Digital joys, no subscription required

Michael Hedges December 7, 2008

Broadcasters have long cast a wary eye at migration from the FM band. As media migrates from analogue (read: old) distribution to digital confusion reigns supreme over how and when and how much will it cost. Wireless broadband has opened a new door and a major Japanese manufacturer has put out the welcome mat.

Sanyo unveiled its internet radio to the Canadian market at the end of October. In January the R227 internet radio receiver will be available in the United States.  The company pitch is ease of use and no subscription fees.

Other internet radio listening devices are on the market. Sanyo’s moves the price point to €125 (US$160). Tivoli Audio’s NetWorks retails at €475 (US$600). And, too, there’s an iPhone add-on for internet radio for about €5 (US$6)…plus the connection charge per nano-second.

Digital radio proponents have suffered for suitable receivers. Ten years and not inconsiderable promotion in the UK brought the consumer price of DAB receivers under £100 (€115). Major consumer electronics manufacturers hesitated leaving UK manufacturers – Pure, for example - to produce clever, attractive and well-priced receivers. UK DAB receiver sales reached 7 million. Household penetration is about 23%. Then UK broadcasters found distribution costs unsustainably high and channels began disappearing.

Sanyo’s R227 also benefits from consumer psychology. First, it looks like a radio and, more or less, functions like one. Media consumers are creatures of habit. The R227 is a clock radio, the primary in-home radio function. It does not look or function like a PC, heretofore the only way to access streamed radio content. 

A selling point for media devices is and always will be wide content availability.  It works for television. It works for PC users surfing the internet. It still works, more or less, for FM radio. Sanyo’s R227 offers 14,831 internet radio stations through the Reciva database. It also will pick up FM radio.

Gizmo reviewers in Canada and the US have been quite positive about the R227’s functionality. It’s easy to use. Nobody buys a radio receiver that comes with a 400 page manual.

Part of Sanyo’s sales pitch in Canada and the US positions internet radio against satellite radio: no subscription fee. Satellite radio gained modest traction in North America based on large and varied content. But – thinking again about consumer psychology – radio has always been perceived as a free access medium.

The Sanyo R227 connects to WiFi networks or Ethernet, meaning users need broadband access. Radio listening via the internet has grown impressively over the last two years – France, Germany and the UK in particular. This trend tracks significantly with IPTV as broadband availability grows and its cost falls.

For broadcasters – audio content producers – the appearance of an affordable and easy to use internet radio device wields a double-edged sword. Anytime consumers are attracted to a media device overall usage rises; think iPod. Monetizing that usage can be a challenge but for the clever not impossible; think Zattoo. Revenue in the digital age comes from interactivity and addressability.

The biggest challenge comes from competing with not 40 or 50 or 60 other radio channels but more than 10,000. Brand strength, promise and performance will always be an advantage. Consumers may be intrigued with arcane and esoteric radio channels – the long tail - but all research on listener behavior shows regular usage is with five or fewer channels. At home listening tends to be with no more than two channels, such is the nature of consumer behavior.

WiFi networks have limited range and other technical restrictions keeping internet radio out of the automobile. That could change with next generation wireless broadband networks like WiMax and LTE. A pilot wireless broadband project in Germany was recently launched to bring internet access to rural areas where copper and fiber aren’t available.

The other big advantage for broadcasters to IP distribution, considering the shaky global economy, is simple: cost. Transmission costs just fall to zero. Maybe there won’t be a need to fire the DJs.

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