Steep Climb ahead for “HD Digital Radio Alliance”

From All Access:

Radio Groups Form “HD Digital Radio Alliance” The big HD RADIO announcement in NEW YORK TUESDAY morning involved the launch of a “unprecedented radio industry alliance” called the HD DIGITAL RADIO ALLIANCE, involving most of the industry’s major operators. 8 companies are charter members- ENTERCOM, CLEAR CHANNEL, CITADEL, BONNEVILLE, INFINITY, EMMIS, GREATER MEDIA, and CUMULUS- and CLEAR CHANNEL RADIO VP of Special Projects PETER FERRARA has been named Pres./CEO of the new organization. The group announced its charter as three major points: to coordinate the rollout of HD digital radio, including coordinating the formats of multicast channeld “HD2”, to work together to secure automotive design “wins” and lower receiver price points, and to jointly market HD digital radio in partnership with receiver manufacturers and retailers. HD2 stations, the “multicast” secondary streams, will be commercial-free and locally programmed (although it is unclear whether the companies intend to use extensive voice-tracking on those channels). Member companies will also devote airtime and dollars- $200 million in airtime plus additional promotional dollars- to promote the service, although the actual dollars were unspecified. New and niche formats will be featured on the new multicast channels in the top 25 markets, with female oriented talk, hispanic and other ethnic formats, jazz and blues, and mainstream formats that may not be available on the main channels targeted for the subchannels. In response to a question from ALL ACCESS’ DAVE HOEFFEL, FERRARA said that the commercial-free would last “as long as necessary to drive consumer awareness.” He also said that the group used a “format selection and allocation process” to decide which company got which format in what markets, although how this would survive anti-trust considerations was not specified.

COMMENTS:

You certainly can’t say the industry isn’t trying to make magic happen here. This communal effort is a noteworthy sign of commitment between the groups.

There are a few interesting tidbits here:

1. It will be very interesting to see how eight groups with their own separate interests will cooperate for their perceived mutual good. This amounts to the OPEC of HD Radio, and we know how well that works.

2. The difference with OPEC is that it has to contend with a product – oil – that is in wide demand. In this case, HD Radio is in no demand. Indeed, the biggest problem with the whole notion of HD Radio is that demand is not organic to the market (the way mp3 player demand was). The industry is trying here not to meet a market need but to create one. And that is a long path strewn with the corpses of those who have tread it before. Can it be done? Maybe, but the odds are not in its favor.

3. Note the technology seems to have been rechristened as “HD Digital Radio,” which is a bit clunky but no more so than plenty of the techno-jargon consumers have grown accustomed to. And on the face of it it would seem not to communicate “radio with a digital dial.”

4. Giving away the secondary channels for free (i.e., no commercials) is an interesting tactic. Although considering the channels will be virtually without audience for the forseeable future, the big groups really have little choice in the matter. Still, “commercial-free” is a very compelling promise and one which certainly drives Satellite Radio’s success. On the other hand, will there by anyone in the audience who believes for a minute that this commercial-free honeymoon won’t end? And most likely sooner rather than later? And what effect will this have on their interest in investing in an HD receiver when they could buy Satellite and have their free music assured?

5. The coalition reflects an unending obsession with variety of channels as the key to what listeners want, when in fact there’s no evidence in the marketplace that this is true. The truth – and my own research bears this out – is that a relatively small number of stations satisfies the great majority of listeners for the great majority of the time. This is a research fact. It will be hard for the audience to buy something when that something is not what they really want.

6. This part is particularly scary: “He also said that the group used a ‘format selection and allocation process’ to decide which company got which format in what markets….” This creates a scenario whereby the big boys compete for a land grab and never in history has such competition been good for the alliance or for the consumer. This gets to the heart of the OPEC problem, where individual interests will invariably trump the “common good,” especially where that “common” good is actually the good of a different broadcast group.

7. Missing (from this blurb, anyway) is any notion whatsoever that the audience and their wants have any role in this process at all. I see lots of commitment to selling, but not much to identifying and serving a need.

8. It is certain that on channels with few listeners, little distribution, and no advertising the groups will budget close to zero on the actual product. Thus any listener who expects these channels to be vastly different from automated streams will be disappointed. And this, in fact, would be an advantage favoring Satellite Radio, where every channel (give or take) is viewed as an asset worth investing with TLC.

On the whole, my attitudes about HD Radio remain unchanged. I view it as one solution to radio’s troubles, but in all likelihood a minor one. We as an industry have done a miserable job of investigating what the audience wants and needs and whether or not (let alone how) this technology can solve an actual audience problem.

Most recently, a couple of focus groups were conducted on the topic of how to label HD stations. This is like heading for an iceberg and doing focus groups on whether or not you can feel a chill in the air.

If several radio groups can collaborate on product, then wouldn’t it be wise to collaborate on getting into the heads of the audience?

Otherwise, I wish you luck.

You’ll need it.

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