Internet Radio Faces Ad Hurdles

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Questions surrounding fees for advertising creative have temporarily halted online radio streams from some major radio broadcast companies.


Meanwhile, house ads -- intermingled with a few non-union ads -- are the only commercial messages heard on the Web radio stations that have continued to stream.


The ones that pulled their streams -- which included rebroadcast commercials run during their traditional broadcasts -- did so after a contract reached between advertisers and the American Federation of Television and Radio Artists called for fees that are 300 percent more than traditional fees for rebroadcast commercials using AFTRA talent. However, the contract called for no additional fees for radio commercials made exclusively for online use.


The contract was struck in November. But the fees apparently have only recently become an issue because ad agencies, at the behest of their clients, began in April to demand that the radio stations pull the ads.


To avoid trouble, broadcasters ABC/Disney, Emmis Communications and Clear Channel Communications ceased streaming last month altogether.


"It is our intention to put the streams back up when it makes legal and financial sense," said Kevin Mayer, CEO of Clear Channel's Internet Group.


For that to happen, the radio broadcasters must develop a way to track and stream Internet-only ads.


"You could liken this to the early days of cable TV," said Tom O'Connor, vice president of sales and marketing at StreamAudio.com. "No one knew how to measure it, and the only people that bought it were direct clients."


What's more, he said, "there is no money in Internet-only ads right now: Agencies won't touch it because they can't measure it. They don't know what it's worth.


"Ad agencies are probably not going to be the early adopters. It's going to be individual clients [advertisers]."


Some radio firms that have continued streaming, such as Cox Radio Group, are using software that blocks ads that would accrue AFTRA charges. And a few are developing ads using non-AFTRA talent.


StreamAudio.com, one of the AFTRA-ad-blocking software providers, streams broadcasts for more than 500 radio station clients. Currently, 67 have added the software to delete ads with AFTRA talent.


Although StreamAudio has had the ad-blocking technology in place for about a year, "nobody had the impetus to use it until AFTRA brought the issue to light," O'Connor said. "They [radio stations] are able to continue reaching their Internet audience" instead of shutting down streaming broadcasts, he said.


Some in the industry believe the AFTRA dispute is the best thing that could happen to streaming media advertising, because many companies will develop Web-only commercials.


"The long-term net effect is great for streaming. It defines us as a medium that, for advertisers to be on, they will have to recognize and purchase it," said Michelle Jennings, chief operating officer at Media America Interactive, a streaming advertising sales firm.


Meanwhile, radio executives are not overly anxious about jumping back into streaming because of a relatively small Internet audience compared with traditional broadcast. One salesman for a large radio network said online commercials account for only $50,000 in sales, compared with $9 million for traditional radio sales.


"I don't think anyone is expecting to make money on it this year. They know they need to simply have a Web presence this year," said Denise Garcia, research director, media at GartnerGroup, Stamford, CT.


However, the MeasureCast Internet Radio Index showed a 2.4 percent increase in online radio listeners from mid-April to late April, even after some companies pulled their streams. "While recent events have temporarily forced some terrestrial broadcasters off the Internet, clearly people continue to listen to online radio stations," said Ed Hardy, CEO of MeasureCast, Portland, OR.


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