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Many Retailers Forecast '08 HD-Radio Gain

5/19/2008 02:00:00 AM Eastern

Consumer electronics stores and mobile electronics specialists say HD Radio hasn't been a big hit to date, but many contend sales have been picking up and will likely get an additional boost this year from a growing selection of affordable products and the launch of iTunes Tagging.

The digital-AM/FM technology could get an additional boost if more retailers focus on HD Radio's ability to deliver multicast stations and if more retailers install outdoor antennas to deliver a compelling demo, HD-Radio developer iBiquity Digital noted. In its latest promotional campaign, the HD Digital Radio Alliance has already shifted to focus mainly on multicasting's benefits.

When the first HD Radios hit the market in 2004, digital FM stations had not yet begun to multicast an additional channel using digital-FM's multicast capability, but now more than 800 FM stations are broadcasting two to three programs simultaneously on their assigned frequencies. "We always had a vision it was about the additional applications it would bring, but out of the gate, the only thing we could say was it sounds better," said Bernie Sapienza, iBiquity retail business development VP. "Unfortunately, that's what stuck with retailers, but our best application is multicasting, and we recently released another application called iTunes Tagging."

In the future, Sapienza added, HD Radio will also offer "conditional access," or the ability to pay for select programming, he continued. "If Bruce Springsteen is playing tonight and you don't have a ticket, you could pay a buck and buy that one concert on your radio," Sapienza said. Listeners could also buy individual sports games. "You may say, I don't want to pay $13 a month [for satellite radio], but I'll pay $1 just to listen to a Browns game."

For the most part, most of the 20 retailers polled by TWICE said HD Radio has yet to generate much demand, but prospects are growing. Aftermarket car HD Radio sales seem to be faring better than their home counterparts, at least for now, TWICE also found.

Polled dealers included MyerEmco of Gaithersburg, Md.; Vann's of Missoula, Mont.; Nebraska Furniture Mart of Omaha, Neb.; Wilshire Home Entertainment of Thousand Oaks, Calif.; Bjorn's Audio Video of San Antonio; Audio Etc. of Orange, Conn.; Take 5 Audio of New Haven, Conn.; AudioMasters of Pineville, N.C.; Car Toys of Seattle; ABT Electronics of Glenview, Ill.; Action Electronics of Newington, Conn.; Westminster Speed & Sound of Westminster, Pa.; Sixth Avenue Electronics of New York; Flanner's Home Entertainment of Brookfield, Wis; Ken Crane's Home Entertainment of Hawthorne, Calif.; and Crutchfield of Charlottesville, Va.

In home audio, MyerEmco purchasing VP Dave Glassman foresees long-awaited gains. "HD Radio is being included on more and more [A/V] receivers that are in the popular price points, so I think you'll see a pick up in interest. But as far as people beating down the door to ask about HD Radio; there's not a marked increase in it. That's the home audio side of it."

Flanner's audio buyer Jarrett Ernst described his home HD Radio as "doing very well," and Crutchfield said it is seeing some momentum build on the home side.

Falling price is a key catalyst for home HD Radio sales, retailers said. A/V receivers with HD Radio started in 2007 at $1,600 for an Integra model, with a handful of other HD-Radio A/V receivers (AVRs) priced at more than $2,000 from multiple brands. This year, Yamaha began offering an HD-Radio AVR at $999, and Coby and Sony have announced $100 standalone component tuners that can be added to a home's existing component-audio system. In addition, retailers said, tabletop HD-Radio gear is holding steady in price but gaining features such as CD players.

Likewise, prices are getting more affordable in the car audio aftermarket. In-dash CD-receivers with embedded HD Radio are starting at $119, and add-on aftermarket tuners are starting at less than $99.

On the car side, "HD demand is growing," said Dan Jeancola, merchandising senior VP for Car Toys. Dual and Jensen CD players with built-in HD-Radio tuner "have been very popular," he said. "And there is excitement from our sales team and customers about the upcoming add-ons with iTunes tagging."

Neil Riffer, mobile electronics buyer for ABT Electronics, agreed that demand is rising on the car side. "We're getting more people coming in and asking for it," he said.

Action Electronics called HD Radio an opportunity for mobile specialists to replenish lost satellite radio sales. "We feel that HD Radio is just stepping in where satellite radio dropped the ball," said owner Mark Gebeloff. "The merger is on hold, and you can't get [satellite-radio car] product."

For its part, mobile specialist Westminster Speed & Sound is promoting HD Radio as a way to boost margins. The company has been pushing the JVC KD-ADH39 in-dash CD-receiver. "We found we can take a customer who was going to buy a $120 CD player and bump them up $80 to a $200 HD Radio," said owner Mark Miller. "There is demand. Some people are asking about HD, and others like the idea once you mention there's no subscription."

On the home side, Bjorn's buyer Joey Martinez called Yamaha $999 AVR promising. "I think because of the Yamaha, it will pick up," he said of HD-Radio sales for the home. Bjorn's also sells tabletop models. Still, he said, "I don't think as many people are coming in and asking about it, which is surprising because in this market, there's so much HD Radio." As for iTunes Tagging, he called it "a great idea."

At Sixth Avenue Electronics, operations VP Tom Galanis said HD Radio "is picking up in both home and car." Although he described current sales as "OK," he pointed out that "HD-Radio products are starting to become more accepted." Sixth Avenue carries A/V receivers with HD Radio along with some car stereo, and the company plans to add tabletop HD Radio.

Sixth Avenue and other retailers said they promote the technology's sound quality. "That's the big advantage compared to Sirius and XM — it's a huge difference in sound," Galanis said. Flanner's, on the other hand, promotes HD Radio's ability to receive extra stations through multicasting. "That's our main pitch," said Flanner's audio buyer Jarrett Ernst. In Milwaukee, he noted, the sole classical radio station ceased broadcasting, and the only classical station is now exclusively on HD Radio.

The Flanner's buyer also claimed his HD-Radio sales over Christmas "were spectacular" in Sangean and Sony tabletop radios. A Sangean stand-alone tuner and select Integra AVRs also performed well, and Flanner's is now waiting for Sony's $100 component home tuner.

Flanner's notes, however, that returns on HD Radio for the home is higher than on other products. "If you get a signal, the sound quality is spectacular," said Ernst. "If you don't get it, you don't get it. It has a higher return rate than other products because someone can't get a signal or maybe they live in a valley or too far away from the station."

At Nebraska Furniture Mart, executive Mark Shaw said, "We haven't seen any increase in sales. There's multicasting, but there's not a lot of content. It's not a big market." The company sells a Sony tabletop radio, a Denon AVR and a car audio piece.

Dax Keuhn, electronics buyer for Vann's in Missoula, Mont., described HD Radio as "kind of floundering," likely because the number of HD Radio stations is limited.

In California, Ken Crane's Home Entertainment sells Denon's AVRs at a suggested $2,499 and $5,200 with build-in HD Radio but doesn't sell tabletop models, which don't work inside the stores because of all of the interference created by all of the TVs inside the store, said senior VP/COO Steve Caldero. Connecting all of the tabletop radios to an outdoor antenna to pull in HD Radio signals is not very practical, he added.

"I would not call HD Radio a real important feature on home products yet," Caldero said. "The local stations are mentioning that they are broadcasting in HD but, I am not sure people understand what that means — yet."

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