Digital Radio Set for Growth?

Market research firm In-Stat has been looking at the development of digital radio—and likes what it sees. According to “More Consumers to Tune Into Digital Radio in 2007” the world-wide market for digial radio receivers will grow from just 5 million units in 2005 to over 25 million units in 2010. And digital radio is gainin strong awareness in the consumer marketplace: In-stat claims 73 percent of respondents to a consumer survey had at least heard of HD radio.

“The primary factors contributing to this expected growth are falling receiver prices, an increase in the amount of compelling digital programming, significant boosts in promotion and advertising of digital radio, and enhanced functionality of digital radio receivers,” says In-Stat analyst Stephanie Ethier. “Overall, digital radio is still an emerging market. Opportunities abound for retailers, broadcasters, automobile OEMs, and receiver manufacturers alike.”

In-stat also estimated that XM Satellite Radio will have signed up 8 million subscribers by the end of 2006, with rival Sirius reaching 6.3 million subscribers. However, while consumers may be aware of HD radio, their differentiation between XM and Sirius satellite radio seems weak. “More people know that one service has Howard Stern than know which one has him,” said analyst Richard Doherty with the Envisioneering Group. In recent months the investment community has been keen to see merger talks between XM and Sirius, pointing out the two companies’ business models are very similar, and a merger could reduce costs while increasing returns to investors. Sirius’ chief Mel Karmazin has repeatedly spoken favorably about the idea of a merger, although XM has remained absolutely silent and neither company has said whether even preliminary talks have taken place.