- 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 on-line 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/Vnavigation head units, and A/V mech-less head units.