Richard Harker
by Richard Harker
Apple took 74 days to sell one million iPhones. Despite mixed reviews, numerous glitches, a long-term service agreement, and a $600 initial price tag, they managed to move nearly 700,000 the first weekend. Nielsen BuzzMetrics reported that in the month following Apple’s iPhone announcement, Apple’s official web site had 1.79+ million unique visitors. The keyword “iPhone” was searched 870,000 times that month.
In March 1997, the DVD was launched. The first year, 350,000 DVD players were sold. Despite the current format war between Blu-ray and HD DVD, something like 300,000 players were sold its first year, not counting the gaming consoles that can play Blu-Ray DVDs.
In the last quarter, XM added 338,000 net subscribers to bring their total subscribers to 8.25 million. In the same period, Sirius added 561,500 net subscribers to bring their total to a little over 7 million. That means there are over 15 million satellite subscribers and something like 10 million radios sold.
Sales figures for HD Radio sales are hard to come by and sketchy at best. HD Radio has been around for three years now, and last year there were perhaps a couple of hundred thousand sold. If the rate of sales had accelerated this year we probably would have read about it. However, the HD Alliance has been rather quiet on sales lately. Let’s face it, as new-tech toy sales go, HD Radio sales have been a dud. Radio reaches 93% of Americans every week and is one of the most effective marketing tools available to advertisers, yet we haven’t been able to sell in three years as many HD radios as Apple sold iPhones in a single weekend. That alone should alarm us.
And what about the buzz surrounding HD Radio? According to Nielsen, the iPhone continues to show up in about 1% of blogs. HD Radio averages less than 0.01% of blogs. And it gets worse. The majority of the posts regarding HD Radio are in the context of posts about satellite radio. There’s considerable confusion between the two, so even when bloggers write about HD Radio, they are often actually referring to satellite radio.
A recent Washingtonpost.com blog by Marc Fisher addressed many of the issues regarding HD Radio. Titled HD Radio: 8 Track Tapes Of Our Age, Or the Next Big Thing?, Fisher writes that, “Digital radio – marketed in this country as HD Radio – has been available in the United States for more than two years but has hardly had any impact in the listening public.” The article offers few new insights, but is worth reading just for the comments of those who posted replies. The majority of posts are highly critical and even vitriolic about HD Radio. It is dismissed as a scam and a rip-off. Even defenders of HD Radio acknowledge that there are problems. One post notes, “HD Radio will simply die out if they don’t increase the power of the signal. There is no point in getting it if you can’t hear anything. I live near Annapolis and I can only pull in two stations. I can get all the FM stations loud and clear.” According to the HD Alliance, there are 23 Washington, D.C. area stations broadcasting 37 HD channels. This person in Annapolis can hear two.
Last Fall Ken Dardis, author of the Audio Graphics blog, wrote, “Either the radio industry is going to start delivering on what’s promised: HD Radios available in stores, and truly unique programming which gets people talking or the public is going to pick up on these false statements.” A year later it seems his prediction has come true. What buzz HD Radio has ranges from mildly tepid to strongly negative. And mostly true. There are serious issues of coverage. Early adopters who bought HD radios report serious drop-outs, poor coverage, and interference. The engineers of Ibiquity may argue otherwise and defend the system, but the industry has a serious PR problem with the very people we need to get the word out on HD.
In New York City, the #1 market in the country, there are 25 stations broadcasting 42 HD channels. You’ll find CHR, AC, Classic Rock, Hip-Hop, News, Talk, and Sports. In other words, everything you can find on the regular FM dial. There are a few variations like Classic Rock Deep Cuts, but in a world with over a hundred channels of music on satellite radio and tens of thousands of channels of music on the Internet, Gotham City’s HD offerings look pretty weak. And that’s in the #1 market. Imagine what the typical listener outside of New York finds when he goes into his local Radio Shack to hear HD Radio.
As the world’s largest market for technology, the products, systems, and standards we adapt are generally adopted around the world. Not with HD Radio. The United States pretty much stands alone on this one. There have been tests in other countries and Brazil has a number of stations using the Ibiquity system, but no other country has embraced this proprietary patented digital radio standard. Europe has essentially united behind the open DAB system. In Great Britain, two million digital radios were sold in 2006 alone. It is estimated that 14% of British households have a digital radio. In Europe there are nearly a thousand radio models available compared to less than two dozen in the US. Defenders might grasp at this apparent success of digital radio in Europe as proof that over time Americans will embrace HD Radio, but Europeans have no satellite radio and fewer commercial radio stations. Success in Europe is not indicative that success is around the corner in the U.S.
It doesn’t look good for HD Radio. Supporters of HD Radio will say that marketing will turn things around. Once people realize the benefits of HD Radio, they will buy the radios. Let’s not forget that nothing kills a bad product faster than good marketing. The word has already gotten out about HD Radio. People who have already bought an HD Radio are telling others of their experience (mostly bad) and no amount of marketing will reverse this.
People have repeatedly shown that they prefer convenience. Easy trumps better (which is why DVRs haven’t been as successful as many expected). How well does HD Radio fit this paradigm? With HD Radio we have multiple stations on the same frequency. We have poorer coverage with drop-outs. And we have the additional expense. So for most people, FM is good enough. They don’t need a problematic but slightly better sounding AC station in HD if they can hear a completely acceptable sounding AC station on FM. It comes in better and doesn’t cost anything. AM stereo worked well, but it was a technology without a need. And it came years too late to help AM stations. Quad FM was another technology that worked (sort of), but wasn’t worth the trouble.
Defenders of HD Radio will say that we need HD to compete against new technologies. The people who are embracing satellite and Internet radio are doing so because they dramatically expand their choices, and the additional effort and cost required is worth it. A New Yorker who buys an HD Radio gains the potential of hearing another 42 stations (probably far less), most of which he can already hear on AM or FM. HD Radio is a modest improvement over traditional radio at best, and in some respects like coverage, a step back. No amount of education and marketing will change that equation.
We also have to wonder about the investment that radio stations are making in HD Radio. Budgets are tight. Marketing and research dollars are in short supply. Maybe the declines in listening levels are not just a result of growing competition. Maybe listeners are abandoning radio because the product isn’t as innovative and isn’t as good as it used to be. Our research suggests that radio’s poor image has much more to do with the product than our technology. Wouldn’t the money being spent in supporting HD Radio (to which virtually no one is listening) be better spent on the things that will have a real impact?
Richard Harker is President of Harker Research, a company providing a wide range of research services to radio stations in North America and Europe. Twenty-years of research experience combined with Richard’s 15 years as a programmer and general manager helps Harker Research provide practical actionable solutions to ratings problems. Visit www.harkerresearch or contact Richard at (919) 954-8300.
