HD Radio business question.. or questionable business

[tested]

When HD radio came out I was interested in it, but didn't want to spend more than $100 to buy a radio so I could listen to it. The key selling points of HD were sound quality (CD like on FM and FM like on AM) and added programming choices. After it had been out a while, I read plenty of comments that suggested it was an unreliable technology - prone to signal loss in even ideal circumstances. That seemed to make the two key selling points rather useless.

On top of that, I could hear the "IBuzz" on analog AM for HD and couldn't imagine that it was a good idea for stations to give up so much sound quality for the sake of a new technology with questionable benefits. Over time, AM stations came to that same conclusion and many (or most?) turned off their HD signals. Nevertheless, I continued to hear an enormous amount of on-air promotion given to HD radio.

I was curious enough about it that when Ibiquity went to the trouble of creating HD radio sections in some retail electronic stores I went in for the sole purpose of trying to see if I could listen to the radios to see if the technology was either as good as Ibiquity was saying, or as bad as the critics said. I could do neither. In store after store the sales people had little to no knowledge of HD radio, but were quite eager to show me satellite radio. In every case the HD radios for sale were not hooked up in such a way that I could actually tune in to an HD radio signal and hear the sound quality on either FM or AM. It was shocking and embarrassing to see displays urging people to buy a technology that could not be demonstrated in the store.

I read with amusement (and/or dismay) the continued pronouncements of Ibiquity and broadcasters how "hot" HD radio had become. The bold claims that millions of radios had been sold and people really liked what they heard. I couldn't find a single friend outside of the radio industry who actually owned (or knew if they owned) a working HD radio.

In the past couple of years, some of the special programming that one was supposed to only be able to get on HD2 and HD3 stations became easily available online. Indeed, I can listen to most all of those streams on my phone for free easier than going out to buy a special radio to listen to them.

Nevertheless, a couple of months ago I finally bought an HD radio. The Sparc SHD-TX2 is a nice little portable. I was surprised at how well the technology works and really amazed that Ibiquity and the broadcasters couldn't figure out a way to demonstrate this better for the average listener in stores. I even put this radio in my car a few times for my drive to work so I could see if the signal was reliable. I lost it maybe 2 or 3 times for a few seconds, but nothing major. I even found two AM stations locally that are in HD. They sound good, but I still think a full 10khz signal on the right radio sounds better.

So after getting this radio and playing with it for a while, I wanted to see if I was getting all the programming I should be. I logged in to the HD radio website to see the promised program guide. It was a joke. The listings are way out of date and inaccurate. Several of the AM stations they say are in HD haven't been in HD for a couple of years. At least two of the FM stations they say are in HD are not and some phantom HD2 stations are listed. The HD radio app for my phone that is supposed to provide this programming guide is even worse. When you search for my city (a suburb of Dallas) it says there are zero HD stations. You have to search for Dallas-Fort Worth or you don't get the listings. Then, when you do, the listings are the same ridiculously out of date listings from the website. This is an embarrassing situation that really needs to be fixed or the website and app need to go away.

What I find so questionable about the entire HD radio business model though is that when I listen to these HD2 and HD3 streams, in most cases I hear no commercials. None. How are you supposed to make money when you don't run ads? I do not get it. I'm sure some of the other stations in other markets do run ads and that's how they're able to promote themselves and show up in the ratings. I just don't understand why you would run any HD2 or HD3 station without ads. It makes no sense.

On top of all that, I did a little accounting of my own on local HD reception. There are 19 FM and 2 AM HD stations that I can get on my radio at home. They provide a total of 16 HD2 and HD3 streams. However, 4 of those are rebroadcasts of AM or FM stations I can already get on a regular radio. That leaves 12 unique streams of additional programming. I'm sure the theory is that people who actually have HD radios will like being able to hear a couple of AM's in good audio quality off an FM HD signal. There are just not enough HD radios out there to really make this much of a benefit. On top of that, it seems like it curtails some of the selling point of the HD radio technology in general when you offer up a simulcast instead of unique programming.

Of those 12 unique streams I have found about 3 that I like enough to tune into from time to time. I am just surprised and somewhat disappointed that they don't offer up more options that I would want to revisit on a regular basis.

