Radio Silence: Streaming technology companies big winners in AFTRA online radio dispute

Internet.com (May 3, 2001)

Loyal online listeners clicking on the “listen live” link on the web site of New York’s WABC in the past few weeks have been greeted by this notice: “We are very sorry you can’t listen to WABC right now. WABC has temporarily removed our audio stream.”

The news-talk giant, which regularly drew some of the largest audiences on the Internet, is one of hundreds of stations across the country that have pulled the online plug. At issue is a demand from the union representing actors that they receive a royalty for each radio spot that is streamed online.

If terrestrial broadcasters are, at least for the moment, the losers in the dispute, the other half of the station’s notice to listeners makes clear who the winners may be: “WABC and all of the ABC stations are implementing major (and expensive) technological solutions in order to be compliant with the Digital Millennium Copyright Act and we do intend to be back on air as soon as feasibly and commercially possible.”

That’s music to the ears of the companies that build those (expensive) technological solutions.

“I think it’s great,” Tom DesJardines, chief technology officer of Lightningcast, says of the dispute. He would. His company specializes in the advertising insertion technology that allows stations to substitute online Internet-only ads for spots carried in the terrestrial feed. The dispute, he says, “just creates more demand for what we do.”

For several years, companies like Lightningcast have hustled to convince radio stations there was money to be made online and that they could help them make it. The dispute with the actor’s union, AFTRA, they believe, provides them with a new window of opportunity.

“The short term media boost is great for the ad insertion folks because it highlights what the technology does in a real world environment,” says Wayne Hickey, a spokesman for Hiwire, which markets just such a system. “Initially we were talking about helping broadcasters generate revenue online. Now we say there’s a more immediate use: Stripping out ads not in compliance and inserting those that are.”

But not everyone is convinced.

“Everyone knows there’s value in the Internet, but no one understands how to get it yet,” says Tim McCarthy, Vice President and General Manager of WABC Radio, who is currently evaluating his entire Internet strategy. “Nobody’s making money at this, and the solutions [to the latest dispute] just look like they’re going to cost us more.”

“They are all claiming it is very simple and they’ve got people deployed today that are using this stuff,” says Bill Piwonka, vice president of marketing for MeasureCast, which compiles weekly Internet radio ratings. “I think I would characterize it differently: What has been a thin margin business just got thinner.”

The AFTRA dispute came on the heels of demands for online royalties from the music industry — all as radio stations scramble to cope with plummeting advertising revenues.

“This is like a big NASCAR race that’s in the first 50 laps and we’re just gotten the second caution flag,” says Tom Taylor, editor of the M Street Daily, a radio industry newsletter. “For many broadcasters, it was reason to look again at their Internet strategy and say, ‘We’re not making any money and we’re subject to these financial penalties, let’s pull back into the pits and wait this one out.'”

While deep-pocketed ABC is taking the plunge into ad insertion, not every broadcaster thinks the time is right.

Susquehanna’s Merge933.net in Dallas was one of the first stations that set out to blur the line between radio and the web. It would be natural that the pioneer would dive headfirst into cutting edge technology solutions to maximize its online revenue potential in the face of the dispute. So what is it doing?

“We put together a tape of promos that we run online during commercials,” explains Dan Bennett, Susquehanna’s vice president and market manager for Dallas. “It isn’t like clients are mad because their ads aren’t on the Internet.”

In fact, while radio and web programming may be “merged” at the Dallas rocker, Internet exposure isn’t even part of the sales equation.

“Most clients realize that what they’re buying first and foremost is radio. The net was really just a little added ingredient that came with it. We don’t put it in any of our sales presentations,” he says.

Ad insertion executives say the AFTRA dispute offers broadcasters the opportunity to refocus on generating online revenues. Bennett, who oversees four major market stations, doesn’t see it that way.

“That’s probably wishful thinking at this point. It may be true at some point down the road, but today there’s not going to be that kind of demand,” he observes.

Bill Piwonka, vice president of marketing for MeasureCast, which compiles weekly Internet radio ratings, argues that such thinking is missing the point.

“Many of these broadcasters had not deployed ad insertion up until now, so they may or may not have had the ability to go out and sell the value of their stream,” he argues.

“Sure they could say to their local advertisers, ‘By the way, we stream and our Internet listeners will hear it,’ but now they have the possibility to sell two ad avails: the terrestrial side and the Internet side. It’s different demographics,” Piwonka adds.

Those demographics are skewed heavily toward affluent college educated males, many of whom are streaming in office settings previously out of reach.

Like national radio sales rep firms, the insertion companies sell ad space on a national basis on behalf of the stations they stream.

“The broadcasters don’t have to worry about the sales end of it,” says Hickey of Hiwire, which claims nine million listeners across its stream of hundreds of stations. “We’re delivering local advertising where you want it, but you don’t have to go to those individual stations and say, ‘I want to buy KTLA.'”

But while terrestrial broadcasters debate their next step online, one group has already benefited from the silence in the stream: Web-only broadcasters.

After an initial dip in online listening as stations began to pull the plug, Measurecast reports a 35 percent increase in total hours streamed since January. Where terrestrial broadcasters like WABC once topped the charts, more than half of the top 25 stations on last week’s list were Internet-only stations.

That, says Taylor of M Street Daily, could mean that by pulling back, broadcasters are creating a vacuum the competition may quickly fill.

“The numbers indicate that although very small, the online listening audience is growing and if it can’t listen to WABC, it will find others to which it <I>can</I> listen.”

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