Internet Radio vs. Terrestrial: Round One

It’s a hot afternoon. You settle into your car after a long day at work, burning your hand on the seatbelt buckle. What’s your next step? Reach for the radio.

Ask yourself why next time. Chances are, the station is overrun with trite advertisements and the song rotation you’ve heard ten too many times before.

It’s no wonder Internet radio is booming. Why succumb to Top 40 hits when you can play music you (gasp) actually enjoy?

According to the New York Times, Bridge Ratings reports 55 million Americans listen to Internet radio each week. This number has jumped 26 percent since last year. Terrestrial radio claims 279 million listeners.

There’s no question that Internet radio is on the rise. So of course the music biz’s next step is to make broadcasters their latest revenue source.

The NYT reports:

“Under a new deal that has been in effect since 2003 Webcasters with annual revenues of less than $1.25 million pay 10 percent of their revenues or 7 percent of expenses to satisfy copyright laws. Larger radio portals like the ones operated by Yahoo and AOL have to pay per song.”

The fiscal future for Webcasters looks bleak. The Copyright Royalty Board has allowed SoundExchange to charge all Webcasters per-song rather than per percentage. The NYT reports that playing a single song will cost $.0019 by 2010. Right now, Webcasters pay $.0008.

Another dilemma is server space. Server space is sold in slots and one slot means one listener. The NYT story said slots can cost anywhere from 50 cents to $3.75 per month.

Depending on the number of listeners, an Internet radio station can be expensive to maintain. A Webcaster can ask his listeners for donations, but doesn’t that defeat the purpose of free radio? Essentially, you don’t have to pay to listen to the radio you get in your car. Not that many would want to.

The executive director of Sound Exchange might disagree. His name is John Simson and he says Internet radio is causing many artists to lose money.

Simson told the NYT:

“Our research shows that there is scant evidence they are getting people to buy music,” he said. “If our artists aren’t making money from CD sales, we think they should make money from those listens.”

That’s not fair. Just because the Internet allows us to finally listen to radio that caters to our taste doesn’t mean we should have to pay for it. Internet radio is streaming, so listeners aren’t saving the songs to their libraries. We shouldn’t have to pay for music we can’t keep.

Traditional radio is paid for by advertisers so it’s free for listeners. Some listeners might prefer Internet radio because the music is better. So perhaps a more important question is what does the free-nature of terrestrial radio say about its quality?

Like I said, Internet radio is booming. There’s your answer.