AOL revamps online radio, adds CBS stations

Much is at stake for AOL, which is looking for new ways to boost revenues from online music streaming a year after a panel of copyright judges sharply increased the royalties that online radio providers pay to record labels and artists.

Lisa Namerow, the general manager of AOL's online radio unit, said the company's music streaming business was still unprofitable, even though recent figures from Arbitron Inc. show AOL has the largest average weekly online audience.

"We really needed to figure out a new business strategy in order for us to stay in business," Namerow said. "We needed to monetize radio better."

For AOL, a unit of the media conglomerate Time Warner Inc., that meant teaming up with CBS' radio business, the second-largest player in radio after Clear Channel Communications Inc.

The addition of CBS stations will bring a number of highly rated news, talk and sports channels such as WFAN in New York to AOL's online radio service, replacing a previous arrangement AOL had with XM Satellite Radio Holdings Inc.

CBS will also use its vast advertising sales force to sell all ads across the AOL radio service, something that Namerow is hopeful will bring in more local advertising dollars.

AOL had been selling national advertising on its radio service but had hardly cracked the market for local ads, which traditionally make up the vast majority of radio advertising spending.

The deal with AOL also jump-starts CBS Radio's efforts to build up online audiences. David Goodman, the head of digital media and integrated marketing at CBS Radio, said the deal could double the total amount of people listening to streams from CBS stations during peak periods. Today, that figure can be as high as 125,000, he said.

Goodman says he expects online business to be a "huge growth area" for CBS stations following their integration into the AOL radio player, though he declined to give specific forecasts.