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Is Internet radio a threat to broadcast radio?

Internet radio isn't just for computer geeks anymore. It's showing up in mobile phones, table radios, car stereos, A/V receivers, TV sets and Blu-ray players. With roughly 50 million subscribers, Pandora® is a runaway hit. While some Internet radio fans may not have been listening to much broadcast radio, and others are listening to broadcast stations online, it's safe to say that Internet radio has siphoned off a portion of the broadcast radio audience.

So how concerned should broadcasters and their fans be about the future of AM/FM radio?

Not too much, according to a web column by Bob Struble, President and CEO of iBiquity Digital, the company that developed HD Radio technology.

"Internet radio cannot and will not replace over-the-air broadcast radio," Struble says. "New and tough competition for stations: absolutely. A listening time and ad dollar share stealer: for sure. Armageddon for AM/FM: most definitely not."

Struble argues that the economics of Internet bandwidth limit the growth potential of Internet radio. In other words, the as the Internet radio audience expands, the cost of serving it grows and the quality of the listener experience suffers. ut this is not one of them.

"An AM/FM radio station can support an infinite number of users within its coverage area ... The broadcast cost is basically fixed and relatively low, and there is no incremental cost to add listeners. 

... Internet radio, on the other hand, relies on a one-to-one architecture. Indeed, this is the strength of the service. Listeners can grab stations from anywhere around the world to cater to their unique tastes, or with service like Last.fm or Pandora, serve as their own program director, utilizing some pretty great software to customize a playlist to their individual preferences. These are very powerful concepts which are rightly and quickly gaining traction. This specific targeting and verification will also be attractive to advertisers, like other online services. But this one-to-one architecture leads to some pretty tough economics. Each user requires a unique network connection. That means each listener brings incremental costs in the form of additional servers and network access costs. More listeners may not necessarily be a good thing."

Each additional listener requires an additional slice of bandwidth (unlike broadcast where added listeners require no more spectrum). Bandwidth is scarce, and streaming audio (or video) is bandwidth hungry, so mass market listening, certainly in mobile environments, is hard to envision."

Shortly after I read Struble's essay, I logged onto You Tube to upload a couple of videos. You Tube was extremely slow to load, and I began to wonder if their service or my Internet connection had gone down. The time was 11 a.m. Eastern Time on Friday, February 19 - the same time Tiger Woods addressed reporters for the first time since his big troubles began. You Tube was offering a live feed of the Woods event, and it dawned on me that the page-load delay I experienced had something to do with the size of the audience on You Tube at that moment.

Will success spoil Internet radio?
My take is that computer-savvy early adopters understand the bandwidth issues and are willing to tolerate occasional hiccups in order to enjoy the variety of content and the personalization available with Internet radio. Will late adopters who buy an Internet table radio or a car radio with a Pandora button be turned off by less than perfect "reception" of Internet radio? That will depend, I suppose, on how bad the network congestion gets.

When I listen to an AM or FM station at home (or anywhere else the tuner remains in one place), I  expect a strong signal to remain strong, and it generally does. At home, I'd get quickly annoyed by spotty "reception" of Internet radio. I have a much different mindset when I'm behind the wheel of my car. I'm sitting right next to the radio, so I can easily touch a button to change my music source. If I lose the Internet radio signal, it's no big deal.

I have enjoyed great results listening to Pandora via iPhone® while driving around Charlottesville. It's a brand new iPhone, and I haven't been on any road trips with it yet. I don't expect the Pandora stream to persist for the entire duration of a long trip. But then, I don't expect to receive a static-free broadcast signal (or an FM station I care to listen to) everywhere I go, either. I can always play the music files stored on my iPhone or listen to a CD.

Do I listen to as much AM/FM radio as I did before I bought the iPhone? Not quite. Do I plan to abandon the airwaves? Not at all. At least not until my favorite FM programs go off the air. If Struble is right, that won't be any time soon.

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