HD Radio and Microsoft's Zune: Six Ways to Make it Happen

With the announcement that Microsoft's new Zune player will include an HD receiver, and with this year's CES and NAB under my belt, it's finally time to reiterate something that I've said before: HD Radio is going to happen.

Further, I'll wager that the first HD Radio station to appear in an Arbitron report will do so as early as this Fall - probably in New York or L.A.

For the most part, I've been putting off writing this because I didn't want to get another deluge of cranky, whiny, e-mails from the scores of guys out there who want to tell me how wrong I am about thinking that HD Radio presents opportunity.

HD Radio bashing is extremely fashionable and has been for some time. Note, however, that bashing HD Radio is about as easy as shorting General Motors stock. When the going gets tough, it's just easier to bet against something than to find possible opportunity in the rubble. Sometimes it's just about the quick money, sometimes it's a lack of vision, and sometimes it's just laziness.

You do have to give it to the negative thinkers, though. In today's economic climate, it's hard to imagine that the same guys struggling to save their current businesses could possibly launch a new one. The odds indeed seem long.

So against those acknowledged odds, here's a general update on HD Radio, as well as six suggestions on how to keep this thing in play.

Status

There were plenty of good things to report from the well-trafficked HD Radio floor space at CES. Unfortunately, sales figures weren't among them. Repeatedly asking anyone in a blue Ibiquity/HD Radio shirt, "So, how many units have been sold?" was met with various mumblings, including three who all independently said, "I should know that."

At best guess, it's about a million.

But let's talk about the good stuff.

In brief, 12 auto manufacturers, 30 radio manufacturers, and the first of the real-time traffic and GPS navigation receivers are hitting the market. And the price barrier has been broken, with tabletops about $80. Better news comes in the strong belief that the FCC will grant HD Radio operators a requested power increase.

So where do we go from here? Even with those 12 auto manufacturers on board, most HD install deals don't really kick in until the 2010 models arrive this Fall. In the meantime, auto companies are expecting a brutal 2009 - forecasting as few as 9.5 million total cars sold. How many of those will have HD Radios? One percent?

Hyundai said in August of 2008 that it could sell 50,000 Genesis in 2009 (HD Radio standard). Let's assume fewer. All the Volvos sold this year will have HD standard. They might sell 75,000 cars. So throw in half the BMW and Mini Coopers, plus a couple of Fords and maybe a couple hundred thousand cars will be delivered with HD Radio in 2009.

It won't make much of a dent in the numbers game, but it might help in the consumer education game, just as early Cadillac installs helped satellite radio. At least now you might know someone in your neighborhood fiddling around with an HD Radio.

But 2010 will be different. With the introduction of the new Zune player plus the auto deals kicking in, there could be as many as four million HD radios in the market. Yep, still a drop in the bucket, but keep in mind these can be considered household numbers, so the potential audience is that much larger.

Six Steps to Create HD Radio Momentum

I believe that, while the problems of HD Radio are many, the most crippling obstacle is the lack of vision. Virtually all of the HD Radio bashers have one thing in common: an inability to see HD Radio as anything but more of what already dominates AM and FM.

These folks need to get out of the way. They're not only hurting HD Radio, they're killing radio, period. For those who remain, six points and suggestions:

1) Paradigm Shift: Bandwidth is Bandwidth

Many HD Radio critics mistakenly pit HD against WiFi. The argument goes, "if WiFi is going to be available in cars, you can get thousands of stations ... so why bother with HD?"

This "either/or" argument, which by the way is rarely put forth by people who actually make content, is flawed. If this is indeed the case, then you might as well just shut down your station today because the radio cause is hopeless.

Second, it assumes that all this digital bandwidth is free. It is not. As consumers, my family has hundreds of "free" radio stations available to us now via our DSL, my iPhone, and her Blackberry. Last I checked, I was paying between $30 and $40 a month for each of those digital delivery systems. That's about $1,200 a year for all those "free" radio stations.

On the content provider side, I'll guarantee that proponents of the "free" argument have never had to cut a check to a streaming provider or SoundExchange.

It isn't, and is unlikely to ever be, free.

The correct approach is to take the view that bandwidth is bandwidth, whether it be AM, FM, Television, HD Radio, in-home broadband, any of the various mobile telephony technologies, two tin cans and string, or carrier pigeon.

Content creators know that the objective is to create great programming, then get it out to the consumer on any and every platform available. In the past, we could count on the consumer to come to radio. That's over. We now chase the consumer - on their terms, on all platforms available.

HD Radio and streaming are excellent complements to one another.

CBS Radio's Dan Mason nails it when he says that his company makes the donuts, and doesn't really care where people buy the donuts.

