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Radio fading away?

Not so fast. Radio is adopting some online, internet-streaming tricks.

By Jacob SilvermanContributor / October 5, 2011

East village radio studio, New York City.

Ann Hermes/staff/File

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For years industry analysts have been predicting the "death" of radio. Satellite radio – Sirius XM has about 21 million subscribers – was supposed to be its demise in the first decade of this century. But one of the great benefits to predicting the future is that there's rarely a cost to being wrong; when events disprove a past prediction, simply move on to the next bit of sage prognostication.

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The latest suspect in radio's impending extinction is Internet music services such as Spotify and Pandora that promise to offer a level of personalization and user control that commercial, or terrestrial, radio can't match. But radio stubbornly lives on: According to the research firm Arbitron, 190 million Americans ages 12 and older listen to radio on a weekly basis. What's more is that for musicians, despite the utility of YouTube, Twitter, or iTunes, the mass reach of radio is still the easiest way to break out big as an artist.

So what's happening in the strange new world of Internet music, and will the prognosticators ever be able to see their prophecy fulfilled? And what will be the effects for musicians?

Gone are the days when a few programmers could throw a music-streaming service online and be blithe about the legal consequences. Streaming music services such as Spotify and Rdio are now expected to make the necessary licensing deals before they enter the marketplace. These negotiations aren't always easy – Spotify came to the United States several years after launching in Europe in part because of difficulties nailing down licenses – but they are cheaper than the costs of litigation.

Licensing deals signal a new era of cooperation between Internet music services and record labels and artists agencies, who, in most cases, no longer view sites like Pandora as a threat to the bottom line.

"In all cases, we've managed to negotiate royalty deals without litigation," says Richard Conlon, a senior vice president at BMI, one of three organizations that collect royalties for US songwriters and publishers.

Companies like BMI keep an eye out for emerging music start-ups, but these new music services often seek out the necessary partners, both to establish legitimacy in the eyes of users and record companies and to signal to venture capitalists that they're deserving of investment. "For the vast majority of major entities, they've come to us," says Mr. Conlon, adding that BMI, in 1995, became the first company to establish a license covering the usage of music on the Internet.

For now, streaming services are largely divided into two arenas. First, there are algorithm-driven Internet jukeboxes – Grooveshark, Pandora, Last.fm – that play songs based on users' tastes. Second, there are on-demand services – Spotify, Rhapsody, MOG, Rdio – that allow users to play any song in the service's library. Pricing plans, ranging from free of charge to $9.99 a month, determine the number and kind of ads a user faces. In some cases, a free subscription limits how many hours of music users may listen to per month. Finally, all streaming services promise access to enormous catalogs of songs that, while containing some notable omissions, are far larger than any listener's purchased music library.

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