Carmakers Against HD-Satellite Radio Combo

[Kelly]

My underdstanding was that GM, (Delphi), was one of the original investors in XM, and Ford, (Visteon), an investor in Sirius.

Based on some conversations I've had with some of the auto sound manufacturers at the last CES show, the satellite guys are giving the radio makers the chips as part of the original agreement. This is the main reason why the big three don't want to play with Ibquity. The HD Alliance and Ibquity want to charge license fees to recover R&D expenses.

Other than the value of the supplied chips, I don't believe the satellite guys are paying either Ford nor GM for access to their satellite reception technology.

 

[KB1OKL]

I wonder how those same auto manufacturers would feel about being told that ALL car radios must receive AM, FM, satellite, and HD.

Probably about the same way The Satrads felt when NAB tried to bully and con the FCC into including a lead balloon technology that nobody wants nor buys into their receivers. Reminds me of an old Stones tune:

Hey, You, Get Offa My Cloud!

Looks like Tate is telling the HD gang the same thing: You want it? You work for it, and in the meantime we'll see if IBOC still even exists in three years:

"Commissioner Tate issues a (new) statement on Sirius-XM"

"WIth regards to the mandatory inclusion of HD chipsets into satellite radio receivers, Tate says, 'Thus, I believe the proper path for the Commission to take is to review the issue, along with the price cap, in three years. In addition, we will launch a Notice of Inquiry to examine what the resulting costs would be and whether HD should be mandated. In the interim, I encourage the HD radio industry to find new and innovative incentives to offer car manufacturers to include their technology in automobiles, just as other technologies have done, to increase their uptake and adoption, perhaps including an innovative revenue-sharing model.'"

http://www.orbitcast.com/archives/commissioner-tate-issues-a-new-statement-on-sirius-xm.html

 

[TheBigA]

I don't believe the satellite guys are paying either Ford nor GM for access to their satellite reception technology.

I was a stockholder in XM, and I can tell you very directly that GM received a payment of almost a half billion dollars in 2006. It's a percentage for every GM car buyer who becomes a subscriber to XM. They would not be getting that money from iBiquity.

The FCC could easily require iBiquity to provide their chip to the auto manufacturers for free. But that issue, to the best of my knowledge, was not discussed.

"I encourage the HD radio industry to find new and innovative incentives to offer car manufacturers to include their technology in automobiles..."

Spoken like a Republican. "Innovative incentives." Where I come from, we call that a bribe. ) Make dem an offer dey can't refuise. If you want to know a big reason why XM & Sirius needed to merge in order to stay in business, this is it, and why I expect them to find a way out of those auto deals.

 

[dumber than a box of hair]

The FCC could easily require iBiquity to provide their chip to the auto manufacturers for free.

Please tell us exactly what law gives the FCC such authority.

 

[davideduardo]

[I was a stockholder in XM, and I can tell you very directly that GM received a payment of almost a half billion dollars in 2006. It's a percentage for every GM car buyer who becomes a subscriber to XM. They would not be getting that money from iBiquity.

This is correct. XM and Sirius have deals where they give the car dealers a commission for selling through their services. This is just like the commissions dealers get for selling through LoJack and other add-ons for new car sales.

The FCC could easily require iBiquity to provide their chip to the auto manufacturers for free.

This would not be legal. Under normal circumstances, this is confiscatory and can not be done.

"I encourage the HD radio industry to find new and innovative incentives to offer car manufacturers to include their technology in automobiles..."

Spoken like a Republican. "Innovative incentives." Where I come from, we call that a bribe. )

No, it is a commission. The car makers have no reason ot put satellite in cars, but if the satellite companies make it profitable, they will do it.

Do you know that manufacturers pay for facings and end isle displays in supermarkets? Paying commissions or their equivalent for facilitating sales is a normal business practice.

Make dem an offer dey can't refuise. If you want to know a big reason why XM & Sirius needed to merge in order to stay in business, this is it, and why I expect them to find a way out of those auto deals.