2) It's Not a Chicken-or-Egg Question

By studying the digital rollout overseas we learned that two things presaged the sale of digital radios on a large scale. One was the price barrier, which we've overcome. The other was strongly desirable content, which we haven't.

In short, like so many new media technologies before it, content will drive the adoption of HD Radio. Waiting for more radios to be in the market before creating strongly desirable content is a false choice.

On a recent Saturday, while listening to a Mets game, The Fan (WFAN/New York) promoted the Bulls/Celtics playoff game that was airing on an HD Radio channel. Brilliant. For the first time, I perked up and paid attention to an HD Radio promotion. As a lifelong Bulls fan, I was reminded of a benefit (not feature) of HD Radio.

Public Radio continues to lead with some of the most innovative HD Radio projects, such as WFUV's excellent Alternate Side (full disclosure: I helped).

Similarly, look how iPhone Apps (content/benefits) are driving that phone forward, while Blackberry plays catch-up. And by the way, who's behind the development of all those apps? More on that in a moment.

3) Strongly Desirable Content May Not Be What You Think Is

Sadly, on the content side, programmers of HD Radio fail to see much beyond more of what already exists on the band. Yet there are significant business opportunities beyond more radio for white people by white people.

Even in these very difficult times, we could likely move millions of HD Radios into the marketplace if we just looked a little harder.

Since there is currently no real pressure on the channel inventory, hyper-niche opportunities could be explored. First, there are data applications such as the aforementioned traffic services. But audio still has legs.

Foreign language programming is an obvious place to start. How about Tagalog? There are 78,000 Tagalog speakers in Los Angeles, for example. Do you even know what country Tagalog is the native language of? (Use the Google.)

LA also has 81,000 Korean speakers and 58,000 Armenian speakers.

New York is a foreign language bonanza, with 263,000 speaking Mandarin, 200,000 Russian, 83,000 Yiddish, 100,000 French, and so on.

There are foreign language opportunities well into the Top 20 markets, including 70,000 Vietnamese speakers in San Jose and nearly 65,000 Bosnians in St. Louis.

A huge opportunity exists in the 65+ crowd. Commercial radio has been kicking this demo to the curb almost as fast as it has been barring the door for the under 24 crowd. The BBC launched a national service (BBC 7) on digital to cater to the upper, upper demo.

And hey, if you really want to talk crazy, how about using a little bandwidth to service the 1.3 million legally blind in this country?

4) If You Don't Want to Deal With It, Get Out of The Way

It's tough for GMs and owners to justify the money and the time on innovative programming these days. And coming up with Tagalog programming is hardly a slam-dunk.

Unless you get out of the way -- just as Apple has largely done with its App Store.

Who makes all those apps? Apple doesn't. Entrepreneurs do.

No sane GM would turn down money today for his or her sub-carriers. Why should your HD channels be treated any differently?

Strongly consider brokering the channels to entrepreneurs at rates that are extremely favorable and then get out of the way.

5) Realize That the Promotion of HD Must be Localized

Currently, HD Radio has no national programming. That means, unlike satellite radio, you can't promote any content nationally. And, as we've discussed, content is the only way this will ever happen.

This means that the generic national campaigns put forth by the HD Alliance need to go away. They may have initially worked in terms of raising awareness that there was some new kind of radio out there, but that's about all these campaigns will ever accomplish.

The new campaign, touted as a second phase, is really just a repeat of the first. It won't work. Every time I read that the HD Alliance was the #1 or #2 national advertiser, I squirm when I consider the results the campaigns have accomplished.

Campaigns instead need to be localized, focusing on the absolute best and most unique products available in the market. Further, the marketing needs to go to the street level and store level to not only demonstrate the product, but promote the unique content that is available.

In my neighborhood, Verizon Fios and Cablevision are in a pitched battle for my business. It's hand-to-hand combat. For a while, we were getting weekly personal visits from Verizon. We still get weekly phone calls.

Does your street team even take an HD Radio out to events to let consumers play with it? Do you still have a street team?

6) The HD Alliance Needs Some Fresh Thinking and Perhaps Fresh Blood

We all know that there were a lot of missteps along the way with the launch of HD Radio.

The biggest, perhaps, was the decision to position HD Radio as the answer to satellite and declare it commercial-free for two years. The result of this decision was that no GM in his or her right mind would invest in the content.

The technology may never overcome this initial blunder.

Yet today, the HD Alliance still touts "less advertising clutter" as a benefit. There's nothing quite like talking down the lifeblood of the radio business. It's absolutely baffling.

Of most concern is, when I mention the HD Alliance to GMs and even iBiquity staffers, I am met with groans and rolling eyes.

This is unfortunately a vote of no confidence that needs to be immediately addressed.