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Continued Consumer Shift to Alternative Digital Media

HD Radio seen as having ‘minimal’ impact on attracting new listeners

The mass media model of “one-to-many” is being challenged by the growing influence of a model that targets individual and multiple niche audiences, according to Veronis Suhler Stevenson in its latest communications industry forecast.

Digital technology is a key driver, pushing the communications industry into a “reset mode” that will see shifts in all industry sectors and revenue streams from traditional to digital platforms, the private equity firm states.

Reflecting the shift to alternative media categories, its forecast found that 17 of 20 segments will post increases in compound annual growth rate between 2009 and 2014, with the largest compound annual growth rate being seen in pure-play consumer Internet and mobile services. VSS expects this category to rise at a 14.6% CAGR and reach $87.79 billion in 2014.

Overall, media usage will remain relatively flat through 2014 as consumer and business users continue to migrate to digital platforms like computer tablets, eBooks and smart phones — seeking more searchable, shorter and more focused content.

The forecast assumes that broadcast radio groups, seeking to shed heavy debt, will reorganize into smaller station groups that provide more original content.

VSS believes station owners will be aggressive in exploring new online and mobile platform strategies to offset declines in traditional revenues short term.

Radio stations, VSS continued, will continue to incorporate cross-platform strategies that extend their brands as they struggle to produce original programming and news content with pared-down staffs and limited budgets.

To drive growth in advertising and listenership, stations will continue to pursue digital platforms, including HD Radio, Internet radio and wireless mobile. It noted that last September, Apple introduced an iPod nano with an FM radio chip that allows for tagging and live pausing. VSS sees this as a signal that the computer company believes radio remains relevant.

However, VSS thinks HD Radio will have “minimal” impact on drawing in more listeners — unless radio groups spend more on different programming as station conversions have slowed as groups cut expenses.

“When Internet radio migrates into the car via OEM wireless hubs in new vehicles, stations will be forced to compete directly against Internet-only audio streams, and the issue of improved sound quality, one of HD Radio’s biggest marketing points, will become a nonissue,” the company wrote. Whether radio can leverage its programming expertise into compelling content that will prevent listeners from drifting to other enticing digital audio options remains a question, it concluded.

Sirius XM, the lone satellite radio company, will devote more resources to developing new venues for its subscription-based products, as its advertising revenues remain “insignificant,” according to Veronis Suhler Stevenson.