Who is Kagan Research talking to?

Here’s how news happens.

Kagan Research releases a report which very few people see. But they also release some headlines which are oft-repeated. And in this case, the headline reads like this:

As the HD rollout continues to gather steam, the industry is expected to benefit from positive buzz while preparing itself for future revenue streams….HD radio is expected to generate $1.6 billion in revenue by 2011, the bulk of which is expected to come from advertiser based secondary channels.

I would love to review the original report in its entirety to give it the kind of analysis it deserves, but it seems like much of this opinion is based on reports from radio industry sources. And here’s what I hear from the industry sources I talk to:

There is no established model for how stations or groups plan to derive revenue from HD radio. “Nobody knows,” is what the experts say on industry panels.

There is no plan to spend more than subsistence sums on investments in HD radio programming.

There is no guarantee that these radios will be offered by the automakers because they want to provide only what their customers want, and audience based demand is so far lacking. Nor are they looking to add expense unless they’re confident that expense can help move cars.

There is widespread confusion about the benefits of HD radio among consumers, let alone “what HD radio is”

– HD radio exists in anything but a vacuum. The trend in technology is toward more control by listeners, not more control by broadcasters. The trend favors audience creation, not industry rules.

– There is no desire to add inventory soon on HD because the industry is trying to entice listeners to buy radios with an attractive introductory offer (no spots). Meanwhile, the number of radios in circulation is small. And with a small number of radios in circulation there is no demand for HD radio spots from advertisers, anyway.

Even with millions of HD radios in circulation there would be no “local sales” model since millions of radios nationwide don’t amount to any significant numbers at the local level.

There is no strategy regarding how the radio industry can sell HD radio without cannibalizing listeners and dollars from the very stations which are now the cash cows. Remember, you have to go through the current station to get to its HD-2 channel. And who is most likely to go there first? The ones who go to your current station, of course.

The success of HD radio is based on the premise that more choice will be more popular, but we know that much of the relative success of satellite radio is driven by its premium content and especially its lack of commercials on music channels – not by choice per se (in fact, if you want Howard Stern, you don’t really have any choice, do you?)

There is no evidence to suggest that listeners are sufficiently displeased with what they hear now that they will pay for an alternative, especially with much of the low-hanging fruit already in satellite’s hip pocket. In fact, the evidence is very much to the contrary.

There is no consensus and little discussion on how Internet radio will affect plans for HD radio development. Even as the Internet is considerably more universal than HD radio and communities across the nation are edging ever closer to border-to-border WiFi.

There is plenty of evidence to suggest that the focus on HD radio is distracting broadcasters from focusing on obvious web opportunities, and this is causing us to lose ground on the web relative to other radio alternatives which might be much more potent in the future than satellite or HD.

New technology products succeed because consumers want them, not because an industry does. Sony wanted BetaMax, but the market didn’t. Philips wanted Laserdisc, but the market has spoken. Today this is playing out in the video world with the race between Blu-Ray and the ominously titled HD DVD, and it’s far from certain that either of them will be successful. And here’s why: For the average consumer, some things are just good enough.

Is radio one of those things?

So here’s my question to the good folks at Kagan Research.

Who are you talking to?

CONTACT MARK RAMSEY

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