Internet radio (also known as web radio, net radio, streaming radio and e-radio) is an audio broadcasting service transmitted via the Internet. Broadcasting on the Internet is usually referred to as webcasting since it is not transmitted broadly through wireless means. Internet radio involves a streaming medium that presents listeners with a continuous "stream" of audio over which they have no control, much like traditional broadcast media; in this respect, it is distinct from "on-demand" file serving. Internet radio is also distinct from podcasting, which involves downloading rather than streaming. Many Internet radio "stations" are associated with a corresponding traditional (or "terrestrial") radio station or radio network. Internet-only radio stations are independent of such associations.
Internet radio services are usually accessible from anywhere in the world—for example, one could listen to an Australian station from Europe or America. Some major networks like Clear Channel in the US and Chrysalis in the UK restrict listening to in country because of music licensing and advertising concerns. Internet radio remains popular among expatriates and listeners with interests that are often not adequately served by local radio stations (such as progressive rock, ambient music, folk music, classical music, and stand-up comedy). Internet radio services offer news, sports, talk, and various genres of music—every format that is available on traditional radio stations.
The most common way to distribute Internet radio is via streaming technology using a lossy audio codec. Popular streaming audio formats include MP3, Ogg Vorbis, Windows Media Audio, RealAudio and HE-AAC (sometimes called aacPlus). The bits are "streamed" (transported) over the network in TCP or UDP packets, then reassembled and played within seconds. (The delay is referred to as lag time.)
In 1993, Carl Malamud launched Internet Talk Radio which was the "first computer-radio talk show, each week interviewing a computer expert." This was Internet radio only insofar as it was conceptually a radio show on the Internet. As late as 1995, Internet Talk Radio was not available via multicast streaming; it was distributed "as audio files that computer users fetch one by one." However Malamud was among the foremost proponents of multicasting technology. In late 1994, his Internet Multicasting Service was set to launch RTFM, a multicast Internet radio news station. In January 1995, RTFM's news programming was expanded to include "live audio feeds from the House and Senate floors."
A November 1994 Rolling Stones concert was the "first major cyberspace multicast concert." Mick Jagger opened the concert by saying, "I wanna say a special welcome to everyone that's, uh, climbed into the Internet tonight and, uh, has got into the M-bone. And I hope it doesn't all collapse."
On November 7, 1994, WXYC (89.3 FM Chapel Hill, NC USA) became the first traditional radio station to announce broadcasting on the Internet. WXYC used an FM radio connected to a system at SunSite, later known as Ibiblio, running Cornell's CU-SeeMe software. WXYC had begun test broadcasts and bandwidth testing as early as August, 1994. WREK (91.1 FM, Atlanta, GA USA) started streaming on the same day using their own custom software called CyberRadio1. However, unlike WXYC, this was WREK's beta launch and the stream was not advertised until a later date.
In 1995, Progressive Networks released RealAudio as a free download. Time magazine said that RealAudio took "advantage of the latest advances in digital compression" and delivered "AM radio-quality sound in so-called real time." Eventually, "companies such as Nullsoft...and Microsoft" released streaming audio players "as free downloads". As the software audio players became available, "many Web-based radio stations began springing up."
Internet radio attracted significant media and investor attention in the late 1990s. In 1998, the initial public stock offering for Broadcast.com set a record at the time for the largest jump in price in stock offerings in the United States. The offering price was US$18 and the company's shares opened at US$68 on the first day of trading. The company was losing money at the time and indicated in a prospectus filed with the Securities Exchange Commission that they expected the losses to continue indefinitely. Yahoo! purchased Broadcast.com on July 20, 1999 for US$5.7 billion.
In October 1998, the US Congress passed the Digital Millennium Copyright Act (DMCA). One result of the DMCA is that performance royalties are to be paid for satellite radio and Internet radio broadcasts in addition to publishing royalties. In contrast, traditional radio broadcasters pay only publishing royalties and no performance royalties.
