Web 'radio' quickly finding niche markets

Despite tiny budgets, new venues blossoming

Like the protagonist of the hit film ''The Incredibles," Paul MacArthur works in an insurance office. And like Mr. Incredible, MacArthur has a double life. But it has nothing to do with fighting evil. MacArthur is into bagpipe music.

After a trip to a Highland Games contest several years ago, MacArthur, a 39-year-old Braintree resident, embraced his Scottish heritage. He became a devotee of everything Celtic, especially the music. He's got about 600 CDs of the stuff, far too much to keep to himself. So MacArthur broadcasts his music collection to the world over the Internet.

''This is just kind of a hobby that got out of hand," said MacArthur.

Thousands of others share a similar affliction, thanks to Internet technology that lets anybody with a little money set up an online ''radio station." The term isn't quite right, since the Internet uses wires, not radio waves, to transmit music and chat. But Internet broadcasting has grown in popularity to the point where it's become a significant alternative to traditional radio, and an appealing venue for major advertisers. And although satellite radio has been attracting significant attention recently as the new radio kid on the block, Internet radio has been around longer, and has more listeners.

Arbitron Inc., the New York firm that rates the popularity of traditional radio broadcasts, has been tracking Internet radio since 1998. According to its most recent figures, about 19 million Americans now listen to online broadcasts every week, up from 11 million four years ago. By contrast, traditional radio attracts about 230 million listeners each week.

But radio is an old technology, and the market is saturated. Meanwhile, the Internet radio audience is growing, and likely to get much bigger as more Americans get high-speed Internet connections. About one-third of Americans with home Internet access had some sort of broadband service two years ago. Today the number is well over one-half, according to Nielsen NetRatings Inc.

Broadband matters because the faster data transmission speed lets Internet broadcasters deliver high-fidelity music. Also, a broadband connection lets the computer stay online 24 hours a day, so it's easy to punch up a favorite Internet radio station.

Perhaps the main benefit of Internet radio is the immense variety of offerings. Traditional broadcasting is limited by the electromagnetic spectrum. There are only so many broadcast frequencies available, a fact that drove the development of a few broadly popular formats -- rock, hip-hop, all-news, all-sports, talk radio. But on the Internet, anybody with a few hundred bucks can launch a broadcast, devoted to any genre that interests him -- death metal music, opera, 1940s radio dramas, Celtic folk songs -- whatever.

Internet broadcasting is much cheaper than traditional radio, but it's far from cost-free. The broadcaster must buy or rent high-speed Internet access and a computer with software that digitizes the music and allows Internet users to listen in. In traditional radio, there's no limit to the number of listeners. But Internet broadcasters are restricted by the power of their computers and the capacity of their network. The more listeners, the more computing power and network bandwidth needed to serve them. So an amateur broadcaster who attracts a big audience can see his operating costs soar.

Besides, Internet radio stations are supposed to pay royalties for the tunes they play. Traditional stations must pay royalties to music publishers; Internet stations are to pay both the publisher and the copyright holder of each song. Not only can this get expensive, it's also too complicated for many amateur broadcasters.

This is no deterrent to America Online, one of the nation's leading Internet providers. AOL offers 200 channels of Internet music, ranging from pop tunes to klezmer -- jazzy Jewish folk music from Eastern Europe. Commercial-free music is available at no charge to AOL subscribers; a free version called Radio@Netscape is supported with advertising.

Launching a station is harder for small operators like MacArthur. That's why many of them sign up with online broadcasting networks. These organizations aggregate thousands of large and small Internet broadcasters, provide a search service to help listeners find what they like, provide the necessary technical support, and take care of all royalty payments. The networks charge low monthly fees for these services, and make a profit by running ads on the Internet radio stations, or by charging a subscription fee to listeners.

The largest of these networks, Live365, offers some 10,000 Internet audio streams, and attracted 2.6 million listeners in January. Only 10 percent of these pay about $5 a month for a commercial-free version of the service; the rest will hear about five commercials an hour. David Porter, Live365's director of business development, said that many listeners tune in through Apple Computer Inc.'s iTunes music software, which includes an Internet radio feature that lists many Live365 stations. ''We're the single biggest supplier of radio to Apple," Porter said.

MacArthur broadcasts Highlander Radio by relaying music from his home to the Live365 computer system. He's become well-known among Celtic musicians who keep his music library supplied with free CDs. MacArthur employs a woman in Ireland to record announcements for the station, and he accepts requests at his website, www.celticradio.net.

''We have over 100 listeners from 10 in the morning to six at night," MacArthur said. That's 100 at any given time; in total, he estimates about 1,000 people tune in every day.

There's no profit in Highlander Radio. ''It's probably $200 a month to run it, and we get small donations," MacArthur said. The money goes for his Live365 broadcast fee, computer gear, and a high-speed Internet line. He also plans to start selling the tunes he plays through a Scottish firm, which will let listeners download them for 99 cents a song.

MacArthur will probably never make a profit on his broadcasting hobby, but the growing popularity of Internet radio suggests there's money to be made. Major consumer product companies like Ford Motor Co. and J.C. Penney Co. are beginning to run Internet ads. Veteran radio marketer Andy Lipset and Eric Ronning teamed up to launch Ronning Lipset Radio, a company that places commercials on Internet radio networks like Live365 and AOL.

Online radio advertising follows the same rules as the broadcast kind. ''We're selecting those radio stations across our networks that make the most sense for the advertiser demographically," said Lipset. You'll hear ads for pickup trucks on the hard rock stations, for instance, while a Mozart concerto might be sponsored by an investment banking firm.

It seems that 19 million listeners are enough to make Internet broadcasting a viable business. And it can only get better, as more of America's 200 million Internet users tune in.

Hiawatha Bray can be reached at bray@globe.com.