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America Online may buy stake in Chancellor

Move would yield access to 65 mil listeners

America Online is in talks to acquire a stake in Chancellor Media — a deal that would give the Web giant access to the programming of the 470 radio stations owned by the broadcasting behemoth and to its more than 65 million listeners.

Insiders said the deal, in which AOL would pony up north of $250 million, has been in the works for weeks and could close early next month. None of the parties could be reached for comment.

Under the deal, AOL would gain access to Chancellor’s stations in 106 U.S. markets, while Chancellor, the industry’s largest radio station chain (after it closes the acquisition of Capstar Broadcasting in July), gets a cash infusion and a potential boost in revenues.

The pact would integrate Chancellor’s more than 65 million listeners with AOL’s nearly 20 million subscribers, a national audience aggregate that advertisers and marketers will likely pay handsomely to reach.

Like Yahoo!

The Chancellor/AOL deal, if completed, would closely follow Yahoo!’s $5.6 billion purchase last month of Broadcast.com, the Internet’s leading provider of radio programming.

Outfits like Spinner.com and RealNetworks have also entered the radio-Web waters with considerable success, and CBS-owned Infinity Broadcasting is expected to join the fray soon with a Webcast play linking the programming of its 160 stations.

The merging of radio and the World Wide Web has become the next frontier for programmers: It’s a way to reach additional audiences without launching new stations. Analysts suggest that more than 250 million people will be connected to the Internet by the end of this year.

Of the more than 10,500 radio stations in the U.S., nearly half have individual Web sites and more than 1,200 feature audio streaming so computer users can hear music, baseball games or stock market information through their PCs. There are also nearly 200 radio stations that operate solely on the Internet, with more bowing online each month

Revenue streams

Through radio Webcasting pacts, both parties can gain additional revenue streams. Stations can continue to generate revenue through the sale of air time for commercials, but by tapping into the Internet, additional revenue sources, such as online ads or e-commerce opportunities, can be integrated into the programming mix.

A station’s content, such as music or news, can also be made available for downloading by computer users for a fee.

And radio is a research intensive industry, in which new songs and programming shifts are thoroughly tested to determine audience interest, while a great deal of effort is expended analyzing listener demographics — all of which becomes easier on the Web.

Researchers assert that radio is the leading medium of interest to Web denizens, and a recent study unveiled at last month’s NAB confab suggested that radio ads for Internet services grew nearly 500% in 1998 over the previous year.

None of the parties could be reached for comment.