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They Might Be Giants
Can indie Web broadcasters make it in the cutthroat world of big-time radio?
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Business New Haven
12/9/2002
By: Mimi Houston
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For just about a year now, folks walking down College Street in downtown New Haven pass the familiar Palace Performing Arts Center only to find themselves face-to-face with an unusual storefront that may make them pause for a moment.
What they're seeing is a live broadcast of one of the millennium's newest offerings: Internet radio. To those who think the immortal computer should offer us more than a more effective way to do our jobs, this may be just the fun they've been looking for.
"We have all the things you hear on a traditional radio station," explains Randy Borovsky, founder and president of CT UltraRadio.com and a 20-plus year veteran of the traditional radio camp. "And it sounds really good."
So good in fact, that Internet radio is a fast-growing industry that pulls in hundreds of thousands of listeners, some with very focused target markets. Like classical music? Tune in to Beethoven.com. Is jazz your thing? Log on to Jazz.com. Sports? Get online with ESPN.Radio.com.
Arbitron Inc., the international media and marketing research firm based in New York, uses its MeasureCast Ratings system to keep track of this newest media outlet. Most recent numbers, from November 21 of this year, indicate the Internet radio station Clear Channel World Wide as the top draw, pulling in more than 350,000 listeners and boasting 1,516,061 hours of total listening time. Like most of the 3,000-plus Internet radio stations, Comcast (also the nation's largest broadcast radio conglomerate, owning some 1,200 over-the-air radio stations) has enjoyed a boom in listenership.
And it's growing - fast. Arbitron reports a rise in total time spent listening to Internet radio since January of this year by 172 percent. These numbers are music to Borovsky's ears.
Internet radio's concept is almost self-explanatory - especially to those who make a habit of surfing the Web and stopping at favorite bookmark. But it is so much more.
Yes, it's listening to the radio on your computer while you're on the Web. But now, while listening - to rock's greatest hits of the last 40 years with a focus on the current favorites - the song's title, composer and musician are on display. So is a place for you to rate the song, which allows the station to keep up-to-the-minute tabs on what their listeners like to hear.
"Our listeners can rate every song," Borovsky explains. "We can see how the entire audience rated them. Our music is very much directed by the listeners."
Borovsky says UltraRadio.com's listeners log on most frequently while at work. Peak hours for the station are weekdays during the day, as opposed to the commuter "drive" times and weekend listening hours traditional radio banks on.
The type and amount of information the station carries is also highly listener-focused. Need the latest concert schedule? Weather? Local happenings? Yes, the disc jockeys at UltraRadio.com have all that information and more, but you don't have to listen to the particulars. If you want to know more - you know what to do.
"When our deejays need to do the weather, you might hear something like 'It's gonna be sunny today; for more information, click on weather,'" Borovsky explains.
Another quality of UltraRadio.com that makes it unique is the open environment of the station. People walking by are welcome - even encouraged - to step into the studio and become part of the show. Fans seem to love the informal, spontaneous structure that keeps them always wondering what will happen next.
"The traditional radio deejay sits in a room away from the public," Borovsky says. "Our deejays have a lot more visibility," says Borovsky. "There are people passing by all day long. It adds energy to them. There is a lot more to do here, including interaction with the public."
Borovsky says this adds up to more work for staffers, but he hears no one complaining. In fact, one fan is so devoted to the station that he has become a volunteer deejay, doing a four-hour shift every weekend so it doesn't interfere with his day job.
Borovsky says UltraRadio.com fans find all this attractive, but the benefits of a local Internet station go far beyond the immediately obvious. He says he came up with the idea of beginning his own station after a time of growing discontent with traditional radio's current climate, something he calls the "McDonaldization" of radio.
"Just like you can get the same hamburger and french fries no matter which McDonald's you're in across the country," says Borovsky, "you're now listening to the same radio station, no matter where you are."
Borovsky explains that recent laws in radio station ownership have changed. At one time there was a limit to how many stations one could buy. But in today's more liberal times, conglomerates such as Clear Channel (which locally owns WELI-AM and sister station WKCI-FM) now own up to 1,200 stations across the country. This all adds up to more shareholders to answer to, safer, more predictable airplay, and a noticeable de-personalization of your favorite place on the traditional FM dial.
