Time of Reckoning Nears for HD Radio
     

It’s beginning to seem like a long time ago when many of us started laying plans to add IBOC digital transmission to our stations.

The topic has dominated our industry as a seminal yet controversial issue since the early 1990s. Early adopters have been running HD Radio for almost five years. But the long ordeal of converting radio broadcasting from analog to digital in this country is still in its infancy.

THEN AND NOW

Early on, many of us concluded that in spite of various issues regarding its business model and technical limitations, Ibiquity’s HD Radio was worth backing. I became a fan of the technology and I am still supporting it. After all, it was the only horse that really qualified to run this race. With the FCC’s adoption of HD-R as our digital radio standard, the gates are now officially all the way open and we’re off and running.

As the aging grandfather in a growing universe of glitzy multimedia consumer electronic alternatives, radio realized it would have to pull out all the stops to remain relevant and competitive. Back when Project Acorn was conceived, almost everybody agreed we needed some kind of digital transmission solution to keep pace with other media.

For better or for worse, HD Radio emerged as the industry’s digital platform to modernize its legacy over-the-air delivery technology, all within the constraints of existing channel allocations. The collaborative efforts of present broadcast stakeholders along with the consolidated venture-technology companies that invented IBOC have brought us to where we are today.

DEAL WITH IT

By the time you read this, fulltime AM-HD IBOC operations will have commenced for many key stations. The early fallout from skywave interference will be raining down from the ionosphere and the FCC will be dealing with the first round of formal complaints. Except for real interference that falls inside protected contours, other complaints will undoubtedly be dismissed.

AM-HD has from the beginning been widely criticized as the noisy and disruptive neighbor a lot of folks hoped would not move in next door. Other than a few isolated cases, Ibiquity has assured us the problem will not be all that bad. Instead of worrying about the background hiss or losing fringe area listeners, we should focus on the benefits of high-fidelity digital stereo on AM for the first time.

When all is said and done it probably won’t matter if AM-HD in the hybrid mode succeeds or not. The big signal AM news-talkers are the anchors saving the AM band and don’t need 15 kHz stereo to remain successful. If anything, lost fringe area coverage hurts them more than any benefit that might be derived from HD.

PROMOTING THE PRETTY GOOD

FM-HD has largely proven itself a worthy successor to its analog-only host, offering cleaner reception, multiple channels and expanded data features. Adjacent-channel interference to its neighbors is nearly a non-issue. The HD car radio experience is for the most part an impressive improvement.

Anyone who has driven a car through an extended area of bad multipath and noisy analog reception quickly appreciates the ability of HD to deliver high-quality listening virtually equivalent to a CD. Multicasting essentially gift-wraps additional stand-alone programming services and profit opportunities to existing stations.

As more stations add HD transmission and HD2 channels, Ibiquity and the HD Digital Radio Alliance are urging stations to do all they can to promote HD Radio sales. Ostensibly, some $200 million in 2007 and $250 million for 2008 has or is being spent on ad schedules and promotions to create awareness of HD with all the new “secret channels.”

Most of that money represents unsold inventory rather than hard dollars. It would appear that very few stations have committed real promotion budgets to independently advertise HD Radio. That’s a tall order with bottom-line industry growth rates mired in single and occasionally negative digits.

MARKET MALAISE

Any consumer who becomes attracted to HD Radio and decides to buy in, usually has to pay a premium for an aftermarket car radio upgrade, as there are still limited OEM models being offered. BMW does offer HD-R as an option in their entire product line, as well as in sister brand Mini Cooper. Hyundai and Jaguar are offering HD-R as an option on select 2008 models. Ford just announced it will offer it as an option in their 2008 models. At long last, we finally have the first sign of an HD-R commitment coming out of Detroit.

If he or she buys the relatively expensive HD-R desktop, that individual often discovers that an effective external antenna needs to be added to make it perform reliably and lock in stations similar to analog. And that person is disappointed he or she can’t find any pocket-sized HD Radios, although Ibiquity has said those are coming in 2008.

It hurts to admit it, but HD Radio and all of its marketing effort so far is virtually lost in the noise of all the other hype surrounding hot new consumer electronic “bling” offerings. Radio to most consumers is a familiar but low-tech commodity, just like water from the tap and electricity from the wall socket. It’s very hard to put any glitz on the product and get the average person’s attention. Is it any wonder HD Radio sales so far are pathetically low?

Ibiquity President/CEO Bob Struble stated over a year ago that its work developing and launching the HD Radio platform was essentially completed. All that needed to be done was the official FCC adoption of HD as the digital broadcast standard. That’s now a fait accompli.

Ibiquity has made it clear that the job of marketing HD Radio to propel radio sales is not solely their role. The big marketing push, they say, must come from the stations and owners, along with radio manufacturers and retail stores. But without more OEM HD car radios, portables and desktops that don’t need external antennas, dumping significant marketing money into a marginal or incomplete product line is proving to be a hard sell.

CHICKENS, EGGS & HD RADIOS

The HD rollout seems to have gotten caught in a bit of a Catch-22. With every passing month, I’m sensing a larger number of industry insiders growing more apprehensive about the rollout and whether HD-R technology can or will ultimately succeed.

