HD Radio Is In The Air
HD Radio is not exactly new, but the development of it has been relatively slow. About a year and a half after Kenwood sold its first HD-ready head unit, the next evolution in traditional radio hasn't truly captured the imagination of the listening public. But that may be about to change with the HD Radio Alliance launching a $200 million ad campaign. We spoke with the president of the alliance, Peter Ferrara, recently about the future of AM/FM and HD.
CA&E: Who is part of the alliance?
Peter Ferrara: It's made up of 12 U.S. licensed broadcasters. They run the gamut from the largest: Clear Channel and CBS Radio to medium-size companies to even a single station operator in Philadelphia.
CA&E: What does HD stand for?
PF: That was a product or brand name designed by iBiquity. I don't know if they ever said it was high definition. Clearly the alignment of HD to HDTV and the momentum that has going for it is obviously clear in the consumer's mind.
CA&E: What is the alliance doing in terms of OEM deals?
PF: I know that people like Delphi and Visteon are ready to go. It's just a matter of getting the manufacturers themselves to begin to put them in the cars, install them either as options or standard equipment. What the alliance is doing is rather than trying to do a specific deal with the OEM, like an XM or Sirius did, where they basically handed them a bunch of money and part of their company, we're offering them the opportunity to join us as marketing partners and getting a piece of the $200 million dollar plus marketing budget we're spending on the radio.
CA&E: Will traditional radio go all-digital any time soon?
PF: The opportunity to do that down the line is absolutely there. But I don't think that's going to happen until there is a high level of HD Radio-set penetration, for the simple reason that we don't want to make any current analog radio obsolete.
CA&E: Satellite radio seems to be here to stay. Are you going to be able to compete?
PF: I think satellite radio is kind of like HBO is. Yeah, it's probably here to stay, but it's a niche business, a small niche business relative to terrestial radio. A few people subscribe to HBO, but everybody gets basic cable. There are 240 million terrestial radio listeners a week. Even if you give satellite radio the opportunity to grow to 20 million-it only represents 10 percent. That's a niche business by any business model standard.
HD Radio is not meant to compete with satellite. This technology was in development before they ever launched their first bird in the air. So this is just the next advancement of an evolution of our medium becoming digital. But to compete with satellite-that's not what it's about at all. It's about getting our listeners more choices, about providing a better quality signal, with new and exciting things they can listen to for free on a local basis without a subscription. That's a pretty compelling proposition for the consumer.
CA&E: But if you combine satellite radio with iPod users, people using more and more multimedia handhelds...
PF: Actually the thing that concerns me the most is the cell phone. Radio is something you consume while you're doing something else. You're listening while you drive or at work. It's a companion. When you talk on the cell phone, that becomes an exclusive event. That particular device has got such ubiquitous coverage - especially while driving cars. You see people with their cell phones up to their ears all over. And they're not listening to the radio. That's a bigger concern than any other thing right now.
CA&E: You might have to lobby for the illegalization of cell phone use in the car.
PF: How about that! I doubt we would get to that. But I'll tell you what we will do. We're going to work hard over time to get HD Radio into cell phones.
CA&E: A key feature for HD Radio is multicasting. How many signals can a station broadcast?
PF: You can broadcast up to eight different channels. But every time you add a channel and you reduce the amount of bandwidth, it degrades the overall quality. Until the consumer gets used to the idea of HD, we're looking at doing a on-band broadcast of the analog format in digital followed by a secondary channel, HD 2 of new content and in some instances we'll do HD 3.
CA&E: What do broadcasters have to do to be able to broadcast HD? In Los Angeles we have some great local stations that we would like to see make the upgrade.
PF: First of all, it requires a substantial capital investment. It's in excess of $100,000 per radio station to switch it to digital. Probably more. You may require antenna or tower work or transmitter updates. L.A. is one of the markets on the fast-track to do it.
CA&E: How long before HD Radio has coverge in all the major urban areas?
PF: Keep in mind that there are other broadcast companies outside of the alliance that are also doing HD. But right now there are 3000 radio stations licensed; there are over 700 currently on the air. I think over time you will see everyone convert over to it. Of course the alliance members will be quicker. For instance, L.A. is pretty much rolled out, as far as alliance members are concerned.
CA&E: How extensive will the traffic and weather information be on HD Radio?
PF: It can be very extensive. That's one of the great things about HD Radio. It's more than just sound, it's also data. It can stream information, it can create an overlay of traffic plot points on a nav screen. Some different companies-I know that Clear Channel is involved in working that in an aggressive fashion. So there are opportunities for what they're calling a Buy Now button. If somebody was listening to the radio in their car and heard an ad or a song, they can hit the button and register their interest in buying a given product. There's a lot of future features that digital radio brings to the consumer beyond just great sound and more content.