August 20, 2007 / 3:23 AM / 12 years ago

Auto manufacturers enter Internet radio race

NEW YORK (Billboard) - Welcome to the new generation of corporate radio, coming to you live from an auto dealership near you.

Car manufacturers are racing to establish Internet radio stations and online playlisting tools as part of a new marketing strategy aimed at hip, tech-savvy young adults. The latest, and so far the biggest, effort comes from Toyota’s Scion division, which in July added 17 Internet radio channels to its experimental Scion Broadband microsite.

Each channel features three hours of music that is looped 24/7 and updated monthly. The company tapped Live365 for the Internet radio technology, and 15 DJs from such partners as Vice Records and Ninja Tune Records for programming.

It’s an interesting time to get into the Web radio game. New webcasting royalty rates may doom thousands of independent Internet radio outlets if the ongoing negotiations don’t go their way. But deep-pocketed auto manufacturers seem unconcerned about paying the higher fees. Scion Radio 17 and the entire Scion Broadband site — which also includes comedy shorts and celebrity interviews — is simply a marketing effort disguised as a source of entertainment.

BLURRING LINES

“We don’t look at it as a revenue generator, because that’s going to be impossible,” said Jeri Yoshizu, Scion sales promotions manager at Toyota. “We sell cars. (But) as you get further into the generation we’re targeting, which is the 18- to 34-year-old male, corporations are advancing in their sophistication in marketing and advertising. It’s beyond TV, billboards and the Internet.”

Using music to create interest in a brand is hardly new, particularly for the automotive industry. But initiatives like Scion Broadband are raising the bar by blurring the line between online ads and online music services. That line faces further distortion as corporate branding moves increasingly into the sponsored-entertainment field online.

“Corporations have to start creating branded items to find new ways of branding to people who are completely inundated by communication,” Yoshizu said. “We have to spend money to advertise our brand regardless, so why not do things that are going to benefit people?”

But car manufacturers aren’t finding this strategy easy, particularly when it comes to licensing music. The music industry regards such microsites and services as advertising, and as such has set licensing rates at a level much higher than these companies anticipated.

Two years ago Nissan USA tried placing a widget on its site that would stream music while online shoppers browsed through models and features. Originally, the idea was to feature all the music ever played in Nissan ads, to maintain some tie-in between the TV and online marketing efforts. Then Nissan saw the bill.

A marketing executive who spearheaded the project and who’s no longer with the company said, “I’d have paid a nominal amount to license the songs, but not the millions they were asking for.” Ultimately, the company went with more easily obtained and less expensive pre-cleared music, but the music widget never caught on and was soon discontinued.

PROHIBITIVE COSTS

Scion ran into similar issues. The company wanted to place purchase links to iTunes or eMusic for each song streamed on Scion Radio 17, as well as play hour-long blocks of music featuring specific artists. But such activities are not listed in the accepted streaming practices outlined in the Digital Millennium Copyright Act, which means Scion would have to negotiate customized (read: expensive) licensing deals rather than just pay statutory rates.

To avoid these expenses, companies so far have teamed with existing digital music services instead of trying to go it alone.

After dumping its music widget initiative, Nissan struck a deal with Yahoo Music to sponsor a series of live performances filmed at Yahoo’s Los Angeles studios, called Nissan Live Sets, with footage appearing on the main Yahoo Music site. According to sources at Yahoo, Nissan is highly involved in selecting artists, and often will tie performances to marketing campaigns for new car models — for instance, pairing Santana and the new Rogue.

Since the program started more than a year ago, more than 10 million fans have viewed the performances, including those attending events live, and Nissan just reupped the initiative for another year.

If Scion’s online experiment proves successful, it’s likely that more consumer brands of all stripes, and not just automakers, will launch their own online entertainment sites. As yet, though, the jury’s out. While the main Scion Web site averages around 750,000 hits per month, the Broadband microsite averages merely 10,000. But that’s with almost no marketing to date. With the addition of the Internet radio element, the company plans to begin advertising the service in hopes of seeing traffic increase.

“I’m not aiming for a Nike-sized audience, or iTunes-sized audience,” Yoshizu said. “We’re aiming for the people that are going to respect what Scion is trying to achieve. And that’s the best you can hope for.”

Reuters/Billboard

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