• by Frank Saxe , January 5, 2003

In Las Vegas this week the next generation in radio technology will make its debut, as digital radio prepares to make its way from audio engineers’ drafting boards to receivers in electronics stores.

At the annual Consumer Electronics Show, eight companies will be debuting prototypes for in-car HD Radio receivers, with another two launching at-home stereo units, all capable of tuning in radio’s next generation of audio signals. Beyond better sound quality, its developers say HD Radio will broaden radio’s advertising possibilities.

After more than a decade of planning, digital radio has begun what will likely be the decades long process of replacing analog signals. Columbia, MD-based Ibiquity Digital has created a system that will allow broadcasters to simultaneously transmit their stations in both analog and digital, allowing listeners to seamlessly convert to HD Radio at their own pace. Broadcasters, who will spend as much as $100,000 per station to upgrade to digital, hope better sound quality and added services will encourage users to buy new receivers sooner rather than later. So far, urban radio giant Radio One is the only radio group to commit to spending the money to convert all its stations, although Ibiquity is owned by the 15 largest broadcast groups, including Clear Channel, Viacom/Infinity, and ABC, so it is widely expected each will back its investment in Ibiquity and convert its stations to HD Radio. “IBOC is the digital future of AM and FM radio,” says Susquehanna Radio president David Kennedy. Helping the odds is a list of Ibiquity’s other owners, which range from tech companies like Texas Instruments to Ford Motor Company, which could offer HD Radios across its eight product lines.

Ibiquity says it has about 100 radio stations in 25 states committed to HD Radio, two-thirds of which are FM stations. So far, about half those have been built, with the other half still implementing their plans. Throughout 2003, it will focus on six priority markets, including Los Angeles, Chicago, New York, San Francisco, Seattle and Miami.

“There is a tremendous amount of interest in two areas,” explains Joe D’Angelo, Director of Wireless Data and PAC Business Development. The first, he says, is the ability to stream a second channel in the FM band that could create an on-demand channel, which could, for example, allow listeners to hit a button to hear the weather. The second, and perhaps more important to advertisers, is a new pipeline to consumers. The first generation of HD Radio receivers will had a simple display space that will allow a station to send message like song titles and artists into a user’s radio. It will also give advertisers a new visual component to their radio ad. “Whether it’s as simple as an URL or a telephone number, you can free-up some of the audio time of an ad and convey the information to the receiver. That’s going to be the initial way that broadcasters test the waters with advertiser and how compelling can they make that display,” predicts D’Angelo. He says some receiver makers are also developing a “recall button” that stores text until the user is able to write down the information. “It gives the radio advertisement a little more duration,” he adds.

A similar type of service, already being tested by Clear Channel in southern California, has found advertisers are willing to pay to add a visual component to their radio ads. There, advertisers have been paying a 10% premium to add a visual, says D’Angelo. “Depending on the economic relationship, it can either be done to retain business and given away, or they could seek to capture a 10% or so premium on an audio-only ad. The jury is still out as to which one is going to get the most traction.” Even so, D’Angelo believes it will require tens of thousands of units in any given market before the advertisers start to pay for these types of services, but based on conversations he has had with agencies and broadcasters alike, he predicts there will be testing and experiments going on right from day one to determine what works best in preparation for the mass consumer penetration.

Ibiquity engineers are also developing other ancillary uses of the receivers, such providing traffic information to navigation systems like OnStar. The broadcast industry already has a tremendous amount of this content, they say, so it’s not a far reach to put some of these pieces together.

For the first few years, the capabilities of HD Radio receivers will be small, with limited graphical capabilities. Beyond 2004, however, it is expected the units will be able to carry larger visuals into a home or a car unit, particularly the emerging rear-seat entertainment units. “When those type of capabilities are enabled by the broadcaster, you’re looking at a whole new opportunity for program sponsorship and branding,” says D’Angelo. Looking even further down the road, developers foresee a day when the receivers have a return chip that will enable m-commerce from the back seat. “That’s when you can take advertising from a broadcast media and a broadcast message to direct response marketing,” says D’Angelo, adding, “It’s really not that far off.”