Tech Steals a March on the Hit Parade

I love music, but I can barely listen to the radio any more. No matter where

I am in the US, I have nothing but bad choices. There are the Clear Channeled, Infinitied commercial-music stations with

playlists so short they barely seem to last one 40-minute hour, not counting

ads. There are the commercial talk shows, where no one lets their ignorance get

in the way of their prejudices. And at National Public Radio affiliates, music

is disappearing in favor of sincere, predictable talk shows that all sound the

same.

I have little hope radio will improve. In fact, rules allowing companies to

own more stations will likely mean yet greater homogenization of programming.

But technology is creating opportunities for radio-like broadcasts with enough

channels to suit any taste.

The most promising offering for the near-term is satellite broadcasting. XM

Satellite Radio (www.xmradio.com) offers nationwide programming of 100 channels,

many commercial- free, for $10 a month. Sirius Satellite Radio (www.siriusradio.com)

offers a similar, $12 monthly service, currently available only in Denver,

Houston, Phoenix, and Jackson, Miss.

Both services are designed primarily for listening in the car. General Motors

offers built-in XM receivers in several Cadillac models and will make them an

option in 23 additional 2003 models, while Ford Motor has a deal with Sirius to

offer its receivers. You also can buy aftermarket receivers–around $300 plus

installation–that work through an existing car stereo.

I spent a week testing XM in a Cadillac borrowed from GM, and I found the

service a delight. The sound quality was far better than FM stereo, and I had a

very good signal everywhere except a couple of isolated spots in Washington’s

Rock Creek Park, an area that has notoriously poor wireless coverage. The main

challenge was choosing from among so many appealing channels. The Top Tracks

classic rock channel and Vox! Opera and classical vocal channel seemed

programmed just for my eclectic tastes.

The big question about satellite services is whether they can make enough

money to survive. XM got off to a fast start, signing up 30,000 customers in two

months. Executives say the company should have 350,000 by yearend. It remains to

be seen whether a $10 to $12 monthly fee can support two companies in the field.

Webcasting, the other major alternative to conventional broadcasting, has a

more uncertain future. The main way to hear music streamed over the Internet now

is on a computer. Compaq, Hewlett-Packard, Kenwood, and SonicBlue offer Webcast

receivers that connect to home stereo systems.

The economics of Webcasting are dicey to begin with: No one has succeeded at

charging for the service, and now the Net broadcasters are locked in a dispute

with the recording industry over royalties. Over-the-air broadcasters pay

royalties to composers and performers but are exempt from the "sound

recording" royalties due record companies. But the US Copyright Office at

the Library of Congress has ruled that a 1998 law requires Webcasters to pay

recording royalties retroactive to their inception. An arbitration panel has set

the rate at 0.14 cents per song (0.07 cents for Webcasts that duplicate on-air

programming), plus a surcharge of 9% for making temporary digital copies of the

music. A separate arbitration covering satellite radio is just starting.

The US Constitution gives Congress the power to grant copyrights "to

promote the progress of science and useful arts." The framers never

imagined Webcasting or satellite radio, but I doubt they would be happy with a

situation that protects established interests at the expense of innovation.

By Stephen H Wildstrom

in BusinessWeek. Copyright 2002 by The McGraw-Hill Companies, Inc