You can't give up hope just because it's hopeless!

Paul Heine at Radio & Records reported today that "off-air" revenue for radio stations actually increased 10% in 2007.

Given that "off-air" is primarily Internet advertising, this can only be viewed as a positive.

Hopefully, radio stations are finally seeing that investing in new technology can actually result in real revenue. As the article points out, local online advertising is poised to grow by almost 48% this year to $12.6 billion. Radio stations have the local sales force which should put radio in a great position to capitalize on this growing market.

The radio consultant cited in the article states that "Hiring online-only salespeople should be well worth the investment".

We agree.

But we would take it even one step further: Radio should hire PROGRAMMING people specifically for their online radio offerings.

To all the Radio General Managers out there who are overwhelmed with having to deliver results for under-financed HD Radio and Internet Radio offerings, we offer you this golden nugget from Futurama:

"You can't give up hope just because it's hopeless! You have to hope even more, and cover your ears and go, 'blahblahblahblahblahblahblah!'" - Philip J. Fry

More on Drop Outs

A reader of our blog sent us a link over the weekend to another recent post describing the issues users are having with HD Radio reception.

In our last post, we highlighted users' frustration with HD Radio reception. This new AVS Forum exchange further proves our point that HD Radio's reception remains a problem.

Here are some snippets from exchange found on the forum:

Original Post: "I just installed the jvc hdr1 hd radio in my accord. I have the antenna that is in the rear window.. I recieve alot of the hd radio stations, but I am also getting alot of drop outs in my reception... then it takes up to 10 seconds, sometimes less, to get the music back...."

Reply: "HD1 should switch back to analog FM, this can be very very very annoying if the volume level or timing is way off, but you should not experience a dropout. HD2 and HD3 are subject to frequent dropouts making their use in a moving vehicle more than annoying. Gerrrrr. Just who thought this was going to be a practical technology since most people listen to radio in their moving vehicles?"

Original Poster: "thanks for the reply... I really enjoyed one of the 80s hd stations, that's why I upgraded my oldie radio to hd... "

It is the last comment, however, that caught our eye. INTERESTING CONTENT is what drove this person to buy an HD Radio. Better yet, he/she is willing to go on an online forum to see if he can fix his HD Radio problem because of this content.

This is a person that HD Radio needs to win over if it is going to have a chance to succeed!

HD Radio Reception Woes

A few days ago we mentioned that iBiquity should make HD Radio's reliability problems their first priority.

Like many of you that read our blog, we keep tabs of what others are saying about HD Radio. One entry in MP3car.com's forum today caught our eye:

"So i have the Visteon HD radio installed and using Mitch's cable (which is awesome and cheap to boot!), the thing is i have reception dropout every few seconds. It will be fill strength HD, then analog crap, then HD, then crap. It goes back and forth every 5-10 seconds. The reason could be a multitude of things; shoddy antenna, bad reception area, bad visteon box, etc.. So i wanted to ping the forum to see if anyone else has come across this issue?"

This post only further validates our point. If reception in the car is not reliable, what does that say about reception in people's homes or offices.

Worse, this guy is most likely an engineer or at least an audio enthusiast who knows a little about adjusting antennas.

Our advice: Forget mobile and next-gen applications like conditional access until these reception issues are resolved ...or at least improved dramatically.

Another Open Revolution?

T-Mobile announced that it plans on shipping its first cellphones built on Google's Android platform later this year.

Even skeptical participants like Qualcomm now see the light. Sayeed Choudhury, Qualcomm's Vice President of Product Management for CDMA technologies, predicted big changes will happen fast once the Android phones get into consumer hands.

Nedim Fresko, Director of Strategic Platform Initiatives at RIM, said that T-Mobile's release would be a "wake-up call for innovation."

When Qualcomm and RIM, companies that have vested interests in closed platforms, see the value of open source, one has to wonder why more technology companies do not embrace the open model.

Radio and iBiquity should take a cue from the mobile industry and consider opening the HD Radio platform to encourage further innovation.

No, No, No, No

Today was Patriots Day in Boston. It is another quirky New England tradition (well actually only in Massachusetts and Maine) which we love. In addition to the getting the day off, we have the Boston Marathon which provides some of the most interesting people watching anywhere.

Along the lines of great people watching, we also found today an interesting video of the HD Radio panel at NAB. You can see the whole clip here.

There are four points that jumped out at us while watching the clip:

1) It is NOT clear that those promoting HD Radio really buy into their own message. This is a major problem. When a panel that includes several broadcasters sound skeptical, how can they expect consumers to be any different.

