Digital Radio Pumps Up The Shipment Volume

Listening to traditional radio may be on the decline, but the music lives on. The Media Audit found a decrease among those who listen to the radio for more than three hours per day, dropping roughly 1.6 million listeners in a year, but In-Stat/MDR expects a surge in the worldwide digital radio market.

In-Stat/MDR predicts that the digital radio market — both satellite and terrestrial [define] — will grow from roughly 3 million in 2003 to over 19 million unit shipments worldwide in 2007, driven mostly be new content and data services. Increased broadband deployment and partnerships with new car manufacturers will help propel the digital radio market that is currently led by the UK and Germany’s terrestrial broadcasting developments and the U.S.’s well-developed satellite radio network. South Korea and Japan are hoping to improve upon the success of the U.S.’s satellite audio stream network by offering video streams as well.

XM and Sirius — U.S. providers of satellite radio services — have watched their subscriptions surge in the last year. XM boasted 1.36 million subscribers at year-end 2003, with expectations of reaching 2.8 million by the end of 2004. During the fourth quarter of 2003, XM added more than 430,000 customers, with 23,000 signing up on Christmas Day alone.

Sirius ended 2003 with 261,061 subscribers — up from approximately 30,000 subscribers at the end of 2002 — representing a 772 percent increase. Like XM, Sirius did brisk business in the fourth quarter of 2003, adding over 100,000 new subscribers.

Comparatively, the number of digital cable TV subscribers in North America increased by 20 percent during 2003, according to In-Stat/MDR, with expectations that the worldwide cable TV market will reach 395 million subscribers by 2007.

Michelle Abraham, a senior analyst with In-Stat/MDR, comments on the motivation behind subscription radio: “Demand for XM and Sirius services will be driven by the desire for wider music choices no matter where you go in the U.S., commercial-free radio, and higher quality sound.”

Despite the high growth rate, it is unlikely that satellite services will achieve the widespread adoption level of subscription TV anytime soon. “While subscription radio is and will be successful, I do not expect the penetration to be as high as pay-TV at over 80 percent in the U.S.,” commented Abraham.

In-Stat/MDR found that receiver prices and hardware options will help advance listenership, but the conversion from analog to digital radio remains a slow process. Several hundred million analog radios are sold worldwide each year, in the form of stereo receivers, CD boom boxes, portable devices, alarm clocks, and car stereo systems. Reductions in the cost of digital tuners will convert the more expensive of the analog radios to digital by the end of 2007.

Abraham notes that when the first digital broadcasts became available in Europe more than five years ago, receivers were too expensive for the mass market. Even though prices have since dropped, many countries are still trialing digital broadcasts, waiting for the regulatory framework to be in place and digital coverage to expand.

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