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HD Radio and the “myth” of price

“We need to get the price down on these radios.”

“When the price comes down, they’ll sell.”

Price is one of the big assumptions criss-crossing the industry regarding obstacles to the success of HD radio.

By next year, there will likely be HD radios available for just under $200, and perhaps less.

Now it’s obvious that lowering the price of an item makes it easier to buy (actually, I have the data to prove this for HD radio, but that’s another story), but – and this is an important point – lowering an obstacle is not the same as elevating a need.

With a strong enough need, price is not usually as great an obstacle. The demand is, in technical terms, more price-inelastic.

Take, for example, Sony’s new PlayStation 3 set to debut just in time for the 2006 holiday season. This unit will be priced up to $600 – $600! And the games, the software, will run perhaps $60 a piece. Now I ask you, do you have any doubts that this machine will sell like hotcakes?

Take, for example, XM’s new Pioneer Inno. Priced at $400, is there any doubt this will be another hot item under the Xmas tree?

And when Apple releases the inevitable next generation iPods (speculative photo here) this fall (as I assume they will), what do you want to bet that the entire line costs more than the cheapest available HD radio?

When something is worth buying, it’s generally worth paying for.

And when it ain’t, it ain’t.

“It costs too much” is the ultimate complaint of consumers who don’t feel the need to buy at any price and need to rationalize their decisions.

We, as an industry, should not assume that lowering the price of HD radios will remove the primary obstacle to the technology’s success. Not until someone convinces us they know what those primary obstacles are.

And when it comes to price, where’s the proof?

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