Internet Radio has a Future.

Earlier this year a considerable shadow was cast over the Internet radio industry. SoundExchange, the organization tasked with collecting and distributing digital performance royalties, set a royalty fee regime for webcasters that many in the industry thought so prohibitive it would put smaller Internet radio stations out of business.

The major area of contention was a $500 minimum per-channel fee for webcasters. For Internet radio services that offer radio channel personalization—potentially limitless radio channels—this spelled impending financial doom. Late last week, the Digital Media Association representing webcasters, reached an agreement with SoundExchange to cap the $500 minimum per-channel royalty fee at $50,000 per service.

“We’re encouraged by this development and the knowledge that good-faith negotiations have begun,” said DiMA executive director Jonathan Potter in a statement. “We look forward to the next step of negotiating the royalty rates that will allow for the growth of the Internet radio industry, a platform for music discovery for consumers.”

This announcement is good news for Internet radio. It provides much-needed certainty for an industry that has generated little advertising revenue to date.

Internet radio includes both the simulcast of terrestrial broadcasts online and Internet-only audio streaming. Arbitron estimates the weekly Internet radio audience is about 29 million. This audience grows to more than 50 million when measured by month.

Online radio has been playing a largely complementary role alongside traditional radio rather than competing with it. Yet few advertisers have been attracted to the medium.

eMarketer, however, believes there are many synergies between radio and the Internet that both marketers and broadcasters can use.

For example, terrestrial radio is popular throughout the day and particularly in the car during work commutes.

According to Arbitron, the American consumer spends an average 15 hours per week in the car, either as driver or passenger. Men 18 to 34 spend 20 hours a week in the car. Data from the Radio Advertising Bureau indicates that nearly one-half of all weekly radio listening takes place in the car.

If a terrestrial broadcaster simulcasts online or on mobile devices, it need not lose that listener once he or she leaves the car. Internet radio is often on at work, providing a valuable way to target an at-work audience.

Further, Internet radio can drive traffic to a Web site, which allows a listener to engage and interact more deeply with the content of interest. It also provides advertisers and marketers with a way to track audio and Internet ads more effectively.

Data from the Radio Advertising Effectiveness Lab show that a mix of one Internet and one radio ad exposure made respondents four and a half times times more likely to recall an advertisement compared with two Internet ads alone.

An audio ad can generate a far higher emotional response than an Internet banner ad alone. But the RAEL study shows that when one combines the best of both media, the result is greater than the sum of its individual parts.

Courtesy of http://www.emarketer.com