Thoughts on Radio’s Digital Future
CES Report Out: AM/FM’s Competition Increases, but Radio is Innovating
We recently got back from the International Consumer Electronics Show in Las Vegas, and there was both challenging and encouraging news for AM/FM broadcasters.
Full disclosure: I sit on the Consumer Electronics Association Board of Industry Leaders, so have a (small) vested interest in successful CESs.
As most probably know, the annual CES is one of the largest trade shows in the world. All the new consumer gadgets are unveiled, from tiny smart phones to huge digital TVs and massive subwoofers. The show is critically important to iBiquity and HD Radio technology, and we have had a presence for more than 10 years. All the key players in the HD Radio rollout are represented: in four days we met with automakers, consumer electronics retailers, radio receiver manufacturers, MP3 and mobile phone makers, semiconductor manufacturers, government and regulatory players, the press and bankers. And broadcasters. As I wrote about in my last column, radio broadcasters have taken a somewhat overdue interest in radio devices, so there were AM/FM guys roaming the convention center pushing radio’s agenda.
Owing to the recession, this year’s CES had fewer attendees, an estimated 110k vs. a more typical 130-140k. We found it more focused and businesslike, with more decision makers and less hangers-on in attendance, and it was undoubtedly still the single best place to get a handle on what is happening in consumer electronics.
One thing was clear: AM/FM’s competition is increasing. In my view, this trend will not stop and likely intensify. A few examples:
- There was big buzz around the new mobile video standard, and devices which will bring DTV into cars and other portable devices will be here soon.
- New internet radios, devices which look and act like regular radios, but use WiFi networks to tune in thousands of internet stations, were shown by several manufacturers.
- All of the automakers are working on new entertainment and information sources for cars, including in-vehicle internet, and fully integrated iPod/MP3 functionality.
- A truly mobile internet, using a variety of existing and planned high speed networks and devices is being worked on by major carriers and handset, PC and receiver manufacturers. The day is not far away when an at home/at work internet experience will be available any place, any time. Think surfing and streaming in the car, at the club or on the bike.
As I have opined before, I don’t think any of these services in and of themselves spell the death of AM/FM. But they do continue a long term trend which has seen radio go from being the sole source of mobile information and entertainment to being one of dozens of choices. We certainly saw that on the show floor. As I wrote about last time, AM/FM tuners are not being included in as many devices as they have been in the past. Many AV products like home receivers, which previously would have always had AM/FM, now only include video capability. I even saw one car stereo without AM/FM: it just had CD and MP3/iPod capability.
In my view, AM/FM is having such business difficulty now because it is suffering from both cyclical and secular issues. The shorter term cyclical issues - the current broad recession and the bad state of some radio company balance sheets - will get better over time. The long term secular issues - the intense new competition from different sources of mobile information and entertainment and the myriad new choices that consumers and advertisers have - are not going away.
So radio broadcasters must continue to gird themselves for this long term fight. And one of our core beliefs is that it will be difficult to fight all that new digital competition with analog technology - probably not a great strategy to be the last remaining analog medium in a world that is fully digital. The broadcasters that founded and funded and support iBiquity today recognize that.
And to plagiarize a previous column, let me be clear that HD Radio technology is not the silver bullet that will solve all the industry’s woes. Broadcasters will have to do all they historically have done to compete: program, sell, promote, manage costs and develop new revenue streams including online businesses. But there is no question that HD Radio technology is part of the solution. Look at every other industry that has gone digital and how much it has improved its position.
So it was encouraging to see a lot of progress at CES on moving AM/FM forward competitively. A lot, but not all, of that progress was on display in the iBiquity/HD Radio booth and the booths of our many brand partners.
We all understand that for HD Radio technology to make any difference, it has to become a mass market consumer product. To do that, we need more digital receivers at lower price points. In our booth, we showed many of the nearly 90 different HD Radio receivers available today (up from 50 or so last CES). These radios cut across all major categories, including the very hot iPod dock segment. And prices continue to fall, with radios as low as $79 now available.
Factory car installation is also critical: people buy radios when they buy cars. 2008 was a breakthrough year here. From just BMW and Mini having HD Radio technology in their cars on the showroom floor, we saw Hyundai, Mercedes and Volvo join the club this year, in the case of Volvo as a standard feature. And with other automakers who have announced their plans including Ford/Lincoln/Mercury, Toyota Scion, Audi and most recently Kia, 13 automakers are on board. Incidentally, I just leased a Hyundai Genesis and it rocks. The car is great, the HD Radio implementation is fantastic.
Radio is fighting back by developing new services which consumers value and which can generate incremental revenue. CES saw several iTunes Tagging enabled HD Radio receivers. These radios allow consumers to tag songs they hear on HD Radio station for later purchase on iTunes. And broadcasters can deliver real-time traffic data using HD Radio technology. Traffic services, provided by Clear Channel and the Broadcast Traffic Coalition (BTC), were up and operating on Vegas stations. The devices which receive real-time traffic, including a new Personal Navigation Device (PND) by Dual Electronics which was a Best in Show Nominee, were all over the show floor. Clear Channel and the BTC have plans to generate revenue from these services.
And AM/FM has to compete by getting on the devices that people carry. No one is carrying transistor radios anymore, it’s cell phones, MP3 players and increasingly, PNDs. Broadcasters have recognized this, and their work has resulted in analog FM tuners, with the new ‘Buy from FM’ capability, being built into Microsoft’s Zune MP3 players, on display at the show. We showed the first ever MP3 player with HD Radio technology built in, and several PNDs. Consumers should expect to see these devices on shelves later this year.
So CES showed conclusively that AM/FM broadcasters are in the game taking swings. It’s a good thing, the competition isn’t going away, and the consumer’s expectations in a digital world demand it. Our great medium is fighting back, and we are here to help you fight the battle, just give us a call.
Thanks for reading, and let me know what you think: email to firstname.lastname@example.org. I continue to be impressed by your passion and (in most cases) thoughtfulness. I do read, consider and try to respond to all of them.
All the best for a great 2009.