I want to turn to the device side of radio and dig in a little deeper on one particular segment, portables — MP3 players, mobile phones, personal navigation devices. We’ve received a fresh set of receiver sales data for 2008, and the trends continue to go against AM/FM.
I think the numbers argue strongly that the radio industry needs to aggressively focus its efforts on penetrating the portables segment. Happily we are making some solid inroads here.
Let me review and update the trends, simplifying quite a bit.
Overall, AM/FM receiver unit volumes continue to decline somewhat alarmingly.
For many years prior to 2004, more or less 100 million devices with AM/FM tuners were sold every year: 15 million in new cars, 50 million in all types of home and aftermarket car radios, and 35 million portable devices like transistor radios and AM/FM Walkmen.
Nearly 100 HD Radio-enabled receivers are available at retail. Now Struble says a concerted effort to get on portables is yielding results. I reported last year on our Web site (www.ibiquity.com, “Thoughts on Digital Radio’s Future”) that the 2006 numbers showed a dramatic decline, with 100 million AM/FM tuners dropping to 80 million. In simple terms, that was because those 35 million portable radios had fallen to 15 million. You guessed it: they were replaced by iPods and other MP3 players.
The downward trend continued in the 2008 numbers. The 100 million AM/FM tuners sold in 2004, which dropped to 80 million in 2006, has dropped to 60 million in 2008. We lost another 20 million: 10 million fewer portables and 10 million fewer home and aftermarket car.
Again, MP3 players are a prime driver as they continue to dominate portables (almost 40 million sold) and a lot of AM/FM clock radios and tabletops and shelf units have been replace by iPod docks — 13 million sold. I may focus on docks in the future, but let’s stay on portables for now.
To review, what was until five short years ago a reliable 35 million units a year of portable AM/FM receiver sales is now 5 million. Competition in the form of MP3 players and mobile phones has basically eliminated the category of portable radios. No transistor radios, no AM/FM Walkmen, headset radios a distant memory.
If this dramatic trend is not addressed, radio risks becoming a second-class citizen. If consumers buy fewer and fewer AM/FM receivers, over time there will be a lot fewer devices delivering the product, which has to mean less time spent listening. Portables represent radio’s future.
To stay ubiquitous, to maintain its reach, radio must be on the devices that people carry. As the numbers show, with the major digital advances of the last several years, AM/FM has been getting trounced in the portables battle.
But as the saying goes, with change comes opportunity. Let’s examine the upside for radio.
How do these numbers sound? Forty million MP3 players sold annually; 150 million mobile phones; and a brand new category, personal navigation devices (PNDs), a cool 14 million units per year, growing like crazy. As others have pointed out, if radio were to gain attachment on a reasonable percentage of these devices, it could quickly overwhelm its recent receiver sales losses and far exceed even that magic 100 million mark again.
In doing so, radio would reestablish its historical place in everyone’s everyday lives. That’s where we need to focus our collective attention with a simple mantra — we need to be on the devices people carry.
A Promotional Digital Radio
Bob Struble says the latest HD Radio portable is ideal as a promotional device for radio stations.
“Since the launch of the Insignia Portable, we have been working with many broadcasters, pro sports teams and other groups on bulk discount purchases for branded giveaways.”
“Several broadcasters have mentioned to me that it reminds them of the early days of FM, when stations gave away transistor radios to drive listenership. It worked for FM, so let’s do it again with digital. We love this idea and can help if you have any interest. Give us a call.”There are strong business reasons for portable device manufacturers to include radio in their products.
Radio’s audio programming content is a proven consumer application, and AM/FM will be a very economic method to deliver additional data, like traffic, weather, advertisements, etc., to mobile devices, saving expensive network capacity.
Applications like “Buy from FM” and iTunes Tagging, which enable consumers to tag songs or other products for later purchase, can generate revenue for wireless carriers or digital music providers, as well as broadcasters.
And real-time traffic info over HD Radio bandwidth will differentiate and add value to PNDs and generate incremental revenue for broadcasters. The networks to deliver this capability have been built by both Clear Channel and the Broadcaster Traffic Consortium, and PNDs with the capability are on the way.
Everyone can win with AM/FM, analog and digital, in portable devices.
That’s why I think industry leaders have made strong progress on getting radio into portables. Emmis President/CEO Jeff Smulyan has led a coordinated industry effort with NAB and RAB to get AM/FM on portable devices, especially mobile phones, with some notable success.
We’ve had some fantastic recent developments on the HD Radio front, with the introduction of the $49 Insignia Portable HD Radio receiver at Best Buy, and Microsoft’s inclusion of HD Radio technology on the brand-new Zune HD MP3 player. There are more exciting HD Radio portable products, likely including an HD Radio PND, which should be out for Christmas, so stay tuned.
We believe the Insignia Portable and the Zune HD are important successes on a number of fronts:
- • They represent brand-new product categories, clearly demonstrating that HD Radio technology will help radio penetrate the critical portables segment.
- • They came to market very quickly: The chips enabling these products just became available last December. So in nine short months we went from new chips to product design, acceptance by major brands, through test, sourcing and manufacture, and finally to the retail show floor with solid merchandising and marketing. That is an exceptionally fast cycle in consumer electronics.
- • They represent breakthrough technology. A lot of R&D went into product and antenna design to enable these portables to perform as well as they do.
- • In the case of the Insignia Portable, we are seeing breakthrough price points — $49 is well in the range of mass-market consumer pricing.
- • Oh, and did I mention, although it’s early, sales have been very strong.
So a concerted effort to get on portables is yielding results. That’s great because we are facing the proverbial fork in the road. If AM/FM continues to lose ground on the devices people carry, it will compound the industry’s difficulty. But if we work together to penetrate MP3 players, mobile phones and PNDs, radio can extend its reach and remain the most ubiquitous medium. Let’s get busy.
The author is president/CEO of iBiquity Digital Corp.