Can playing tunes online pay on the bottom line?

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NEW YORK -- Internet radio generates excitement, but it's not making much money. And that will remain so until broadband connections expand and business models mature, say industry experts and panelists at Jupiter Communications Inc.'s Plug-In music and Internet conference here.

Internet radio sites such as Spinner.Com, Tunes.Com, SonicNet and NetRadio now seek several revenue streams, including:

  • Linking to e-commerce sites that sell music, such as Amazon.com, and through affinity network programs that pay a slight fee for purchases made through links.

  • Selling CDs, digital downloads and merchandise.
  • Advertising, either with banners on the Web site or audio advertisements embedded between songs.
  • Selling subscription services.
  • Competitive challenge

    Still, many struggle in a highly competitive market. Competition is heightened because the market has few barriers to entry, especially when compared with traditional radio broadcasting with its Federal Communications Commission rules and expensive transmission towers.

    The good news about streaming audio is that it offers some advantages over traditional radio broadcasting.

    Radio airwaves can take only a limited number of niche listening tastes, but Internet radio can provide as many channels as there are music genres. Spinner.com, for example, has 128 channels, according to company CEO David Samuel.

    Listeners can create their own channels and personalize their Internet radio. Imagine Radio and SonicNet -- both recently purchased by MTV -- have led the way in offering visitors the capability to program their own channels.

    By pairing sophisticated Internet tracking tools and niche broadcasting, Web sites can deliver precise psychographics to Internet radio advertisers and brand marketers. In turn, they can provide more targeted messages.

    Traditional radio is local; Internet radio is international. Big-name national and global advertisers enjoy greater reach on the Web. Traditional radio advertising typically offers 20% national and 80% local ads, according to Gerry Boehme of Katz Media Group.

    Increasingly, listeners of online streaming music will be able to buy music when they hear it. Radio listeners, on the other hand, often aren't even told the name of the song on the air, fumble to find a pencil and, in the end, can't find the music when they get to the retail store.

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