The Sunday Times FT - Internet radio offers sex and sermons, rock and ragas

Bill Goldsmith has converted the upstairs floor of his two-storey California home into a radio studio that broadcasts his favourite rock, blues and folk tunes over the Internet.

What started six years ago as a labour of love has turned into a viable business, and the recent introduction of stand-alone Internet radios could bring even greater success as people change how they receive their radio music and news.

“So far it is working out very well for us,” the former FM radio disc jockey said, explaining that he lives off listener donations. “People really enjoy our programming enough so they feel its worth paying for.”

On Radio Paradise, he offers about 59 minutes of music per hour, compared to about 40 to 50 minutes per hour on most conventional commercial FM stations. Even former commercial-free FM areas such as National Public Radio now repeatedly air sponsorship announcements akin to advertising.

The flood of ads on traditional radio and the subscription costs of satellite radio are driving listeners to Internet radio, whose stations either rely on government funding (such as the commercial-free BBC), donations (such as Radio Paradise), or advertising (including FM stations that also stream on the Internet).

Some companies are also hoping to earn money through Internet radio subscriptions. Enthusiasts with fast connections have been able to tune into Internet radio through their computers for a decade or more. But now the long-delayed arrival of stand-alone Internet radios from equipment makers such as Roku or Philips could greatly expand the market by making it easier to tune in.

At its best, Roku's $400 SoundBridge Radio allows users to listen to a station at the touch of a button.

“As time goes on, everyone is going to have Internet radio,” said Roku head Anthony Wood, 40, who invented the digital video recorder at Tivo-competitor ReplayTV and started Roku four years ago with $9 million of his own money. “It's a huge market but for some reason it is under-recognised.”

According to a survey by Arbitron and Edison Media Research of 1,925 people earlier this year, more than one in five Americans over the age of 12 listen to Internet radio monthly.

Even though Wood considers Roku his sixth company (Roku means sixth in Japanese), the place still has the feel of an Internet start-up. He showed off his offices dressed in shorts and a T-shirt, and unpackaged Internet radios lined the office hallway in this Silicon Valley bedroom community.

The unfinished process of creation sometimes manifests itself in the firm's music streaming and Internet radio products. As with many software programs, sometimes things go mysteriously wrong, making Internet stations or audio ripped onto your computer unavailable. Still, the products are a hit with hardcore audio enthusiasts and other patient music fans.

“It's a lot better than it was two years ago,” Wood said. “It's got a little ways to go before it's perfectly seamless.”

The reward for the occasional snafus are a huge choice of Internet stations, which range from global media corporations to enthusiasts operating from their garages.

Some stations focus narrowly on bands such as the Beatles or Grateful Dead. Others offer music from Cuba, Iran, China or even Antarctica, from where Anetstation.com broadcasts guitar blues music. Others focus on talk, from the sacred to more profane topics such as on YNOT Radio, which focuses on the adult film industry.

Some are small hobbyists with few listeners, others are real businesses which pay royalties on the music they play.

“We're not coming from a basement at this point,” said Sandy Shore of Smoothjazz.com, which has been on air since 2000. “The cream of the crop of Internet radio will rise to the top.”

The path to finding new stations involves searching Internet sites such as AOL's shoutcast.com, vtuner.com or live365.com.

Shore, who broadcasts about five minutes of ads and talk per 55 minutes of music, started in FM radio. “I was growing more and more frustrated by the direction radio was going,” she said.

At Roku, Wood sees his company's future in licensing its software at the heart of a $25 wireless computer chip to make Internet broadcasts a standard feature on radios and stereos within five years. Such components soon will make possible the $99 Internet radio, he predicted.

Roku started to turn a profit in the last few months, Wood said. His firm had revenue of $4.2 million in 2005 and expects $5.8 million this year and $10 million next year. U.S. retailer Best Buy <BBY.N> is Roku's biggest outlet.

One obvious obstacle to growth is limited mobility of Internet radio. But the spread of citywide Wi-Fi networks may one day make car Internet radios and other devices possible.

“As the Internet becomes more and more of a mobile medium,” Goldsmith of Radio Paradise said, “the increase is going to grow rather more rapidly.”