OFF IN A FAR CORNER OF A converted Capitol Hill warehouse, a group of young men spends a warm Sunday afternoon struggling with a paradox. The group runs Groovetech, one of the first Internet radio sites aimed exclusively at dance music fans and DJs, and given the surge of investor interest in this new medium, the kids should be drowning in cash. But the latest digital gold rush has rushed around rather than through them. In other words, Groovetech needs to figure out how to make money. One of the people charged with tapping into the cash flow, a lanky 23-year-old named Jon Cunningham, excuses himself from the meeting and walks across the airy space. He passes a glassed-in booth where a DJ is spinning a bass-heavy type of music, called hard house, that emits a subtle thump felt throughout the office—and that can be heard around the world on www.groovetech.com. “We look for what our audience wants,” Cunningham says with a glint of idealism. “People want to listen to music that rocks them.” He and his partners, RealNetworks employee Zach Jenkins, 23, and DJ Brian Pember, 25, have mastered the art of rocking their audience. Since starting Groovetech as a Web guide to Seattle’s dance music community in 1995, the site has gone on to include recorded DJ sets from clubs such as ARO.space, which users can listen to in streamed audio feeds. During the past year, with help from a silent investor Cunningham refuses to name, Groovetech moved into the warehouse, began streaming live DJ sets from the space 12 hours a day, and, in its first attempt to generate some cash, established an online record store specializing in electronic music titles. Like any other Internet company, Groovetech is faced with the trick of converting happy visitors into paying customers. Cunningham and his friends have reason for hope: At last month’s Plug.In music and technology conference in New York, analysts and industry types agreed that radio is one

of the Internet’s Next Big Things, if not the future of radio itself. In an amazingly short time, the Net has eliminated the barriers of the Federal Communications Commission-controlled AM/FM band, allowing thousands of stations to bloom. But as the industry players note and as Cunningham himself acknowledges, the niche stations that have developed won’t last long without a revenue stream. “I give serious props to anybody who’s out there in their bedroom with their computer and their DSL line pumping stuff out,” Cunningham says. “But to try covering all the bases that we’re covering, this has to pay for itself.”

Groovetech, then, is a bellwether for Internet radio—a small, young company (with eight employees in Seattle and two in a new London office) that may or may not reconfigure the landscape.

IF 1991 WAS The Year Punk Broke, as a documentary film title summed up the Nirvana-led revolution at the outset of this decade, then 1999 will go down as The Year the Internet Broke. Ironically, this isn’t because technology faltered, but because it progressed. During the first half of the year, better broadband and faster computers propelled the downloadable form of music known as MP3 into the nation’s consciousness. Now, Internet radio is poised to follow.

It’s just as easy, if not easier, to experience an Internet radio broadcast as it is to download a song. RealNetworks and Microsoft both offer free software on their Web sites in the form of a player (Apple debuted its own last month) that allows computer users to transform a portion of their desktop into a high-tech variation on the AM/FM dial.

Once a user downloads Real’s G2 Player, Microsoft’s Windows Media Player, or Apple’s Quick Time, he or she can visit one of the thousands of online radio sites and sites of traditional radio stations that have made the transition to the Web (see sidebar at end of article). With a single click, a user can listen to near-FM quality Webcasts from around the globe, covering every imaginable type of music and talk shows, news, sports, and weather.

The only catch is that the listener has to be attached to a computer that in turn is attached to the Internet. At the moment, this means that users tune in at home or at work rather than in their cars.

One of the people who helped develop Microsoft’s applicable technology, lead product manager for Windows Media Gary Schare, says that so far the benefits of Webcasting have outweighed the limitations for both listeners and the companies that stream audio. “Every day I talk to people who have found a favorite radio station that is somewhere else in the country or in the world,” he says. “They make time to listen, whether at home or on their PC at work.”

A recent study by the radio ratings company Arbitron lends credence to Schare’s observation. A poll of more than 1,500 Webcast listeners found that nearly 50 percent use their computer as a glorified radio at work, and that many of them also tune in at home.

