Web Radio Goes Silent in Legal Crossfire

Broadcast stations suspend Webcasting while caught between union battle and copyright fights.

Frank Thorsberg, special to PCWorld.com

The Web editions of most radio stations have quietly gone off the air this month, thanks to a morass of disputes involving artist payments, royalties, and copyrights.

What primarily triggered the shutdowns is a problem with advertisers unwilling to cough up the extra money needed to satisfy the American Federation of Television and Radio Artists (AFTRA) contract. The union calls for special payments to creative talent in ads originally produced for terrestrial radio but also sent out over another medium, like television or the Internet. Most advertisers aren't ready to take the leap of faith to pay for Net radio ads that are streamed everywhere to anybody with a PC or laptop media player.

Another problem facing stations is a dispute with the Recording Industry Association of America (RIAA) over the amount of copyright fees paid by Webcasters. The two sides are far apart on the amount of the fees. The dispute goes to a copyright arbitration royalty panel at the Copyright Office on July 30. The RIAA is the same group that derailed Napster.

The Union's Still Fighting

The AFTRA contract dispute was the immediate cause for the radio silence. Clear Channel Communications, which owns more radio stations than anyone else in the country, shut down streams from all Clear Channel Internet Group (CCIG) radio station Web sites on April 10. Many other radio stations have since followed suit.

"It is our intention to put the streams back up when it makes legal and financial sense," says CCIG's Kevin Mayer, CCIG chief executive officer.

AFTRA defends its stance and points back at the advertisers themselves as the real culprits behind shutting down most of the radio station streaming activity across the country.

"When advertisers advised stations and companies like Clear Channel, Emmis Communications, and ABC/Disney about the contract, they made a business decision to stop streaming rather than to try to get permission from advertisers," says Mathis Dunn, AFTRA's assistant national executive director for commercials and nonbroadcast. "The reason they gave for stopping streaming was that the union was being the bad guy: 'Because of the fees the union is charging us, we are changing our streaming policy.'"

But AFTRA doesn't charge the broadcasters, Dunn points out. "Advertisers buy advertising time from broadcasters, and they are responsible for paying performers for usage of their product. If advertisers don't want their advertising streams, AFTRA doesn't address that."

Media Players Proliferate

The disputes are exploding at a time when Web radio is making headway. Nearly everybody with a PC has a media player on it. Jupiter Media Metrix reports that 99 percent of computer users have one or more of the most popular media players, which include RealNetworks' RealPlayer, Windows Media Player, QuickTime, Spinner Plus, and RadioWave.

Broadcasters, like progressive radio station KPIG-FM in Monterey, California, anticipated that popularity. KPIG-FM put its music on the Web several years ago to widen its reach beyond the geographic limitations of terrestrial radio broadcasting.

"[It's] because of the potential, where we see this thing going," says Bill Goldsmith, director of Web operations at KPIG. "We want to be there and be ready to capitalize when that happens. We want to continue to stay up toward the top of the heap as the heap continues to grow."

But so far, Web radio sings the same song as many dot-coms: Nobody has turned Webcasting of radio signals from an interesting sideline into a profitable revenue stream. And now, the AFTRA union demands and RIAA's copyright concerns are raising the stakes.

Making Space for Web Ads

While AFTRA negotiates with the advertisers, Web radio stations are exploring work-arounds. A primary one is to splice in targeted ads, designed for the Web, in place of the broadcast ads.

Hiwire is one of several firms developing software that inserts targeted ads into live or archived audio streams. The company gives its software away to radio stations in return for a share of future ad revenues. Hiwire then goes out to convince advertisers and advertising agencies to buy commercial time on those stations.

"If you can't replace ads that play on the Internet with ads targeted to out-of-town listeners, you are essentially giving away revenue," says Nikki Pope, Hiwire vice president of marketing.

Hiwire's competition comes from companies such as Surfer Network, Cool Link, and Lightning Cast.

CCIG is testing the Hiwire software on one of its stations to see if it should be deployed across the full network.

"We are also in the process of selecting and deploying technology that automatically inserts and removes commercial messages and making other changes that will ensure the financial and legal viability of the product," says CCIG's Mayer.