Thursday, March 29, 2007

Getting in on the HD bandwagon?

Anyone who knows me knows that I primarily deal with smaller college radio stations in my off hours, and with public radio for my day job. Last week the FCC made a huge announcement that directly affects both camps.

Namely, it's that they're going to formalize multicasting via HD Radio. This means it's no longer an experimental service, and therefore no longer restricted to non-commercial programming. It's not quite official yet - as in, it's not in the Federal Register. But that'll happen within a few weeks, no doubt.

For what it's worth, they also authorized nighttime operation for HD Radio on AM. That's a topic for another post.

So why is this so important? The non-commercial restriction meant no ads. If they can't sell ads, they can't make money on the multicast...which means nobody wanted to put any money into their multicasting. So many (too many) commercial stations' multicasts were little more than iPods on shuffle. Blech.

The removal of that means that some enterprising commercial outlets are going to eventually start doing more interesting things with their multicasts. Not much at first, but it'll grow over time. That means the monopoly that public radio has had on innovative multicasting is about to evaporate. So far public radio hasn't been all that innovative, either...and with the extra competition they're going to need to start thinking outside the box if they want to see ROI on all that money they've poured into HD Radio installations.

Okay, but how's it important to college radio? The removal of the NCE restriction all but guarantees that we will soon see FM multicast channels being rented full-time to other parties. Again, it'll start small...but I'll bet it'll grow faster than innovative programming will. We're already seeing reciprocal-broadcasting deals like WAMU and WTMD and I'm 100% positive that some small and medium AM stations will start renting FM multicast channels to simulcast the AM. This'll be especially true for daytime-only AM and also clusters where there's a popular AM program sports. Why? HD Radio has barely started to penetrate the receiver market but that's rapidly starting to change with Radio Shack carrying HD Radio receivers. Multicasting will be a fast and easy way to reach dedicated listeners who don't mind paying $200 to hear their favoriate station...and why not? Satellite radio listeners are paying $150/year for the same concept, and with HD Radio you know that you once need to pay it once and you're done.

(prediction: unless their contract with the Sox prevents it somehow...Entercom will simulcast WRKO 680AM's Red Sox games on WMKK 93.7FM and/or WKAF 97.7FM via multicasting to reach the lucrative Metrowest suburbs & drive HD Radio receiver purchases. And they'll do it before the end of the 2007 season)

This means that if your little college station had any hope of renting an HD multicast channel on another station in town (a quite viable strategy to expand your reach) then you best come up with an offer and soon. It won't be long before stations wake up to the huge potential revenue draw this can be and your station gets priced out of the market.


Anonymous said...

Aaron, I think you would be interested in these HD radio articles - I wouldn't be too optmistic about HD Radio:

"Sirius, XM, and HD: Consumer interest reality check"

"While interest in satellite radio is diminishing, interest in HD shows no signs of a pulse."

"What kind of digital radio are listeners searching for?"

"HD Radio on the Offense"

"But after an investigation of HD Radio units, the stations playing HD, and the company that owns the technology; and some interviews with the wonks in DC, it looks like HD Radio is a high-level corporate scam, a huge carny shill."

"RW Opinion: Rethinking AM’s future"

"Making AM-HD work well as a long-term investment is seen as an expensive and risky challenge for most stations and their owners. There is the significant downside of potential new interference to some of their own AM analog listeners as well as listeners of adjacent-channel stations."

Aaron Read said...

Thanks for the comment, Brian!

Yes, I'm familiar with Mark Ramsey from his articles on Radio World...he raises valid points but my read of him is that he's never felt HD Radio never should've happened the way it did, at all. I agree that HD Radio has lots of problems but I feel that HD Radio is here to stay, so might as well make the most of it.

The FCC's actions last week would seem to back my interpretation.

There's also a huge difference between HD Radio and XM/Sirius that few people seem to realize: if HD Radio takes 10 years to gain's not good but it's not the end of the world, either. It has always been designed as an evolutionary transition rather than a hard changeover like Digital TV.

If XM/Sirius don't catch on by the end of THIS YEAR there's a good chance one or both will go bankrupt and disappear.

In other words, there's a lot more pressure on satellite radio to comparing the rollout of satradio to HD Radio's rollout is not a one-for-one comparison.

Anonymous said...

Hey Aaron, thanks for responding !

