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Published November 8, 2009
It’s easy to dismiss HD Radio as dead-on-arrival. The much-hyped radio technology has shown little programming innovation and even less consumer take-up since its rollout in January 2004, when the first receiver was sold. Earlier this summer, CNET called HD Radio one of the decade’s 25 biggest tech flops.
Still, the mere fact that it currently is the only upgrade for terrestrial radio stations authorized by the Federal Communications Commission lends it credence for success. In addition, radio stations and consumer electronics manufacturers are placing bets on the technology. Stations in the largest
The idea behind HD Radio is simple: It allows AM stations to sound like FM stations, and it makes FM sound like CD quality. In addition, it gives FM stations the opportunity to multicast their signals, using the same band spectrum to deliver the equivalent of two or three new stations. Instead of having to drop a music format for an evening game broadcast, for example, the station can air the game and have music on an additional channel.
The problem is that the conversion has proved to be expensive. To listen to HD Radio, consumers have to buy HD Radio-compatible receivers, which average about $200. Manufacturers also have to pay license fees of between $1 and $6 for each system sold to a company called iBiquity Digital, which holds an intellectual property patent on the technology.
The programming has been a problem, as well. Because of the slow take-up rates, broadcasters are reticent to putting their marquee programming on their HD feeds. That leaves the newest of technologies, ironically, airing some of the more-tired programming formats, like channels devoted to a decade of music from the 1970s or 1980s.
— John Ourand
One of the big growth areas for radio is known as connected radio, which is where users connect through the Internet (wired or wireless) to radio stations or audio streams throughout the world.
The big drivers of this business are the content aggregators. Users can choose from hundreds of music and talk categories, such as by genre or by country.
One site, RadioTime.com, boasts of having access to more than 100,000 radio stations and shows. On a Sunday morning in late October, the site featured pregame shows from every NFL city for free.
Another site, Reciva.com, is like an electronic TV guide for audio streams on the Web, offering more than 60 genres, ranging from “adult contemporary” to “world tropical.” Reciva’s core business is a chip to provide this up-to-the-minute list in products made by connected radio manufacturers. Users of radios that include Reciva technology can log into the venture’s Web site and program their radio from the Web.
Both of these companies’ primary business is a license fee they charge each radio manufacturer carrying their list.
Another driver of the connected radio business comes through a company like Livio Radio, which is creating radios that access Internet content. Livio Radio has been cutting deals to stream specific content to these devices. In late October, for example, it signed a deal with National Public Radio to create an Internet radio device. The NPR Radio by Livio will retail for $200 and will feature more than 800 NPR stations. The benefit of these devices is that they allow users to use a remote control to program them, enabling users to request more information on the audio they are listening to. Or, in the case of Pandora Livio Radio, they can use the “Thumbs Up” and “Thumbs Down” technology to guide the automatic music selections.
— John Ourand
Over the past several months, measurement of radio listening has changed in the top
Previously, radio ratings relied on an antiquated system in which participants would write down, unaided, the stations they listened to in a weekly diary. Almost nobody seemed to like the system, and even fewer people trusted it.
What’s new is a system that calls for listeners to carry around a pager-like device that picks up sound in a room. So far, 25 markets are taking part in Arbitron’s Portable People Meter (PPM) rating system, accounting for more than half of the country’s radio station revenue. The PPM works by picking up watermarks that are attached to a station’s signal.
The diary system is still being used in smaller-sized radio markets, pending expanded future rollout of the PPM system.
Early returns on the new system have brought complaints from ethnic and urban broadcasters who believe they are being under-sampled. There have been dramatic downturns from the diary system to PPM for many stations with these programming formats.
In addition, the PPM system requires users to have a dial-tone home phone for the nightly download of data from the pager to Arbitron. Some broadcasters say many of their listeners only have cell phones and are being excluded from participating.
The controversy has led the U.S. House Oversight and Government Reform Committee to demand the concerns be examined. But while the system may ultimately be tweaked a bit, it appears to be here to stay. Arbitron is increasing the number of markets in which it plans to roll the system out. It also announced a plan to increase its sample of the 18-54 demographic by 10 percent in 2011.
— John Ourand
The nation’s only satellite radio provider, Sirius XM Satellite Radio, has seen dramatic growth in the past five years.
In 2004, the two companies operating separately — as Sirius Satellite Radio and XM Satellite Radio before their 2008 merger — had just 3 million subscribers combined. Today, that figure is north of 18 million subscribers. So why has Wall Street generally hated this company?
In October, TheStreet.com characterized Sirius XM as one of the worst-run companies of 2009, calling it a “classic case of a great product coupled with a bad business model.” It also cited Sirius XM’s $3 billion in long-term debt and $4.5 billion of intangibles and goodwill.
One reason for the criticism is the potential threat from HD Radio and connected radio, which provide free competition to Sirius XM’s monthly subscriber fee of $9.99 to $16.99 per month. Another reason is Sirius XM’s close alignment with the auto industry, installing its equipment in new cars from Ford and Chrysler. As the auto industry was crippled with the economic downturn, Sirius XM was hurt, as well.
Management problems could be seen earlier this year, when Sirius XM sparred with Major League Baseball, which had signed an exclusive deal with XM in 2004 for $650 million over 11 years. The company tried to convince MLB to give all subscribers of the merged company access to its game programming, but MLB declined, and the two could not reach an agreement this past season. Other leagues, including the NFL and NBA, are available on both systems.
Still, the satellite radio company could be about to rebound. After a round of cost-cutting, Sirius XM avoided bankruptcy filing, and Standard & Poor’s raised its credit rating. In addition, Sirius XM last year launched an online service that provides all its content through a Web-based music player for a smaller fee. The service is now available as an iPhone app and on select stand-alone connected radios.
— John Ourand