Bridge Ratings' just-released consumer study on HD radio isn't cause for too much excitement for the radio industry. iBiquity Digital Corporation, which created HD radio to bring AM and FM radio into the digital 21st century, recently confirmed that the number of HD radios sold through 2006 numbered in the 'several hundred thousands'. Our study confirms that the radio industry's massive ($400 million) HD radio marketing campaign of 2006 has helped raise awareness of the term "HD radio" but has done little to motivate consumers to want or purchase the technology.
Why is there such little consumer interest in the technology that terrestrial radio seems to be depending on to move it into the digital era?
Our study of 3000 consumers of terrestrial radio reveals one thing right off the top: they don't understand what the benefits of this new technology are and why they should make an investment into a new radio. The marketing pros who have done the creative for the $400 million campaign have not been able to communicate this simply and effectively to the masses.
Thus far it is still the audiophiles and early adopters who show interest and that is where the 'several hundred thousand' units sold comes in to play. Even more discouraging is that consumers understand the benefits of and need for satellite radio. With less than a million HD radios in use, satellite radio's 13.5 million subscription numbers appear overwhelming. And while 4 in 100 persons in the U.S. subscribes to satellite radio, less than 2 in 100 are considering it. With interest in HD radio substantially less than satellite radio, perhaps HD's challenges are becoming more clear.
It is only speculation, but part of HD radio's growth problem is hinged on the fact that satellite radio beat it to the punch - was first to the market, and with such a sliver of a market available, there is little room for second players or sub-niches such as HD radio.
HD radio's problems are complex but the root lies in simple marketing. Marketing gurus Ries & Trout have clarified product 'positioning' in many of their books. In their classic "Positioning: the Battle for Your Mind", Al and Jack point out that there is just so much information 'noise' that is trying to get into your head that our minds try to simplify the onslaught by creating ladders where we just naturally rank all sorts of information. For some of us, Hertz is at the top of the rental car ladder and Avis is second, Coke is at the top of the soft drink ladder - Pepsi is second.
However, for minor niches there are fewer 'rungs' on these mental product ladders; some may have only two products or brands - others, such as beer, could have as many as 7 if you're a beer drinker. In the last few years, the radio product ladder has added rungs for Internet radio and satellite radio along with AM/FM radio. HD radio's tiny niche doesn't have a rung on most consumers' product ladders. For most it doesn't exist yet! That is the marketing dilemma facing this new technology.
If HD radio is going become the solution to terrestrial radio's battle with digital technology options, a significantly greater sum will have to be spent on educating the public. It'll take time. Positioning HD radio in the minds of consumers is at the heart of our conservative growth estimates for HD radio. (see www.bridgeratings.com).
The radio industry needs a realistic, tempered expectation for what HD radio can do for its expansion into the digital 21st century.