Financial Status of the Internet Radio Industry

Most Internet radio stations have found that they have to pursue non-traditional revenue streams to supplement the traditional revenue streams. In other words, while lucrative, advertising sales have proven to not be enough alone for stations to afford the increased bandwidth capabilities necessary for large audiences. Thus, many stations have supplemented advertising revenue with income from e-commerce. There does seem to be potential for Internet radio advertising to grow in popularity. According to a study conducted by Arbitron NewMedia, seventy percent of Internet radio listeners visit the radio sites seeking ads and e-commerce opportunities. Arbitron also found that forty-nine percent of listeners buy advertised products online, and forty-four percent click on ads. These findings suggest that Internet radio has the potential to be a very successful medium for advertisers due to its interactivity.

The study also found another possible source of revenue for online broadcasters - national spot ads. The research found that seventy-four percent of listeners tuned in to broadcasts from outside of their area. This could be due to a curiousity factor that could go away as the novelty of online radio wears off. However, if this is not the case, stations with the largest bandwidths could potentially appeal to national advertisers who would normally not bother with radio advertising, since radio has traditionally been a local medium.

Some owners of successful stations have cashed in their successes for whopping sums of money. Broadcast.com was sold to Yahoo! for $5 billion. Recently, America Online acquired the radio firm Spinner Networks Inc. and Nullsoft Inc, a music technology company, for $400 million. CMGI just purchased Magnitude Networks for $100 million.