HD Radio had high hopes of being included in SDARS receivers. If such a requirement were mandated by the FCC, the business model of terrestrial radio could continue virtually unfettered, and without offering up a revenue share to automobile manufacturers.

At this point there is no requirement to include HD in satellite radio receivers. This means that HD needs to go back to the drawing board... literally. The marketing method of HD has thus far yielded deals with only BMW and Ford. In the case of Ford, getting an HD receive means giving up on the highly touted SYNC system, something consumers are not likely to do.

HD Radio is a decent concept, but they need to offer far more to get consumers to clamor for their technology. Whether they like it or not, terrestrial radio's HD version may well have to pony up subsidies to OEM's, and maybe even cut a deal with SDARS.

HD touted in the satellite radio merger case that the HD chipsets only cost $10. While Sirius Buzz readers know this is only a portion of the cost, perhaps Ibiquity should bite the bullet and cut deals. HD recently received $40,000,000 from congress to promote their technology. At $10 per chip, HD could get into 4,000,000 cars this year if they are able to convince an OEM to accept $10 to install the technology. Yes, $10 is unlikely to woo the OEM's, but HD could get a start. In my opinion, HD radio needs to follow a path similar to that which SDARS followed. They need to pay to get into the game.

HERE ARE SOME STEPS HD CAN TAKE TO BE VIABLE:

1. Come to terms with the fact that an installation subsidy is needed. Take the $40 million supplied by congress, and add to it a contribution from all HD Radio players. Raise about $200 million total, and go to the OEM's. The OEM's will seek an installation subsidy as well as a revenue share. The revenue share may be steep, but you need to start somewhere.

2. Negotiate with SDARS. While mandated installations has not been a success, there is nothing that would stop HD from cutting a deal with SDARS. Take SDARS content, and broadcast it with commercials on HD. In return, give SDARS ad spots that say something like, "Do you like the Pulse? Get the Pulse and many other music channels commercial free on Sirius at prices starting as low as $6.99 per month. Go to HDRadio.com for details." HD can get a revenue share from SDARS for bringing in track-able subscribers. HD gets content that differs from that which is playing on the non-HD channel. SDARS will get a portion of the ad dollars. If worked properly, such a deal could be beneficial to all parties.

3. Make HD Radio special. Make it something that listeners do not get on regular radio. Less commercials, better play lists, etc. Get an Internet radio service running that lets fans interact, download songs, etc. Trim the ads. Get a tag line like "HD Radio....Better sound and half of the commercials....Better yet, it's free!"

4. Sponsor channels on services like LastFM, Pandora, or Slacker.

Simply stated, HD Radio is not getting "pull" from consumers. In order to get to a "pull point", HD needs to have something special that consumers want. Right now most consumers feel that HD is nothing but the regular feed with better sound quality. Who wants better sounding commercials?

Now is the time for HD to shift gears. Don't let another holiday season pass with the status quo. Don't let another model year pass with little or no installations. Maybe even go to an open access manufacturer and pay them to include an HD chipset into the SDARS mix. HD can not ride the gravy train for free. They need to spread a bit of the wealth if they want to play in the audio entertainment landscape.

I can't blame HD and Ibiquity for trying to get something for nothing. If they had succeeded, it would have been a brilliant business move. It is now time to move on, and come to terms that the money pie needs to have some pieces distributed to others. Adjust the business model, or fail. It is that simple.

Position: Long Sirius, XM.