The merged company will have more ability to do more of these deals, since there is no "either or" choice to make by the manufacturers. They will negotiate acceptable commissions for putting the devices in the cars ( a significant expense) and will likely get more subscribers, pay more money to the car companies, and all will be happy.

 

[TheBigA]

The FCC could easily require iBiquity to provide their chip to the auto manufacturers for free.

Please tell us exactly what law gives the FCC such authority.

I'm not saying there's a law. It's more of a "You want something? You have to give something" deal. The FCC clearly doesn't want to mandate an exclusive technology that would act as a financial windfall for one specific manufacturer. That's why they've been very careful with this entire issue. More of that "innovative incentives" that Commissioner Tate was talking about.

 

[TheBigA]

This would not be legal. Under normal circumstances, this is confiscatory and can not be done.

This would not be "normal circumstances." I'm talking quid pro quo.

The car makers have no reason ot put satellite in cars, but if the satellite companies make it profitable, they will do it.

However, HD radio is not a subscriber service. So it's very different circumstance. Once again, our case of "innovative incentive." I really love those two words. I'm going to start using them around the office more.

The merged company will have more ability to do more of these deals, since there is no "either or" choice to make by the manufacturers. They will negotiate acceptable commissions for putting the devices in the cars ( a significant expense) and will likely get more subscribers, pay more money to the car companies, and all will be happy.

Knowing Mel, he is going to want to negotiate down the rate they get. These car companies are now stuck with obsolete receivers that are either only XM or Sirius. The new company will cover that for a few years, but then they become obsolete. So now the car companies want that situation fixed. Which gives Mel something new to negotiate. Which he likes. Because the initial deals were made before he became CEO.

 

[davideduardo]

This would not be legal. Under normal circumstances, this is confiscatory and can not be done.

This would not be "normal circumstances." I'm talking quid pro quo.

Where is the something for something here? You force iBiquity to give away chips that they don't even make, and what does iBiquity get in return? They get nothing... iBiquity's main source of income is the licence fee on chips.

The car makers have no reason ot put satellite in cars, but if the satellite companies make it profitable, they will do it.

However, HD radio is not a subscriber service. So it's very different circumstance.

Yes, HD's economic model is based on a fee for every chip put in a receiver. There is no economic benefit to car makers to put satellite receivers in cars unless they get something back from the people who gain on the transaction, the satellite programming providers.

This is the reason why HD is having trouble getting into cars... there is little gain unless car buyers in large quantities ask for HD and pay extra, which is not happening.

Knowing Mel, he is going to want to negotiate down the rate they get.

He is going to gladly pay what the car companies want to put the receivers in the cars. Just like he paid his Infinity salespeople commissions on sales.

These car companies are now stuck with obsolete receivers that are either only XM or Sirius.

There are no combined service receivers yet. The ones on the lots are going to be gone before multi-service receivers are available.

The new company will cover that for a few years, but then they become obsolete.

The only way I see the combined company providing all the channels they are comitted to, including all the minority channels, is to continue to operate both systems which are on different frequencies and even in different orbits.

So now the car companies want that situation fixed.

No, they just want to get something in exchange for equipping cars with satellite or they won't do it any more.

Which gives Mel something new to negotiate. Which he likes. Because the initial deals were made before he became CEO.

The party holding the cards is the auto industry. If the satellite industry wants receivers put in cars (an something like 90% of all satellite receivers are in cars) they have to make the auto companies want to do this. Unless the car companies badly want to put the receivers , there is no deal. And given the current state of the auto business, those car companies are going to go for as much as they can because they hold all the cards.

 

[TheBigA]

Where is the something for something here? You force iBiquity to give away chips that they don't even make, and what does iBiquity get in return? They get nothing... iBiquity's main source of income is the licence fee on chips.

And how's that been working out? Not too good.

They need to become mainstream. They need to become a toaster or microwave oven. They're not going to get there using their current business model. OK, so they don't give the chip away for free. But they sell it at a huge discount in exchange for becoming mainstream.

This is the reason why HD is having trouble getting into cars... there is little gain unless car buyers in large quantities ask for HD and pay extra, which is not happening.