This hasn’t escaped the notice of those in the radio and technology industries. In the past few months, nearly everyone has jumped on the bandwagon: Yahoo shelled out $5.7 billion for Broadcast.com, a sort of radio portal with links to traditional and online-only stations; America Online purchased the 120-channel original content site Spinner.com as part of a $400 million deal; Viacom, the owner of MTV, bought Imagine Radio, which allows individuals to create and then broadcast their own playlists; and recently the largest chain of offline radio stations, Dallas-based Chancellor, changed its name to AMFM in part to help redirect the company toward an expansive online strategy. The companies are shuffling for position to cover themselves in both the near and long term.

Right now, the increasing popularity of Webcasts in the workplace is leading to innovation and excitement. An eclectic online station, GoGaGa, has capitalized on the trend, airing a lively show called “Music For Cubicles” with a cutting-edge playlist and commentary for the too-hip-to-read-Dilbert set. At Groovetech, Cunningham says that his core audience consists of listeners whose jobs require them to sit in front of a computer but who enjoy hearing a DJ spinning electronic music while they work. “People with programming jobs or whatever,” he says. Traditional stations like Seattle’s adult-alternative The Mountain and urban KUBE, meanwhile, are streaming the same content that they broadcast offline in hopes that listeners will transition from the commute to the cubicle—thus creating a broader appeal for advertisers.

This aspect has softened the blow to broadcasters who otherwise might see the Internet as the enemy, says RealNetworks general manager for media publishing Mark Hall. “Here’s an opportunity to get an audience between nine and five, when radios are usually turned off,” he says. “I don’t think the [stations] are nervous about it. They’re all rushing as fast as they can to get in there and get a piece of it.”

STILL, ANYONE WHO has experienced the thrill of discovering an online station that’s perfectly suited to her or his taste can see where this is headed. For several reasons, Internet radio could make the AM/FM dial obsolete.

The first is that Webcasts aren’t one-dimensional. While listening to a station, a user can interact with a site, reading reviews or artist interviews, chatting with other listeners, and emailing DJs. From the industry’s point of view, this interactivity is golden: When a listener likes what he hears, he points, clicks, and can instantly buy the CD. With the improved quality of streaming video, some sites even offer visual accompaniment; though watching a gal or guy spin records is not the most riveting sight, Groovetech’s camera offers a real-time feed from the DJ booth.

Second, the Internet does away with the notion of stations with a singular broadcast goal. Many companies are experimenting; Groovetech has agreements with clubs in Seattle, London, and Miami, allowing it to broadcast, then archive, live performances. More common is for a site to offer genres with playlists pinpointed to specific tastes. At Spinner.com, a user can choose from 120 channels covering alt-country to indie-rock to reggae to swing. “Radio is kind of a bad word to us,” says Jim Van Huysse, whose irreverent title at the San Francisco-based Spinner is Director of All Content. “We’ve just gotten bigger and broader.”

A third threat to the status quo comes from software like Shoutcast, which enables individuals to create their own playlist and stream MP3s. Similarly, the Real Jukebox offers users the option of designing their own catalog of songs, which can then be sorted into personal playlists.

Of course, not everyone wants to be a DJ, which is one reason why radio exists in the first place. So is this a case of technology causing companies to overreach consumers’ desires?

Not at all, says Real’s Mark Hall. “Some people like to have control over everything on their screen,” he explains. “Others are more passive and want people to do the programming for them.”

Either way, radio as we know it will change dramatically—and quickly. Starting in late 2000, a few high-tech companies will try adapting the subscription model to radio, debuting stations on the FCC-approved “S” band for satellite radio. CD Radio and XM Satellite Radio are among those planning to charge users between $10 and $15 a month to receive hundreds of programmed channels over car units that will sell in the $200 range.

By the time this technology is up and running, however, it too may be obsolete. Industry players say it’s not a matter of if the Internet can become wireless, but when. What this will mean to the world in general is open to speculation, but it’s clear that given the choice between a few dozen local radio stations and thousands from around the world, listeners will opt for the latter. “Whether it’s a year or two years or five years is still not clear to people,” says Hall. “But there’s no doubt that within the next five years you’ll start to see delivery of Internet radio signals via wireless—and that means portable devices.”

INTERNET RADIO ARRIVED with perfect timing for listeners. Over the past decade, the government’s favorable attitude toward big business and the consequent consolidation of the radio industry led to a severe narrowing of playlists. Stations once programmed by adventurous music directors now are driven by the corporate bottom line, meaning that when a song’s a hit, it must be played ad nauseam until market research proves that it’s tapped out. And the rest of the air time—as much as 10 minutes of every hour—is filled with paid ads.

