HD Radio: Fun with Math

Let’s pretend we fast-forward about ten or fifteen years to a time when, let’s say, there are 20 million HD radios in the hands of consumers. Although no radio group-head has, to my knowledge, provided any measure of what a successful HD radio distribution would be, I would have to believe they would consider 20 million radios to be successful.

And let’s further assume that these radios are only sold in the top 50 markets (for the sake of simplicity – it makes my argument stronger if we do NOT assume this).

If we then assume that radio unit sales are proportional to population, we would find, for example, more than 2 million radios in New York. If we assume that each radio is listened by by 1.5 listeners (it’s probably not that high in reality), that’s over 3 million listeners, meaning the entire distribution channel would have the cume of about two conventional New York radio stations or one really, really good week for Z100.

Now, let’s say HD yields roughly twice as many HD stations on the dial as conventional ones, and let’s just say that number is 60.

If we divide the number of listeners by the number of stations, we find that the average HD station in New York would have an average audience of 56,000.

And that’s New York.

In Washington, the number is 15,000

In Denver it’s 7,000.

In Columbus it’s 5,000.

In Memphis it’s 3,800.

And that’s with 20 million HD radios in circulation, a number we’re not likely to hit until many of today’s group heads have retired. A number roughly double the current distribution of satellite radio.

Now, these numbers are very, very rough. But they’re close enough to make a point crystal clear. So my question, in all candor, is this: What’s the revenue model here? I’m not being critical. I really want to know.

For satellite radio, a national service under one big roof with subscription support, I get it. But explain to me the model for HD Radio, please.

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  • George

    I wish people would apply those same numbers to satellite.
    The fact is…there is no revenue model. That’s not what this is about. If you’ve read what people in the consortium have said, it’s all about offering programming, not about making money. That’s why most of the HD channels are done on the cheap, with no announcers, and no commercials. They’re taking the satellite or internet radio model and applying it to broadcast. That’s all it is.

  • http://freetalklive.com Ian Bernard

    HD is DOA. I’m a bit of a radio geek and early adopter, and buying an HD radio doesn’t interest me in the least.

  • http://www.mercradio.com Mark Ramsey

    George, I think they said it’s not about making money in the SHORT term. It’s impossible to imagine that there can be this much fuss abuot not making money forever.

  • George

    Actually, I don’t see that there’s been a lot of “fuss.” And that may be part of the problem.
    There’s a lot more space being taken up with people attacking it than from people supporting it or even offering to fix it.

  • http://www.mercradio.com Mark Ramsey

    Well I think that’s wrong.
    If 200 million dollars in on-air promotional value isn’t “fuss” I don’t know what is.
    The trades are flush with HD radio tidbits on a daily basis – all trumpeting progress or announcements of one sort or another.
    I have seen relatively few folks attack HD radio. WE are certainly not attacking it. And when the industry confuses “marketing fundamentals” with “attacks” they’re in big trouble.
    You and others should know that my company has reached out to many of the powers-that-be in the HD radio world and so far they don’t want any help with anything – unless it’s for free.
    You get what you pay for.

  • George

    I don’t know if you read the comments by Robert Conrad of WCLV. I think they’re pretty fair and reasonable.
    As I’ve said before, HD Radio appears to be mainly a corporate initiative, not a local station project. The stations are co-operating, but it’s not a priority. From what I hear, you aren’t the only one who has been rebuffed.

  • tim wallick

    sort of sounded like conrad is done and wont promote it
    mark i have heard from others the exact words you spoke..
    i know of at least two people that were asked to speak with a ceo from one of the larger players after a few hours it was clear they wanted no help and were only trying to have the truth toned down
    looks to me like the friut is dead on the vine based on the lack of progress with product rollout and “content”
    it was clear when ford made no effort to replace the automotive units something is still not working correctly

  • Whitehall

    I think it is fair to say that the audiophile community, those people who take their FM seriously, is dead set AGAINST HDRadio.
    Not only do most people never intend to buy a radio, unless as a plaything for early adopters and collectors, but are aghast at the FCC for even allowing IBOC to thrash up the FM bandwidth.
    Plus, people with enough technical savvy to read the specs are insulted by the false claims of “CD sound quality” or even “near-CD sound quality.” These are transparent marketing hype, beyond mean puffery.
    Sorry, but HDRadio has sworn enemies. This goes beyond just business but has political reprecussions for FCC and for Congress. This has the whiff of political scandal – and I’m a rock-ribbed Republican! The Corporation for Public Broadcasting is especially vulnerable.
    My advice for any businessman is to avoid any association with HDRadio.

