“Car companies are having their own problems; it’s wrong to ask that anything be added to the cost of what people are paying for a vehicle. The consumer ought to decide. The government shouldn’t be requiring HD Radio just because the content is not compelling enough on its own to get people to buy these radios.”
At first blush, this quote by Mel Karmazin seems like a direct slam of HD Radio. BUT....Karmazin is a self described "operator", and he is always in search of the next deal. What Mel Karmazin has done is point out what people already know. The content on HD Radio is virtually identical to that which is offered on standard terrestrial radio stations. The theoretical benefit is better sound quality. However, is sound quality alone enough to make the difference? For the average consumer, the answer is no.
So how does HD Radio survive, or beyond that thrive. Perhaps they can work with satellite radio in some form or another. During the Sirius XM merger process, Ibiquity made it a point to not take any position. By doing this they hoped not to alienate either side. HD became the Switzerland of audio entertainment.
Instead of taking a position on the merger, HD made strong efforts to become incorporated with satellite receivers, thereby bypassing expensive negotiations with the auto manufacturers. What HD Radio was seeking may not seem fair, but it was worth a try. In the end they were successful in at least getting inclusion reviewed.
So, with all of this, where is the solution? The FCC may not even have the authority to mandate HD inclusion into satellite receivers. One possible solution is that Ibiquity team up with Sirius XM to provide a solution that can benefit everyone.
Mel Karmazin has pointed out that the content on HD is not compelling enough to have consumers charge a premium. Most HD content comes from terrestrial radio programming that is already being broadcast. If that programming is not compelling enough, then the solution is to obtain better programming. Most will agree that Sirius XM has better content that can not be found on the standard terrestrial dial.
What if Sirius XM were to offer up some compelling programming to HD in exchange for a cut of the ad revenue that HD derives from their service? HD could take a channel such as Sirius Hits One, insert commercials, and pay Sirius XM for the right to do so. This solution could be reached without FCC or government intervention. It would give Sirius XM a piece of the HD action (including a cut of lucrative "local" advertising), and it would give HD Radio a pathway into the OEM channel without having to go through costly negotiations.
Such a deal would boost the concept of HD, as well as boost the profitability potential of Sirius XM Radio by adding a new revenue stream complete with what boils down to "free promotion" over terrestrial airwaves.
Sometimes when someone is in the midst of a negotiation, or considering entering into a negotiation, they will downplay the value of the entity they are thinking about working with. This may be exactly what Mel is doing. Mel stated that he wants to get into "more devices". More devices could also include OEM receivers that do not become self paying subscribers. If Sirius XM were to include HD chipsets, they would at least have potential of still gaining revenue from the non-subscription HD.
Clearly HD does not have what it takes to compete with satellite as yet. The question is whether or not to work with HD to create a middle tiered service. HD could be the crossover format between terrestrial radio and satellite radio, and it is in that type of roll that HD has the best chance to survive. HD needs satellite, so they should be willing ton pony up some revenue sharing to become viable.
Position - Long SIRI