"There is an awful lot of pre-programming in radio now," says Borovsky. "A lot of the disc jockeys you hear are not there, live. It's all pre-recorded earlier and then played back on the computer."
All that may signal is a slow death to some of radio fans' most cherished perks. Most noticeable right away are the longer and more frequent commercial breaks to feed the bottom line. Plus, no more dialing in to request your favorite song and no local presence at the mall on a Saturday morning. The deejay you are listening to in Branford could be the same one fans are hearing in Seattle.
Borovsky says there are clever ways to hide the growing changes on your favorite station, but it might take a while for you to notice them.
"People might notice that contest prizes are getting bigger," he cites. "They now can be up to $25,000 a day. But they don't tell you it's running on 1,200 stations. That means your chances of winning are reduced by at least 1,000 times."
Borovsky cites all these changes as road signs that led him down the path to Internet radio ownership.
"I saw that technology could make radio better at a time when listeners were finding more dissatisfaction with their favorite traditional radio stations," he explains.
Since there is no more room on the bandwidth in most markets to create a new traditional FM station, and the current market price to buy an existing one now exceeds $15 million, Borovsky had to find a new way to bring the good old days of radio back, only with a twist - and that might make all the difference.
"This is the next revolution," he reveals. "There are Internet-only radio stations with a program niche that's not been filled, like jazz or classical, but they've been done with a national scope."
Borovsky points to the one major problem that continues to haunt these radio stations - the advertising dilemma. And speaking from the down-to-brass-tacks business end of it all, it's advertising dollars that keep every radio station - whether on the band or on the net - spinning the songs.
"The national [online] stations are stuck," he explains. "The audience is still too small for national advertisers and too spread out for local advertisers."
Borovsky says his station is unique in the sense that it is a local station relying on local advertising to keep it going.
"There are very few stations in the country doing that today: maybe ten or less. But it's evolving as the way we'll keep Internet radio alive."
If many listeners haven't yet discovered Web radio, the broadcast establishment certainly has. And the companies that dominate the industry have not been shy in counterattacking what they view as a threat to the historic alliance between record companies and broadcasters.
"Traditional radio gets a lot of attention from record producers," Borovsky says. "We're so new and different that record labels are not dealing with Internet radio. We don't break new artists. Instead, we use that time to break local rock bands."
On the business side of the radio business, copyright royalty fees must be paid to composers and performers in order to play their songs. Borovsky says it is this fee that very nearly put all Internet stations across the company out of business before they even got a chance to get off the ground.
"We have to pay fees to BMI [Broadcast Music Inc.]," Borovsky explains, "the copyright company that all radio stations pay for the right to play music. These fees go to the composers and performers. That's one way they make their money. The fee structure was set as a flat rate. You pay so much for each listener for each song. And they were to be retroactive for four years."
On the tiny financial playing field that is online radio, that fee represents an exorbitant amount - one that no Internet station could likely have borne. But a recent law enacted by Congress has changed the fee.
Now Internet stations have the option of paying a percentage of their revenues. All of this means that UltraRadio.com may not only survive, but get a chance to show a profit - something Borovsky is banking may happen sooner, not later.
Borovsky says Internet radio generally is not, as yet, profitable. Even the biggest stations are not making money, he says. But the sturdiest of these have the luxury of investors funding operations to see it through for a while before the profits come in.
UltraRadio.com has no big investors, says Borovsky. But he's hopeful his station may not need them.
"It looks like December is going to bring us a profit," he says. "We're almost there and I think we're going to do it. If we do, we'll be one of the first Internet stations in the country that will be profitable so soon."
The advertisers that UltraRadio.com so heavily depends on - ranging from area restaurants and nightclubs to major corporations like SNET-SBC and Comcast Cable, and even the U.S. Air Force - are apparently happy enough with advertising results to have driven the station's third-quarter revenues northward by 300 percent over the previous quarter.
"A large portion of our advertisers are renewals," Borovsky says. "Our rates are much less than traditional radio rates. Our audience is smaller - that's true - but it's priced proportionately."
