high-definition radio (HD radio)
Next-gen radio signaling new growth opportunities
Digital, satellite services gaining momentum
By Darrell Dunn
EBN
(08/16/02, 01:51 PM EST)
Eager to exploit new developments in radio, several chipmakers and broadcast service providers are primed to serve the market that helped shape the early days of the electronics industry.
Texas Instruments Inc. last week introduced a chipset for the digital, or high-definition, radio market. And STMicroelectronics Inc. and Agere Systems Inc. recently introduced next-generation chipsets that support satellite radio service providers XM Satellite and Sirius Satellite Radio, respectively.
The success of the next-generation radio market, however, largely depends on widescale adoption by the automotive industry next year.
Although financial concerns have surfaced at two satellite service providers, the market is beginning to show promise, with more than 137,000 subscribers and commitments for installation by various automakers. Digital radio systems are expected to begin shipping next year, offering CD-quality sound for AM/FM broadcasts.
"This is the first major change in radio technology since FM was introduced in the '60s," said John Gardner, marketing manager for digital radio at TI in Houston. "Digital radio will provide CD-quality sound as well as data capability, and the latter is an area I believe broadcasters will see value in, providing them a new revenue stream."
The high-definition radio (HD radio) market is being driven by iBiquity Digital Corp., Columbia, Md., which developed the In-Band On-Channel (IBOC) technology being used to implement digital terrestrial broadcasting. HD radio receivers are expected to begin appearing next year.
The satellite radio market began in earnest last November, when XM Satellite started to roll out services. By June, XM had 136,500 subscribers, and the company, which is backed by American Honda, Clear Channel Communications, DirecTV, and General Motors, has projected it will have 350,000 subscribers by the end of the year.
Sirius began its rollout July 1 and had signed 6,510 subscribers as of Aug. 11. Investors include ABC, Clear Channel, and Viacom. In a filing with the Securities and Exchange Commission this month, the company warned it may have to seek bankruptcy protection if it can't raise as much as $600 million to stay afloat.
Sirius posted a net loss of $215 million through the first half of this year. XM reported a net loss of $240 million in the same period. Both companies are tying revenue to subscriptions, with Sirius charging about $20 a month and XM $10 a month. Both offer CD-quality sound and more than 100 channels. XM promised minimal commercials, while Sirius is promoted as commercial free.
Both companies are heavily relying on the automotive industry. XM radios are being offered as an option in 25 GM models, as well as six Infiniti and Nissan models. Sirius has agreements with BMW, DaimlerChrysler, Ford, Jaguar, Mazda, Mercedes-Benz, Nissan, and Volvo.
"The [satellite] service is a viable one, and given enough time the two would be profitable. I just don't know if they are going to have the time," said Michelle Abraham, an analyst at In-Stat Group in Scottsdale, Ariz. "They are still losing a lot per day, and they need to keep up the advertising to inform people they are out there. We'll have to see if they can come up with more investment, and it's hard into today's market."
Silicon providers are doing their part to reduce cost and size requirements to allow the new radio services to compete more effectively.
ST has recently introduced a two-chip device for XM that reduced component count from around seven chips in its previous design. Agere this month introduced a single chip for Sirius that the company said reduced the size of the radio card from that of a videocassette in current systems to a credit card. And TI last week introduced a chip for iBiquity that the company said uses a single DSP core compared with 12 in an older model.
Will Strauss, an analyst at Forward Concepts Co., Tempe, Ariz., believes companies will need to sign an unrealistic number of satellite subscribers to turn a profit, but said he believes the digital radio market will grow from 1.4 million units next year to 23 million in 2006.
"The satellite guys have spent a lot of money upfront, and it's still pretty iffy. I like free radio better," Strauss said. "IBiquity will ultimately become universal."
Michael Kasparian, technical marketing manager at ST's automotive business unit in Detroit, said it's not the fee that is hindering the satellite market but the system cost, an issue that is being addressed.
Receivers have already dropped from around $400 to $200, Kasparian said. Automakers can include the cost in the total car payment, and even roll in the subscription fee, he said. Pontiac is currently offering a free satellite radio for 2003 models purchased before the end of the year.
"If you look at the television model, you have free over-the-air analog going to digital, cable, and satellite," Kasparian said. "And really the digital sound is not what sells XM, it's the programming. The sound is very nice, but you can get that with your own CDs or MP3 files."
TI's Gardner said the attention on satellite systems "could actually spur digital radio. The more successful [satellite] is, I think the more pressure it will put on broadcasters to move to digital."
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