New digital format takes aim at satellite radio, iPods
Death Cab for Cutie
As iPods, satellite radio and other new media increasingly compete for consumers' ears, the AM-FM radio establishment has launched a counterattack: digital radio. Last month, a consortium of the biggest radio conglomerates announced that more than a hundred FM stations had gone digital, offering listeners with a special receiver near-CD-quality sound and up to three additional channels per frequency.
Most stations offer alternate takes on their primary format: Detroit hard-rock station WRIF typically plays bands like Nickelback and Korn, and its indie-focused multicast, RIFF2, is more likely to play Death Cab for Cutie or Electric Six. But some stations offer unusual alternatives: Boston rock outlet WAAF broadcasts a live-music channel, and Indianapolis Top Forty station WZPL has an all-comedy multicast.
"Broadcasters have made a strong commitment to populating this, and not just with carbon copies of the stuff that already exists on the dial," says Tom Bender, a programmer for WRIF.
In response to the dwindling market share -- terrestrial radio's audience has dropped thirteen percent in the last ten years -- eight of the top radio companies (including Clear Channel and CBS Radio) formed the HD Digital Radio Alliance in 2005 and have launched digital stations in twenty-eight top markets so far. The radio companies have spent millions to upgrade their stations to broadcast in digital, and each will spend millions more to market and promote the new format.
"This is our way of claiming a stake in the digital ground and saying, 'You don't need to go anywhere else,'" says Alliance CEO Peter Ferrara. "We can give you the same or better opportunities for entertainment and information than any device." Susan Kevorkian, a consumer-markets research analyst, agrees: "Broadcasters have lagged. It was absolutely necessary for them to make these moves."
Currently, Boston Acoustics' $499 Receptor Radio HD is the cheapest home-based digital radio available, although other manufacturers are rushing models to market and several car radios are available. Robert Struble, CEO of iBiquity Digital Corp., the Maryland technology company that spearheaded the industry's digital conversion, says the expensive radios are typical of new media. "We all remember the days of $2,000 VCRs and $2,000 DVD players," he says, adding that digital will soon be the regular radio format for stereos and alarm clocks. "If you go into a store six, seven years from now, you're not going to ask for a digital radio, you're going to ask for a radio. This is the new standard."
For the next year and a half, as broadcasters work to build an audience for the new channels, they have agreed not to air commercials. In the long term, Alliance members say they are considering a wide range of advertising options, including having corporations sponsor segments, as they do on National Public Radio, or integrating ads onto the radio's digital display. But as radio companies try to recoup their massive investment, competitors say that digital stations will likely turn to conventional on-air ads. "At the end of the day, their business model is still predicated on selling commercials," says XM Satellite Radio exec Eric Logan.
But Ferrara says the terrestrial-radio industry has survived supposed killers in the past, and it will survive current challenges too. "Everything from television to the 8-track and the CD player was supposed to be the radio killer," he says. "Nothing has, because it's a local medium and a free medium. Those are two pretty strong things to compete against."
EVAN SERPICK