Let’s face it. Without car receivers, radio doesn’t prosper or go anywhere. Only a very small percentage of consumers opt to buy an aftermarket car radio. The vast majority will undoubtedly have to encounter HD Radio not by choice but by accident, just like RDS text displays. When they buy a new car, hopefully HD will be included and they’ll be pleasantly surprised to discover HD’s advantages and additional features.

So far, few automobile companies have made a commitment to offer HD capability in any stock OEM-supplied radios in any car model. While BMW, Hyundai, Jaguar and now Ford are offering HD Radio as a surcharged option in 2008 models, neither GM nor Chrysler are even offering it as an option yet, let alone standard equipment.

It would appear the major Japanese manufacturers are waiting for the Americans to fully back their own country’s official standard before jumping in. Clearly, the car companies are still hedging their bets with a wait-and-see attitude. That, my radio friends, has effectively stalled the HD rollout.

We can only hope that now, with the HD standard officially adopted, car companies, especially Detroit’s Big Three, will step up quickly and start supplying OEM standard equipment radios in most all vehicle models. I’m now convinced that unless and until that happens, HD is not likely to gain real traction.

BEATING THE CLOCK

Beyond the receiver problem, conversion to HD also appears to be caught in a race against time.

It took 15 years for HD technology to develop, plus the long delay before the FCC finally made it the digital standard. During that time, the Internet, wireless and IP technologies were advancing at a much more rapid pace.

Radio’s Web and streaming presence on the Internet has eclipsed HD as a digital marketing product and is proving to be a much more effective weapon to compete with other digital media. Web streaming is quickly gaining prominence as an important conduit to reach listeners, especially at work. Cell phones and other wireless devices will soon be delivering relatively reliable good quality audio streams in most population centers. WiMax is rapidly deploying in much of the civilized world.

RADIO MORPHING

As the “IP radio” is perfected and eventually becomes widely available, especially in car dashboards, consumers will have another alternative. And that includes terrestrial analog, HD, as well as satellite.

We’re already hearing about the possibility that if XM and Sirius do not survive using their present platforms and business models, the SDARS 2 GHz spectrum might be converted to satellite-provided WiMax services.

WiMax has a long way to go technically, but everyone understands its enormous potential. The best brains on the planet are continuously improving its capabilities. At some point in the not-too-distant future, it is generally anticipated that the use of IP radios will likely grow to eventually surpass AM and FM use.

The legacy radio bands could be rendered less popular and ultimately obsolete when free or subsidized reliable WiMax services become widely deployed. It is probably more likely that both platforms would co-exist for quite a while and be integrated into the same receiver package.

With strong indications that radio’s major point of presence will eventually be transported over to the Internet, owners will be faced with deciding if and when it will make good business sense to turn off their transmitters. A few of my colleagues think that could happen within 10 to 20 years. The death of AM and FM as we know it won’t happen that soon, but certainly 30 to 40 years doesn’t seem unreasonable.

Obviously that scenario suggests that even if HD takes hold, it will not sustain the long extended life span that traditional AM has enjoyed over the past 85 years and FM for over 55 years. Is HD worth the investment it now still requires for either broadcasters or receiver manufacturers if it’s not going to offer long-term viability?

DOING OUR PART

With more than 80 percent of the U.S. population covered by HD broadcasts, and virtually all major and most large markets running many stations in HD, the transmission side has reached critical mass. Broadcasters have for the most part anted up to play and stay in the HD game. After the equipment acquisition and conversion costs are absorbed, keeping the HD transmission gear running and the extra power bills paid is mere pocket change.

The lion’s share of radio listening and revenue produced is on FM, so HD Radio’s future will be determined by FM-HD. In my view, AM-HD is really a less important sideshow. Certainly lower cost and better performing receivers in all classes will be needed, but multicasting is the main HD application that matters most.

In the end, HD’s success will be measured by whether the multicast channels can be monetized into additional, compelling content providers. Cleaner reception is a nice bonus but not all that crucial for most consumers. Additional revenue generated by text and datacasting will be relatively trivial to most stations’ bottom lines.

POKER, ANYONE?

Ibiquity is probably going to be faced with some tough decisions going forward in order to improve the chances of HD success and survival. The incremental cost of HD Radio chips and set production drops dramatically as the number of units produced increases to millions of units. But a significant part of the cost to build and sell HD Radios is the Ibiquity royalty fee.

It’s the major car companies who hold the trump cards in this standoff and can afford to make Ibiquity blink first to ensure that HD can have a future. If HD Radio sales do not start making real headway, undoubtedly the car companies will want concessions to start supplying OEM HD Radios as standard equipment in large quantities. Without that, HD will continue to face an uncertain future. Ibiquity may be forced to change its royalty structure and business plan in fundamental ways to prevent an early demise.

Bob Struble is playing tough now to make money for his investors and himself first; but he should be smart enough to know when it’s time to fold a hand and two so that other players will stay in the game. If not, the big brass of Ibiquity’s invested broadcast partners may have to intervene.

Rating People: 0   Average Rating:     
Comment List:


Post your comment

Your Name:  Required
Your Mail:       Your email will not be published.
Your Site:    

max. 800 characters


Posts are reviewed before publication, typically the next business morning. Radio World encourages multiple viewpoints, though a post will be blocked if it contains abusive language, or is repetitive or spam. Thank you for commenting!