If the revenue stream were flowing freely, radio station owners contend, more Internet streaming might have continued through the current crisis.
Because of potential liability under a contract between advertisers, agencies and the American Federation of Television and Radio Artists—which requires additional fees when commercials made for radio get Internet play—ad agencies began to notify stations that many of their ads were not authorized for Net use. Some stations have moved, and are moving, toward ad-insertion technology that will allow them to put other ads, public service announcements or promos in the space given to unauthorized ads.
But in addition, a dispute between broadcasters and the recording industry over copyright royalties charged to record companies when music is streamed over the Internet has diminished enthusiasm among broadcasters for streaming.
BRS Media, which tracks radio Webcasters, says the number of radio stations offering their programming over the Internet has grown from 56 to more than 5,000 in only five years. But an estimated 500 radio stations—including hundreds owned by Clear Channel, ABC Radio, Emmis and Bonneville—have reversed course and taken their radio programs off the Internet.
The controversy has been a boon to Internet-only broadcasters, according to Web-reporting service MeasureCast, with two- and three-digit percentage increases in total time spent listening for some net-only services, compared with a decline of 38% for terrestrial stations' efforts.
"This was a corporate decision," Kevin Mayer, CEO of. Clear Channel Internet Group, said when Clear Channel stopped its streaming last month. "It is our intention to put the streams back up when it makes legal and financial sense." Like other groups, Clear Channel said it is looking into commercial-insertion technology "and making other changes that will insure the financial and legal viability of the product."
Mathis Dunn Jr., assistant national executive director for AFTRA, said last week there has been no movement toward modifying its contractual relationship with advertisers. "The parties believed at the time, and still do, that the settlement agreement is one that works for advertisers," although he acknowledged that advertisers have determined there is no value in certain radio advertising being streamed.
Referring to the practice of streaming an entire broadcast, including commercials, over the Internet without the advance consent of advertisers or agencies, the Association of National Advertisers told its members, "In order to lessen the potential for claims for talent payments as a result of passive streaming ... The JPC recommends that media contracts contain a provision that limits a station's authority to stream commercials on the Internet to situations in which the advertiser or agency has provided written authorization."
"It's not in anybody's interest to kill this," said Emmis Chairman Jeff Smulyan, who stopped streaming at 15 of his radio stations when the controversy surfaced. "The problem is that we don't have a business model yet. Everyone wants to tack on fees, AFTRA fees, licensing ...They're demanding fees for a business that's not generating any revenues."
Emmis expects to work out its streaming problems this year through its involvement with the Local Media Internet Venture, in which Emmis, Bonneville, Corus Entertainment, Entercom Communications and Jefferson Pilot will use Real Broadcast Network's streaming technology on their nearly 200 stations.
Emmis said it has received "very few complaints" about the absence of streaming. But, the issue will get resolved, Smulyan noted. "Both advertisers and RIAA will realize that it won't accomplish anything for members if they don't have the business."
Eventually, he predicted, the Internet audience will be quantified into an advertising rate. But the current AFTRA fee "is so far out of whack with fundamental economics." Comparing it to the issues in the recent TV-writers' labor dispute, he said, "they were dealing with ancillary revenue streams 20 years after they developed. Give us five years. At least we'll have a business model."
"Six-hundred-and-sixty dollars is a reasonable fee" for the Internet differential, countered AFTRA's Dunn. A total of $880 buys the rights to that work for 13 weeks of broadcast and cable use, and one year on the Internet. There have been no negotiated minimums, he noted, regarding commercials made expressly for the Internet. AFTRA plans to gather information on such advertising for three years. "We would prefer not to kill the Internet business," he said.
Tired of the perception that it was AFTRA that brought down radio streaming, AFTRA pointed out: "The larger requirements placed on Webcasters are those required by the Digital Millennium Copyright Act (DMCA), which Congress passed in 1998.
Washington lawyer Ira Shepard, chief negotiator for advertisers and the ad agencies in the talent negotiations, said: "Many radio stations were streaming broadcasts without the prior authorization of anybody. We issued a bulletin to the industry saying that the broadcasters were streaming the entire broadcast and the talent unions were claiming their payment. We advised our constituency that where they to authorize streaming, they would have to pay the talent. If they don't have the authority to stream commercials, they shouldn't do it.
"Right now, because of the infancy of the medium, it is hard to grasp what the appropriate rates are," Shepard noted. "Therefore, at present, the advertisers to not value it highly. I think they recognize that it will be a valuable medium in the future."
The imposition of rates in practice might be a bit premature, he acknowledged, because the value for advertisers is not as quantifiable as in other media, and advertisers "are hard-pressed to come up with a number to pay for it."
The 29 stations owned by Susquehanna were all continuing to stream as of last week.
"We have built what we believe is a valuable audience," said Dan Halyburton, senior vice president for operations. "We came up with an immediate plan to block ads at their source so that they don't reach the audience. We cut them out of the stream." Because Susquehanna was working with a digital system, Halyburton continued, "our engineering and information technology people were able to move quickly."
The controversy, he added, "has put a significant burden on radio. I'd like to see more discussion between ad agencies and clients about the potential value of streaming radio over the Internet and the potential loss of listenership.
Not everyone wants the streaming to continue. "I think the issue's dead," said Jerry Lee, CEO and president of WBEB(FM) Philadelphia. It's a combination of RIAA and AFTRA—we're going to have to pay a lot more. Why would we do that?"
Lee said his station has coordinated its radio ads with its Web site. "We post the name of every song that's playing, and we have an icon for every advertiser [on the site]. If you insert other commercials, you just confuse the audience. We do a lot with advertisers; we reflect what's on the air. Listeners click on the screen and get offers from the advertisers. That's where the value is. I have a faithful listener in Korea. What's that worth? Nothing."