Don’t Adjust Your Dial

This past Christmas, when shoppers were making DVD players the electronics gift of choice, Britain’s radio broadcasters tried an experiment. They subsidized the sale of 300 digital radios at eight locations across the country at the wallet-friendly price of €99 (about $142), a savings of at least $210 over the cheapest unit now available. They sold out in 30 minutes. Alba, the U.K.’s largest consumer-electronics manufacturer, got the message. It’s bringing out a range of digital radios this fall priced from about $140 to around $285 under its mass-market brand, Goodmans.

Buyers will have plenty to listen to. By December, the number of digital stations in Britain will shoot from 24 to 310; 11 will belong to the state-owned BBC. On March 11 the Beeb will launch its first, new national music service in 32 years, the all-digital 6 Music, described as a station produced by and for music enthusiasts — in other words, a no-Britney Spears zone. Meanwhile, Capital Radio, a commercial station, is joining forces with Disney to create Capital Disney, a digital station aimed at the under-16 set (read, Britney welcome).

“We are certain this is the year for digital radio,” says Terry Scicluna, chief executive of the Digital Radio Development Bureau (drdb), a consortium created by the BBC and its commercial rivals around a year ago to bring the new medium to the masses. The technology has long been ready, but receivers have been scarce and expensive as electronics firms hesitated. “Manufacturers were not ready to make the radios until they had proof of a huge market,” says Quentin Howard, ceo of Digital One, the U.K.’s first commercial digital network. “It’s been a classic catch-22 situation.” But with cheaper receivers and growing content, the British market is set to explode. While the U.K. is digital radio’s first big test, much of the rest of Europe isn’t far behind. The Swiss consultancy Prognos forecast that once receivers are widely available the Western European retail market could eventually hit $4.1 billion a year.

Consumers rarely adopt new technology until they’re sure of its benefits. Luckily for the industry, digital radio’s pluses are easily explained: clearer sound and more choice. Digitalization transforms sound into the binary codes of 1s and 0s, which can be transmitted as audio waves free from interference. The result is a CD-like broadcast unmarred by the hiss, static and drift that bedevil analog stations. And because digital uses little bandwidth, it allows for the transmission of many more channels. Niche stations already available in Britain range from all-film music to classic rock to One Word, a station that features audio books. Advertisers are keen to embrace digital radio because its increased market segmentation will let them target specific audiences. Text and pictures can be transmitted with the audio signal as well, which should provide additional advertising and e-commerce revenues to digital stations. Several platforms can distribute the signal. Home and car radios use a terrestrial system called Digital Audio Broadcasting (DAB). But signals can also be received from cable and satellite television operators, as well as over the Internet.

By year-end, digital radio will be available in 85% of the U.K. Several other countries, including Belgium, Germany and Portugal, also boast extensive digital coverage. But Germany is Europe’s biggest market. The enormous Japanese manufacturers are unlikely to mass-produce receivers until there is sufficient consumer demand for the radios there. But the German market — dominated by regional stations — is confusing, because most digital coverage is concentrated in the south. To fuel national demand, Helwin Lesch, general manager of Bayern Digital Radio, a transmitter-network operator, admits that German broadcasters are borrowing marketing ideas from Britain. An on-air campaign to explain digital radio begins in March, and there are plans to auction a few hundred inexpensive radios over the Internet in April. Most German automakers, lured by the promise that 100% of the autobahn system will be covered by a digital signal by 2004, have begun ordering units from manufacturers, which should also boost the market.

Radio remains an enduring and popular medium. Britain’s audience is still growing, and 91% of all adults listen to at least five minutes of “the wireless” each week (though the average listener tunes in for more than 24 hours a week). And audience levels are similar across Europe. “The relationship people have with radio is personal and unique. It’s the most passionate medium I can think of,” says Digital One’s Howard. And about to get even more so.