The radio industry's answer to the Internet, iPods and satellite radio has
been slow to make waves with consumers.
Called HD Radio, the technology allows radio stations to transmit a digital
signal in addition to a traditional analog signal. Plus, extra stations,
called "HD-2" or "HD-3," allow broadcasters to offer a wider range of
programming in a static-free medium. And listeners don't have to pay
subscription fees charged for satellite radio.
But four years after the first HD radios hit the marketplace, the new
service hasn't gained traction with consumers. For one thing, the signal can
be heard only through special digital radio receivers, with prices that
start at about $80. And just some of the nation's radio stations offer extra
HD-2 or HD-3 channels -- with programming that often isn't much different
from what broadcasters play on their primary frequencies. Moreover, the
digital signal typically doesn't reach as far as the same station's analog
signal, so in many cities, the signal comes and goes as listeners drive
[Sony's XDR-S10DHiP] Sony
Sony's XDR-S10DHiP is one of about 70 different tuners in the marketplace
that get HD Radio.
These drawbacks are temporary, argues Bob Struble, chief executive of
Ibiquity Digital Corp., the company that licenses and develops HD Radio
technology. He points to improvements, such as steadily lowering prices for
HD radios, along with some innovative HD stations.
Still, some industry veterans say HD Radio's rollout was bungled and fear
that the window of opportunity is rapidly closing as other audio
entertainment options, like Apple Inc.'s iPod music players, become
entrenched. "If they don't get [HD Radio] going right now, they're going to
lose it," says Bill Figenshu, a Skytop, Pa., consultant to radio and other
About 600,000 HD radios are expected to sell this year. Many say that rate
is too slow, considering that satellite radio now has 19 million subscribers
and that Apple will sell about 33 million iPods in the U.S. this year, says
Majestic Research's Richard Klugman.
But Mr. Struble says those aren't the right comparisons. Because HD radio
represents an upgrade rather than a brand new technology, it makes more
sense to compare it to the rollout of FM in an AM-dominated radio
environment or to color television in a world of black and white. Both
technologies took years to become dominant. "If folks expect this to be a
one- to two-year transition, that's not realistic," he says.
HD Radio is trying to find ways to piggyback on other popular products, like
creating HD tuners with docking stations for iPods and a feature that allows
users to tag songs for purchase later on iTunes.
Despite millions of dollars spent developing and marketing HD radio,
consumers' awareness and enthusiasm for the new technology is hard to gauge.
The industry-backed HD Radio Alliance, citing a survey it commissioned from
Critical Mass Media, says three out of four radio listeners know about the
technology. But an independent study from ratings service Arbitron Inc. and
Edison Media Research released earlier this year says only about one in four
had heard or read "anything recently about HD Radio." Since that study, the
industry has launched an aggressive advertising campaign for HD Radio.
Of some 13,000 radio stations in the country, about 1,800 are broadcasting
digitally. And of those, some 900 are offering extra HD-2 or HD-3 stations.
About 84% of Americans live in an area where they can hear at least one HD
radio station, Ibiquity says.
Work is also needed on the retail side, where some consumers report walking
into big electronics stores, asking for HD radio receivers and being led
instead to the section for satellite radio.
About 100 different models will be available in stores this holiday season,
up from just 30 last year, according to Ibiquity. Yet persuading holiday
shoppers of HD Radio's merits poses another challenge. The lure of extra HD
stations isn't always all it's cracked up to be, with too many sounding just
like what is already on the dial -- a classic-rock station might offer
deep-cuts classic rock on its HD-2 channel, for example. With such routine
fare, "the audience is going to give you a big ho-hum," says Mr. Figenshu.
Few HD-2 stations bring in revenue because most don't run advertising --
until recently, the radio industry agreed to ban it in part to help HD-2
stations win listeners. Meanwhile, because of the advertising downturn,
revenue from over-the-airwaves radio broadcasting has been declining at a
rapid clip, shrinking every month this year compared with the year-earlier
To win advertising, the digital HD-2 stations will have to prove they have
listeners. A new radio-audience measurement device being rolled out in some
big markets shows some people are listening to HD-2 and HD-3 stations, says
Thom Mocarsky, a spokesman for Arbitron. However, the listener numbers
aren't significant enough for the stations to show up in the rankings
Arbitron sells to radio companies.
There is a silver lining for HD-2 stations, however. Most are also running
on the Internet, where the better ones seem to be making headway. In
Detroit, the much-praised WRIF's Riff 2 plays a mixture of rap and rock,
genres that are normally strictly segregated on regular radio. It got about
6,000 streams in September, meaning 6,000 visits by people who turned on the
online feed. In Denver, rock outlet 97.3 KBCO's HD 2 station, Studio C, got
about 13,000 streams in September with its playlist of music sets collected
from 20 years of musician visits to its station.
Managers at both stations wondered whether adding HD-2 stations would draw
away listeners from their main outlets, hurting the rates they can charge
advertisers. In the end, they decided the tradeoff was worth it.
If listeners are about to switch off the station anyway, having them go
instead to Riff 2 is "better than having them go to all the other sources
that are out there," says Doug Podell, program director for Greater Media
Inc.'s WRIF. Still, he believes the vast majority of Riff 2 listeners hear
the station on the Internet, not on digital radio sets.
For the technology to really catch on with offline listeners, radio veterans
say, the industry needs to beef up the number of HD-2 and HD-3 stations and
increase the strength of the signal.
Already, the industry has filed a report with the Federal Communications
Commission, advocating the signal upgrade. Some broadcasters object, saying
stronger digital signals from nearby stations might cut into their own
signals. National Public Radio, a big HD player, supports the upgrade, but
with some protection measures in the roughly 15% of cases where it estimates
serious interference might result. Those measures could include limiting the
signal increase to core urban areas, says Mike Starling, NPR's chief
The industry also needs to make sure HD radios are widely available in cars.
But now that the price of the chipsets is dropping, making the extra cost of
HD Radio just $30 to $50 for car makers, the technology is creeping into
more auto showrooms. Next year, for example, HD Radio will be standard in