Will Jelli’s Crowdsourcing Kill the Radio Stars (and Save the Stations)? Stay Tuned

7/12/10Follow @wroush

As the Web enters its third decade, it’s getting harder to think of industries that haven’t been transformed in major ways by its ubiquitous, disintermediating, democratizing force. But we wrote about one of them last week—banking—and there’s another that’s just as ubiquitous as the Web itself: broadcast radio.

“If Alexander Graham Bell came from the past and saw the current stage of the telecom industry, with its massive change in network architecture and wireless devices, for example, he wouldn’t recognize it,” says Mike Dougherty, CEO and co-founder of San Mateo, CA-based Jelli. “But if Charles David Harold, the first guy who started a radio station—which was in San Jose, incidentally, in 1909—came into today’s radio world, he would probably recognize everything about the technology…There hasn’t been a lot of innovation in radio for a long time, for lots of reasons.”

At Jelli, Dougherty and co-founder and COO/CTO Jateen Parekh are doing their part to modernize terrestrial radio, one station at a time. For the last six months, San Francisco-based CBS affiliate Live 105 (KITS) has been handing over its airwaves to Jelli’s automated, Web-based audience voting software six nights a week, with an electrifying effect on ratings. Through radio syndicator Triton Media, Jelli programming now airs on 18 stations nationwide, including X107.5 in Las Vegas (WZRX)—which will launch a Jelli-powered program called “Resistance Radio” at 9:00 p.m. tonight.

The basic idea behind Jelli is to let a radio station’s listeners decide which songs get air time, at least for part of each day. “It’s a crowdsourcing concept,” says Dougherty. “Rather than being chosen by a programming director or a DJ, the playlist is now being developed by the audience itself. We call it ‘social broadcasting’ or ‘radio democracy.’”

Mike Dougherty, co-founder and CEO of JelliOf course, there’s nothing new about letting listeners suggest songs. Radio stations have been taking call-in requests since the 1940s. But Jelli’s concept goes well beyond that. Once listeners are logged into Jelli’s website, they can not only vote for their favorite songs, but use “power-ups” to push a song to the front or back of the queue. They can also influence what’s currently playing, through votes called “Rocks” or “Sucks.” Enough “Sucks” votes and a song will implode in mid-stream, complete with funny sound effects. It’s all a great example of what Greg has called the “gamification” of the Web—or in this case, the airwaves.

Dougherty, Parekh, and their backers—who include Battery Ventures, First Round Capital, and a variety of angel investors—hope that the Jelli concept will become the next big thing in radio, helping an industry that’s been hit especially hard by the recession. The goal is to help stations find new ways of engaging with listeners while at the same time lowering programming costs. A station syndicating Jelli doesn’t need a DJ during the hours Jelli’s platform is in control, which makes the format “highly cost effective,” in Dougherty’s words.

That’s key in a business that saw an 18 percent revenue decline in 2009, thanks to the evaporation of key advertising accounts with sectors like the automobile industry. “This year it’s back up about 16 percent, which gives them some breathing room, but it was a wakeup call that they are at risk,” Dougherty says. “They need to start thinking more about what the future of radio is.”

Speaking of automobiles, Dougherty says the original idea for Jelli grew out of his work for Microsoft, which is collaborating with Ford on a system for hands-free music, phone, and navigation access called Sync. (Dougherty had joined Microsoft through the software giant’s 2007 acquisition of voice applications company TellMe, where he’d been vice president of business development.)

“During that experience at TellMe and Microsoft I started getting interested in all of the things that could happen in the car that aren’t happening,” Dougherty says. “As part of that I was fascinated by this ubiquitous but to some degree forgotten thing that we all have, which is the radio. There are about a billion working radios in the United States and 236 million of those get turned on every week. It’s a pillar of media, along with print and TV, and it has a well established business model related to local advertising.”

But what radio doesn’t have is much audience interactivity, let alone the kind of interoperability between content sources that makes the Web so powerful. Leaving aside streaming “Internet radio” like Pandora or Last.fm—which is an entirely separate technology—the systems that deliver music and other content to terrestrial radio stations are for the most part closed, proprietary, and siloed, Dougherty says.

“There are no open interfaces, no platforms, no room to get more advanced in terms of content management systems or podcasts or the other things we take for granted on the Web,” he says. “So we started thinking about what would happen if you could create a Web platform for radio. In so doing you could create really cool things, like for the first time in a broadcast you could create a feedback loop…and combine the social Web directly with radio.”

(By “we” Dougherty means himself and co-founder Parekh, who is a veteran of ReplayTV and was the first engineer recruited by Amazon to work on the Kindle e-reader. “We’re both very excited about the concept of combining the Web platform with things that are very well understood, such as books with the Kindle, or the phone with TellMe,” Dougherty says.)

What Dougherty, Parek, and their team built is essentially a Web-based social playlist generation system. When Jelli is on the air, a station turns its controls over to the startup’s system, and everything listeners hear comes from Jelli. A given station’s listeners log in at Jelli’s central site, then go directly to the station’s Jelli page, which is skinned with the stations’ own graphics and logos. The page lists all the songs in the station’s current playlist, with a point score next to each.

