INTERNET—Clear Channel Deal Gives Hiwire an Edge

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Fresh off its landmark deal with radio giant Clear Channel Communications Inc., Los Angeles-based streaming company Hiwire Inc. gains instant market dominance.

“It’s a big deal. This shoots them far ahead,” Danielle Romano, an analyst with Jupiter Media Metrix, said of Hiwire’s growing clout as a result of the Clear Channel alliance. “In the past, there’s been no money to be made in streaming. This definitely makes it more interesting.”

It was no coincidence that Clear Channel announced its deal with Hiwire at the same time it trumpeted its plans to return more than 250 of its radio stations to the Web. Those streams were yanked in February to avoid a legal battle with the American Federation of Television and Radio Artists, which demands royalty fees for actors whose radio ads are streamed online.

With Hiwire’s technology, Clear Channel and other Webcasters can avoid that problem by removing those ads from the stream and replacing them in real time with narrowly targeted ads made specifically for Internet distribution.

In addition to marketing its proprietary ad-insertion technology, Hiwire functions as an advertising agency, collecting fees on ads it inserts that are sold by its clients, or selling its own ads to customer stations.

“The real appeal of the system is that it allows advertisers to pluck out the audience they want,” said Hiwire Chief Executive Warren Schlichting. “It’s a very powerful form of advertising to be able to extract an attractive demographic.”

Using demographic information provided by Clear Channel and its other clients, Hiwire can target the specific “streamie” sought by the advertiser. That means 12-to-25-year-old males might hear a spot for video games, while urban-based women 18-55 get an SUV ad. The streamed ads typically run in conjunction with banners on the screen, increasing their click rate and their value, Schlichting said.

As AFTRA and Webcasters work toward a deal that would allow the companies to stream regular radio ads for a discounted rate, another potential hurdle involves the looming battle with musicians and the Recording Industry Association of America.

While traditional radio stations are exempt from such fees, the RIAA wants streamers to pay for every song played over the Internet, a request that has been resisted.

Hiwire, which also provides ad insertion for NetRadio.com, DiskJockey.com and others, said its deal with Clear Channel will push the number of ads it runs or impressions from 25 million per month to 1 billion a month when all of Clear Channel’s stations come back online.

With Clear Channel the most aggressive large media company in Internet radio streaming, those numbers bode well for Hiwire, particularly during a period in which ad sales have dropped.

“Any move by Clear Channel in this space will be the equivalent of the rumbling of giants,” said Steve Vonder Haar, an analyst with Yankee Group. “There are only a handful of players, and Hiwire is in a very good position.”

But Schlichting said Hiwire is taking nothing for granted.

Even with the Clear Channel deal in place, Hiwire cut its workforce in May from 65 to about 35, and there are no immediate expansion plans. Hiwire raised $16.3 million in a second round of funding in February 2000 and is back in the hunt for more capital.

“This year’s emphasis is all about getting (to break-even), and the sooner the better because capital markets are demanding profitability and positive cash flow,” said Schlichting. He said Hiwire is on track to be in the black by mid-2002.

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