Bob Struble

In a contentious time amidst economic struggles, iBiquity Pres./CEO Bob Struble has remained bullish on the development and eventual mass-appeal success of HD Radio. The MIT graduate and Harvard MBA, who previously headed up Westinghouse Communications and Wireless Solutions Company for CBS, has led the battle to get HD radio into more cars, stocked on more retail shelves and offering more programming choices. It hasn't been easy in a tough economy and critics questioning the its financial potential, yet Struble hasn't wavered in his optimistic belief. Here he explains why.

How did you get into the radio industry? What were you doing beforehand?

I got in because Mel Karmazin gave me this job. After Westinghouse and CBS came together and then bought Infinity Radio, as the largest radio broadcaster, they wanted to push forward with radio's digital strategy. Mel told me to take USA Digital Radio, partially owned by CBS, and make it a business. We ran it inside CBS for awhile and then spun it out with investment from most of the other radio broadcasters

You were named the 2005 Ernst & Young Maryland Entrepreneur of the Year. What makes a successful entrepreneur and what traits would work well in radio?

The most important one is perseverance; guys who show up and do the hard work, day after day....

HD Radio receivers are now being installed in an increasing number of makes and models of automobiles. Many radio groups have been creating sub-channels with a combination of niche/specialty formats and brokered religious or ethnic programming. Where do you see HD Radio technology evolving from here?

It's all moving forward. We look at both sides of the business. We've got to keep going with the radio industry; there are now more than more than 2,000 HD Radio stations, with over 1,200 multicast channels in HD2 and HD3 -- and the HD4s are now popping up around the country. In most top-25 markets such as New York, Los Angeles, Chicago or Boston, you will find 25-40 HD Radio stations on-air and 15-20 new HD2s, HD3s and HD4s. So there's now a broad national infrastructure on the broadcast side.

On the consumer side, we're even more excited with the recent progress. We now have 15 different auto manufacturers offering HD Radio receivers factory-built in their cars; it's standard equipment in 36 models and is available in 86 total vehicle lines. That includes luxury brands like BMW, Mercedes and Volvo and mainstream brands like Ford, Hyundai and Kia. Those numbers have been rapidly increasing over time; we expect to see several more meaningful auto announcements in the next several months.

Consumer electronics sales are going well with 100 different products available at 12,000 retail outlets across the country, including Best Buy, Wal-Mart and Radio Shack. Portable receivers were just launched in the past year and are selling well; Best Buy's Insignia armband radio is doing great, the Zune HD is doing very well, and the GigaWare HD Radio tuner for the iPhone and iPod is now in Radio Shack, so all that has led to sustained sales growth. We've more than doubled receiver sales every year for the past several years. We're three-quarters through our current fiscal year, and we're comfortably ahead in sales over the previous year and will easily put up another double.

With all that going on now, what are your more immediate and challenging goals for next year?

If I could wave a magic wand and see one thing accomplished, I'd like to see the industry make more money from the technology. Initially the stations that went on-air were largely big broadcasters that were investing for the strategic future so radio would be a digital medium. We're now getting into medium and smaller broadcasters.

We need real ROI stories to move the technology forward ... and we're starting to see all kinds of examples, highlighted by some broadcasters making money from selling spots on their HD2 and HD3 channels; spectrum leasing for ethnic and religious broadcasting; and iTunes tagging that makes it easy for consumers to capture data and buy a song automatically on iTunes. We've got new traffic services that deliver real-time traffic info over the radio bandwidth, where broadcasters get paid to offer it.

So we're seeing all kinds of good examples, and I'd like to see stations doing more to focus on monetizing the investment. Money is being made ... and there's no better way to drive the technology forward in the radio industry than for stations to start making a profit from it.

There are still many radio stations that have yet to upgrade to an HD Radio signal. What can you do to facilitate their progress?

There are definitely still holdouts out there; we see them every day. There are two things we can do - first, we've got to expand the sale of receivers ... and we're doing that by more than doubling sales every year. That installs a base for stations. The second is to spotlight the stations' ability to make money. Many of the holdouts haven't looked at the technology in two years. Since then, we've gotten Ford to offer the technology in cars, and we're now in Hyundais and Kias. So there are a lot more HD Radio receivers being sold with these cars.

There's been sales growth in portable devices, too, so the consumer landscape has changed dramatically for the better - and we're going to keep that going. And as I said before, the more we show these holdouts cases where stations make money on their HD Radio investments, the easier it will for them to make the decision to upgrade.

Although some radio groups are making money by brokering their HD Radio multicast channels to ethnic and religious interests, that's really not the "new and compelling content" that would attract a larger, more mainstream audience needed to sell advertising. Nor are the music formats that were dumped off terrestrial because they weren't mainstream enough to win in the PPM. Who's creating the compelling content on their HD Radio channels ... and what's being done to make the mainstream listener aware of it?

