a box on the table. Also, unlike some dotcom concepts, venture capitalists find this easy to grasp. One of our 'angels' told us the acid test is explaining this at a cocktail party. When he says that he's funded a company that delivers Internet audio without a PC, people get it right away. The simplicity is very exciting."