Web Radio Pioneer Live365 Is Returning -- But to What?

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"There's a huge opportunity with representing scale," the company's new boss says, "and if we're able to rebuild Live 365 in some shape or form.... we can actually go compete with iHeart or Pandora." But can they?

A regulatory one-two punch this past December had a dramatic impact on small webcasters (when you see that word, just think "web radio station"), either forcing their closure or at least putting them between a rock and very hard financial place. The first punch, the clincher really, was the lapse of the Webcaster Settlement Act, a law from 2002 (extended in 2009) that allowed small webcasters, those making less than $1.2 million in revenue annually, to pay a percentage of their revenue instead of the standard streaming rates, a rule which protected small web stations from drowning due to royalty costs. In addition to that law passing into extinction, the rates that webcasters pay per stream were increased by 21.4 percent.

Last December's rule change resulted in the shuttering, this past January, of Live365, one of the earliest and largest hubs for radio listening on the internet. (It was preceded in spirit by Broadcast.com, the literal "radio on the internet" concept which made Mark Cuban into a mogul after its billion-dollar sale to Yahoo! in 1999.) Live365 debuted in 1999 and aggregated thousands of stations, drawing attention from an impressive list of musicians. Notably, the company fostered the growth of homegrown web radio by offering tools to broadcast radio stations, or entrepreneurial web hosts, for streaming their own stations on the web. It was never a massive financial success, but it was stable.

Live365's closure was another sign of an inexorable trend. December's webcasting rule changes could have a similar effect -- through different means --  as the Telecommunications Act of 1996, which eliminated the cap on radio station ownership, previously 40 stations nationwide (the rules were reaffirmed a couple weeks ago). That resulted in American broadcast radio ending up, broadly speaking, in the hands of just a few companies, with iHeartMedia at the front with 850 stations. (iHeartMedia, it's no coincidence, is also the second-largest digital radio broadcaster in the U.S., behind Pandora.) Much as smaller broadcasters were protected before 1996 because ownership rules fostered more ownership diversity, larger webcasters are now protected from smaller entrants.

"For small webcasters just starting out, it's very difficult to monetize until you get scale," David Oxenford, a partner at D.C. law firm Wilkinson Barker Knauer and someone who helped craft the 2002 Webcaster Settlement Act, tells Billboard. Otherwise, as is well understood, "advertisers won't be very interested in you. In order to attract them, you've got to have large, large scale -- and you're paying for every listener before you've reached scale."

One source with intimate knowledge of one major webcaster's internal opinion says it welcomes the whetstone that competition provides.

A well-known brand -- even one with a bad name -- always has a second chance at life, and that's exactly what Live365 is getting. Sorta. In July, Jon Stephenson bought Live365 at a bankruptcy auction for an undisclosed sum. But Stephenson's Live365 is likely to resemble the original in name only.

Stephenson owns and operates the content delivery network EmpireStreaming, which helps broadcasters stream digitally and secures advertising in aggregate for those clients. "We work with a lot of small-to-medium sized broadcasters," he tells Billboard on the phone from Italy. "If you're a single station, or a really small station, we aggregate all of their ad inventories, so we can go directly to advertisers" with a larger scale, and greater negotiating leverage. Jon says his purchase of Live365 would've been worth it if he'd just gotten the hardware they'd left behind, however. But that's not the plan. "I definitely see that there's an opportunity with bringing back a lot of smaller radio stations. There's a huge opportunity with representing scale. And if we're able to rebuild Live 365 in some shape or form, then we have that branding and we can actually go compete with iHeart or Pandora. We can actually build a significant scale." That's a big if.

Stephenson already has a company, EmpireStreaming, that's working for him. He's just hoping some pieces of Live365's property, intellectual and literal, can bolster it. There's no reason for this young entrepreneur to reinvent the wheel, or try to get rid of it altogether -- which maybe points to a deeper problem. Certainly, without significant capital behind a project, its chances of survival and/or development are negligible. (That sound you probably already hear is Marc Andreessen furiously tweeting.) 

Anyone "surfing the information superhighway" in the mid-'90s experienced something like a beehive with no queen, no organizing principle other than the underlying structure of the web itself (which remains basically the same), limited significantly -- helpfully, maybe -- at the time by bandwidth, which allowed only minimal graphics and pretty much no video or music outside of laughably terrible MIDI audio. Now we have broadband -- via seemingly two companies, one of which is also a media conglomerate -- that connects us quickly to a funnel. The web's earliest "internauts" (ugh) were kidding themselves to think something like the internet would remain a pure intellectual or fiscal meritocracy. Just read Nick Denton's good-bye letter. It's not a revelation that power tends to consolidate.

"I think a lot of folks," Oxenford says, "looked at the internet and said 'This is a way for more musicians [you could put nearly any creative profession in place of 'musicians'] to make money.' But you still have the hierarchy [in place]... the same way it has been forever!" The only novel thing is the speed at which we've been able to watch the Wild West become Los Angeles.