I Looked Hard but Could Not See: AM/FM is the only Analog Technology at CES
...and that is not a long term growth strategy
In what is somewhat of an annual ritual, I want to share some perspectives from this month’s Consumer Electronics Show in Vegas. Most know that CES is the world’s largest consumer technology trade show and a launching pad for the hottest CE products and services. [Full disclosure: I serve on CEA’s Board of Industry Leaders.]
The 2012 CES broke most important records: 150,000 attendees, 31,000 exhibitors, over 1.85 million square feet of exhibit space. The excitement about new technology and enthusiasm for creating new business was infectious. As others have said, more radio people need to be at CES to see what is happening and feed off the vibe.
I can’t claim that I saw every booth or met every exhibitor, but I did see a lot, and came to a distressing realization: AM/FM radio is the only analog technology remaining at CES, everything else is digital.
An HD Radio Booth Tour. Watch Dave Graveline’s ‘Into Tomorrow’ overview of HD Radio Technology from CES. I think you will be impressed by the exciting opportunities available to broadcasters.
OK, I’m not certain I didn’t miss some CB radio manufacturer hidden in some corner, but you get the idea. Every competitor to AM/FM, every other source of information and entertainment and every CE gadget radio listeners are carrying around or enjoying at home or at work, are based on digital technology – except AM/FM.
And that should concern all radio broadcasters, deeply.
That AM/FM is still growing and profitable while using 100 year old technology is a testimony to the industry’s resilience and adaptability. But it is not a viable long term growth strategy. As CES showed, the vastly superior consumer experience digital technologies can deliver will win out over the limited capabilities of analog technology. Fair minds can debate how long that will take, but the end point is clear.
We know the end point because we have seen it with every other infotainment business which used analog. Broadcast and cable television, mobile phones, audio and video physical media, arguably even the Yellow Pages, all were analog, now are digital. Radio does not want to find itself in the vinyl album or VHS bins.
We saw on the show floor why digital wins - it provides a superior consumer experience: better quality, more content choice, more customization, more interactivity, more innovative uses. These digital capabilities were on display in cars, the segment radio broadcasters care most about, and in mobile phones, their key target area.
More automakers exhibited at CES than ever before, because the digital dashboard is a vibrant area of competition and differentiation. I first wrote about this two years ago, and the fight for the dashboard is now more intense than you can imagine: all cars will have internet connectivity and the standard offering will include streaming services like Pandora and iHeart Radio, social app integration like Twitter, satellite radio, iPod USB integration and data storage for music libraries. The Wall Street Journal summed it up in a must read post-CES wrap up: “In the not-too-distant future, a car with a radio that receives only AM or FM will qualify as an antique.”
Analog radio’s limited capabilities will not compete well in this new digital dash. Unless broadcasters upgrade their offering to digital to meet consumer expectations and work together to deliver a compelling and consistent consumer experience, they risk AM/FM becoming a forgotten app in the digital dashboard.
I know, you’d expect me to say that, but the observation was widespread:
Inside Radio said “A common theme... was the need for… broadcast radio in the car to mimic a similar level of elegance, ease of use and functionality that consumers have come to expect from iPhone, iPod and internet radio.”
Radio World reported that “sources hammered home the fact that terrestrial radio needs to look better in the dash to compete... That means transmitting data for images to be synched with the audio… Of the umpteen demos I experienced last week in new cars, I can’t tell you how many times a terrestrial station’s stream was displayed with text only, no image. That looks dull compared to the vivid imagery of a personalized Internet stream. And if radio doesn’t step it up, though it may still be included in the dash for several more years, eventually traditional AM/FM won’t be if younger people don’t actually use it.”
Radio Ink wrote that Ford’s Jim Buczkowski, who knows a thing or two about cars, “touted HD Radio [Technology]. ‘It's so important because of its connection to local radio… Being able to offer that with a much better, higher quality signal is what HD Radio [broadcasting] is all about." These expand on comments Jim made last fall in an open letter to broadcasters, asking them to “Catch Up to the Digital Age with Digital Broadcasting and All It has to Offer”.
