Bill and Rebecca Goldsmith are making a living from an idea that would probably get you laughed out of business school: running an Internet radio station commercial free. From their home in Paradise, Calif., in the foothills of the Sierra Nevada, they operate Radioparadise.com a format-busting station that spins a tasteful mix of music ranging from the Beatles to Norah Jones to the Strokes. Fewer than 5,000 listeners tune in during peak times, but fans like it so much, they sent the couple $120,000 in contributions last year, covering the cost of bandwidth, song royalties and other expenses and leaving enough to support a "comfortable lifestyle," says Bill Goldsmith, who quit a 30-year career in FM radio to run and DJ his homegrown version.
If you can't bear another spin of Britney Spears, you're one of the reasons that stations like Radioparadise are beginning to prosper and investors are again flocking to another alternative to the AM/FM dial: satellite radio. After years of unmet promise, online stations, along with satellite offerings like Sirius and XM Satellite Radio, are building audiences even as regular radio struggles through a decade-long slump (time spent listening is down 14% since 1994, according to the ratings firm Arbitron). Critics say industry consolidation has turned AM/FM stations into McRadio: nationally uniform, repetitive and clogged more than ever with ads and promos. But scores of high-quality alternatives are now competing for your ears (and dollars).
Just a few years ago, online radio heads were mainly tech geeks willing to put up with patchy, low-quality sound. These days about 19 million people listen to online radio at least once a week, up from 7 million in 2000, according to Arbitron. Online listenership is growing at an average 43% a year as more people get broadband connections at home and tune in for content that's unavailable or in short supply on commercial stations, from blues to folk to Al Franken's new liberal Air America network, which is broadcast in just a few markets on the AM/FM dial but was streamed 2 million times in its first week, according to its exclusive webcaster, RealNetworks. "People are fed up with terrestrial radio," says Dave Goldberg, who oversees Yahoo's music site and radio network, Launchcast, which draws 1 million listeners a week.
For now, it's the satellite guys, together claiming around 2 million subscribers, who are drawing Wall Street's attention. Though their stock prices had plummeted over concerns that they might run out of cash, their shares have soared in the past year. XM is up 379%; Sirius, 491%. Analyst April Horace of Janco Partners in Denver predicts that within five years 16 million Americans will be listening to satellite radio. She says the market would explode if a popular shock jock like Howard Stern were to defect with his 15 million listeners, a prospect that looked more likely last week after six traditional stations dropped his show following an FCC proposal to fine their corporate parent, Clear Channel Communications, $495,000 for airing his "indecent" content.