The bottom line: the technology is better than I thought but the business side has been mishandled and ultimately I don't think it has added much to the radio industry at all. It's a shame.

 

[TheBigA]

What I find so questionable about the entire HD radio business model though is that when I listen to these HD2 and HD3 streams, in most cases I hear no commercials. None. How are you supposed to make money when you don't run ads? I do not get it.

How are you supposed to sell ads when you have no listeners? Or rather, not enough to show up in the ratings.

 

[landtuna]

What I find so questionable about the entire HD radio business model though is that when I listen to these HD2 and HD3 streams, in most cases I hear no commercials. None. How are you supposed to make money when you don't run ads? I do not get it. I'm sure some of the other stations in other markets do run ads and that's how they're able to promote themselves and show up in the ratings. I just don't understand why you would run any HD2 or HD3 station without ads. It makes no sense.

So how would the sales staff sell an HD if, in fact, they don't accept unique ads? As another way to reach customers from the base signal of course. Agreed, not many more customers but it doesn't cost the advertiser any more than whatever base rate they are already paying and quite possibly beats the station down the street without any HD. It is also a way to offer multiple formats from one station so if the sales people can tie format to target customer it is another sales tactic.

It also can be a way for a crappy base station to extend its coverage. Example: we have a crappy AM here in Phoenix on 1440 that doesn't begin to cover the metro area so it fired up two HD streams on two FM stations with big coverage and simulcasts. Viola! Metro area coverage without the cost of moving/establishing new stations. Another sales benefit. I live in an area that cannot receive the AM signal nor one of the HD's, however the second HD comes in great and is the only metro outlet playing Oldies.

There are just not enough HD radios out there to really make this much of a benefit.

There are more out there every new vehicle sales cycle. Most new HD radios are installed in vehicles. I have one in one of my cars and it is the only thing I listen to while driving. I don't even bother listening to SiriusXM any longer.

On top of that, it seems like it curtails some of the selling point of the HD radio technology in general when you offer up a simulcast instead of unique programming.

All depends. In my example above I cannot receive the desired signal on their AM location so listening through their HD translator is my only other option. The numbers are not huge but they are there.

The bottom line: the technology is better than I thought but the business side has been mishandled and ultimately I don't think it has added much to the radio industry at all. It's a shame.

Fully agree with you here and I think most radio insiders would agree also. The marketing was a huge flop. When HD was first adopted by a CBS station here in my town ran HD ads many times per hour extolling the virtues of HD "the station between the stations". But they never explained what it was or how it differed from regular radio. It also required buying a new radio to listen which most people refused to do. The stations themselves didn't appear to know how to implement their HD streams or what to put on them. In some cases they simulcast. In others they added new formats. But there didn't seem to the customer to be a compelling reason, or mandate as was the case with the DTV migration, to go to HD. Myself, I could never make out the difference between a good FM stereo signal and HD. It wasn't the same as between AM and FM so why spend the money? I now have one of the best automotive radios available and still cannot tell the difference.

 

[Kelly A]

FM HD Radio has been making gradual inroads in spite of the terrible original marketing by Ibquity and the original station groups. Listeners are discovering the alternate channels in increasing numbers. The discovery by listeners seem similar to the way FM started gaining traction in the 70's.

 

[PTBoardOp94]

Originally in 2006 when the HD Radio Alliance came to be, the Alliance membership agreed to not air commercials on their "stations between the stations" until 2008 as a means of goosing listenership.

That gamble didn't pay off, and almost no HD stations (without analog translators) are airing ads.

 

[davideduardo]

There are more out there every new vehicle sales cycle. Most new HD radios are installed in vehicles. I have one in one of my cars and it is the only thing I listen to while driving. I don't even bother listening to SiriusXM any longer.

Only about a third of radio listening is in cars.

The average car is 11 years old.

If half the new cars have HD installed today, at that rate it will take 20 years to get 50% penetration just in cars.

Since HD is not available on smartphones, and that is where the market is going, it remains to be seen if anything at all can be done with the HD channels other than using them to snag translators and bypass the FCC ownership caps.

