Radio Wars

Back in the 1970s and '80s, radio audiences migrated in droves from the AM dial to FM, soaking in the array of music, broadcast in stereo, with no static at all. For the past few years, audiophiles have been gravitating toward satellite, willing to pay for its sound quality and diverse programming. Now terrestrial stations, including Southwest Florida outfits, are trying to lure those listeners back to earth with high-definition radio.

Ironically, good old AM will play a role.

HD radio enables AM and FM stations to broadcast their programs digitally, providing listeners equipped with digital receivers with improved audio quality, better signal reception, song and artist information, as well as the ability to choose a range of different programming on the same channel.

"Picture playing a CD, and that's what it's like," explains Tom Passafuime, former general manager of the House of High Fidelity in Naples. "The reception is clear, no static, with a much stronger signal."

HD radio began appearing in major markets such as New York, Philadelphia and Chicago in 2003, but the major rollout across the country began this past January. Naples-based Beasley Broadcast Group, which owns or operates 41 stations across the country, has been at the forefront of the move to digital, having launched it with WXTU in Philly in 2003.

Fort Myers-based Meridian Broadcasting, which owns WARO-FM, WINK/WNOG-AM, WRQC-FM, WTLT-FM and WUSV-FM, is planning to convert. "Within two years the availability of digital receivers in cars and homes and the number of digital broadcast signals should hit the critical mass necessary to make HD radio mainstream," says James Schwartzel, Meridian's director of sales. "We are really eager about its potential."

Hot sounds

Fans tout the quality of HD radio as being worlds better than traditional, offering an AM that sounds like FM and an FM that sounds like a CD. The one snafu still being worked out is that, because of signal interference, digital AM has to be turned back to analog at night.

A key feature of HD radio is that it allows stations to broadcast three or more digital feeds on the same frequency. While not all broadcast companies that have switched to HD are multi-casting, the ability to offer a second and third option opens new doors.

In July, Power96 (WPOW-FM), a Beasley station in Miami that broadcasts contemporary music including pop, rock and Top-40 hits, began offering a new sister dance-music station, HD2 Dance, on its expanded HD radio spectrum. HD2 is Miami's first multicast programming available through HD radio technology.

Learning curve

Educating the public is a big part of the move to high definition. The company that developed the digital broadcast system that's been approved in the United States, iBiquity Digital, offers a world of information on the technology at its Web site, www.hdradio.com. (HD radio is available through other systems in other countries.) Beasley Broadcast Group is a member of the HD Digital Radio Alliance, a group of 28 of the nation's leading broadcast companies focused on coordinating the rollout of HD radio, jointly marketing the new technology and increasing the installed base of HD radio receivers in cars. The alliance offers incentives to listeners, such as no commercials on HD's multicast side channels for up to 24 months.

"Everyone's asking how HD radio is going to change advertising, but there's really not a business model because it's such a new technology," says Caroline Beasley, executive vice president and chief financial officer of Beasley Broadcast Group. "Our goal is to get receivers out into the market and to educate the listener. At this point, we are incurring the cost and trying to get the word out."

So far, says one critic, the terrestrial alliance has fallen short of that goal. "The interest level is really low," says Dave Van Dyke, president of Bridge Ratings, a Glendale, Calif., radio-market-analysis firm. "The industry has not done a very good job of marketing [HD radio]."

Satellite competition

Even if you never tuned in to hear shock jock Howard Stern's diatribes about the FCC or listened to his naked guests squeal, it would have been tough to miss the commotion that ensued when it was expected that many of his faithful listeners would jump ship to follow him to Sirius Satellite Radio.

While the inclination to compare HD radio to satellite radio is natural, the differences are many. "It's apples and oranges, a completely different type of situation," says Jim Collins, vice president of corporate communications for Sirius Satellite Radio. "We are not allowed to broadcast locally. Sirius and XM are both licensed by the Federal Communications Commission to broadcast nationwide." And he insists, "We are not looking to bury local radio. There will always be a desire for people to tune into their local stations for weather, traffic and to listen to their favorite announcer or DJ."

One of satellite radio's biggest draws is its commercial-free status for music. Collins quips about HD radio that "the bottom line is that it will allow people to hear commercials better."

Satellite radio has spent some $750 million in advertising to draw subscribers. More than 9 million are onboard nationwide and between 35 million and 45 million listeners are projected by the end of the decade. But some say Sirius and XM Satellite Radio are hemorrhaging so much cash because of promotions that they could go broke before critical mass is achieved. Only about one-sixth of Stern's estimated 12 million listeners followed him to Sirius, which reported a $712 million revenue loss last year, while XM reported a $667 million shortfall.

It's all about choice

As far as programming, satellite has the edge. Sirius uses three satellites to broadcast more than 125 channels featuring digital-quality media from sports, news and entertainment. XM offers more than 160 channels. Both boast original, not canned, programming. Fees vary, but in December the monthly fee for Sirius or XM was about $13.

"If you're just sitting in your car or working out of your car, the way so many realtors around here do, there's no comparison," says Jeff Davidson, a salesperson with Sound Advice in Naples, which is installing many satellite radios.

Davidson says people don't balk at the monthly fees. "When you pay, you get more," he says. "There's the soup kitchen and there's fine dining."

On the terrestrial side, according to iBiquity, 13,500 analog stations reach between 230 million to 250 million weekly listeners, and 5,000 of those stations cover major markets. To date, 3,000 of the 5,000 are committed to converting their stations to HD radio, costing up to $100,000 each, by 2008. Through these 3,000 stations, an HD radio signal will reach 90 percent of the U.S. population.

The rush to convert has probably been pushed by satellite radio. "This is a great opportunity to be able to provide HD radio to our listeners and to our advertisers," Beasley says. "We are really excited about it."

She adds that Beasley Broadcast Group hasn't lost advertisers to satellite radio. "Terrestrial radio is primarily a locally driven business model, and so at this point we have not seen satellite radio cut into our advertising revenues," she says.

So Howard Stern won't be ranting about the gridlock on I-75 any time soon. And for that, as well as the new world of choice in the air, listeners can be thankful.