Trying to Figure Out HD Radio

While consumers get a grasp of hybrid digital technology, manufacturers wrangle with how to package the option with their products

Five years after winning FCC approval, HD (hybrid digital) Radio is still a mystery to most consumers. Pricey HD receivers, most of which cost upward of $200, have caused many potential listeners to tune out—despite the support of major broadcasters including Clear Channel Communications (CCU), who have boosted the quality of existing stations by using analog-digital transmitters and created hundreds of HD subchannels.

In a survey released May 23, radio researcher Bridge Data estimates there are only 450,000 weekly listeners of HD Radio—compared with 15 million satellite subscribers and 57 million Internet radio listeners. (About 93.5% of all Americans tune into traditional radio every week.) "A majority of Americans are now aware of the term HD Radio. But fewer than 5% of them understand what it is, what is the benefit," says Dave Van Dyke, CEO of Bridge Data. Still, 40% of respondents expect to listen to HD Radio more frequently in a year.

That's a trend Robert Struble hopes to encourage. His company, iBiquity Digital, licenses its HD chipset to equipment manufacturers such as Polk Audio, Boston Acoustics, Sangean, and Sony (SNE), allowing them to make devices that can receive HD's digital/analog signal. A consortium of broadcasters, including Clear Channel, CBS Radio (CBS), and Cox Radio (CXR), organized the HD Digital Radio Alliance to coordinate marketing efforts. In five to seven years, says Struble, you won't walk into an electronics store and ask to buy an HD Radio. Simply ask for a radio, he says, and you'll get one with HD capabilities already built in.

It's All in the Packaging

The key to broadening the audience for HD Radio is packaging. Susan Kevorkian, an IDC analyst who researches audio technologies, thinks HD Radio will catch on with a wide range of consumers over coming years, but only if hardware makers do a better job bundling it with satellite radio and other audio offerings. "AM/FM radio has historically been offered as a feature of a device that does another primary function outside of radio," she says.

A variety of multifunction tabletop stereos with HD Radio have been on the market since 2004 (BusinessWeek recently reviewed six of them). But the cost of an HD license (all manufacturers must have one) has driven up the price of making an HD device so much that extras such as satellite receivers, Apple (AAPL) iPod cradles, or even CD players, are left out.

The least expensive tabletop stereo is RadioShack's (RSH) $199 Accurian (see, 4/9/07, "RadioShack's Inadequate Accurian"), a unit that differs little from an inexpensive $30 AM/FM radio other than its HD function. At $249, both Sangean's HDR-1 and Directed Electronics' Table Top Radio (see, 5/29/07, "Directed Electronics' Misdirected Radio") add appealing design elements, but sacrifice sound and functionality.

And competing at a $299 price range, the frontrunners are Cambridge Soundworks' 820HD Radio (see, 5/18/07, "Cambridge Soundworks' Easy Listening"), which boasts simple, Apple-like design; and Boston Acoustics' terrific-sounding Receptor Radio HD (see, 4/13/07, "The Big Noise in Digital Radio"). Despite the strengths of these two models, Cambridge Soundworks and Boston Acoustics are gambling that having HD Radio as the single feature will catch on with a lot of consumers.

The exception in the HD Radio field is Polk Audio's iSonic (see, 5/9/07, "Polk Audio's Radio Goes Overboard"). The unit costs a whopping $599 because it has both HD and XM satellite (XMSR) radio chipsets (plus a CD/DVD player). If HD Radio is going to gain widespread acceptance, insists IDC's Kevorkian, the bundling of high-fidelity components and features shouldn't come with such a high premium.

Market Crossover

HD Radio still needs to break into two other markets: car and portable audio. "A third of all radio listening occurs in the car," says Peter Ferrara, president of the HD Digital Radio Alliance. "It's an important space for local radio to continue to thrive." So far, carmakers are slow to come on board. But in January, BMW became the first to offer HD Radio as an option across its entire line, and Hyundai and Jaguar both offer the option on some models.

On the portable front, Samsung has an agreement with iBiquity that may allow it to unveil a portable HD Radio sometime in 2008, though details have yet to be released. And while some reports have suggested that Apple is looking into incorporating HD Radio in its iPod (see, 1/13/06, "Everyone's Aiming at Satellite Radio"), no plans have been made official. For now at least, the HD mystery continues.

Click through BusinessWeek's slide show for a product-review roundup of a half-dozen HD Radio offerings.

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