Posted by chicagomedia.org on August 03, 2008 at 21:20:08:
War of the wireless
Emmis CEO is on the offensive as iPhone's popular applications for radio on the go tread on traditional industry's turf
Your ears are a battlefield. And broadcast radio is plotting ways to turn them back in its direction.
Battered by iPods, satellite radio and the Internet, some radio executives think they've found a path to sneak back into your life: the cell phone.
Jeff Smulyan, chief executive of Indianapolis-based radio broadcaster Emmis Communications Corp., is trying to persuade carriers to stick AM/FM tuners in their phones for 40 cents a pop. And voila! Some 226 million people would get instant additional access to radio stations that are fighting to maintain their audience.
But he may be too late. The Apple iPhone may have beaten him and the radio industry to the punch.
In the last month, millions of iPhone users have downloaded applications that make it easy to listen to Internet radio directly through their car stereo systems -- and push broadcast radio aside.
Armed with Apple's App Store on iTunes, the iPhone has gained a foothold where broadcast radio lives. The car is broadcast radio's bread and butter. It's the one place where people still listen to the medium consistently.
Since 1999, radio listening has decreased both at home and at work, according to Arbitron, but in the car, it actually has increased as traffic has increased.
"That 40 percent of radio listeners is up for grabs right now," said Tim Westergren, founder of the Internet radio company Pandora.
In the days after July 11, when the second-generation iPhone hit stores and the App Store went live, 400,000 people downloaded the free Pandora application from iTunes.
In that first weekend, the company streamed 3.3 million songs just to iPhones. New listeners tuned in every 2 seconds and listened for an average of one hour per day.
Granted, that's just a fraction of Pandora's 15 million listeners who stream music for hours at a time from their computers, but that hasn't stopped Westergren from pushing users to go mobile. He even has a video on Pandora's Web site that teaches people how to plug their iPhones into car stereos to stream music.
"Right now, the numbers are very small," he said. "Eventually, it's going to be tectonic."
Difference in viewpoints
To Westergren, the iPhone is a big deal. It's one of the top-selling phones in the country, and in less than a year it has inspired a legion of imitator touch-screen smartphones with flat-rate data plans that make streaming music affordable.
To others such as Smulyan, the iPhone is just one phone. He's more interested in the entire cell-phone ecosystem and getting AM/FM tuners into the food chain.
The task won't be easy.
In the U.S., less than 10 percent of phones have radio tuners. Sprint Nextel, the nation's No. 3 carrier, doesn't sell any.
The reason has more to do with the carriers than the manufacturers, many of which sell phones with tuners in other countries. Here, where cellular networks are closely guarded assets, carriers make money off subscribers using their networks to download ring tones and games, and off partnerships with outside companies, such as CBS Radio and the former XM satellite radio.
These partnerships encourage subscribers to buy data plans, then pay to subscribe to a streaming radio service and then perhaps buy a ring tone of a song they have heard. Partner companies get a cut of the profits.
But AM/FM tuners don't use cellular networks.
Therefore, carriers actually have a disincentive to ask manufacturers to add tuners, said Lewis Ward, research manager of IDC's Wireless Communications Research.
Even with the iPhone, which offers many applications for free, all parties win. Apple, which contends it never planned to make much money on the App Store anyway, encourages the sale of more iPhones with downloadable applications.
The more iPhones that are sold, the more AT&T, the exclusive U.S. carrier, gets subscribers. And application developers like Pandora get increased visibility and traffic to their Web sites.
"If you just put in a radio in a phone, what that will do is to take away from what the carriers are doing," Ward said.
Smulyan sees it another way -- as a solution to a problem.
He says carriers can reduce their bandwidth burdens by providing a network-free way for subscribers to listen to music. He says he's in talks with carriers and "it's going pretty well."
But neither Sprint nor AT&T seemed concerned about conserving bandwidth.
"Sprint has a very robust network that can handle streaming (Web) radio," said spokesman Aaron Radelet.
That may be strike one.
The iPhone doesn't have an AM/FM tuner and may not get one for quite some time. It's a hardware issue, not a software issue that can be changed with a download from the App Store.
That may be strike two.
Creative uses
So Smulyan and the radio industry are also going in the back door.
They are hoping to persuade the federal government to modify the WARN Act of 2006, which ordered carriers to create an alert system for mass notification during emergencies. A text messaging system is under development, but Smulyan argues that broadcast radio's existing Emergency Alert System could handle it if tuners were put in cell phones.
"If one broadcaster survives, everyone is alerted," he said.
The benefit to broadcasters, of course, is that if AM/FM tuners are in phones, people will have another way to listen to the radio. Whether that actually will translate into more listeners, as Smulyan asserts, is unclear.
Right now, the number of people who listen to music -- recorded or streaming -- on their phones is small. According to M:Metrics, 18.7 million subscribers did so in May, with about 700,000 tuning in to streaming music. That number is surely much higher now with the iPhone.
"The technology will certainly come along," Ward said, "but the question will be what percentage of people are interested and can the pricing come down to increase the user base."
Indeed, one reason the iPhone's Web radio applications may be so popular is because many are free.
One thing is certain, though.
If streaming radio does continue to catch on in the car, either through the iPhone or some gadget that hasn't been invented yet, broadcast radio will have one more competitor to worry about.
More than 33 million Americans listen to Web radio every week, up from 29 million last year, according to Arbitron. And, market research firm Bridge Ratings predicts, the time people spend listening to broadcast radio will decline as Web access becomes more prevalent in cars.
"Overnight the discussion changed," Westergren said of the iPhone. "People discovered they could listen to Web radio on the go and in the car. Why should I listen to broadcast radio in the car?"
(Indianapolis Star)