Unfortunately for these stations, higher earnings may mean lower ratings. A recent Arbitron study found that two-thirds of all teenagers would pay a subscription fee to receive commercial-free programming. Additionally, radio listening among those 25 and under has plummeted 10 percent in the last six years.

Not surprisingly, as the new media barons ponder how to make Internet radio profitable, the question, “to be or not to be commercial-free” looms large. At Plug.In, industry players were split on the issue of whether to embed ads into streamed content; some felt that other revenue streams could be exploited, others said that since banner advertising and record sales can only generate so much cash, commercials are the only way.

Groovetech’s Cunningham is adamantly anticommercial: “There’s lines we won’t cross with this site,” he says. He’s confident that at this stage, a loyal audience is a site’s most important asset. As for what comes next, Cunningham, his partners, and everyone else leading the way into this brave new world will continue to hold meetings and—keeping in mind that it’s the music that matters—struggle to find a palatable way to make the medium self-sustainable.

In the meantime, they all are caught up in the simple pleasure of pushing technology forward. “It’s all that start-up bullshit,” Cunningham says, rolling his eyes for effect. “The hours are insane, but we enjoy doing it.”

The Weekly‘s step-by-step guide to Internet radio

INTERNET RADIO’S GREATEST obstacle is a general lack of knowledge about how to use it. But really, kids, it’s easy! Just follow these five simple steps:

1. First you’ll need to turn on your computer.

2. Next, log on with your favorite Internet Service Provider.

3. Go to www.real.com and find the free RealPlayer G2 (it should be a thumb-sized icon floating on the left of your screen), or, if you want to shell out $29.99 for a supposedly superior experience, download RealPlayer Plus G2.

(You also may want to point your cursor toward Redmond and download Microsoft’s Windows Media Player 4.0, which some sites offer as an alternative to Real and a very few sites use exclusively).

4. Plug your speakers or headphones directly into your computer’s sound card, probably round back.

5. Once you’ve got your player, there are any number of ways to get out there and lasso some content. Both the RealGuide (at realguide.com) and Microsoft’s Windows Media Player toolbar feature links to hundreds of Internet radio sites, or you can proceed directly to Broadcast.com, Spinner.com, or the massive Web-Radio.FM (www.web-radio.com), which can connect you to over 2,500 channels.

OR YOU CAN go directly to one of these ultragroovy, Seattle Weekly-approved sites:

Groovetech (www.groovetech.com) streams live in-house DJ performances from a warehouse in Seattle’s Capitol Hill neighborhood. The site also features periodic live club Webcasts with the cream of the underground dance music crop, archived shows with big-name electronica artists including Fatboy Slim, and online record shopping.

Skratchcast (www.skratchcast.com) is a Seattle site streaming live hip-hop DJs along with archived broadcasts. The emphasis is on West Coast hip-hop and turntablism. There’s also online record shopping, graffiti art, interviews, and links to other hip-hop sites. A non-Seattle alternative of note is UndergroundHipHop.com.

WFMU (www.wfmu.org or www.broadcast.com/radio/Public/WFMU) broadcasts freeform and extremely eclectic playlists from a variety of DJs, 24-7. The Jersey City FM station was one of the first to hop online and begin streaming, and it’s rightly become a popular destination for serious musos. You can hear anything from King Crimson to Air to Buddy Rich to Sufi chants to frogs croaking to—well, you get the idea.

Radio Nova (www.novaplanet.com) is another free-spirited traditional station that jumped online early, and it’s got a primo mix of soul, electronica, hip-hop, chill-out, funk, drum ‘n’ bass—and wacky French DJs.

GoGaGa (www.gogaga.com) may be from the musical black hole of Colorado, but this online-only station is among the Web’s best. It’s also one of the few to incorporate chatty DJs into the stream, particularly effective during the smartly conceived “Music for Cubicles” program. Music-wise, GoGaGa runs the gamut from rock to dance to jazz and beyond; a list of the different shows on the site explains the DJs’ tastes.

Locally, a number of AM and FM stations stream through their Web sites. Broadcast.com and Web-Radio.FM feature search functions that’ll help you find ’em.

(Note: Listening to Internet radio requires patience. There are still bugs galore, and you may encounter lapses in the Webcast due to dreaded “Net congestion.”)