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Old 02-01-2005, 12:16 PM   #1
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Default Radio Stations Feeling the Heat

Radio feels the heat of high-tech competition
Sunday, January 30, 2005

By Adrian McCoy, Pittsburgh Post-Gazette

Question: What four-letter word won't get a radio station in trouble with the FCC, but is guaranteed to make radio executives cringe?

Answer: iPod.

Satellite and Net radio

For the unplugged who want to know how to tune in satellite and Internet radio, here are the basics in the form of two questions and answers:

How do I listen?
Listening to Internet broadcasts requires a computer with a sound card and software such as RealPlayer, iTunes or Windows Media Player -- which can often be downloaded for free. A high-speed connection is an advantage for better sound reception and quality, as are external speakers.
Many of the top Internet service providers, such as America Online, Lycos and MSN, now provide easy to access "radio" channels in many popular formats, along with specialty formats and music that don't find a place on the radio dial because of their smaller audiences.

How much will it cost?
Those who want to subscribe to satellite radio have two choices -- Sirius Satellite Radio and XM Satellite Radio. They require special receivers, which are sold as options in many new cars or are available as stand-alone devices that can work with a home sound system. Each offers 100-plus channels of music in many popular formats, plus news, information and entertainment channels.
The monthly subscription fees are $9.99 for XM, with discounts for multiyear contracts, and, for Sirius, $12.95 a month or a one-year subscription with one month free for $142.45.

-- Adrian McCoy

Devices like the iPod make downloaded music files portable, enabling anyone who owns one to create their own commercial-free music format and take it anywhere. Combine that with the growing satellite radio industry and the smorgasbord of music streaming over the Internet, and the competition for the hearts, minds and ears of radio listeners is becoming fierce.

Internet broadcasting, subscription satellite radio, downloaded music and mp3 players are all new ways for people to hear the music they like. They get digital quality sound, no commercials -- and with mp3 players, they can program their own play lists.

Many of the most popular satellite and Internet music channels are mirror images -- sans commercials -- of commercial radio formats. It would seem that listeners aren't embracing these new technologies for an alternative to commercial radio, but as a way to enjoy what has already been proven successful in mainstream radio.

Still, the fact that it comes with more music, better sound quality and fewer interruptions than commercial radio is its own selling point -- a point not lost on traditional broadcasters.

"We recognize that satellite radio is here," says Ron Davenport, president of Pittsburgh-based Sheridan Broadcasting's radio division. "But we also believe that if we put a compelling product on the air, we'll be just fine."

True. No one's sounding the death knell for commercial radio just yet.

But satellite radio is on the march, and the shadow it casts seems a little larger every day.

Personality parade

The list of top-rated former and current radio personalities who have inked deals with satellite networks gets longer each month.

Howard Stern will end his contract with Infinity next year and move to Sirius in January 2006. Others picked up by satellite include a spectrum from controversial shock jocks Opie and Anthony to respected former NPR "Morning Edition" anchor Bob Edwards, now on XM. G. Gordon Liddy and Dr. Laura Schlessinger will begin broadcasting on XM next month.

Also on satellite: Al Franken, Phil Hendrie, Art Bell, Sean Hannity, Glenn Beck and a host of well-known talkers.

Sirius Satellite Radio doesn't disclose listenership figures for its individual channels or its research methods for getting those statistics.

XM also doesn't disclose audience figures for individual channels. But among popular categories are its "Decades" channels, which play popular music from the '40s to the '90s, pop and country hits channels, comedy, and news channels like CNN and FOX News.

Both networks have seen substantial growth in subscribers in the past year. XM is the leader, with 3.2 million subscribers. Sirius has 1.4 million subscribers and is banking on Stern to bring a good chunk of his millions of listeners to the fold.

Speculation about a merger between the two satellite networks surfaced last week, when the New York Post reported that executives of both companies had met for discussions. But Sirius CEO Mel Karmazin and his XM counterpart, Hugh Panero, dismissed the report as "rumor," and industry analysts point to several factors -- including the need for regulatory approval and the two companies' use of different satellite technologies -- as obstacles.

A click or two away on the Internet, there is a virtual world music library catering to every imaginable taste through radio stations that stream their signals and Internet-only channels. Once used mainly for in-office listening, they're now an at-home entertainment option, as more people convert to high speed connections, which provide better quality web casts.

Some services let the listener co-program his or her station. For example, Yahoo's LAUNCHcast lets listeners customize the kinds of music they like. Never want to hear "Stairway to Heaven" or another particular song again? With the click of a mouse, you won't.

