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Internet riding to radio's rescue

December 6, 2008

By Valerie Block, Crain's New York Business

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Internet riding to radio's rescue

 

    

At the same time, the company announced a deal to "power" Yahoo Launchcast, a popular online radio site, and to take over ad sales. Cha-ching!

"Life is good," says David Goodman, president of digital media for CBS Radio.

So can the Internet save radio, even as it kills off just about every other traditional media business?

"Yes," says industry consultant Robert Unmacht, who's generally a fairly cynical guy. "That's the way it's all going."

In contrast to other media, radio has created many of its own problems, he says. After years of consolidation, overleveraged radio operators are in real trouble. Industry insiders expect a shakeout.

But well-managed stations continue to make gobs of money, and audience levels remain constant, despite the advent of iPods and satellite radio.

"The reality is, the profit margins were so incredibly high that now that they're back to normal, people feel like radio is dead as a doornail," says Ken Dashow, a DJ for Clear Channel's classic rock station WAXQ-FM.

He insists that it is not, though he acknowledges that the Internet is the industry's only hope for growth.

CBS Radio has become the unlikely leader in the space. While its terrestrial business takes a beating—operating income plunged 19% for the first nine months of this year, to $420 million—CBS Radio's Internet operation is on the march.

Its audience has skyrocketed since the radio company hooked up with AOL Radio in March, in a deal similar to the one it announced with Yahoo. CBS Radio reached 2.2 million individual listeners online per week in September, according to comScore.

Launchcast will add more than 1 million come February, when CBS's radio player is embedded on the site and stations like WFAN-AM get placement on high-traffic channels like Yahoo Sports.

Mr. Goodman says that his digital media group has racked up double-digit revenue increases so far this year, though the company does not break out the numbers. He adds that since CBS has lots of talk stations, it is less affected than pure-play online operators by music royalty payments.

"We've built killer technology with terrific programming tools, which gives us the ability to monetize Internet radio," Mr. Goodman says.

Of course, for Internet radio to really take off, the technology has to get into cars, and that could take a decade. Chrysler is working on it, but the auto manufacturer has bigger worries right now—like survival.

Today, selling radio ads on the Internet accounts for a tiny fraction of the $12.6 billion that terrestrial radio brought in for the first nine months of the year, according to the Radio Advertising Bureau.

That fraction is growing, though. Off-air revenues are expected to hit nearly $2 billion this year, RAB says—a year ahead of projections.

Mr. Dashow says radio will survive the technology transition.

"When that car five or 10 years from now has an Internet radio, people will put on Q1043.com," he says. "And they'll be turning it on for same reason: I'm their friend for the ride home."

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