Web radio hears its master's voice

Not long ago, internet radio stations were gearing up to take advantage of a fast-growing market, as surfers sought to liven up the relatively silent online environment.

But, it hasn’t quite turned out like that. Over the past six months, almost all of the UK’s big new internet radio ventures have either closed down or scaled back their plans. Chrysalis closed Puremix after just three months, while Bruno Brookes’ StormLive replaced its big-name DJs with an automated system. Capital Interactive is reported to have pulled plans to put heavyweight promotion behind its kikido.com online radio brand.

So, is there a future for internet radio – and, if so, what works and what doesn’t? Six months ago RadioRevolution rewrote its own business plan to launch itself as a business-to-business (B2B) proposition rather than a consumer radio portal. Eugene Perera, chief executive of RadioRevolution, believes the UK market will currently only sustain B2B propositions, or existing radio broadcasters that simulcast through websites. Capital’s Capital FM and xfm, as well as BBC Radios 1 to 5 and the World Service, are all simulcast online, for example.

Perera observes: ‘I think the mistake that both Puremix and StormLive made was to treat internet radio in the same way as broadcast. You can’t view it in the same way as the traditional broadcast model – the number of listeners is restricted by a number of factors and, if you were able to get [as many listeners as broadcast], the streaming costs would be astronomical. [At present], standalone internet radio propositions directed at consumers are not really viable and, if you haven’t got a huge number of listeners, you’re not going to make revenues.’

While existing broadcasters might benefit from some additional advertising revenues by offering internet-only ad packages – as Virgin Radio does, for example – the revenues aren’t sufficient to support standalone mass-market internet radio, says Perera.

At the record label BMG, head of new media Jon Davies observes: ‘They’re hit by the same problems as all consumer-facing dot.com business models – they’re struggling to find the revenues and, from the investor point of view, there isn’t the appetite to support [them].’

The solution for RadioRevolution has been to become a provider of ‘sonic branding’ to clients, such as the clubbing site, Applebelly, for which it has developed Applebelly FM. Perera says: ‘Our strategy is to work with existing brands to provide an incremental service…that will provide added value.’

But at NetFM, which launched in February and is aimed at an audience of 25–34-year-old ABC1 males, chief executive Richard Jacobs believes that there is a market for consumer-facing internet radio despite the cutbacks, so long as the content matches the potential of the medium and audience.

Jacobs says: ‘They failed because they’re not internet radio…Internet radio has to be about combining the audio with the best features of the web – interactivity, clickthroughs, the idea that you go from one place to the next. There isn’t an audience on the internet if you’re purely audio, because then you’re competing with [broadcast] radio, which is fantastic in the UK.’

NetFM listeners can click on links to artist sites, for example, or go to Amazon to buy the track that is playing. To advertisers, NetFM offers onscreen sponsorship and advertorial and, crucially, takes advantage of the fact that internet radio presenters – unlike their broadcast counterparts – are not barred from endorsing products and services. Every 20 minutes in its ‘webwatch’ slot, one of the station’s key revenue streams, NetFM presenters talk up offers on advertiser’s websites.

Nevertheless, Perera remains doubtful as to broader potential for consumer-facing internet radio propositions at present. He says: ‘It’s conceivable that at some point in the future, when there is widespread unmetered access and broadband, that we would look at traditional business models again.’