As wireless broadband, particularly 4G networks, becomes more widely available and as cars become widely connected, streaming as a method of delivering both radio and music services will increase in importance and is likely eventually to become the main way of consuming content in the car. However, terrestrial broadcasting will continue to offer a number of important advantages, particularly in terms of coverage and network capacity for many years to come, for example:
· Ubiquitous coverage – terrestrial FM (but not necessarily digital radio networks) and satellite radio (US only) offer ubiquitous coverage compared to cellular networks which often have patchy coverage in rural areas in certain countries
· Network capacity – there are concerns that cellular networks will become congested when multimedia streaming becomes widely adopted. Although the majority of this traffic is likely to be video streaming, mobile operators are looking at ways of shifting multimedia streaming data to other digital networks such as Wi-Fi in the short or medium term
Over the years, there has been a steady although unspectacular increase in the number of users listening to the radio via FM tuners in their mobile phones. However, the arrival of mobile apps about six years ago suddenly made radio listening much easier and much more convenient, and has resulted in a considerable increase in radio listening on mobile phones.
In fact, radio broadcasters have embraced the Internet and the majority have developed their own apps. Radio apps offer many benefits to listeners and to broadcasters. For listeners, they make radio interactive and personal. Apps are a good way for radio stations to get closer to their audience and to develop a relationship with them. They are also an excellent marketing channel for broadcasters giving them 24/7 visibility with their listeners and the ability to push events, promotions, ticket sales, etc. directly to their listeners’ smartphones. It is therefore no surprise that most broadcasters report substantial increases in mobile listening via apps (rather than FM).
For the past 10-15 years, broadcast radio has been in the midst of an excruciatingly slow analogue to digital migration with a number of different digital radio standards such as DAB, DAB+, T-DMB, DRM and DRM+ in Europe and Asia, HD Radio in the United States and ISDB-TBS in Japan vying to become mainstream digital broadcast radio standards.
Not only are sales of digital radios depressingly low, the number of traditional AM/FM radio receivers sold seems to be falling rapidly as well, as listeners move to listen via apps and online. Although DAB sales in the UK remained steady in the year to June 2013 (at around 1.9 million units), the sales of analogue radios fell by 1 million compared to the previous year. A total of 5.6 million radios were sold, the lowest figure ever recorded by regulator Ofcom, down from a peak of 10.4 million in 2008.
In the United States, iBiquity’s proprietary HD Radio technology has not fared much better. The company claims that 33 out of 36 car brands in the United States offer HD Radios, but only 17.5 million units have been sold since 2005. Around 15 million of these were line-fitted in new cars (or sold as aftermarket units), which means that only around 2.5 million non-automotive HD radio receivers have been sold in the United States to date. In 2013, a total of 5.5 million receivers were sold.
Clearly, broadcasting is a much more economical delivery platform than cellular for “one-to-many” type applications and there have been a number of companies who have tried to capitalize on this. For example, mobile radio app TuneIn is one of the few radio apps to use the FM tuner in its mobile phone apps to receive radio broadcasts which not only saves battery life but also allows users to listen longer without consuming mobile data. In Europe, a similar capability which aims at even closer integration of broadcast radio with IP delivery known as RadioDNS has been “in development” for many years, but for various reasons has yet to get off the ground.
One of the key benefits of streaming compared to broadcasting is that the Internet connection enables content and service providers to monitor and track how listeners consume content, together with their likes and dislikes, and based upon this information allows them to offer targeted advertising services for which advertisers will pay a premium charge.
Of course, personalized Internet radio services such as Pandora and on-demand music subscription services such as Spotify need a “one-to-one” Internet connection but traditional radio could also be delivered via streaming in future thus eliminating the need for a separate broadcast network. This could have profound implications on the traditional radio industry in the medium and long-term.
With billions of dollars being invested in 4G networks and with broadcasters and other content providers increasingly focused on targeted mobile advertising services, including in the car, there seems little economic justification for investing substantial amounts of money in building out expensive digital broadcast networks, particularly as the take-up of digital radio in terms of receiver sales remains embarrassingly low.
What does all this mean for the automotive industry?
Clearly car OEMs will need to offer FM tuners in their cars for many years to come but the decision with regard to digital radio receivers is a lot less clear and will vary from region to region and even from country to country.
The United Kingdom is currently the only country where digital radio receivers based on DAB are included as standard by car OEMs alongside the traditional FM receivers (with a migration to DAB+ probably likely sooner rather than later).
Although a number of other European countries such as Germany have re-launched digital radio (via DAB+), these developments are probably too little and too late and the widespread adoption of digital broadcast radio networks across Europe (particularly France and Spain) as well as other regions of the world now looks unlikely. France has had a perennial plan to re-launch digital radio (the latest earmarked for mid-2014) since almost 2001 but very little ever happens. Realistically, what are the odds on France or Spain ever building out a comprehensive DAB+ network with coverage matching FM? The UK has still to reach that goal fifteen years after the first commercial DAB network was launched in 1999.
Indeed, the digital radio industry now seems to be pinning its hopes of survival on the automotive industry. Yet, with the vast majority of listening to radio and music on mobile phones via apps, it is becoming increasingly more likely that these same people will continue to listen to this content via streaming when they are in the car.
Nevertheless, it is still possible that car OEMs may one day need to consider making DAB+ standard in their cars (possibly around 2020-2025) in some European countries such as Norway, Denmark and Switzerland if these countries do eventually decide to switch-off FM services as planned. If so, OEMs will then probably install DAB+ receivers in all cars sold in mainland Europe, irrespective of whether other neighbouring countries have good DAB+ network coverage or not.
If this is not the case, the alternative might be to stick with the current strategy, which is to offer DAB+ as an option and let the car buyers decide themselves!