The top dogs in Internet broadcasting are going after the satellite audience with a similar product. MSN offers MSN Plus, with more station choices than the basic free service and with commercial-free music for $29.95 a year. LAUNCHcast offers a similar deal for $35.99 a year,

Maybe the clearest signal that online radio has become a contender is that Arbitron Inc. has been measuring radio and video broadcasts over the Internet since 1999.

In December, the company launched the comScore Arbitron Online Radio Ratings. The system gives potential advertisers the same statistics they look at when buying regular radio advertising spots.

In October, Arbitron estimated a weekly audience of 4.1 million people aged 12 and over tuning in to the three top Internet broadcasters that subscribe to the service -- America Online's AOL Radio Network, Yahoo's LAUNCHcast and Microsoft's MSN Radio. In November, the weekly audience for the three increased 5 percent to 4.2 million.

But satellite and Internet have a long way to go before they can compete with the audience numbers that commercial radio can sell advertisers.

It's not so much that these other media are stealing listeners from radio, but they are cutting into the time people spend with it. According to Arbitron surveys, the total number of people who listen to radio hasn't declined. But in 1993, people spent on the average 23 hours and 15 minutes a week listening to radio. As of spring 2004, that figure had declined to 19 hours and 45 minutes per week.

The counterattack

How is commercial radio reacting?

"There are more options than ever before. Radio shouldn't underestimate a new competitor," says Gene Romano, senior vice president of programming for Clear Channel, which owns six stations in Pittsburgh: WDVE-FM (102.5), WKST-FM (96.1), WXDX-FM (105.9), WWSW-FM (94.5), WPGB-FM (104.7) and WBGG-AM (970).

The corporate strategy at Clear Channel is to be "more entertaining, more interesting and more compelling to keep step with the ever-changing environment," Romano says.

Clear Channel stations made a concentrated effort to decrease the number of commercials per hour, which Romano says has led to a "substantial reduction." The number varies and is determined by individual station managers,

And there is an emphasis "on hiring -- and keeping -- great personalities, both local and syndicated," he says.

Satellite and Internet are missing the local connection portion of the equation, Romano says. "We develop that relationship with the listener. We can come to the aid of local flood victims. We can reflect the passion of Steeler fans. Satellite radio can't do that."

Davenport, whose Sheridan Broadcasting owns WAMO-FM (106.7), WJJJ-FM (107.1) and WAMO-AM (860), agrees that with convention comes advantage.

"Terrestrial radio has been around for a long time. Its mix of news, sports, traffic and personalities is what people tune in for, and it hasn't yet been duplicated in any of the other new media," Davenport says.

The iPod is more of a "concern," he believes. "Being able to hold almost unlimited songs gives listeners the ability to chose what they want to listen to for a fixed cost. With satellite, there's a monthly fee. There's the portability factor with the iPod."

Country music fans have lots of choices on the local dial: WDSY-FM and the Froggy stations -- WOGF-FM (104.3, WOGI-FM (98.3), WOGH-FM (103.5) and WOGG-FM (94.9). Frank Bell, vice president programming for Keymarket Communications, which owns the country "Froggy" stations, says those stations aren't changing their ways much in the face of new competition.

"Given the low number of sets in use and the fact that no satellite station has yet to generate enough listenership to show up in an Arbitron ratings report," Bell says, "it looks like their appeal is somewhere between Al Sharpton and Dennis Kucinich."

The Froggy stations have "always kept a lid" on the number of commercials, Bell says. "We feel that's good programming."

And he believes radio will always have an edge by being part of a community. "One of the first lessons I learned in radio is be local, be loved. That's the best way to reach an audience."

Another weapon in radio's arsenal against satellite is HD or digital radio, a technology that transmits digital audio and data along with AM and FM analog signals. The result: CD-quality sound with no static or hiss.

The biggest hurdle facing online radio is selling it to potential advertisers, says Ken Dardis of the Cleveland-based research firm Audio Graphics Inc. "Media buyers are resistant" to advertising on Net channels because they look at the percentage of total listeners tuning in to a given station. With that part of the equation missing, it's a tough sell.

Audio Graphics has taken another approach, selling advertisers not on the quantity, but on the quality of Internet listeners. For potential Web cast advertisers, it's more about psychographics than demographics. The company has numerous studies that show online listeners to be an appealing group -- young and on the higher end of the income scale.

"They're the most affluent and highly educated of the lot," Dardis says. "That's how online radio needs to make its mark."

While satellite audiences are growing, radio executives are watching to see how many stick with it after a few months or so. Both Sirius and XM have yet to make a profit, and the next few years will be critical in the future of the fledgling industry.

Still, the new kids on the block clearly have radio broadcasters worried. As Clear Channel's Romano says, "Satellite is a competitive threat. We have our work cut out for us."
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Old 02-01-2005, 12:52 PM   #2
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