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By most timelines terrestrial radio is around 1 year into the HD Radio marathon. A year ago we began to see stations converting at a meaningful rate and now we are approaching 1000 stations using the new Ibiquity IBOC system. We are still waiting patiently for the HD Radios to start showing up in consumer’s hands. Programming is moving ahead at a pretty rapid state with many stations using the sideband channels and we’ve formed a coalition or action group to build a unified programming effort and push for wider consumer acceptance. All of these are very positive developments on the radio industry side and hopefully we can create enough of a demand with consumers and the electronics industry to get the needle moving.
We’ve also seen a number of critics and Wall Street is clearly taking a wait and see attitude as they continue to be wooed by all the PR stunts from the satellite radio groups. Terrestrial radio has clearly been demoted in the eyes of many as an outdated media, but we’ve all seen and heard about how radio manages to reinvent itself and rise from these moments many times in the past. Still, it’s always hard pulling out that 9th inning save and this time is feels like Kurt Gibson and the Dodgers back in the 80s. Let’s take a deeper look at the progress and challenges ahead as we get digital:
Conversion: It’s moving pretty quickly when you consider that TV took 5-8 years to get stations set up for HDTV. In 1998 the FCC set the standards, in 1999 it mandated conversions in the top 10 markets and required all TV stations to convert by 2006. Just in the last year have we seen significant movement of HDTV receivers. Mind you that there is no FCC mandate on HD Radio and we are already seeing HD station penetration in most of the top 150 markets only 1-2 years into the project.
Satellite radio really began in 2002 and now has 4 years under its belt. It’s very hard to get exact numbers on the penetration - how do they count the cars radio deals and free gift subscriptions that may not be renewed? There are tons of trial promotions that will not convert and some Wall Street hype in the numbers XM and Sirius put out. It looks like 8-10 million is pretty close estimate right now. At 2 years into their growth both satellite providers had around 2 million subscribers combined.
Radio has only a handful of sets in the field right now, but the efforts are just starting. Radio Shack is on board and regional retailers are starting to line up. In many markets we are hearing ads for HD Radio and the HD Radio coalition seems to have a full court effort on to get the sets in the field. But, what about the national big box stores Best Buy and Circuit City and Wal-Mart, Target, and Sears/K Mart? In new cars only BMW is offering an HD option, so we have a long ways to go. The satellite radio teams offered many retailers and car manufactures’ lots of coop, kickbacks on subscribers, rebates, and even stock. How many extra sources of revenue are there in every satellite radio sold? We have to imagine it might be enough for the big box retailers and the bigger auto companies to be under some pressure to take a wait and see attitude towards jumping on HD Radio. Prices are a little steep right now at around $300 for a system, but we know we will see systems in the $120 to $200 range in the next 8-10 months. Remember when a DVD player was $500 – now they are $28 at the drug store.
We’ve only just begun here so we can’t really grade the progress yet. Let’s get through the Fall here and see if we start to see some growth. It’s going to take a full court press from the HD Radio coalition and the local radio teams to move the needle here. As a team we can’t hold back. The more we offer HD Radio promos and programs with retailers to gain distribution and awareness the sooner we will see demand grow.
Programming: Higher audio quality alone won’t get the audience to convert to HD Radio. More variety, new programming and a lot more choice is the opportunity the audience is looking for. The HD coalition has taken bold steps to introduce new formats and avoid competitive launches – we know the audience doesn’t want 3 CHR stations all playing the same 100 songs on the HD side channels.
Larry Rosin from Edison Research put on an interesting perspective on the HD Radio sideband programming efforts (read it by clicking here). His point that trying to create all these sub-brands and build them into something the audience will seek out and spend the dollars to upgrade their radios for is going to be tough with just a collection of songs that might be a little deeper or fulfill a small niche in the market. Larry’s idea is to link into recognized brands by linking up with magazines, big product names, TV shows or real popular music web sites and build off of them – The Rolling Stone Deep Cuts Channel - The Revlon Love Songs Channel etc.
While it’s an interesting idea and will probably spark a few new creations from programmers we need to start working on building some personalities into HD Radio offerings. We already have lots of resources how about some of these ideas:
• Morning Show Channels – A best of Bob and Tom or John Boy and Billy running all day long could bring their fans to the new media. There are probably 75 or more shows that have the fan base and enough material to pull it off in all the top 100 markets.
• Younger Targeted Channels – One of our big mistakes in the last 10-15 years was ignoring the younger audience. Today these children of the late 80s and early 90s are heading for their late teens and 18-34 land with radio being seen as so out of touch for them. We need to hit them with more than just music strung together – they have Ipods for that. We need content, personality and quickly learn their culture. MySpace is the most glowing example of how you can capture this audience – we need to focus on it and discover the radio version of MySpace and it needs to happen on HD Radio. This is a huge market and we are not even looking at it – most CHRs are more obsessed with 25-34 numbers for sales. Here’s a channel where sales doesn’t matter yet – go for it.
• Rock and Roll Hall of Fame Channel – An inspiration from Larry Rosin’s article – but look at the history here and all the audio clips the Hall has. What a great way to promote the Hall on a consistent basis.
• Secure more Celebrity Hosts – We have seen lots of stars go to the satellite channels mostly for the name. Do you really think Martha is hanging around Sirius at the coffee machine? At least we know Whoopi will be in the studio many days a month with here new morning show. There are more people out there – Dennis Miller, 2nd City, Amy Sedaris, Paul Dinello, Carlos Mencia? In today’s technology it doesn’t take a full time commitment for the star power to draw on radio - look at Alice Cooper who has a 5 hour show 5 nights a week yet he still tours the world (lots of dates in the last year), does his celeb thing, and manages to play a few rounds of golf.
• Team up with more music stars -John Tesh could expand his empire. Little Steven’s Garage could grow. How about a Springsteen rock/folk channel. Neil Young could put together an anti-war series. Sting or Bono a world cause series. Maybe Sammy Hagar, Tom Petty with a folk rock show, or even Lisa Loeb and Dweezil (heck they tried a cooking show on TV).
We could all go on with many ideas for new channels, but the problem right now is funding. Finding a way for Dennis Miller to get compensated as he probably deserves to be from HD Radio isn’t going to happen with no revenue in the sidebands, but we still NEED to make the investment. What can we do with the resources we already have? This is where the real creativity from all of us in programming will be most needed.
One idea that might help us in the competition with satellite and streaming media is PORTABLITY. One of the advantages with satellite is you can get the special Jazz channel anywhere you travel. How about coding the HD channels? For example if you are a rock listener the radio scans the dial every so often and builds a ‘format preference’ list – as you drive into Pittsburgh from Syracuse it automatically updates the buttons so you have all the rock stations and the rock side channels on your 5-6 pushbuttons and can sample away. Take it from us consultants who roam from city to city – it takes an expert to keep all the calls and frequencies sorted out as you move from city to city and with triple the stations counting the sidebands we are heading for consumer confusion.
Don’t let Wall Street, the press and some of the advertising buyers get us down here. All their talk of radio’s lack of sexiness has to face the reality sooner or later that we have 95% of the countries ears – in the world of fragmenting media sooner or later quantity will mean something. HD Radio gives us the room to expand and meet the new challenges. Actually we are moving pretty fast and with considerable cooperation, even between competing broadcasters. We can’t let it fall off the radar and we have to use every opportunity to promote the new advantages and ‘sexiness’ buzzing from your transmitter.
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