And it's not going to happen. No matter what content is available. Unless HD comes as standard equipment, not an option, it won't get sampled. How can you sell something if the customer can't try it out? Would you buy a suit you couldn't see or try? Of course not. So, as I said, ibiquity has to decide what it wants to do: Stick to its guns and go out of business, or make a deal and have a chance. The FCC is going to act like the NFL Commissioner and wait a few minutes to see what happens.

The party holding the cards is the auto industry.

Except the auto industry needs money. They'd rather get SOME money than NO money.

There's a trend in everything I'm saying here. Negotiations. We need some "innovative incentives." We need to see them for HD and we need to see them for satellite. And I think there's a lot to talk about.

The other part is that iBiquity has stockholders. Some of them happen to be radio companies. They see their investment isn't producing any dividends. Radio is contributing its part. Lots of free on air promotions. They're giving away free radios. They're talking it up on the air and online. What's iBiquity doing? Waiting for the royalty checks to come in. That's not going to cut it. I think the fire is going to get turned up a bit in the next two years. Meanwhile, the FCC will sit on its butt and watch. Something they do very well.

 

[davideduardo]

They need to become mainstream. They need to become a toaster or microwave oven. They're not going to get there using their current business model. OK, so they don't give the chip away for free. But they sell it at a huge discount in exchange for becoming mainstream.

iBiquiy does not make chips. They license the technology to Samsung and others to make the chips. So they can not sell them at a discount since they don't even make them

Unless HD comes as standard equipment, not an option, it won't get sampled. How can you sell something if the customer can't try it out? Would you buy a suit you couldn't see or try? Of course not. So, as I said, ibiquity has to decide what it wants to do: Stick to its guns and go out of business, or make a deal and have a chance. The FCC is going to act like the NFL Commissioner and wait a few minutes to see what happens.

Cars are not even the most important radio market. That is why iBiquity is trying to get the new chips to be put in a wide range of clock radios, kitchen radios, office type radios, etc., since most listening is not in the car. And consumers don't have to buy a $15,000 case for the radio! If HD becomes more widespread in the home and at work, car maniufacturers will have to put it in the vehicles they make.

Except the auto industry needs money. They'd rather get SOME money than NO money.

Disagree. 90% of satellite market is in the car, and car makers hold the cards on this one. They could simply say "no" and walk.

There's a trend in everything I'm saying here. Negotiations. We need some "innovative incentives." We need to see them for HD and we need to see them for satellite. And I think there's a lot to talk about.

Car makers make no money on HD unless it is on an expensive upgraded radio. They can make lots of money lon satellite, and are doing so now. Expect satellite to pay more now, in all probablility.

The other part is that iBiquity has stockholders. Some of them happen to be radio companies. They see their investment isn't producing any dividends. Radio is contributing its part.

Nobody expected a payoff on this; the investment was essentially seed capital for digital radio. for most companies, the investment is less than a day's billings, and was done nearly a decade ago.

Lots of free on air promotions. They're giving away free radios. They're talking it up on the air and online. What's iBiquity doing? Waiting for the royalty checks to come in. That's not going to cut it. I think the fire is going to get turned up a bit in the next two years. Meanwhile, the FCC will sit on its butt and watch. Something they do very well.

AM HD is dead, because AM is dead. FM wil take a long time, if ever. In the meantime, iBiquity tries to get chips designed that use lower power, etc. That is their purpose in life... to license technology. They make nothing, they have no factories.

And stations promote HD not to help iBiquity buy becaue they want to have a digital presence. And even that is not a sure thing.

 

[TheBigA]

Cars are not even the most important radio market. That is why iBiquity is trying to get the new chips to be put in a wide range of clock radios, kitchen radios, office type radios, etc., since most listening is not in the car.

Quite a bit of listening is done in the car. Enough so that the satellite companies are willing to give up hundreds of millions of dollars to establish a beachhead there. The types of radios people buy don't have HD. I've sold radios in retail stores and I can tell you the table radio market is the absolute smallest market for radio.

If HD becomes more widespread in the home and at work, car maniufacturers will have to put it in the vehicles they make.

That's a mighty big "if."

