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iBiquity: Stations Want More HD Radio Sales

8/30/2010 12:15:00 AM Eastern

Columbia, Md. - Radio
broadcasters are waiting for further growth in the installed base of HD Radios
before they resume a more aggressive pace of station conversions to digital
broadcasting, said HD Radio developer iBiquity Digital.

"Broadcasters want to see some
more eggs before they take the next step," iBiquity president/CEO Bob Struble told
TWICE.

Broadcasters jump-started the
market years ago by turning on stations before their HD signals had an
opportunity to be heard, he said. They converted hundreds of stations per year,
but the rate slowed to 135 in 2009, with 51 added so far this year to reach a
total of 2,085 out of about 13,000 stations. The 2011 conversion rate won't be
much different than this year's rate, he added.

Also slowing the station rollout
were dramatic declines in radio-station revenues from about $20 billion to $16 billion
in recent years, major broadcast groups' debt loads, debt-covenant profit
requirements, and Chapter 11 filings by broadcast groups.

Although radio station revenues
are expected to grow again in 2010 this year, and broadcast groups' finances
are stabilizing, radio stations are putting the ball in the CE and automotive
industry's courts to move HD Radio forward.

"We have a way to go," however,
to convince current HD Radio suppliers to expand their selections and entice
more suppliers to enter the market, Struble said. Many have only their "toe in
the water." Nonetheless, the company is making headway, particularly on the
automaker side of the business, he claimed. "It felt like we were pushing a
rock up the [OEM] hill for eight years, but now it feels like the rock is
starting to roll downhill," he said, pointing to a forecast that about 5
percent of all new vehicles sold in the U.S. this year will come with HD Radio.
The "competitive dynamic" is driving up automaker adoption, he said.

In the CE industry, iBiquity's
challenge is to entice 60 current suppliers into expanding their existing
selection of about 100 home and car SKUs, get more suppliers to offer it, and
get existing retailers to stock more models. The selection of SKUs held steady at
about 100 in 2010, in part because of the economy and dramatic reductions in
subsidies that iBiquity, owned by struggling broadcast chains, paid to
suppliers, Struble said. The selection will remain at about 100 in 2011,
although unit volume will be higher, he added.

As for distribution, Struble said,
"We don't need more storefronts. We need a bigger selection in those stores."
Best Buy, for example, offers about 15 SKUs, but Walmart offers only three or
four, he noted. More than 12,000 storefronts already sell HD Radio, excluding
online storefronts.

To convince retailers and suppliers to step up
their commitment, Struble points to statistics showing that HD Radio devices
sell faster than their comparable analog counterparts and drive up average
selling prices (ASPs). HD Radio technology adds about $30 to the price of a
radio at retail, he said. "Retailers can get the premium."

Also to convince suppliers and
retailers, he points out that the potential customer base for HD Radio is
large. Although only 2,085 stations have converted out of 13,000, the converted
stations operate in markets with 85 percent of the U.S. population and account
for more than half of all daily radio listenership, Struble said. In terms of
ad revenues and listenership, "4,000 stations matter, and we have 2,000 of them
already," he said.

Another incentive for suppliers
and retailers is rising HD Radio sales and share in the car audio aftermarket. Retail-level
sales of aftermarket in-dash CD players and mech-less audio head units with
embedded HD Radio tuners rose 58 percent in units and 78 percent in dollars
during the January to July period compared with the year-ago period, The NPD
Group told TWICE. The figures exclude sales of mobile multimedia A/V head
units, all-in-one A/V-navigation head units and A/V mech-less head units.

On the OEM side, sales are also
up, Struble said, in part because new-car sales are rising again but also
because of more OEM availability. So far, automakers have announced that 84
vehicle models from 14 vehicle brands will offer standard or optional HD Radio
in the 2010 calendar year, and that number will go up in 2010 as automakers
announce more HD Radio deals, he said.

OEM unit sales to consumers will somewhere between double
and triple this year, he said, mostly due to increasing HD Radio availability,
but a small part of the increase is due to the general car sales rebound. The
percent of new vehicles sold with OEM HD radio will exceed 5 percent in
calendar 2010, up from the previous year's 2 percent to 3 percent.

With OEM and CE retailer sales rising, iBiquity estimates the
installed base exceeded 3 million units at the end of June, based on the
company's royalty reports.

The company's latest royalty
report, for the fiscal 2010 three quarters ending June, reported sell-in of
more than 1.2 million units, up from 734,000 in all of iBiquity's 2009 fiscal
year. Those numbers lag actual sell-in by three months, he noted.

See charts for this story here.
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