By clicking on “check” or “X” icons, listeners can add one point to a song’s score or subtract one. The song with the highest score at any given moment is the one that gets played next. But to make things a little more fun and unpredictable, a single listener can send a song almost all the way to the top or bottom of the playlist using a power-up—either a “rocket” or a “bomb.” The more times listeners vote on songs, the more rockets and bombs they’re rewarded with. Users can stockpile up to five bombs and 11 rockets. If a rocketed song gets played, an automated system reads the screen name of the person who rocketed it—which may be what makes the rocket the most popular power-up. Says Dougherty, “Everyone is trying to rocket their favorite songs onto the air.”

As for the music itself, that comes either from the relatively small catalog of tunes that Jelli has licensed, or can be ingested from a station’s own catalog. “We’re still very early in our catalog development,” Dougherty says. “We have a forum where people request songs that we should have available, and those are the ones we go buy next. But because of our broadcast partners and the way people are using Jelli in this early phase, we have strong alternative rock coverage, and pretty good pop-rock, and then some eclectic stuff. We’re probably light on the hip-hop and definitely light on country.”

Jelli debuted its system on Live 105 in San Francisco on June 28, 2009. “They gave us the least risky time slot they could give us, which was 10 to 12 on Sunday nights,” Dougherty recounts. “We were just excited to get whatever time slot. It was super cool, and we saw some interesting things that I don’t think a lot of people predicted would happen. [More on that in a moment.] Importantly, our ratings were strong, which obviously, in traditional media, is the point. And about six months after running that pilot on Sunday nights, Live 105 said they would try it out on a more standard schedule, so now we have 8 to midnight six nights a week.”

Jelli ended up being so successful for Live 105 that the station climbed from the No. 5 slot in the ratings for that time slot to the No. 1 slot for its demographic (alternative rock fans). And that success, in turn, helped Jelli win its syndication partnership with Triton, which is now building a national footprint for the startup.

Jelli makes money in the same way as any other provider of syndicated radio programming. A radio station buying an hour of content from Jelli gives a certain percentage of the advertising spots during that hour back to the startup, which it is free to sell directly to advertisers. (In practice, ad spot sales are handled by a national radio advertising network.) “We launched in one of the worst recessions of all time, so we said ‘Let’s keep the business model simple’ and make the economics the same as what a radio station would typically pay for Rush Limbaugh or Ryan Seacrest,” Dougherty says.

So far, so good. But if automated social playlists are really the future of radio, what will happen to old-fashioned DJs—the best of whom are valued by listeners for their skills as musical curators and introducers? Will Jelli kill the radio star?

Dougherty points out that at a lot of chain-owned radio stations—the name ClearChannel comes to mind—DJs don’t really choose music anyway. Playlists are handed down by automated systems, often at far-away corporate headquarters.

“I think that true curation is very good,” Dougherty says. “But I think crowdsourcing stands alongside of it. One morning you can listen to a curated experience, and when you want something different or more dynamic you can cruise over to this crazy radio station using Jelli. It’s very similar to reading a highly curated blog for a while and then going over to a free-for-all like Twitter.”

In fact, the experience of listening to a Jelli-driven station can be surprisingly entertaining, Dougherty says. This goes back to the point about the unexpected lessons of the Live 105 pilot.

“Before we launched, a lot of people thought this might become just another popularity chart, just another Billboard 100,” he says. “And another set of people, ironically, had the 180-degree-opposite concern, that this was going to end up being gamed and controlled by a small community, who might make it like ‘all Goth radio all the time’ or something. What we ended up seeing, when you have a bunch of smart people who love music actually get together to shape a playlist, is that sometimes they can do things that are very unexpected, or human, or ironic.”

For example, Jelli listeners have spontaneously assembled whole blocks of songs on themes such as the lunchtime munchies, schoolteachers, and even swine flu (every song contained a reference to pigs). “When these things happen on Jelli, they are truly special, and have everything to do with the audience,” says Dougherty. “It really does encourage us to say that if you are a broadcaster, you should harness this very powerful group of fans for your station, who are generally knowledgeable around music and can do things that are unexpected and cool and really create entertainment value that’s hard to fabricate by doing things the old way.”

Jelli closed a $7 million Series A funding round with Battery Ventures and First Round Capital in May, and will use some of the money to expand its current team of 15 employees to about 20, Dougherty says. Also high on the agenda is a mobile version of the Jelli Web interface. “You can make an argument that we should have launched just with mobile,” he says. “Roughly 65 percent of all radio listening occurs outside the home, and we should have Jelli available wherever listening occurs.” Dougherty says the company will be making some announcements “shortly” about the company’s strategy for taking advantage of the iPhone, Android phones, Twitter, and the like.

Meanwhile, Jelli continues to roll forward in its original time slot on Sunday nights on Live 105. In fact, that show has become so popular, with so much feel-good participation by fans that the station unofficially rebrands itself as “Love 105″ during this time slot, Dougherty says.

“If you’re going to pick a show to listen to, I really like Sunday night,” he says. “It’s just got an awesome vibe.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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