How to Guarrantee HD Radio's Success

What's 2 years old and doesn't get any respect? HD radio.

Radio's theoretical saving grace is five years too late and by all the data we can see at Bridge Ratings, it will be a smaller consumer niche than satellite radio...if it continues down the path it is currently on.

And with the hundreds of thousands of dollars being spent by American radio companies to upgrade their existing equipment for HD capable broadcasts, there is a dire need for HD to be the technically next great thing for terrestrial radio. But how does this get done?

The answer lies in taking a look at the FCC's mandate for HDTV and applying it to radio.

The FCC notified U.S. television broadcasters that the standard for transmitting TV over-the-air would permanently change from analog to digital. While there are many technical, political, and economic reasons for and implications of this change, the end-result for the American TV audience is a dramatic improvement in picture and sound quality.

According to the original FCC rules, all full power stations were to convert to digital by the beginning of 2007, followed by shutdown of analog broadcasting. An escape clause stipulated that 85% of receivers in the service area must be "capable" of receiving digital signals before the shutdown could occur. At the time of analog shutoff, one of the channels (digital or analog) would then be returned to the government, with the other channel remaining as a digital station; the freed spectrum could then be used for other TV stations, with UHF channels at the high end of the band being decommissioned and sold for other uses.

The 2007 deadline could not be satisfied under many interpretations of 85% "capability" of digital signal reception. So....

On February 8th, 2006, President Bush signed into law the "Digital Television Transition and Public Safety Act of 2005". This law mandated a hard shut-off date of February 17, 2009 for the end of all analog (NTSC) TV transmissions in the U.S.

A similar hard shut-off date for the end of all analog FM radio must occur in order for HD radio to get past its current consumer growth doldrums. The forced shut-down of analog radio will give America the incentive to adopt HD radio.

Perhaps more importantly, like HDTV, a forced shut-off will force consumers to become more familiar with HD radio's offerings and benefits which will, in turn, motivate broadcasters to develop stimulating content.

This is really the only way to quickly stimulate the rapid adoption of this new technology. One wonders why this wasn't the FCC's plan all along. Why place a mandatory transition deadline on television stations and not radio?

Even our British broadcast neighbors are beginning to lobby their FCC equivalent (Ofcom, the Office of Communications) to turn off the FM band by 2015 in order to force British broadcasters to become digital. They have said they fear being antiquated in the face of all digital audio technologies.

They have a point.

What do you think?

Radio Moves Consumers to Buy

Once again, radio gets a bad rap.

This one comes from the University of Texas professor Stan Leibowitz who claims in a paper first published in January of this year that radio airplay can actually hurt music sales. I'm not sure what, if any sample, he used to come to this conclusion, but study after study we've done at Bridge Ratings is more than enough to convince me that radio moves music product. A variety of other industry research confirms this notion.

Both physical CD's and digital downloads are positively impacted by radio airplay; that's what our consumer samples have told us. We've been doing these types of studies since 2002.

In fact, let me reiterate a quote from the summary section of a study Bridge Ratings conducted in 2005 and confirmed again in '06: "Radio airplay - especially of new music - directly and positively affects consumers interest in listening to and subsequently buying new music. Digital downloads are the primary media of the young and early adopter young adults, and CD sales are still the media of choice for adults, especially those with younger children."

Our studies have gone on to establish that a radio format leaning heavily on new music and structured in such a way as to allow listener input on the songs being played, would be highly successful with the 13-21 year old age group with bleed-over into the upper 20's. This is because (we discovered) that no matter what the age group, consumers use traditional radio stations to satisfy their need for "surprises" in the form of either unexpected programming or new music.

And it is specifically the stations currently airing a predominance of current music that garner an audience whose number 1 reason for tuning in is music discovery. Consumers of this type of radio use those radio stations as a filter, screening out the poor and playing the best of the rest.

Yes, radio does sell music - and it sells tons of other consumer products. Music just happens to be easier to sell on the radio because the product is the commercial.

Here's a calculation the record labels might want to consider:

A Los Angeles radio station with average ratings playing 8 current songs an hour is, in essence, playing 8 commercials for those artists and the record labels. We've proven music moves product.

Over the course of a typical week, if that radio station received compensation as it would for its typical commercials, it should receive $2,150,400 for the value of the airtime that week alone!

Now, of course, these radio stations benefit greatly from accessibility to that music product given so generously by music labels. It is, after all, the station's programming content. And, truthfully, those stations garner ratings that generate revenue that generates profit. True. It's a symbiotic relationship this thing that radio and the labels have, but it works - has worked - and will continue to work.

To say that radio airplay hurts music sales is a misguided statement which either needs to be recanted or at least better explained.

Survivor: Internet Radio

Last month's "Day of Silence" was an eye-opener on two fronts. First, it is clear that through the significant support of thousands of Internet radio stations - small and large - a message came through loud and clear to Congress, to the Copyright Royalty Board, music performers and the American public that the numbers don't lie, i.e. there is a huge passionate audience out there for Internet radio. That's the good news.

Those I've communicated with at political levels were impressed by the thousands of calls but they don't think the noise created by unhappy Internet Radio fans will change congressional opinion. Congress is already convinced that something must be done to save the industry that could be wiped off the face of the earth with the Copyright Royalty Board's rate increases. It just needs to come up with a suitable compromise.

The second eye-opener has to do with the data we collected at Bridge Ratings over the three days surrounding the "Day of Silence".

1. We learned that 21% of the American public listens to Internet Radio on a weekly basis. That's up from 19% earlier this year.

2. We learned that of this 21% that listen weekly, more than half (55%) did NOT listen to Internet Radio on Tuesday, the "Day of Silence".

3. More interestingly, we found that 45% of that 21% DID listen.

4. 62% of the sample found their preferred Internet Radio station silent on Tuesday.

5. What did this 62% do when they found out their preferred Internet Radio station was silent? 72% of them found another Internet Radio station to listen to.

6. By Wednesday, the day after, audience levels returned to normal. 89% of the 21% had listened.

What's clear by this study is that even if the majority of Internet Radio stations go 'dark' should the royalty rates force them 'off the air', the consumer will find replacements in other surviving Internet Radio stations.

Perhaps this is what some of the big boys who did NOT support the "Day of Silence" have been thinking. Elimination of the majority of the Internet Radio competition will generate larger audiences for those still standing.

And even if the royalty rates skyrocket, perhaps it is feasible that these larger audiences will allow the remaining Internet broadcasters to monetize sufficiently to make the business work.

This may be what SoundExchange and the performers are hoping for, but in all likelihood the consumer will once again get the short end of the stick.