A couple things: First, the only way those ethnic broadcasters can be successful is if we get HD Radio receivers into the hands of people they're targeting ...and there are separate sales efforts going on to accomplish that. Secondly, there are a lot of different strategies on content. Like analog radio, some HD2 content is good and some is not-so-good. One way we can create new and exciting content is to find the up-and-coming radio programmers out there and let them take a shot at creating something new and unique, but with radio's cutbacks there are a lot fewer programmers out there.

On the other hand, we're seeing a ton of creative stuff coming out that's all over the map. There are great deep-cuts Classic Rock stations ... "live cuts" channels ... Detroit has got a great "Garage Band" channel. There are three channels of CSPAN. CBS has built a regional sports network out of its Washington, D.C. cluster: they've put Sports/Talkers from New York, Philadelphia and Baltimore on their D.C. Sports/Talk's HD2, HD3 and HD4 channels. They have the N.Y. AMs on HD2s in Florida, so displaced New Yorkers can keep up on their teams. There are HD2 channels that specialize in local news. There's an Irish music channel. "Radio You" in Boston has a bunch of college kids programming with enthusiasm; it harkens back to the golden days of radio. There's a dance channel and a reggae party channel in Miami. Other local channels play bluegrass, gospel, and indie rock.

Clear Channel does it differently; they do all their programming out of Tampa. They created a bunch of well-programmed formats so their local guys can pick and choose what they want. Which strategies work the best? I don't know, but we always want better programming and more programming. The HD Radio Alliance has been doing a great job of spreading the word, but it's also important for local stations to tell the listeners about their multicasting.

In past Power Player interviews, some radio group executives and consultants expressed concern that the niche/specialty formats on HD Radio channels could siphon off its own terrestrial listenership, plus the additional inventory would make it more difficult to maintain optimal spot prices for their analog stations. What would be your response to those concerns?

We do hear that from staffs that focus on analog and haven't had much or any experience in selling digital. What they need to understand is what we see now - there's money out there in digital. The people who go out there to get it, will get it; those who don't ... won't. Plus, if the formats are done right, they should be additive to a station's audience, not dilute it.

When HD Radio Technology first came out, everyone was concerned that stations would, for example, put a Classic Rocker or Hot Hits on an HD2 to cut into the audience of a rival group's analog station. That has not happened. Almost all of the music stations out there are formats you can't get on analog in that specific market.

My view is that radio has got to look beyond the radio station across the street ... to compete against iPods, Internet radio and cell phones. Pandora and all the other digital entertainment choices have shown us that people who want diverse content know where to get it - and it doesn't have to be radio. The whole argument that diverse channels shrink the pie doesn't reflect what's going on. We can either offer that diversity to complement our mainstream offerings ... or we're going to lose those listeners. If we use HD2 and HD3 channels to just copy analog programming, we're collectively nuts. It's the wrong way to go. You put new, diverse content on there that focuses on psychographic demos and sell it in addition to your analog content.

What can radio and the HD Radio Alliance do, marketing-wise, to attract the non-radio listener or those who have abandoned radio for other media?

It's hard because the main ad campaign is going on the radio, geared at current listeners. One of easiest ways to attract non-radio listeners is to get more HD Radio receivers in new cars. When someone drives a BMW or Volvo off the lot, whether they know it or not, there's an HD Radio receiver in there. They may have bought the car for 10 other reasons, but they still have that HD Radio receiver, which they will inevitably sample. If they hear something they like that they don't hear anywhere else, that's great. They will expose any passengers in the car to it, too.

On top of that, there are Facebook pages and Twitter accounts devoted to HD Radio Technology; we also use blogging and in many cases, the stations are out there with their listeners and use HD Radio Technology as a promotion. A good example is next month's HFStival in the D.C. area. It's the next generation of the popular Alternative concerts put on by WHFS -- only now it's based on HFS-2, an HD2 in D.C.

And consumer brands are doing a lot of promotion of their new HD Radio receivers - Sunday circulars, for example. Also, we have worked closely with the automakers to promote HD Radio Technology as part of their broader ad campaigns. There was even a Hyundai Sonata TV ad that led with the HD Radio offering. We can certainly use a lot more of that.

Does this alternative and niche programming attract national advertisers ... or local advertisers?

A bit of both. Real revenue is now flowing onto HD2 and HD3 channels in terms of advertising. Legitimate advertisers have stepped up, including Southwest Airlines, Budweiser, Labatt's Beer and Harley Davidson. There are also spots coming from local automobile dealers. I haven't seen any real good grand corporate strategy to monetize HD Radio investments yet, but there are a lot of local initiatives where creative sales managers go out and sell this stuff. To be sure, we're in the very early days of ad sales.