The car stereo wall: fully featured HD Radio receivers from the biggest brands at a wide range of price points
We are working hard to help radio ‘catch up’ in cars, and our progress was evident in Vegas. We had our biggest booth ever to fit all the new HD RadioTM auto offerings, jamming in the latest from Ford, Toyota, Hyundai, Kia and Scion. Overall, 22 automakers are now building HD Radio receivers in their vehicles, many as standard equipment. Millions of HD Radio equipped vehicles are on the road, and we will add millions more this year, including the first cars from General Motors.
Automakers are adding advanced HD Radio services such as iTunes Tagging, which allows listeners to tag songs for later purchase on iTunes, and Artist Experience, which enables stations to broadcast album cover art for display on radio screens. Automakers are also using the HD Radio data pipe to deliver local telematics services such as news, sports, weather and traffic, providing increased value for listeners and new revenue sources for radio broadcasters.
Fred Jacobs, in a tremendous CES summary focused on the automotive sector, highlighted how important HD Radio Technology is to radio's future in the digital dashboard: "HD Radio is generally perceived as a positive – a digital entrance requirement to these in-dash systems for broadcast radio".
As to mobile phones, there is a strong industry consensus that broadcast radio must find its way onto the ubiquitous mobile device of our times. Radio cannot be the go to out-of-home medium if it is not on the device in everyone’s pocket. Happily, we are seeing solid progress on this critical initiative.
Efforts led by Emmis's Jeff Smulyan are making real headway, as Blackberry announced they would include analog FM on several handset models. NAB FASTROADs is developing an end-to-end broadcast system which unleashes the true power of radio in connected handsets, creating exciting new experiences for listeners and innovative new services for advertisers. And at CES we showed the first working HD Radio mobile handsets. So we are getting there.
The battle for the dashboard: a wide range of infotainment apps are being built into radios, with HD Radio Technology right in the mix.
But the same digital dashboard requirements apply equally to phones. If radio in phones does not deliver a compelling digital consumer experience equal to other entertainment apps, it will not be broadly included and even if it is, it will not be widely used. A 1970s transistor radio look and feel in a phone, which is all analog broadcast radio is capable of delivering, will not get it done.
At this point I know some might say ‘wait a minute, radio is going digital, we are streaming, look at all the progress iHeart Radio and others are making.’
Yes, there has been exciting progress and it was on full display at CES. iHeart Radio had a big crew and threw a fantastic party (thanks, guys). Having radio broadcasters unite behind one or two universal apps, with several broadcasters folding under iHeart, is positive in my view. Pandora also spent big in Vegas to advance their efforts, and have very real traction in the digital dashboard.
But as I first wrote after the 2010 CES, internet radio cannot and will not replace broadcast radio. Bandwidth capacity issues will prevent streaming from coming anywhere near the reach of broadcast radio in a mobile environment. And because data plans are not free, consumers will pay for the privilege of listening. Pay radio, through increased monthly data fees, will not replace free broadcast radio.
So radio broadcasters should certainly work to build their streaming offerings, for many reasons. But they in no way should believe that those services will come anywhere close to replicating their broadcast business.
Again, don’t take my word on this. I thought Clear Channel’s John Hogan said it best in describing streaming last fall in Radio Ink: “It is not a business, it is a feature… This is a feature in a large and very, very successful and vibrant business. It is interesting and it’s a neat feature, but it is not a business.”
That very vibrant and successful business is over-the-air radio broadcasting, and the industry must ensure its future. Coming out of CES, the evidence is conclusive: that future requires an HD Radio transition. CES 2012 emphasized that 100 year old analog technology simply cannot deliver the rich experience – in cars or in phones - that today’s consumers expect.
Happily, as seen in the HD Radio booth, we are making strong progress upgrading broadcast radio to digital: many more cars, lots of new, lower cost CE Radios, exciting new advanced services, the first mobile phones with the technology built in. But there is a long way to go, and much of the effort has to come from radio broadcasters themselves.
And the motivation for that effort should now be obvious: across almost 2 million square feet of exhibit space and more than 30,000 exhibitors, AM/FM was the only analog medium at CES. That is not healthy. There are entire digital industries gunning for radio's audience and ad dollars. Radio broadcasters must upgrade to over-the-air digital HD Radio broadcasting to address these competitive threats.
As ever, iBiquity is here to help, it's all we do. Call anytime.
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Thanks for reading, and let me hear your thoughts: email to thoughts@ibiquity.com.
Bob Struble
Columbia, MD
January 2012