2) One panelist suggested that broadcasters should lobby the FCC to mandate that HD Radio be available in every radio receiver. This is also a very BAD idea. Consumers have so many alternatives today that mandating such a switch will only further alienate young consumers (the future). The only winner in this scenario would be lawyers because they will expect payment regardless of whether this strategy actually works. Why not spend the money on programming so that consumers will actually ASK for HD Radio.

3) Another suggestion was that HD Radio should be rebranded. There may be some merit to this argument. HD Radio does imply higher fidelity. Clearly, fidelity is not a driving factor in a world filled with MP3s. On the other hand, we feel the value of a name can be overrated. Build a good product, and people will deal with the name.

4) Finally, iBiquity needs to be careful not to oversell HD Radio. We have heard more than one broadcaster say that HD Radio can be the "Internet for the car". This is a promise that will never be fulfilled because it is inherently a BROADCAST technology. There are definitely many new applications that could be provided by HD Radio. For example, traffic services or eventually broadcasting newspapers for e-paper readers. BUT, overselling will only lead to disappointment...both for consumers and broadcasters.

Advertising Recession and Google

I usually do not pay much attention to the stock market but this story on Google caught my eye.

It was not Google's stock surge that was interesting but the fact that Google actually increased their Q1 advertising revenue by 42% versus Q1 last year.

Meanwhile, the RAB is reporting that both local and national radio advertising revenue fell by 4% in February. This followed a decrease in January as well.

We are not as pessimistic as the AP Reporter who said:

The decline in advertising revenue in nearly all major markets has continued unabated as listeners abandon the format for prerecorded music and commercial-free satellite radio.

But it does appear that some mediums are more recession proof than others.

It will serve broadcasters well if they keep this fact in mind as they refine their HD Radio strategy.

HD Radio: Portable vs. Reliable

Lawson Digest reported that iBiquity will be releasing this Spring new HD Radio chipsets that will require less power.

Not sure if they are referring to the 200 mW chipsets recently shown by iBiquity and Samsung at CES. If anyone has more details let us know.

While we support iBiquity's effort to reduce the power profile of HD Radio chipsets, we hope that this will not take away from the more pressing need of resolving reception issues.

There are two reasons for this:

1) Mobile phones (the holy grail of mobile platforms) are already power hogs. The current cellular chipsets for the iPhone use almost 300 mW...and this BEFORE Apple implements 3G chipsets (or even Silverthorne). Incorporating an HD Radio chipset that uses almost 200 mW does not seem feasible right now.

2) Without improving reception, HD Radio will continue to face consumer backlash. Our most popular blog entry over the past few months was our entry on improving HD Reception. This speaks to the scope of the problem that many consumers are having with their HD Radios. We can tell you first hand that these reception issues are real and very ANNOYING.

Sure, we all would like to have HD Radio on all types of mobile devices (iPods, cell phones, etc.). But the reality is that without good reception, you have nothing. No one is willing to deal with a signal that constantly drops for too long. Just ask Sirius.

We realize that some of the problem is the power of these digital signals, but getting permission to increase broadcast power is a long process. While waiting for the government's permission, iBiquity should be looking to improve receiver sensitivity even further. This should be their highest priority.

We know that iBiquity is still a startup and they only have so many engineering resources to go around. Learning to prioritize can be the difference between success and failure.

All projects are iterative - it's just that some managers choose to have the iterations after final delivery.
-Urban Wisdom

Baby Steps

CBS Radio is on a roll.

A few weeks ago, we applauded CBS for their deal with AOL Radio.

Today, we want to congratulate CBS Radio for bringing legendary station WNEW back onto the airwaves as the HD2 counterpart to Fresh 102.7 WNEW.

Better yet, CBS Radio is streaming the station on WNEW.com in partnership with last.fm.

WNEW is a name brand that CBS should definitely be leveraging on ALL mediums...even if it is brand that has been missing for a few years.

Of course continued investment is still required to make this a success, but it represents a baby step in the right direction!

Why consumers don't buy HD Radios?

Recently a friend recommended the paper Why Consumers Don't Buy: The Psychology of New Product Adoption by John T. Gourville. It is very insightful. Given our vested interest in HD Radio, we looked at HD Radio's poor sales figures through this paper's perspective.

The author classifies new products into three categories based on relative (with respect to incumbent products) costs and benefits.

• Category 1 - The new product is cheaper than the incumbent products but offers no new benefits. For example, a generic drug at 50% the price of the branded alternative.
  
  
  
  
• Category 2 - Cost remains the same but the new product offers all the benefits of existing products plus more. For example, without any additional cost to end users, Google search engine returned better search results than the other search engines that it replaced.
  
  
  
  
• Category 3 - The new product offers all the benefits of existing products plus more but at an additional cost. Grouville says that most new products belong to this category.
  
