A Case Study In Managed Growth:
Digitally Imported Radio

Digitally Imported Radio (www.di.fm), a hip Internet radio station specializing in European techno and trance, is just one of thousands of small, niche Webcasters across the country. Today, music fans can tune in to any type of Web station, from Beethoven.com and AccuBroadway to Radio Margaritaville (for Jimmy Buffet and friends) and Live 365.com, the self-proclaimed world’s largest network of independently produced audio content.

Internet radio is enormously popular (USA Today reported earlier this year that research firm GartnerG2 estimates that 16 percent of adults who use the Internet at work and at home tune into online radio). However, for fledging stations their business is precarious at best. Many of them, including Digitally Imported Radio, rely almost entirely on listener donations to cover their operating expenses. And making things more complicated is a recent decision by the U.S. Copyright Office to establish a royalty fee payable to record companies, a direct result of the 1998 Digital Millennium Copyright Act. If upheld, retroactive payments to 1998 are due in October 2002, with regular royalties kicking in November 1. Many experts predict these fees will mean the end for thousands of smaller stations that don’t have the advertising revenue or listener donations to support them.

Clearly most station managers are not in Internet radio for the money, and keeping their sites running, much less expanding their operations, is a constant challenge. Despite the obstacles facing smaller stations, however, some of them continue to prosper. Digitally Imported Radio is one that has developed an impressive following despite its limited technology resources. "Our mix of European techno and trance tunes has cultivated a large loyal fan base, and getting celebrities like German star DJ Dean to spin for us has done wonders for our reputation," says founder Ari Shohat.

To capitalize on the popularity of Dean, Digitally Imported Radio wanted to add live video streaming events to its Web site so fans could watch Dean mix it up. The problem? The young company had only two Microsoft streaming servers in New York. Pulling off global, high-quality video and audio broadcasts would require more network power. But Digitally Imported Radio was reluctant to invest in expensive servers that would sit idle between events.