Internet radio is moving in a new direction that is, in part, a response to the Digital Millennium Copyright Act. Following the DMCA, it was not economically feasible for thousands of internet radio stations to pay blanket fees for use of mainstream music. Therefore, a new market for royalty free independent music is being created. It is still not clear if independent internet radio will rival the power of terrestrial radio and it is also very difficult to measure the success of independent artists who may not be registered through Soundscan.
So, what might be the driving force behind this new development? I believe the only way for independent internet radio to succeed is to attract people. Hopefully, as people become aware of a reasonable alternative, it then becomes a matter of taste.
I think the timing may be right as we have been bombarded by the same songs mixed with a few new songs (averaging about 17 in rotation) for years now. Traditional music industry resources have diminished and infrastructure has downsized considerably. The downsizing of the traditional music industry can no longer provide enough music to satisfy the listening public.
Actually, supply has exceeded demand in the area of music for many years, but the supply is no longer limited to terrestrial radio and the majors. Many believe independent music is taking a small portion of the market share, but again, it is very difficult to measure as many sales go unreported. I believe the only real indicator will be the number of artists who are able to sustain themselves in the very near future. If independent internet radio survives, then we should see growth that is borne out of a return on investment rather than a love for music. It will take a while for the results to come in, but I suspect the Internal Revenue Service will be monitoring this very closely if it starts to show signs of life.
Meanwhile, royalty free internet radio does seem to be growing if you look at Live 365 or Shoutcast. In addition, I am able to Google hundreds of standalone stations that are playing independent music (I suspect I could find more if I had the time to dig a little deeper into the search results).
I think one element that will make independent internet radio a viable option will be the growth of mobile devices such as Blackberrys, iPhones, iPods, and a whole new generation of cell phones designed to offer the same new features as their competitors. The other element that will provide a boost will be the standardization of input jacks allowing mobile devices to play on car stereo systems.
The culture has already changed as young people are listening to music on their mobile devices. It will take a while for this culture to be accepted by older generations, but the signs are very positive as I just saw a granny at Target wearing ear buds. Seriously, this medium has become viable as it is now the medium of choice and will likely become the easiest to support in a growing market.
Another positive sign is the explosion of podcasting as an alternative to radio. Podcasts are programs that may be downloaded from the internet that bear many similarities to terrestrial radio with the exception of timing. Podcasts are not in real time, so call-ins must be recorded, for example. However, the only limits to podcasts are the rights to music that is played and the imagination of those folks who are creating the podcasts, called podcasters or casters. The music must be podcast friendly, or offer content (i.e. independent music) that is outside of the scope of the DMCA. Many popular podcasts like those featured at Mad Caster Networks are now featuring indie artists and reviews, which will help to provide indie artists with exposure to a larger number of potential fans.
There are some issues that remain for independent internet radio. For example, money remains a problem for many independent stations that are fueled by love for music and a desire to provide an open medium to deserving artists. It is also interesting that the majors are responding with their own internet stations which has a tendency to bury the independents in the search results. Guess what? The internet is the ultimate free market society. That is, a large component of success in gaining the top spots from search engines may be bought with advertising dollars. Yes, it is possible to organically grow a viable site based on good ol' "word of mouth" and search engine optimization (or SEO), but money still talks. This will be one of the obstacles for independent internet radio, along with the possibility of more legislation influenced by music industry lobbies under the guise of protecting music.