  
  
  

HD Radio falls in the third category. HD Radio receivers are more expensive than the conventional analog radios. But, the technology also offers better sound quality, more content and program information.

Obviously, these benefits are not sufficient for convincing consumers to shell out a few hundred dollars for an HD Radio device. It is because consumers don't treat comparably sized gains and losses the same. In the words of psychologists, "losses loom larger than gains".

Gourville also presents six strategies for improving consumer responses. We believe the most important strategy is offering 10X improvement - we believe the only improvement that will be attractive to consumers is great content. Fill the airwaves with fantastic content. Consumers will flock to HD Radio. Everything else is just insignificant - things like sound quality are not important because analog radios already offer very good audio quality.

Nice. Nice. Not thrilling, but nice.

So the big announcement on HD Radio from the NAB Show today is that iBiquity and the four leading broadcast equipment manufacturers are releasing a new product line based on "Embedded Exporter" technology. This new equipment will cut costs significantly for radio broadcasters to upgrade to HD Radio.

To quote Emperor Nero from History of the World: Part I:
"Nice. Nice. Not thrilling, but nice."

We were hoping that the beer man, David Rehr, was going to announce some sort of coordinated programming effort by NAB members, but alas, that was not to be.

Let's hope that the broadcasters take their savings and invest in new content for HD Radio.

Because without content, more than just Marcus Vindictus will be calling HD Radio a eunuch.

Let's Make a Deal for HD Radio

Currently consumers have three choices for "over-the-air" radio: Traditional or Analog Radio, HD Radio, and Satellite Radio.

One idea that has been floated around is that HD Radio should position itself as a low-cost option (relative to satellite radio) for secondary radios owned by consumers.

Will this strategy work?

Let's assume that sales people eager for the sale will promote the newer satellite and HD Radio models as the first option. According to this strategy, consumers will have a slight preference for satellite radio over HD Radio for their first selection. Thus, satellite radio is chosen.

The choice for additional radios, now falls between the non-subscription based (and therefore cheaper) HD Radios and analog radios. But which option will most likely be chosen in the second selection?

Well, the Monty Hall problem tells us that people will actually choose analog radio over HD Radio.

This is because of people's initial preference for satellite radio.

Below are the three scenarios for overall rankings assuming that satellite radio is preferred over HD Radio:

Preference Rank One: (1) Satellite Radio (2) HD Radio (3) Analog Radio
Consumer will choose HD Radio as their second option.

Preference Rank Two: (1) Analog Radio, (2) Satellite Radio, (3) HD Radio
Consumer will choose Analog Radio as their second option.

Preference Rank Three: (1) Satellite Radio, (2) Analog Radio, (3) HD Radio
Consumers will choose Analog Radio as their second option.

Statistics show that consumers will choose analog radio as their second option 2/3rds of the time.

Psychologists may even say that this paradigm is an example of "choice rationalization". This theory states that since satellite radio is chosen over HD Radio, analog radio will be chosen 2/3rds of the time over HD Radio. Once we reject something, we tell ourselves we never really liked it anyway, so we are more likely to reject it again.

So the answer to our original question is a resounding: NO!

HD Radio needs to go for the gold rather than settle for silver. Radio needs to start investing that way!

Disclaimer: Ok, so this theory does not really work for our example given the different prices and offerings, but it was a fun exercise anyway:-) Also, our conclusion that radio needs to invest in HD Radio to be successful is still valid.
Check out the real story on how math guys called out psychologists on their long-held assumptions here.

Internet Radio + HD Radio < Don't know

American Media Services has released more results from its "Radio Index" survey. You can see the detailed results here, but there were two stats that caught our eye:

Asked of those likely to listen to radio over the Internet in the future, the question was what type of equipment do you think you are likely to use:

A computer at home	83%
A computer at the office	43%
A cell phone or other mobile device	38%
An Internet connection in your vehicle	22%
None	5%

The 83% number for home computers is not surprising because this is how Internet radio is used today. What is more surprising is that people seem receptive to Internet radio over the phone and car. With such little penetration for these devices, it bodes well Internet radio.

Or is that the whole story?

When the survey asked participants what their favorite way to listen to radio is, we get a better sense of the current state of radio:

Regular radio	77%
Satellite radio	15%
Internet radio	2%
HD Radio	1%
Don't know/no response	4%

Bottom line is that Internet radio still has a great deal of work before its promise is fulfilled. Clearly the user experience remains relatively disappointing. Analog (regular) radio proves that simplicity is a huge factor.

As we mentioned in the past, Internet radio and HD Radio should leverage each other to close this gap with analog radio...At least until Internet connectivity is truly ubiquitous.

