How Does Internet Radio Make Money

Costs Associated with Online Radio Stations

While there are options available that allow an individual to create and maintain simple and free Internet radio stations there are still costs associated with maintaining and running a station, no matter how large or small.

Equipment, Internet access, hosting fees and potential royalty payments to record labels (stations playing any copyrighted music must pay royalties) can turn even a free online station into a monthly expense for the owner, so it is in her best interest to find sources of income to help pay the bills.

Ad-Based Internet Radio

Internet radio stations can sell airtime to advertisers and play their ads during programming. For novice and smaller operations, web-based ads may work better. Programs such as Google AdSense allow anyone with a website to sign up for free and place Google-programmed ads on their station's websites.

Donations

Many stations solicit donations from loyal listeners to help pay the bills. Companies such as PayPal allow users to set up a free account and add a 'PayPal donation' button to their website.

Listeners can then donate a set amount or the amount of their choice or sign up to donate automatically on a monthly basis, giving listeners the ability to support radio programming they enjoy.

Payola Practices

Payola—when a band or record label pays a radio station or DJ to play its music—is illegal, as it has been dating back to the 1950s, when such scandals rocked the commercial-radio business. But it is technically legal for a band or record label to pay a station to play a song as long as the station announces that arrangement on air before playing the song, notes that the song does not constitute regular airplay, and states that the song is sponsored airtime.

Some consider this practice, even with full disclosure, to be unethical, so a station owner should decide where she stands on this issue.