A rancorous dispute ensued over how performance royalties should be assessed for Internet broadcasters.   Some observers said that royalty rates that were being proposed were overly burdensome and intended to disadvantage independent Internet-only stations - that "while Internet giants like AOL may be able to afford the new rates, many smaller Internet radio stations will have to shut down." The Digital Media Association (DiMA) said that even large companies, like Yahoo! Music, might fail due to the proposed rates. Some observers said that some U.S.-based Internet broadcasts might be moved to foreign jurisdictions where US royalties do not apply. 
Many of these critics organized SaveNetRadio.org, "a coalition of listeners, artists, labels and webcasters" that opposed the proposed royalty rates. To focus attention on the consequences of the impending rate hike, many US Internet broadcasters participated in a "Day of Silence" on June 26, 2007. On that day, they shut off their audio streams or streamed ambient sound, sometimes interspersed with brief public service announcements. Notable participants included Rhapsody, Live365, MTV, Pandora, and SHOUTcast. Some others that did not participate, like Last.FM, stated that they did not want to punish their listeners for the station's problems.
SoundExchange, representing supporters of the increase in royalty rates, pointed out the fact that the rates were flat from 1998 through 2005 (see above), without even being increased to reflect cost-of-living increases. They also point to the fact that CBS recently purchased Last.FM for 280 million dollars, and if internet radio is to build businesses from the product of recordings, the performers and owners of those recordings should receive fair compensation. Opponents argued that the purchase price paid for Last.FM reflected that it was primarily a social network service that included a radio service.
On May 1, 2007, SoundExchange came to an agreement with certain large webcasters regarding the minimum fees that were modified by the determination of the Copyright Royalty Board. While the CRB decision imposed a $500 per station or channel minimum fee for all webcasters, certain webcasters represented through DiMA negotiated a $50,000 "cap" on those fees with SoundExchange. However, DiMA and SoundExchange continue to negotiate over the per song, per listener fees.
SoundExchange has also offered alternative rates and terms to certain eligible small webcasters, that allows them to calculate their royalties as a percentage of their revenue or expenses, instead of at a per performance rate. To be eligible, a webcaster had to have revenues of less than $1.25 million dollars a year and stream less than 5 million "listener hours" a month (or an average of 6830 concurrent listeners). These restrictions would disqualify independent webcasters like AccuRadio, DI.FM, Club977 and others from participating in the offer, and therefore many small commercial webcasters continue to negotiate a settlement with SoundExchange.
An August 16, 2008 Washington Post article reported that although Pandora was "one of the nation's most popular Web radio services, with about 1 million listeners daily...the burgeoning company may be on the verge of collapse" due to the structuring of performance royalty payment for webcasters. "Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures." The article indicated that "other Web radio outfits" may be "doom[ed]" for the same reasons.
On September 30, 2008, the United States Congress passed "a bill that would put into effect any changes to the royalty rate to which [record labels and web casters] agree while lawmakers are out of session." Although royalty rates are expected to decrease, many webcasters nevertheless predict difficulties generating sufficient revenue to cover their royalty payments.
In January 2009, the US Copyright Royalty Board announced that "it will apply royalties to streaming net services based on revenue."
In 2003, revenue from "online streaming music radio" was US$49 million. By 2006, that figure rose to US$500 million.
A February 21, 2007 "survey of 3,000 Americans released by consultancy Bridge Ratings & Research" found that "[a]s much as 19% of U.S. consumers 12 and older listen to Web-based radio stations." In other words, there were "some 57 million weekly listeners of Internet radio programs. More people listen to online radio than to satellite radio, high-definition radio, podcasts, or cell-phone-based radio combined."
An April 2008 survey showed that, in the US, more than one in seven persons aged 25-54 years old listen to online radio each week. In 2008, 13 percent of the American population listened to the radio online, compared with 11 percent in 2007.