Magazine

Tech Steals a March on the Hit Parade


I love music, but I can barely listen to the radio anymore. No matter where I am in the U.S., 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. (Satellite needs ground-based repeater stations to ensure reception in urban areas.)

Both services are designed primarily for listening in the car. General Motors (GM) offers built-in XM receivers (XMSR) in several Cadillac models and will make them an option in 23 additional 2003 models, while Ford Motor (F) has a deal with Sirius (SIRI) to offer its receivers. You also can buy aftermarket receivers--around $300 plus installation--that work through an existing car stereo. Sony (SNE) has a convertible model that can be taken out of your car and used with a home audio system. More home systems are likely, along with a plan that would let you add receivers without paying full price for extra accounts.

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 (CPQ), Hewlett-Packard (HWP), Kenwood, and SonicBlue (SBLU) 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 U.S. 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. That doesn't sound like much, but AOL Time Warner (AOL) says it plays 160 million songs, or $244,000 worth, a month. A separate arbitration covering satellite radio is just starting.

The U.S. 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


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