HD Radio is 'Not The Silver Bullet'

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Posted by madcityradio.com on August 24, 2008 at 17:59:50:

Digital Over the Air and Digital Online: We Can Walk and Chew Gum at the Same Time

Beware of pundits, advisors or bloggers advocating false choices.

Recently, some radio industry commentators have made the assertion that broadcasters must drop everything and focus on internet streaming and getting their content online. In this narrative, any time spent on HD RadioTM implementation (or much of anything else for that matter) is wasted, because being digital online is the only way to save our great industry.

Preposterous I say. We are capable of and need to do both.

Radio broadcasters have two fundamental businesses: they are content developers and they are spectrum owners. In the digital world, both are precious and actions must be taken to maximize their value.

On the content side, radio folks have an undisputed track record of producing some of the most compelling audio content available. (And we must never forget that this is the core product � if we don�t consistently work to produce spectacular, entertaining, informative content, we should be selling shoes.)

In the digital world, maximizing the value of that content is essential. That means distributing it as widely as possible over all those new digital pipes: stream it, podcast it, P2P it, download it to mobile phones. Use the new technology to create compelling websites and web services, better connect to and customize for listeners, and provide extra value to advertisers. In doing so, broadcasters can generate incremental revenue and build their brand and listener relationships.

We must be realistic here. The thought that online broadcasting could replace broadcasters� over the air business is a pipe dream. Listener aggregation online with 50,000 other stations to compete with is simply not going to reach what can be done in a local market with limited over the air choices. But there is the potential for solid incremental revenue and businesses.

[A slight sidebar in this area: all those claims that mobile internet (Wi-Fi, WiMax, others), in cars or elsewhere, means Armageddon for AM/FM radio are hogwash. I paid enough attention in my economics and engineering classes back in the day to know that the numbers and the technology don�t add up. Economically, mobile internet is dramatically more costly than AM/FM as an audio streaming service (think spectrum auctions and build out costs). Technically, these point-to-point networks won�t have the streaming capacity to support anything close to what point-to-multipoint AM/FM does. Commuters listening to audio streams in any major market would literally shut the networks down. So mobile internet will be great for other apps like email and search, and will be a strong addition to the growing list of radio competitors, but it is not the Death Star.]

There are tremendously exciting online businesses developing: the CBS/AOL distribution deal, the Clear Channel/Katz online network, Emmis�s Interactive efforts and many more online efforts by broadcasters big and small. And revenue is beginning to flow. I could not be happier about all these online developments; they are helping to revitalize the radio business.

But radio broadcasters are also pipe owners. The spectrum assignment each station has is some of the most valuable real estate imaginable � look at what spectrum auctions fetch for the government these days.

And in the digital world, maximizing the value of our pipes is equally critical. And digital pipes are worth more than analog pipes, without question, because you can do more with them.

Ask the cable industry. Hated the concept of upgrading to digital. Billions of dollars of capex. Forced to go digital, kicking and screaming, by competition from satellite TV. Guess what happened when they did: telephony over cable networks, internet over cable. Entire new businesses and revenue models were created, as well as the improvement to the core product. Digital pipes are worth more, period.

For AM/FM, digital pipes come via HD Radio technology which will bring the benefits digital has brought to other media. Better quality, more content and consumer choice enabling better demographic targeting and the ability to address the long tail. And more interactivity and services to engage our audience, better serve advertisers and develop new revenue: iTunes Tagging, traffic delivery, subscription-based programs, mobile commerce are all launching or being worked on. With addressable radios, we can over time pursue one-to-one ad models, boosting CPM. And like cable, there will be new services we haven�t even thought of yet. When radio broadcasters get a digital pipe into every home and car in America, good things will happen.

Let me be clear, HD Radio technology is not the silver bullet that will solve all the industry�s woes. You don�t just flip a switch on that new digital exciter and party like it�s 1999. Broadcasters will have to do all they historically have done to compete: program, sell, promote, manage costs. And develop 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 let�s stop mulling over false choices. Like every other consumer medium, AM/FM must be digital, online and over the air. And the efforts are complimentary � streaming those HD2s helps educate listeners; it�s a good thing. And HD Radio implementation can drive web traffic. Neither initiative will right the ship alone, but both play a role in the solution.

C�mon folks, after all our industry has accomplished over the years, I know we can walk and chew gum at the same. We have to�

(iBiquity Digital Corp. CEO Bob Struble)

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