HD Radio is an option for terrestrial broadcasters. It allows them to offer a clean digital simulcast of the analog signal, and also create additional stations (HD1, HD2, etc.) without building new towers. On the consumer side, the audio sounds better and digital-only features such as track information, album art, and traffic mapping are possible.
We spoke to Bob Struble, President and CEO of iBiquity, the developer and owner of HD Radio technology. Obviously his view was uplifting as he discussed the adoption of HD Radio, its presence in cars, the value to broadcasters, and how consumers perceive it.
RAIN: Will digital radio eliminate analog radio?
In the case of radio, we’re operating now in a hybrid mode. In every receiver now sold, the all-digital mode is built in. That allows for a smooth transition if that day ever comes. I’m not sure that happens in my lifetime. There are millions of analog radios out there and plenty of stations that are broadcasting analog. Until you get to a point where the majority of the audience is listening on digital, it’s hard to envision the turn-off occurring.
RAIN: You mentioned “not in my lifetime.” When television switched over, it was a shock and inconvenience to a lot of people. Had TV reached some kind of consumer adoption tipping point that radio has not reached?
BOB STRUBLE: It’s a different situation. There was a cut-off date set by the government. Everyone knew that analog TV wouldn’t work anymore. That drove the market response to build a lot of receivers and convert. In radio, the same motivations to reclaim spectrum don’t exist.
The way HD works, it uses the exact same frequencies that are already allocated. Nothing extra was given to broadcasters for the roll-out of digital. There’s nothing to reclaim.
We don’t think in terms of an analog sunset date. We think of it in terms of a digital sunrise. Maybe the FCC says, “All right, stations, there are enough digital receivers out there. If you want to turn off the analog, because you think that would be good for your listener base, you are allowed to do that.” But not saying that it’s a requirement.
RAIN: There have been gains in HD adoption, and in the HD footprint, particularly in cars. Despite those gains, what has held back HD radio adoption in the U.S.?
Based on those other examples, HD radio is ahead of the curve. Ten to twelve years in, and it’s in one-third of all cars, 90-95% of the country covered by HD radio broadcast. In a market like New York and Boston, every one of the top-10 rated stations is converted.
The reason it takes so much time is that you’ve got a billion radios out there. People aren’t going to throw them in the garbage because there’s a new technology. Also, there are 13,000 radio stations that have to invest money to upgrade to digital.
RAIN: You mentioned two things: whether consumers will upgrade their receivers, and whether broadcasters will upgrade their facilities to make the transition. Consumers are willing to spend money on gadgets — new phones and tablets, for example. What will drive consumers to buy into HD receivers?
BOB STRUBLE: One answer is: Nothing. If you look at AM/FM, it is no longer a product category. You don’t go into Best Buy and say, “Show me the radio department.” The radio department doesn’t exist. There are still plenty of devices sold with AM/FM tuners, but how do you get them? You buy a car; you buy a clock radio; you buy a home audio system. The reason that AM/FM is less a category than a feature, is that consumers take it for granted as a background service.
With HD, you’re upgrading something that people aren’t asking for to begin with. Should we try to stimulate consumer demand, or should we treat it the same way as AM/FM, by saying that it’s “along for the ride”? I absolutely agree with the assertion that format and programming help sell the technology. But there’s a big debate that says that if we run a national ad campaign about new radio stations in markets, and you have to buy a new radio — most of our research says that would probably not move the needle. It’s in the home stereo, or it’s in the car, or it’s in the iPod dock, and that’s how the consumer gets exposed to HD radio.
RAIN: You used the expression, “along for the ride.” Is the connected car your leading market?
As of the 2013 model year, HD Radio is built into cars by 34 car makers, in 195 vehicle lines.
RAIN: How are people using modern dashboards? Is that possible to track?
BOB STRUBLE: No, not for us. There’s not good monitoring. Beyond surveys, there’s no hard data.
RAIN: Are satellite and Internet challenging competition?
BOB STRUBLE: We honestly don’t look satellite and Internet as competition. All we do is upgrade AM/FM. That’s all we do. That’s our product. If someone believes that Sirius or iHeart is going to kill AM/FM, then we wouldn’t have a business. We just don’t see that. There were true believers at the start of satellite saying that AM/FM would go away — that hasn’t happened. There was the same sort of thing when Internet radio first came around. But, for good technical and economic reasons, a free over-the-air service is going to stay around. We don’t worry about that on the OEM side.
On the consumer side we worry a lot. We think about how to go about educating exciting, entertaining, coming up with new services, that are not only going to help sell new receivers, but also keep broadcast radio competitive with all the other service in the dashboard, and in other products.
RAIN: How do the broadcasters feel? Is the investment worth it? For the stations which have upgraded, are the owners happy with how it’s playing out?
BOB STRUBLE: Yes, I think so. But you’ve got to realize that larger broadcasters and NPR put out HD stations in the 2004-2006 time frame, after the FCC approval. They did that for long-term strategic reasons. There were no HD radios at the time. Without radios, you can’t get a return on the investment. They did it because they recognized that there’s a chicken-and-egg thing happening, and unless you put some signals out there, nobody’s going to build radios, or buy them. The strategic investment had to be made before it was possible to see a return.
We are getting to a point now, with over 15-million radios in the market, where they can get a return, in some straightforward ways. Somebody’s got an HD2, they get an audience, they sell the good old-fashioned advertising model is employed.
We also see stations leasing HD2’s and HD3’s to smaller broadcasters, so there’s a variety of foreign-language broadcasters that have built national networks leasing HD2’s and HD3’s. Russian, Indian, Pakistani, Caribbean.
RAIN: What about HD in the home? What are the products there?
BOB STRUBLE: The main product is hifi audio systems. You’ve got Yamaha, Marantz, and others, are all licensees. Typically, you’ll see better penetration rates of the higher-end devices than lower-end devices. There are also clock radios, boomboxes, bluetooth speakers, and docks rolling out with HD. There is a slight cost increase when building in HD, and it’s easier to build in that cost to a $30,000 car, or a $1,000 home audio system, than in a $49 clock radio.
Penetration in the home mirrors what we see with radio generally. The greatest amount of listening takes place in the automobile, and we’ve put our effort where the listening is. We don’t neglect the home, but we focus more on auto.
RAIN: Any new technology, features, or functions coming down the pike?
BOB STRUBLE: One new function is called Emergency Alert. It is a supplement to the age-old radio function of alerting the populace during times of natural disaster. This technology gives a lot more information and wakes up the radio if it’s sleeping. You’ll see that roll out in the next several months. You can expect more announcements of features we’re working on now. The general direction is going to be hybrid radio features. Building new applications that take advantage of the broadcast infrastructure but also using connectivity to enhance that experience.