Wired Makes 3 Points on HD Radio, RadioSherpa Makes 4

Wired posted a story today about the iTunes tagging feature for HD Radio.

Reading this blog, three points jumped out:

1) Wired remains quite cynical about HD Radio. They START the blog by saying:

"From what we can tell, iBiquity is far more excited about their HD Radio technology than consumers are."

2) Worse, Wired appears to have jumped on the "trash commercial radio" bandwagon. Before the first paragraph even finishes, the author states:

"With so many great music sources available at our fingertips, it's understandable that music fans aren't dying for improved fidelity from the radio stations we no longer listen to."

Yikes. Having Cramer trash terrestrial radio is bad, but Cramer is just a financial guy. Having an influential blog like Wired trash terrestrial radio, however, is REALLY BAD.

Readers of these technology blogs are early adopters. HD Radio has no chance of going viral if these early adopters are not on board. Maybe it is already too late. But it would be a whole lot cheaper if these people were on board.

3) The last point that grabbed our attention was Wired's comments on conditional access:

"The prospect of listeners paying for conditional access to HD Radio programs ("pay-per-hear?") isn't much brighter."

Finally, we can agree with Wired on this point. Adding new features for HD Radio does not make sense right now. HD Radio has too many moving parts to add yet another feature which may only rub consumers the wrong way.

Here is what we feel HD Radio needs to tackle first:

1) As we have said before, Improve FREE content first!

2) Tackle HD Radio reception issues. This can be accomplished with better receivers and increasing the broadcast power of HD Radio stations (although we realize that the latter would be scary proposition for iBiquity).

3) Reduce cost of HD Radios. Adding new features like conditional access right now only will slow this process.

4) IF first three points are addressed, then iBiquity should worry about reducing the power profile for mobile applications. But it is better to have a high-power radio that works well rather than a low-power radio that is crappy.

Unfortunately, we speak from personal experience on this one.

Tagging Miley Cyrus on HD Radio?

Clear Channel announced today that it will become the first radio chain to feature iTunes tagging across 345 stations broadcasting in HD.

Not sure about Clear Channel's claim about being first as Greater Media made a similar announcement a few weeks ago.

Either way, we congratulate both for using this technology to tie HD Radio to a popular platform: the i-Pod.

But is this tagging feature truly a difference maker?

No Way!

First, the current HD Radios that support this feature (the Polk I-Sonic Entertainment System) are ridiculously expensive at $600.

Second, we feel that given its asynchronous nature, it is not clear that people will carry this feature through to purchase. With people increasingly unlikely to pay for music, the ability to purchase needs to be made immediately after hearing the song while the listener is still excited (read: Internet).

Finally, as we have argued several times before, without new and interesting content, tagging is irrelevant. Do people need really need to tag the Miley Cyrus' song that is currently playing 15 times a day on many Top 40 stations?

Solution for Blackberry Thumb

A few weeks ago we learned that XM had lost its relationship with AOL. In our entry that day, we talked about how this was a great victory for terrestrial radio, and CBS Radio in particular.

Almost a month has past, but XM is not retreating to the corner to regroup.

Just the opposite. First, XM learned that the FCC had approved its merger with Sirius. And now, today, we learned that XM has struck a deal with Blackberry.

The deal will allow Blackberry users to listen to 20 XM stations via the cellular network for $7.99 per month.

While we remain on the fence about the appetite of consumers to pay so much for just 20 stations, we applaud their effort to increase exposure of their content regardless of the medium.

Blackberries are hot and having people start to associate their cell phones with radio is a step in the right direction.

Finally we have something to do while resting our thumbs!

Radio is Wireless Right?

CTIA is officially underway and Radio should be paying attention.

For those who have not, here are two points that we found very interesting:

1) From Sprint:
“The walled-garden wireless company is the company of the past… At Sprint, we want to be the easiest to work with and the most open provider. More SDKs coming out. Easier for developers to put out web-accessible apps that’ll run on Sprint devices. Will begin exploring true open-source development. We want to own the pole position and we want to own “the now” as the most open network in America."

Not sure if it is Sprint's fear of being an "also-ran", but WE LOVE IT. We suspect that all carriers will eventually come to the same conclusion.

Radio should take a cue from Sprint because, like Sprint, Radio has the potential to become an "also-ran" as the Internet becomes more ubiquitous.

Radio needs to open their streams (HD Radio streams too!) to more partners because ultimately "ears" are what matters most. Radio should be leveraging their brands now.

If you don't see the Internet being a threat....check our (2):



Granted...this is a staged demo by Intel. But even if this is still five years away...it is still only five years away.