And UltraRadio.com's audience is - in some cases - an advertiser's dream.
"Our research says our listeners are upscale, well-educated, affluent and more likely to buy online," Borovsky boasts.
He explains that listeners are asked to fill in a demographic information sheet posted on his site when they visit, one that doesn't demand information that's too personal, but will give him a basic profile of who is listening. Listeners fill it out and register as "official" fans, eligible to win prizes such as a happy hour for their entire office crew. And Borovksy can provide his advertisers with crucial information about the listening audience. Then there is that button marked "E-mail this site to a friend."
Borovsky asserts that in these lean times, advertisers can stretch their dollars more by using his Internet-only station to buy the air time that will get their businesses prime exposure. Because the rates are cheaper, they can run more frequent ads - a technique that is mandatory in radio to promote listener familiarity, and one that traditionally demands spending thousands of dollars - for a much more cost-effective rate. And because each advertiser's Web site is linked to the UltraRadio.com site, the ads themselves are spared the particulars that tend to tune listeners right out.
"We don't have to include any of the details that bring the commercials down," explains Borovsky. "We're able to write shorter, more motivating commercials. We don't have to repeat 'That number again is…' three times. And yes, our audience is smaller, but our commercials are affordable, so local businesses can get the repetition they need. On traditional radio - for smaller businesses especially - they just can't afford that."
Commercials are shorter, and so are commercial breaks - another key difference that seems to make UltraRadio.com fans happy.
"Our commercial breaks are 90 seconds or less," says Borovsky, "compared to six- to 18-minutes [hourly] of commercials on traditional radio stations. That means there's no listener tune-out. The listeners like it, and the advertisers like it."
But Borovsky acknowledges that even with all these perks, some local companies aren't jumping in on the deal, at least not yet. The economy's soft state forces many marketing directors into a better-safe-than-sorry state of mind.
"Our timing has been tough," he admits. "The advertising market has been very soft, and a lot of businesses, if they do cut back on their advertising, will cut back to the traditional things. They'll stay with that direct mail piece that they know brings in X amount of returns instead of trying something new."
But those that have jumped in have taken the station to its next phase.
Borovsky says that UltraRadio.com is poised to take on its first round of equity investment. He says interest in investing has been brewing among fans of the station for months now, but it's only recently that the economic climate of the station has made this possible.
"We're talking about maybe ten to 15 investors who will have equity in the station, and they're coming in on the ground floor," Borovsky reveals. "Our listeners are people who have the money to do this, and they also appreciate and see the future of this technology - because they're [listeners] right now."
And many of those listeners are devoted fans that have made the station a part of their lives. Of course, not all fans - and recent UltraRadio.com studies have counted more than 14,000 of them - are volunteer deejays, but many have had their lives changed because of the station. People have met significant others at UltraRadio.com-hosted weekly happy hours after first meeting them in the station's chat room. And they've made it a point to include UltraRadio.com in their daily lives.
"The listeners love us," laughs Borovsky. "They send us e-mails all the time saying, 'You guys are great - you're our favorite radio station. We have one guy who hosts a weekly poker party, and he posts it on our site."
In fact, it's these devoted listeners who are most effective at spreading the word about UltraRadio.com. Borovsky says his audience grows mainly by word of mouth. And he wants to keep the word moving - not only from the fans - but from local rock bands as well. UltraRadio.com has become an important venue for these local bands to get actual radio airplay.
"We currently play about 30 local Connecticut rock bands," says Borovsky. "We feature about one song per hour or every other hour. The bands really want the airplay, and they promote us at their shows and on their Web sites. And they'll come out and play for us at events. Sometimes they come into the studio and play live."
Borovsky clearly enjoys the eclectic, exciting atmosphere of his dream-of-a-better-radio-station-come-true. And he is rewarded by meeting the fans that have made his station the success it is today.
"It's very satisfying," he allows, "to actually see the listeners. To go to the events and see how this has really touched their lives."
But he's also the first to admit that UltraRadio.com has a long way to go in terms of its evolution.
"Our goal is to be as big - or bigger - than the FMs," he smiles. Don't be surprised if it happens sooner than later.
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