 

[spiritof67]

Nevertheless, a couple of months ago I finally bought an HD radio. The Sparc SHD-TX2 is a nice little portable.

This evening I checked the Amazon website, and this radio is listed as 'currently unavailable.'

 

[landtuna]

This evening I checked the Amazon website, and this radio is listed as 'currently unavailable.'

I just bought an Insignia HD Radio Tabletop Radio Black NS-HDRAD from Best Buy for $40 (incl shipping) for my nightstand. It is still in transit so I don't have experience with it yet.

 

[landtuna]

Only about a third of radio listening is in cars.

The average car is 11 years old.

If half the new cars have HD installed today, at that rate it will take 20 years to get 50% penetration just in cars.

Since HD is not available on smartphones, and that is where the market is going, it remains to be seen if anything at all can be done with the HD channels other than using them to snag translators and bypass the FCC ownership caps.

You say the same thing every time someone mentions HD in cars but the truth is more and more new cars have HD as part of their entertainment package. Now even moderately priced cars are starting to carry them. I look at HD radio much as I look at the diginets - they cost practically nothing to run and they have some interesting content not available on the primary signals. It doesn't cost me anything significant to listen, so I do.

 

[TheBigA]

I've been saying that I expect interest in HD radio to improve once the patent expires. That's what happened to FM. The Armstrong patent expired in 1966, and just a few years later, FM usage exploded.

 

[davideduardo]

I've been saying that I expect interest in HD radio to improve once the patent expires. That's what happened to FM. The Armstrong patent expired in 1966, and just a few years later, FM usage exploded.

I don't think that the expiration of the patent had very much to do with FM's growth in the US... it was mostly related to the prohibition of simulcasting of FMs with co-owned fuilltime AMs starting in January of 1967. Still, it took about a decade to get decent automobile penetration of FM receivers.

In the meantime, iBiquity and its new owners can enhance HD and extend the patent, just as drug manufacturers have learned to do.

 

[davideduardo]

You say the same thing every time someone mentions HD in cars but the truth is more and more new cars have HD as part of their entertainment package.

But, again, with likely less than 5% of cars with HD today, and even if every car had HD with the next model year, it would take 5 years just to get up to around 30% of all cars with FM counting the existing ones. With in-car being the smaller part of radio listening, this means that in 5 years only 10% or people would be listening on an HD capable radio. That is a very small universe.

 

[TheBigA]

I don't think that the expiration of the patent had very much to do with FM's growth in the US...

Maybe, maybe not. I'm thinking about it from the manufacturer perspective. They were still making AM only radios, and FM in cars was an option, but that changed after 1966. In the case of RCA, the battle was personal. The trial with them ended just as the patent was ending. That made the FM tuner very cheap and easy to install. I think the price difference for the additional band was about $10.

I agree that the simulcast decision ALSO played a part, but wasn't the only factor. We'll see what happens with HD once the technology becomes open to developers.

 

[landtuna]

But, again, with likely less than 5% of cars with HD today, and even if every car had HD with the next model year, it would take 5 years just to get up to around 30% of all cars with FM counting the existing ones. With in-car being the smaller part of radio listening, this means that in 5 years only 10% or people would be listening on an HD capable radio. That is a very small universe.

Are there any verifiable stats on in-car HD listening? Or are you assuming that HD is just a minuscule portion of total in-car? I am not disputing that HD is a small part of total listening but I am saying it will no doubt continue to become more popular (as a percentage of the total) as more and more vehicles are equipped.

As with the diginets and their old time content, HD may never get to be primary listening in our lifetime but it will certainly continue to grow from what it is now. Right now it is the perfect solution for me for otherwise I would not be a radio listener at all.

 

[davideduardo]

Are there any verifiable stats on in-car HD listening? Or are you assuming that HD is just a minuscule portion of total in-car? I am not disputing that HD is a small part of total listening but I am saying it will no doubt continue to become more popular (as a percentage of the total) as more and more vehicles are equipped.

There are no stats on HD listening to speak of as no stand-alone HD subchannel of a commercial FM has ever shown up in Nielsen, despite being separately and specifically encoded.