Actually, the FCC has left it up to the marketplace to decide the fate of HD Radio. Only 1,200 stations, out of 13,500 are broadcasting in HD and most are owned by the HD Radio Alliance. Consumer interest in HD Radio remains flat and Bridge Ratings just downgraded their projections for HD Radio (their projections are still way too high, as only a few tens-of-thousands HD radios have been sold, and no doubt many returned for lousy reception and poor HD channel programming. Here are my comments to a recent Washington Post article on HD Radio:

"The FCC has just given away our free airwaves to a few corporate thugs, including iBiquity Digital Corporation. Especially on AM, HD/IBOC causes adjacent-channel interference, which I have confirmed listening to WTWP in Wash., D.C.- the digital sidebands are over-powering on 1490 and 1510 and would clobber any existing stations on those frequencies. Few HD radios have been sold, as consumers have not bought into this farce. This whole setup is just to the advantage of the HD Radio Alliance, as they own most of the 1,200 stations broadcasting in HD - the small mom-and-pop stations have lost coverage and will probably disappear. This FCC sole-source, non-competitive contract award to iBiquity is a total travesty !"

Here is another interesting article:

"HD Radio Effort Undermined by Weak Tuners in Expensive Radios"

Successful technologies sell themselves, and don't need to be "pushed" onto consumers with a $500,000,000 ad campaign, which by the way, has been almost a total failure. We are not stuck with HD Radio, as the marketplace will eventually decide.

Aaron Read said...

Again, I don't deny that HD Radio isn't a perfect technology. It was the best that could be done after a political mandate of "no new spectrum" was forced upon broadcasters.

And while I heartily disagree with many things iBiquity has done (and continues to do) both in private the strategy that one company be given the monopoly on developing this technology. We tried letting the marketplace decide on AM Stereo and that was a dismal failure from the start. At least HD Radio looks like it's got SOME chance of succeeding.

BTW, I don't mind you making the argument that only X stations of Y total are using HD Radio, but I would ask that you account for translators in your figures. Nobody should really include translators in HD Radio discussions at this point since it's still experimental that you can even transmit HD Radio over a translator's airwaves. And since they're a secondary service with no original programming they are most definitely held in "second tier" regard in the HD Radio rollout.

With that in mind, the FCC's year-end totals for 2006 list 13837 total AM & FM stations, but 4131 of them are FM translators or boosters.

So really it's 1236 (iBiquity's latest figure for March 07) of 9706...or about 15%. However, you must also compensate for WHICH stations have converted. By which I mean that usually it's the biggest stations in each market that have made the jump...and by "biggest" I mean both in terms of signal and in terms of listenership.

For example, according to Radio-Locator there are 31 FM stations within listening range to Boston, MA (I don't count the one translator). Of them, 12 have not installed and/or turned on HD Radio. That's a pretty bad ratio - only 62% penetration in one of the highest technology cities in the country.

However, you have to look at WHICH stations haven't coverted yet. Five are tiny college stations. Three are smallish, independent commercial stations that probably can't afford HD Radio until more receivers are out there. And there's four that have HD Radio plans (one even has a transmitter ready) but they haven't gotten the digital quite up yet.

I don't have the Arbitron numbers, but I'd bet you have more than 90% of the listening public (for FM) covered with HD Radio when you account for ratings. That's not too shabby.

AM, of course, is another story...but since nighttime authority hasn't even officially hit the rules yet, it's apples and oranges to FM.

BTW, the ad campaign is $200 million dollars, not $500 million. It's been estimated that Apple cleverly finagled about $400 million of free publicity by the way they announced the iPhone. Granted, they got it for free, but that's because the iPod is a revolutionary product...and people are assuming the iPhone will be the same (personally, I doubt it will). HD Radio was never meant to be was meant to be evolutionary. There's no "gotta have it" buzz about radio and there isn't going to be. Not with today's media landscape. So people have to invest for the long haul...betting money now that will pay off over the long term.

Let's put it this way. Apple may be the master of getting free publicity, right? But for EVERY new product (hell, every new RELEASE) they have to go through the same marketing dance to get people to buy it. The cycle of investment never stops. With HD Radio, you only have to convince listeners to buy it ONCE (maybe twice) over the entire 20 year span of the rollout period. Viewed in that light, the $200 million investment today could have very good ROI over the long term.