It really saddens me to point out this article, but I’m doing it only because no radio industry trade will touch it and denying reality doesn’t make it go away.
It’s from Reuters and it’s titled “U.S. automakers not jumping into HD Radio” – and that title speaks volumes:
Officials from General Motors Corp. and Chrysler Group said they were not rushing to commit to [HD radio] devices, which would cost the struggling Big Three U.S. automakers as much as an estimated $600 million annually to install. “We’re investigating HD radio and we’ll probably make a decision in six months. When you add up the cost, it’s a lot of money,” said Michael Kane, director of technology strategy for Chrysler, a unit of DaimlerChrysler AG. The radios are estimated to cost about $45 each to install, or each of the three carmakers about $150 million to $200 million annually, automotive industry sources said. More than a tenth of the estimated 12,000-plus U.S. radio stations have upgraded to the technology, including many in the country’s top 100 markets.
An executive who oversees satellite radio services for GM [which, I should add, has a close relationship with XM] said the carmaker had no plans to install HD radios until the devices catch on. “I don’t think there are too many American carmakers jumping on this. It’s a fairly expensive proposition to put that technology in a vehicle and there’s no certainty around the revenues associated with it,” said Rick Lee, executive director of satellite radio services for GM unit OnStar. “We don’t know if there’s demand there or not and we’re not inclined to test that market,” he said.
And the HD Radio Alliance’s Peter Ferrara added: “We have 11 automotive manufacturing agreements and 55 car models are sourced and committed. We’re under confidentiality (agreements), so we can’t disclose them, but they are not GM, Ford and Chrysler. They’ve made a conscious decision to wait and see,” Ferrara said.
All well and good, however the Big Three are still the Big Three holdouts (and the commitments are likely to be “option” deals, not “standard” ones).
The Big Three are essentially saying they are not convinced that consumers will demand these radios in cars such that a premium will be worth paying. The issue for them is not how hard the radio industry pushes the technolgoy but how hard consumers demand it. They’re likewise saying that they doubt the additional expenses of HD radio will help them move more cars.
The solutions for the radio industry are to:
1. Pay the Big Three to install these radios as standard equipment
2. Barter on-air time to Detroit the way we’re bartering it to Wal*Mart and Best Buy and Circuit City and Sharper Image.
3. Offer the automakers a share of HD Radio revenue in combination with 1 or 2 above
Given the costs involved, I doubt we’ll see option 1 any time soon. And given the importance of the automotive category to radio’s bottom line, I’m not optimistic about option 2. As for option 3, that will be gravy only.
But if you want to get the technology in cars in any significant volume in our lifetimes, that, my friends, is how.