In your mind, what's the best way to sell HD Radio content - a small dedicated sales staff that specializes, as part of a digital sales staff, or just as another component to the regular staff?

Honestly, that's up to the station. I couldn't give an answer that would be better than anyone else's. Look at what they're doing with the streaming business; some have a dedicated sales force and others don't, so there's no right or wrong answer here. What I have found to be important to sales success is in motivating the sales team. If you incentivize AEs, they sell.

We are seeing plans where HD Radio inventory is being sold as part of a Net budget, where sales reps are selling a digital bundle. Some are packaging over-the-air spots with HD Radio spots and streaming. The ones sold through commission plans tend to work as well, too, so there's no one cookie-cutter answer.

In an optimal world, how will HD Radio Technology be financially successful? What do you see as the working business model?

I don't see just one grand corporate strategy for a successful business model, but there are some common sense themes. You start with a well-programmed station, then have people who have taken the time to understand what the local clients' needs are and address those needs. You also want to make sure your HD Radio stations are encoding; PPM is already picking up some HD Radio signals.

What doesn't work is using HD Radio spots as an add-on digital asset. I don't like to see it just thrown in for the ride, where a client pays for an on-air spot and gets an HD Radio spot as a value-added bonus. That cheapens its value.

The other thing absolutely clear is that the advertising revenue model can work in different ways. The HD2 and HD3 channels usually have very light spotloads, sometimes just top and bottom of the hour. But you can also do some deals where advertisers sponsor a channel or certain programs on the channel, much like public TV or radio does. Less intrusive advertising seems to work.

The last thing I want to stress is that if stations have any questions on this, call us. This is all we do; we've got all kinds of tips and best practices. Whatever the station could want in getting their HD Radio sales efforts up and running, we've got 'em and are ready to help. Stations can check out HDRAdioAlliance.com as a start, and they should definitely pick up the phone and call us.

You have said, "Streaming won't kill or save radio" ... does HD Radio Technology make a difference in that equation?

Streaming has been radio's first digital priority, but it shouldn't be its only one. You've got to do both; we can walk and chew gum at the same time. I often hear broadcasters say, "We're already into digital; we do streaming." No, streaming your on-air product is not a complete digital strategy.

Broadcasters have been streaming long enough to understand that streaming is not a cash cow. What's unclear is if they'll make any decent money at all when you factor in the increasing costs. Secondly, even if you do make money, the ability to attract a bigger audience will always be difficult when you're competing against Pandora and 100,000 other sites -- unlike the local market served by your terrestrial signal and a few dozen others. So, claiming that over-the-air broadcast radio is dead and that streaming will replicate the dollars spent on-air is sheer lunacy. Don't get me wrong -- stations should be in the streaming business; it will be nice incremental revenue and will push the brand, but they have to be realistic about what it will do for them financially.

On the other hand, those who say Pandora will attract the size of an audience now listening to terrestrial radio - well, that's not going to happen, either, for the same economic reasons. There's not enough bandwidth because it's a different architecture - one-to-one vs. broadcast's one-to-many. Our view is that streaming will definitely be part of the digital audio landscape, but at some point in time people will end up having to pay for it, because the bandwidth is going to cost more to use. You can't ignore the free over-the-air product, and that over-the air products have to be digital to compete over the long term.

Should all cell phones have HD Radio chips in them instead of, or as well as, FM chips?

It's all good, analog FM in these devices is a nice first step to HD Radio inclusion. We're all working very hard to get into portable devices. Radio can't be ubiquitous if it's not available everywhere -- and no one carries around a transistor radio anymore. Our objective is to be available in all cell phones and MP3 players. And make no mistake, there is no 'instead of' with HD Radio chips. Every HD Radio chip always receives the analog broadcasts.

Why push for that when there are apps for terrestrial radio stations already?

Those apps run over the cell phone network, they are not using the AM/FM spectrum. If everybody gets an app, the networks will eventually shut down. There's not enough capacity in the mobile networks to support the volume of listening to over-the-air radio. Eventually, when a critical mass of people has downloaded the apps, they'll have to pay extra to listen to the radio through them.

You mentioned earlier that AM/FM is the only analog medium in a fully digital world. In that light, is the long-term goal for HD Radio Technology to eventually replace analog radio completely? If so, how far down the road will that be?

Long term, absolutely. In time, analog won't be able to compete with digital competitors, because digital offers more channels, better quality and more services. The ability to display images on a screen; you can't do that when advertising on analog radio. Thanks to iPods and the like, almost everyone expects to see album covers when listening to a song. Things like that can typecast analog radio as a "horse and buggy" medium. To remain competitive over the long term, radio has to transition to digital. It may take 10 or 20 years ... and the transition won't be forced like the transition to digital TV. In the meantime, as long as there's many millions of analog radio listeners, radio needs to generate optimum revenue as it continues to move towards digital.