The state of radio--the start of a revolution.(industry forecast)

There are some 282 million unique radio listeners in the US, according to Dan Mason, former president of Infinity Radio and current advisor to iBiquity Digital. That's roughly 94% of the population.

Over the past several years the radio industry has undergone several major changes. Now, in addition to AM and FM, consumers can tune into satellite radio or listen to thousands of Internet radio stations. They can listen to radio at home, in the car, on their MP3 player and even on some cell phones. With the satellite services, they can take the receiver with them. With home networking, they can listen to Internet radio in rooms where there's no PC.

During a panel about the evolution of radio at the Digital Media Conference, Dave Ulmer, director marketing for Motorola Media Solutions, told the audience he likes the idea of device convergence, but said that it's important to avoid the "toaster oven" syndrome--you have a toaster, you have an oven, but when you put them together, you get a lousy toaster and a lousy oven. Camera phones are a good example of successful convergence. Consumers buy camera phones, but still purchase standalone digital cameras as well.

According to Ulmer, Motorola has become a company with three distinct units--cell phones, home networking solutions and automotive solutions. About a year-and-a-half ago it decided how it could get all three to work together, with the major result being the iRadio, a service that lets consumers take their favorite music--from their own digital collections or Internet radio--wherever they go. The idea is to offer users a "continuous radio experience," such as picking up a song in the car at the exact spot where they stopped it on the home stereo.

The mobile handset of the future, according to Ulmer, will have a phone, storage, a music player, stereo-quality sound and Bluetooth support. Motorola has had a phone with the RealNetworks media player on the market since last year. It has since announced an "iTunes" phone and recently announced handsets that will support Windows Media.

With all these new choices, the consumer is more in control of his media decisions than ever before. Ulmer believes that the consumer is gaining control the in the same way that happened with television with cable, satellite and on-demand programming. He called it "me-casting," the ability to choose exactly what I want to watch or listen to. With traditional broadcasting, Ulmer said, the user has to listen to whatever content the broadcaster wants to provide.

Ulmer quoted some Motorola research that found that when people first get an iPod, they pretty much stop listening to the radio. Six months later, however, their radio listening time increases by 25% because they want more new music. With the radio, they can discover new music without having to pay for a service or buy a CD or song download.

Another New Option

Rather than focus on where consumers can listen to music, Srivats Sampath, founder and CEO of Mercora, build a company that expands what they can listen to. Essentially, Mercora took "peer-to-peer and made it legal," said Sampath. Instead of letting subscribers download music, Mercora works with a broadcasting method, turning it into a potentially worldwide Internet radio network.

Mercora's IM Radio lets users search, find and legally listen to music provided by individual Webcasters from around the world in near-CD-quality sound. According to Sampath, it currently broadcasts eight million songs a day.

Whenever a song is played, the company pays royalties to SoundExchange, a performing rights organization that collects royalties for sound recordings played over nontraditional radio systems. SoundExchange collects royalties from Internet and satellite radio broadcasters as well as cable and satellite TV music services.

The rights available to Mercora listeners depend on the country the user lives in. By year-end, said Sampath, it will be a "legal radio broadcast network" in seven or eight countries.

For radio fans wanting more than AM or FM but don't need the thousands of "channels" offered on Mercora, they can join the millions of folks who've turned to satellite radio.

According to Lee Abrams, chief programming officer of XM Satellite Radio, his company has 70% of the US market coast-to-coast. It also recently got approval to offer its services in Canada. XM, like its competitor Sirius, offers roughly 150 channels in all sorts of genres from rock music to talk radio.

Three decades ago, FM radio came on the air and took a huge chunk of the market away from AM by offering stereo sound, a wider variety of music and fewer commercials. XM's vision, said Abrams, is for the company to "have the same effect on FM that FM had on AM."

What's Next?

According to Sampath, radio used to be a "lean back experience," where the listener would lean back and enjoy the music. Now, thanks to the ability to listen on a PC, the listener can search for and discover the music he wants to listen to, making it a "lean forward" experience. Now, he said, the listener can listen to "what I want, not what you want to give me."

With all the new gadgets and music services out there, consumers are often stunned into indecision, what Motorola's Ulmer called the "deer in headlights effect." Ulmer believes that the industry will sort itself out--that the "iconic products" that survive the upheaval will be around for a long time. "But for now, it's a mess," he said.