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By SARA FISHER

Staff Reporter

Last Friday night, the rock band Hootie & the Blowfish serenaded its fans via a concert broadcast live into their homes. But the fans didn’t tune into a radio station or turn on their TVs for the performance.

Instead, they watched their computer screens.

The Oct. 2 concert kicked off “ear1 MusicFest ’98,” a month-long concert festival sponsored by Burbank-based Warner Music Group that will be broadcast exclusively over the Web. For the rest of October, Warner’s ear1 Web site will feature nightly concerts from popular music acts such as Paula Cole, Barenaked Ladies and Third Eye Blind.

MusicFest is the latest undertaking in the nascent “Webcasting” industry, a collision of music and technology that has strong roots in Los Angeles.

West Hollywood-based House of Blues, which is winding down its own summer online concert series, claims to be the largest Webcaster in the nation, with almost three years and hundreds of events under its belt. The Ultimate Band List, a 7-month old division of Encino-based Artistdirect Inc., will screen about 50 concerts over the Web this year, plus a slew of interviews and behind-the-scenes profiles of artists.

In early November, Boston-based trade magazine Webnoize will host the first-ever conference at Universal City dedicated to examining the growing alliance of music and new media.

“Webcasting is a great way to use the Internet and it’s a growing trend both from the consumer side and the music-industry side,” said Tom Roli, publisher of Webnoize, whose Internet site attracts about 75,000 visitors per month. “Having said that, it’s also important to note that Webcasting is very much an industry in its infancy.”

This caveat resonates throughout the industry.

“Given its small audience and high production costs, Webcasting is an economic mismatch,” said Barry Parr, director and of e-commerce strategies at International Data Corp. “You have to deal with demands for sophisticated technology, which most consumers either don’t have or aren’t comfortable with. Perhaps even more important is that you have a broadcast model imposed artificially on the Internet, which up to this point hasn’t succeeded in drawing a large audience to passively watch online events.”

For the fledgling industry, a lack of profits is the most immediate problem. Expenses far outweigh revenues coming in from Webcasts, which generally are offered free of charge to viewers. So far, corporate sponsors and record companies have been picking up the tab, allowing the Webcasters to break even.

“For the most part, our revenues come from the artists’ companies, who in return get exposure for their acts and the rights to the master recording of the concerts,” said Stephen Felisan, vice president of new-media technology and development for House of Blues. “The demand for Webcasts is there, but our main limiting factor is the expense.”

Production costs alone for House of Blues Webcasts run between $7,000 and $20,000. The company does not pay any fee to a performing musical act. Instead, record companies have been signing the paychecks, hoping that the Webcasts will prove useful marketing tools for new releases, said Steve Rennie, president of the Ultimate Band List and a former executive at Sony.

“The music industry has warmed up to the concept of Webcasting,” he said. “Right now, the raging debate is not whether (the industry) should do it all, but whether they should do it themselves.”

Donna Cohn, senior director of multimedia at the Warner Music Group, says Webcasting can be a cost-effective endeavor, pointing out that the Discover Card and Alabama-based Web service firm Cornerpost.com are fully underwriting the MusicFest’s expenses.

But most traditional advertisers show little interest perhaps because the size of an audience can vary widely, from 70,000 visitors to just a few hundred.

“Webcasting hasn’t shown itself to be a viable means of advertising,” said Mark Hardie, an analyst for Forrester Research. “This is an immature market, so advertisers are simply not sure of what bang they’ll get for their buck.”

Any concert’s success ultimately comes down to the sensory experience it offers and so far, that experience has been severely limited on the Web.

While the audio quality of most Webcasts equals that of an FM radio station, video quality is another matter. Watching a concert fed to a computer over a 28.8-baud modem looks like a slide show. On faster modems and Internet connections, the quality can surpass that of a television, but only a fraction of Internet users have that kind of equipment.

Hardie estimates that only 5 percent of the 100 million households connected to the Internet have broadband access, although the figure is expected to grow to 20 percent within the next three years.

“Would I watch a live concert this way with the existing technology? Not on your life,” Hardie said.

Webcasters insist the analysts are missing the point. Webcasts are unique due to their interactive element. Interviews with performers and glimpses of backstage activity give viewers more than what normal concertgoers can see. For Warner’s MusicFest, most performers give interviews with fans via the Web following their performances. The Ultimate Band List’s most popular Webcasts also have involved question-and-answer periods with the performer.

Meanwhile, the House of Blues is positioning itself to become a content provider when the worlds of digital television and computers collide.

Starting with its flagship club in Los Angeles this year, all House of Blues venues will be equipped with digital studios. The company will begin recording and Webcasting its concerts as a matter of course, and Felisan estimates that production costs will drop down to 10 percent of their current level.

“The business model is not in place yet, but companies are positioning themselves as this medium continues to develop,” said Roli.