Radio stations: history, operations, and cultural impact

¶ … largest problem with radio stations is that the mass-market "one- size-fits-all" approach seems to fail at making any one individual particularly satisfied. We live in a world of individual expression and people will begin demanding individualized radio stations. Internet radio holds the greatest potential to deliver on this vision. Many companies are already taking advantage of streaming audio to deliver music over the World Wide Web, but this proposal explores the ability to take music delivery to the next step.

The idea for this new radio station called Tunes You Choose is to offer a personalized service for each listener. The customer selects from a portfolio of music options which songs to include for playing when they login. And, there's a new releases section categorized by types of music to encourage the audience to listen to new songs. It's almost like a free version of Napster, except songs can't be downloaded; they can only be listened to via continuous streaming. And, unlike traditional radio, song can be repeated or started over by the user. Tunes You Choose's major value proposition over traditional radio stations is that the customer never has to listen to music that he or she doesn't like and can change music selections after they grow tired of hearing a particular song.

As early as 1999, more than twenty percent of Americans listen to radio online, which is more than three times as many in 1997. Also, in 1999, Internet listening was already up to thirty percent of all Web users. A study of more than 1500 Webcast users found that fifty-six percent of these consumers showed an interest in creating their own customized radio stations on or through a Web site. Therefore, it appears that Tunes You Choose is spot on with market trends for radio listening and in touch with consumer preferences for how they would like to listen to radio on the Web.

Like regular air play, Webcasting involves royalty fees that must be paid to music labels and musicians for sound records. The fees work out to be approximately two cents per listener per 100 songs, plus and an 8.8% surcharge to cover temporary copes of music needed for streaming. So, the most fees that a radio station could owe for a listener would be $23 per year for twelve songs per hour around the clock. Obviously, the average consumer wouldn't even approach half of these fees.

As the case with traditional radio, Tunes You Choose will attempt to cover its expenses through advertising. Unlike traditional radio, Web users don't seem to mind the audio ads as much. A research study found that more than two-thirds of respondents thought that the ads were a fair price to pay for Internet radio. Given that Internet listeners are not averse to advertising, Tunes You Choose has made the decision to recover operating expenses and hopefully make a profit through advertising revenues rather than service fees to users. Radio listening has long been viewed as a free service and this perception would be very difficult to change.