Thoughts on Radio’s Digital Future
The Barbell Strategy: Bulking Up for Radio’s Growth
Cars and portables, that’s where we need to be: we’re focused on it and making great progress.
I’ve been writing a lot recently about the device side, the dynamics and importance of radio receivers. On that topic, my long time friend Lew Dickey has a colorful way of communicating where he (and many other broadcasters) thinks we should focus our efforts on HD Radio uptake. He says, “Bob, it’s the barbell strategy, you need to be in cars and portables, and nothing else matters.” I qualify somewhat that pure sentiment, but there is tremendous logic to the barbell strategy, and we are seeing some great advances.
Hopefully, it is reasonably clear why the two sides of the barbell are important. Listening in cars is where the money is: we all know drive time drives revenue, so radio cannot cede its preeminent place in the dash. And portables - MP3 players, mobile phones, personal navigation devices (PNDs) are part of radio’s future. No one is carrying around transistor radios anymore. To stay ubiquitous, to maintain its reach, radio must be on the devices that people carry. We also believe cars and portables offer the best place for consumers to benefit from newly emerging HD Radio applications which are critical to increase consumer demand and broadcaster return on investment.
iTunes Tagging, for example, where a consumer can press a button and capture song information for later purchase at the iTunes store, makes a ton of sense in cars as opposed to fumbling for a pen to write down a song and driving into a tree. Tagging is also a compelling application in mobile phones and MP3 players, where a consumer can directly purchase and place songs on her primary music storage device. Wireless carriers and device manufacturers will also like the revenue these purchases generate.
And real time traffic info over HD Radio bandwidth could be a killer app when delivered to navigation systems built into cars or PNDs. This capability has the potential to drive HD Radio receiver uptake and produce incremental revenue for broadcasters, and the two sides of the barbell are perfect device targets for it.
So the barbell strategy is critical. But I believe you have to qualify it somewhat. To stick with the analogy, you need a bar to support the barbells, and that bar is traditional consumer electronic radios sold at retail. This traditional CE market is huge in its own right, and penetrating it first leads to more rapid adoption in cars and portables.
The traditional CE market is too big for iBiquity or radio broadcasters to ignore. As I have written previously, in a normal year (not this year), 15 million or so cars are sold with AM/FM receivers; 65 million AM/FM tuners are sold in all other CE products – home stereos, table radios, clock radios, boom boxes, iPod docks, aftermarket car radios, etc. That’s a lot of radios and potential listening.
But even if you just want to focus on the barbell strategy, you can’t do it without this CE bar. Let me explain.
Take cars. Consumer electronics almost never penetrate the factory installed auto market without first proving out in the CE segment. Automakers won’t put new consumer technology in cars until they are certain that it works and there is demand for it. CE products in cars we now take for granted – AM/FM radio, CD players, DVD players, mobile phone, iPod and Bluetooth connectivity – were all in the consumer market for several years before they ever made it into cars. Even when carmakers choose to include a new CE product, their development cycles are typically so long (your new 2013 ride is being designed now), that rapid introduction is almost never possible. You have to be a success in CE first.
Somewhat similar dynamics exist in portable products. Mobile phones and MP3 players have limited space to add new applications. So before the manufacturers or wireless carriers devote precious real estate to a new feature, they must believe that it will help them sell more of their devices or lead to incremental revenue. You must demonstrate that product potential in the traditional CE market. Think of digital cameras and MP3 players becoming established standalones before they became incorporated into mobile phones.
Traditional CE, then, is both a huge market in its own right and the bar necessary to execute the barbell strategy. So it’s good HD Radio technology has made great progress there. Almost 100 different products from some of the most recognized names in CE are in the market across all segments, including hot categories like iPod docks. Prices are as low as $79. Distribution is at more than 14,000 stores including Best Buy, Radio Shack, Target and Wal-Mart. And importantly, products contain new consumer friendly features like iTunes Tagging. There is a solid bar being built here. Good thing, because the barbells are getting bigger.
The auto progress has been particularly encouraging. A short year ago, HD Radio technology was available on BMW and Mini vehicles, and only as a standalone option. Now Mercedes, Hyundai, Volvo and Jaguar also offer the technology and there have been announcements from Ford, Lincoln, Mercury, Scion, Audi and Kia on their near in launch plans. In all, there are 12 car makers offering or having announced their plans to launch HD Radio technology and together they will be installing HD Radio receivers in more than 70 vehicle lines.
Not only are there more automakers offering the product, more consumers are taking it, as we move from a standalone option to having HD Radio technology included in popular option packages or, in the best case, being offered as standard equipment. Our factory auto sales have soared, and we expect significant additional launch announcements soon. The car side of the barbell is getting heavy.
And we are getting ready to add some plates to the portable side of the barbell. We just completed a necessary technical requirement, developing with our partners Samsung and SiPort second generation HD Radio chips with power levels suitable for use in portables. At the Consumer Electronics Show, we demonstrated the first ever armband HD Radio receiver (it’s an MP3 player too), and there is a lot of product development in the portables space. We are working with several brands to make sure consumers will see these products this year. As they say, stay tuned, it will be exciting.
So we believe the barbell strategy - modified to include the bar - is crucial to a successful HD Radio rollout. We have been working on it for several years, and believe we are seeing the results. We have a strong bar of traditional CE products in the market, the car side of the barbell is growing impressively, and we have all the elements in place to load up the portable side. We have come a long way in a short time.
So help us lift that barbell. It will help the radio industry get stronger and grow.
Thanks for reading, and let me know what you think: email to firstname.lastname@example.org. I read, consider and try to respond to all of them.