Radio changes its tune

These days Radio and Records, a trade publication, doesn't just list what's hot on America's AM and FM stations. It also lists the Top 10 songs playing on Sirius satellite radio and the Top 10 downloads from the Internet music service iTunes.

"We have to adapt," says Roger Nadel, executive editor of the radio-industry publication in Los Angeles. "It's a significant part of the business."

In fact, the radio business may be undergoing its biggest shakeup ever. So many new digital technologies are beckoning to its traditional listeners that it's hard to know what radio is anymore.

It's no longer limited to the airwaves, thanks to cable TV's music offerings, the Internet, and one day, perhaps, cellphones. It's not strictly live because online "podcasters" and others let you download music to play at your convenience. About the only thing that really separates radio listening from, say, uploading music to an iPod is that on radio, someone else plays deejay.

"What we increasingly have here is one big, bad digital soup" of programming, says Paul Saffo, a director at the Institute for the Future, a Silicon Valley think tank. Various companies "are offering us different kinds of ladles to use at different moments."

That spells upheaval for the industry. But for consumers, the result looks mostly positive: more choices of programs and more control over when they can hear them.

For example: Some of the most cutting-edge radio can't be heard on a radio at all. Internet broadcasters send all kinds of programming streaming live over the Web. Others, called "podcasters," are mostly amateurs who offer highly individualized programs that can be downloaded to computers or personal music players such as an iPod.

IPods themselves, capable of storing up to 10,000 songs, have become a significant alternative to radio. Will people keep tuning in if they can so easily build their own music library?

Yet another traditional radio alternative comes from Internet companies that provide music from giant online libraries. Subscribers can download songs for "rent," rather than buy them from sources such as iTunes. The songs no longer play if the subscription lapses. Napster now offers a $15 per month service, and others are expected to follow.

Cellphone companies may also offer portable music, with satellite radio as a possible source of some of its programming.

Except for iPods, which threaten to crush radio, none of the new digital technologies has yet built the audience to directly challenge the 3,000 AM and FM radio stations in the United States. But two satellite radio companies, XM and Sirius, each with more than 100 channels of audio programming, are trying hard. By the end of the decade, about 40 percent of all American households will subscribe to satellite radio, about 32 million listeners, predicts the investment firm J.P. Morgan Chase.

Despite those optimistic projections, the two satellite companies are far from profitable. Together, XM and Sirius lost more than $1 billion last year.

XM, the larger of the two with 3.4 million subscribers, has cut deals to be available on JetBlue and AirTran airlines and in Hertz rental cars. Its hand-held MyFi receiver makes satellite radio portable and available anywhere - in the car, on a hike, or inside the house. The MyFi also can store up to five hours of programming for later listening. Besides scores of specialized music channels, XM offers the entire slate of Major League Baseball games (listen to your home team wherever you are), two NASCAR channels, and right- and left-leaning talk-show channels - all for $10 per month.

Sirius gained notoriety last fall when it signed controversial Howard Stern to move his radio show to Sirius next January for a cool $100 million per year. For $13 per month, it offers its own long list of musical niches, including a hip-hop channel programmed by rapper Eminem, two channels programmed by Bruce Springsteen guitarist Steven Van Zandt, and an all-Elvis channel. Football fans have access to the radio coverage of all the NFL games. Sirius plans to offer mobile video programming in 2006.

"Satellite [radio] has the chance with almost 130 channels to be almost all things to all people," says Tom Taylor, editor of Inside Radio, an industry newsletter. He sees local radio stations as similar to local newspapers, needing to attract a fairly wide variety of consumers. "You can think of Sirius and XM as more like being the magazine stand" where consumers go for specialized content, he says, from rock climbing to home improvement.

Installing satellite receivers in cars, especially as original equipment, will be crucial to its success, analysts say. XM has developed ties with Honda, Toyota, General Motors, and Nissan. Mercedes-Benz is installing Sirius in all its 2005 models, and Ford will offer it as an option. In all, satellite radio now is available on 38 percent of 2005 model cars, according to online automobile marketer Autobytel Inc.

The competition for dashboards could be fierce. Drivers already listen to local radio, tapes, or CDs. Adapters allow iPods or other personal media players to play on car speakers. Someday soon, the entire Internet will be available via an onboard broadband connection.

"The car is very important to radio" because it's a big audience of captive listeners, says Robert Unmacht, an independent media analyst, consultant, and investor in Nashville, Tenn.

Before then, users may flock to satellite radio for real-time ultralocal traffic reports, a service already offered by XM and coming to Sirius. The system, available in about 20 major markets so far, captures information through acoustical roadside sensors as well as traditional cameras and feeds it into the car's navigation system. "For the average commuter, there's no reason to have a navigation system because you travel the same routes," says David Schrier, an analyst at ABI Research in Oyster Bay, N.Y. "Once you add in traffic [information], it becomes much more valuable to them."

Meanwhile, traditional radio is fighting back with a $28 million advertising campaign ("You hear it here first"). And it points to its own digital radio, sometimes called HD Radio, which would boost the sound quality of FM channels to CD quality. It would also have TiVo-like store-and-replay ability.

"This is going to revolutionize the terrestrial radio industry," says Dennis Wharton, a spokesman for the National Association of Broadcasters (NAB). "It's going to be a vastly improved listening experience."

But automakers have yet to offer HD Radio as original equipment. "I wonder if the time for it has come and gone," Mr. Nadel says. "I don't hear nearly the buzz outside the industry that I hear within the industry about it."

To counter complaints over too many ads on local radio, Clear Channel Communications Inc., owner of more than 1,200 stations, recently promised to cut the number and length of commercials on its stations.

The buzz now from commercial radio is that, unlike satellite radio, it's "local." Some observers see that push as ironic, as locally owned stations have been bought up by chains.

But "the reality is that if you're not local in the radio business, you can't be successful," counters NAB's Mr. Wharton. "Any station that thinks it's going to be successful importing a signal from 2,000 miles away, and pass that off as a local radio station, isn't going to be in business for long."

Last year, local radio topped $20 billion in revenue, a record, he says, though that represents only a 2 percent increase over the previous year. "We're long past the stage of realizing there is going to be competition for radio listeners time," Wharton says. But "right now there are 225 million people who on a daily basis listen to hometown radio stations, compared to something like 4 million people who've subscribed to satellite radio."

Despite the mushrooming digital competition, local radio has innate strengths, Mr. Taylor agrees. "You just turn one on, and it's there. You don't have to subscribe to anything, you don't have to decode anything, you don't have to wait for it to [boot] up. It's there."

Since Guglielmo Marconi first transmitted signals 110 years ago, radio has become one of the world's most common sources of news and entertainment. By one estimate, there's one receiver for every three inhabitants. But they're not equally distributed. Every American owns two, on average; in East Timor, there's one for every 50 people.

• Almost all commercial radio is local, with only a few players, like the BBC, operating globally. Public broadcasters have a higher share of the market in Europe than in the US or Asia. One of the fastest-growing markets is China, where some broadcasters have seen revenues double.

• Radio amateurs broadcast as well as receive. Today there are nearly 3 million such amateurs spread around the globe. That's double the total in 1985.

• The Internet has spawned new forms of radio, including "podcasting," which provide content on demand.

Sources: World Book; UNESCO; Datamonitor plc; International Amateur Radio Union