Top U.S. radio operators are competing for the ears of car drivers by promoting devices that can turn any car radio into a high-definition digital stereo.
The HD Digital Radio Alliance was launched in December to promote a technological transformation for broadcasters like Clear Channel Communications (CCU.N: Quote, Profile, Research) and CBS Radio (CBS.N: Quote, Profile, Research), defending their turf against satellite radio and the popular iPod music player.
Now in a $200 million campaign to sell the public on the quality and features of HD radio, the alliance will target car audiences by offering a converter box through auto dealerships starting in November, said CEO Peter Ferrara.
The converters allow an ordinary car stereo, as well as stereos built into cars for rivals like XM Satellite Radio (XMSR.O: Quote, Profile, Research) and Sirius Satellite Radio (SIRI.O: Quote, Profile, Research), to air terrestrial stations with CD-quality sound and multiple new program formats.
Nine automakers have agreed to offer HD radio as an option to customers in 49 car models in the next 18 to 24 months. The converters could give the industry an earlier foothold in cars, where listeners often spend the bulk of their radio time.
"This is a way to bridge that gap and push the auto manufacturers into the game faster," Ferrara told Reuters in an interview. "Mid-2007 and all of 2008 will be a big year for HD radio in cars."
HD radio converters will be offered by car dealers and in radio promotions that go "so far as probably to give them away," Ferrara said. He did not give details on regular pricing for the converter.
The stakes are high for HD radio's success for traditional radio, which has lost listeners tuning into commercial-free options offered by satellite radio or digital music players that can store hundreds of songs that consumers chose themselves.
Deals with major car manufacturers have helped subscription-based services like XM and Sirius make inroads in the key drive-time market. IPod maker Apple (APPL.O: Quote, Profile, Research) launched its own salvo earlier this month with deals for an easy stereo hookup for the device in cars.
The HD Alliance's ultimate goal is to make HD radio so ubiquitous, in cars and at home, that it simply becomes known as "radio," not unlike FM radio's entry some four decades ago.
Nearly 100,000 HD radios have been sold over the course of its eight-month roll-out, entering an already crowded market for digital audio consumption.
But many consumers have already bought one or more digital audio devices, including cellphones that download music, raising questions about their appetite for HD radio.
HD radio also faces a steep challenge in lowering the price of its new technology to make it attractive at major retail outlets like Wal-Mart Stores (WMT.N: Quote, Profile, Research) or Target Corp (TGT.N: Quote, Profile, Research). It expects a deal with a large-scale store chain in the next month as a timetable for lowering the cost emerges.
Specialty electronics retailer RadioShack (RSH.N: Quote, Profile, Research) will sell a $199 table-top HD radio in its stores for this year's holiday season, and a $99 HD radio could be on store shelves in time for holiday shopping in 2007, Ferrara said.
HD radio is also developing a replay feature to track back to a favorite song or program on the radio.
"We're going to go from selling hundreds of thousands of radios to selling millions of radios," said Ferrara. "You will know I have been successful when I don't have a job anymore."