It seems to me the demand would have to be huge to overcome the cost of the royalty. I don't realistically see the demand for ANY radio becoming that huge any time soon. Unless it comes with a phone, a computer, an mp3 player, or a device that provides physical gratification, if you know what I mean.

 

[davideduardo]

Quite a bit of listening is done in the car. Enough so that the satellite companies are willing to give up hundreds of millions of dollars to establish a beachhead there.

Less than a third of listening is done in the car. In any case, satellite, like GPS devices, are most suited for the car, and rather ill suited for in home and in-office or at work locations which have a roof over them.

The types of radios people buy don't have HD. I've sold radios in retail stores and I can tell you the table radio market is the absolute smallest market for radio.

It's where most listening is done.

 

[TheBigA]

Less than a third of listening is done in the car.

You have three choices: Home, work, and car. They're all about even, according to Arbitron, depending on age and time of day, although car is growing and work is declining.

If they're aiming to reach home or work, table radio is not the best approach. Especially if we're talking about table radios over $100.

 

[davideduardo]

You have three choices: Home, work, and car. They're all about even, according to Arbitron, depending on age and time of day, although car is growing and work is declining.

All indications from the Spring books out so far is that at work is growing, while in-car is decreasing. This may have multiple causes, but the in car part may be related to less congested highways, greater use of public transport, 4-day workweeks, etc.

In the PPM, we have no way to distinguish between in car and at work... it is all under "away".

 

[Savage]

The FCC has no jurisdiction over iBiquity. The Commission can't compel the HD development company to "provide chips" or do anything, including whistle Dixie, any more than the FCC can order your local water company to increase the pressure in the pipes.

 

[TheBigA]

The FCC has no jurisdiction over iBiquity. The Commission can't compel the HD development company to "provide chips" or do anything, including whistle Dixie, any more than the FCC can order your local water company to increase the pressure in the pipes.

Who said anything about jurisdiction?

HD Radio wants a mandate. The question is what are they willing to do in order to get it. I'm talking about compromise and deal-making.

All indications from the Spring books out so far is that at work is growing, while in-car is decreasing. This may have multiple causes, but the in car part may be related to less congested highways, greater use of public transport, 4-day workweeks, etc.

In the PPM, we have no way to distinguish between in car and at work... it is all under "away".

It doesn't really matter. The topic here is HD radio. The fact is they're not selling. If they could get a few million installed in cars, that would be a huge boost for a fledgling technology.

 

[Savage]

In reply #42, BigA quoth: "The FCC could easily make iBiquity provide the chips to the car manufacturers for free." That strongly implies that you have the bizarre notion that the FCC can compel, by administrative order or otherwise, a private company with no direct mass media ownership to do something.

How would you suppose the FCC could "easily make" iBiquity do its bidding? Maybe Adelstein might trundle down to Hallmark and pick out a nice Hoops & YoYo card ("c'mon, Bobby, give 'em the chips already!!!!") and send it along to Strew-Bull??

 

[TheBigA]

I think I answer that in several replies, but most recently #55. I'm not talking about administrative order. I'm talking about, as Commissioner Tate says, "innovative incentive."

But I better watch what I say, since you'll misconstrue it into support for HD.

 

[dumber than a box of hair]

HD Radio wants a mandate. The question is what are they willing to do in order to get it.

They willl NOT get the mandate they're after, which is to have the FCC do their dirty work for them. Any other "deal" they make is beside the point, because it must necessarily involve a very simple concept: Does it sell or not? So far, "not" is the correct answer...and nothing anyone can do by legal fiat is going to change that. There is NO interest in this product.

If iBiquity is really interested in getting the product out there, as distasteful as this sounds, they're going to have to do what SiriusXM does and pay for dashboard space. No way around it. The auto makers, particularly the Big Two (GM and Toyota) have effectively said it.

 

[TheBigA]

If iBiquity is really interested in getting the product out there, as distasteful as this sounds, they're going to have to do what SiriusXM does and pay for dashboard space.

I think you're right. But I think it's cheaper to take the royalty off the front end, and give it a few years to catch on.