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Satellite broadcasters use a pay-radio model, beaming dozens of channels coast to coast commercial free, with original programming such as comedy and kids' shows. Financially backed in part by automakers, the satellite firms charge between $10 and $13 a month, mainly targeting car-radio users. Increasingly, though, listeners are buying portable tuners for their homes. To neutralize a key AM/FM advantage, both satellite broadcasters have started to provide traffic and weather updates in select markets.
So far, digital radio's growth isn't hurting big radio empires such as Clear Channel. With 1,213 stations and roughly a 30% ratings share in markets such as Phoenix, Ariz., and Milwaukee, Wis., Clear Channel had a record 2003: revenues of $8.9 billion and a net income of $1.1 billion. But listeners are clearly spending less time with terrestrial radio. One cause may simply be more media competition, from DVDs to video games to an expanding universe of digital TV. But critics of the radio industry say consolidation is partly to blame too. They claim Clear Channel and other big groups have ruined the airwaves by homogenizing song lists, politicizing the dial with conservative talk and sucking out local flavor with voice-tracking technology, which enables DJs to sound like local talent even if they're a thousand miles away. Clear Channel contends that its cost-cutting measures have saved hundreds of stations from bankruptcy and that it's the programming's popularity, reflected in ratings, that ultimately drives the business.
Nonetheless, teenagers and young adults are increasingly going online to find new music (not just file-sharing networks), particularly alternative content that rarely gets airplay on the commercial FM dial. About 13% of Americans ages 12 to 24 now listen to online radio on a weekly basis, up from 6% of that age group in 2001, according to Edison Media Research/Arbitron. With 185 stations, AOL's radio network, which, like TIME, is part of Time Warner, draws a weekly listenership of 1.5 million (by that measure, Arbitron notes, it's the nation's largest online network). Advertising remains tiny, but that may change. Ronning Lipset, an upstart Internet-radio ad firm in New York City, recently started packaging AOL, Live365.com MSN and Yahoo into a kind of national network, which has a combined audience of at least 250,000 listeners in a quarter hour, the minimum needed to appeal to national-media planners. The firm says the networks will start running audio spots from national advertisers in May.