  • George

    Here’s the thing: sound quality has also been one of the sales points for satellite radio, and it’s also a lie. The one area where HD radio is an improvement is for AM. Perhaps that will be the place where the technology will have a future. Especially since the band is pretty much dead, now that companies are moving news, talk, and sports to FM.

  • Vytas Safroncikas

    “The one area where HD radio is an improvement is for AM. Perhaps that will be the place where the technology will have a future.”
    So far, all HD Radio AM’ers are restricted by the FCC and by the laws of physics to being digital DAYTIMERS due to night-time interference issues affecting a total of 5 co-and-ajacent channels by each IBOC station. What kind of future is that in today’s world?

  • tim wallick

    sdars interoperable units (orbitcast yesterday)that may allow for alacarte content selection should be available this year from a joint venture company composed of sirius/xmsr
    sirius and baseball
    xm with nfl and stern
    the basic device is done, this step is a very important milestone step toward standard installs,in automotive platforms
    and it meets another listener mandate i want what i want when and where i want it
    on that note the very first order for video displays has been placed with shipments from the vendor expected in the third quarter of 06
    sound quality i think for most is a secondary issue its the basic content and quality of that which brings and holds listeners to your broadcast
    hd radio revenue model forget about it, there is none near term. only greater expense in trying to catch satrad

  • MattS

    HD Radio is the broadcaster’s attempt to get into the multi-channel universe. The’re seeing the listening audience become increasingly fragmented, so they need to reach as many ears as possible. After all, the number of ear-pairs tuned into any signal is all that counts.
    The satellite model allows (for example) the same commercial to appear on 100 different programs at once. You reach sports fans, country fans, rock listeners, all the various niche groups you could never reach with one format. Since the name of the game is getting the advertiser’s message to a demographically attractive ear-pair, you can reach an 18-21 year old easily: you run the commercial on multiple prograams…the advertiser is delighted because he’s getting the oddball listener whom he needs to reach, but likes polkas, or mariachi music. No other “buy” has that efficiency.
    I think the reason Mel Karmazin went to Sirius was that he saw the advertising sales/revenue potential of multiple formats under one roof as a marketing tool.
    HD is traditional radio’s effort to thwart satellite’s wide spectrum of music formats, and at the same time time hitch a free ride on the HDTV hype. People see HDTV quality and they get excited. In their minds they associate HDTV with HDRadio.
    There are a couple of other benefits for HDRadio: it effective blocks listeners from tuning in suburban stations on adjacent frequencies (an HD station on 92.9 can occupy 92.7 and 93.1 with its digital hash), and it basically locks out LPFMs, programmed translators, and other threats to the FM spectrum.

  • http://hdradiofarce.blogspot.com/ Greg

    In response to George’s statement, above:
    “Especially since the band is pretty much dead, now that companies are moving news, talk, and sports to FM.”
    This is a typical response of HD Radio supporters – that AM radio is dead and that HD Radio will be its saving-grace. Many 50KW AM stations are ranked #1 (WLW, for example), or are in the top-5.
    If anything, the music-oriented FMs are under attack from other media, such as iPods/MP3s and cell phone Internet Radio streaming, such as Pandora:
    “News/Talk/Sports:Radio’s Last Bastion”
    “Music FMs of any flavor are utterly screwed… Right now — while FMs are losing the music audience to new media — satellite radio is offering more News/Talk/Sports programming than we can fit on AM radio…”
    “The Last Days of AM Radio?”
    “Sports, all-news and talk programming continue to draw large audiences to the AM band in most big cities…”
    “News/Talk/Sports Tops Radio Formats, Interep Analysis Reveals”
    “The latest share numbers place the News/Talk/Sports format at the top, pulling in an average of 17 percent of listenership among persons age 12-plus, based on Arbitron figures for total radio listening in 92 continuously measured metros. According to Interep, more stations than ever are programming News/Talk.”
    There is only so much room on the already crowded FM band.

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