DECEMBER 1, 2006
News Analysis
By Tom Lowry
Radio's High-Definition Blitz
The radio industry is preparing to launch its largest ad campaign ever, to promote new high-def technology
In its largest advertising campaign ever, the broadcast radio industry plans to give up airtime next year valued at more than $250 million to promote a new technology—high-definition or HD radio—that enables listeners to receive hundreds of new stations with niche formats, from Washington Post Radio to Spanish oldies, BusinessWeek.com has learned.
Facing stiff competition in recent years from music downloads, the Internet, and satellite radio, broadcasters are placing this bet because they see an opportunity to win back audience and eventually attract new ad dollars. The new promotional campaign, expected to be announced next week, comes as the prices for digital radio receivers required to get the new stations dip below $200. More than 500 existing stations now offer these new digital channels, up from 89 a year ago.
Still, HD radio faces huge challenges. Foremost is getting consumers to understand exactly what it is—technology that squeezes more programming into one frequency. As a result, existing stations can offer side channels, presumably with higher-quality sound. But early reviews of the HD offerings have not been so rosy, with critics zeroing in on patchy signal strength and the inability to find stations.
The price of the receivers until now has been an obstacle, too. And even though Radio Shack (RSH), Circuit City (CC), and regional consumer-electronics retailers are selling the receivers, giants Best Buy (BB), Wal-Mart Stores (WMT), and Target (TGT) have not yet signed on.
Backed by Some Biggies All this is precisely why radio executives surely feel compelled to turn over their precious airtime for a promotional blitz, even though the industry's ad revenues remain stagnant. Through the end of September, radio ad revenues year-to-date were essentially flat, at $8 billion, according to TNS Media Intelligence.
The ad campaign, backed by an alliance of virtually all the large radio station owners, including Clear Channel Communications (CCU), CBS Radio (CBS), and Citadel Broadcasting (CDL), will be multipronged.
The first directive will be to educate consumers about HD radio and why it is different from regular AM and FM radio. The spots will also promote how these new programming formats can be tailored more deeply in specific genres, says Peter Ferrara, chief executive of the HD Digital Radio Alliance. "We also want people to know there will be no subscription fees, unlike satellite radio," he says. "People have enough monthly expenses, from cell phones to Starbucks (SBUX)."
Some Interaction, Please? Beyond the radio ads, broadcasters will team up with the manufacturers of the radio receivers, retail outlets, and car makers, which are now offering HD radios in some models, to get their message out in print and TV ads, says Ferrara (see BusinessWeek.com, 4/20/06, "From Vanilla To Full Metal Racket").
One industry observer has a bit of advice for the radio guys. Stations doing promotions should spend time welcoming "listeners to the club and congratulating them on being early adopters," writes Sean Ross, Edison Media Research's vice-president of music and programming, in a report dated Nov. 29. "[The] stations that promote HD Radio should mention that listeners are getting the radios for the holiday. And there should be some way for listeners to interact with the new stations and each other; what fun is joining the club if you can't talk to somebody about it?"
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