J.D. Power: HD Radio pricing garnering higher consumer interest than satellite

Premium surround sound systems HD Radio are highly attractive features consumers would like to see in their new vehicles based on their estimated market prices, and consumers prefer to pay a one-time fee over a monthly subscription for satellite radio, according to the J.D. Power and Associates 2005 U.S. Automotive Emerging Technologies Study released Friday.

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The study measures consumer familiarity, interest and purchase intent for emerging automotive technologies both before and after an estimated market value is revealed. While consumer interest in new technologies typically drops after a price point is revealed, relative interest in premium surround sound and HD radio actually improves dramatically after the market price is provided. Premium surround sound, which ranks sixth in consumer interest before the price is revealed, moves to second after consumers learn its market price (400 dollars). With a realistic market price of just 150 dollars, the HD radio-compatible receiver jumps from 16th in initial interest to third after pricing is revealed.

"What is truly surprising is that among those interested in equipping their next new vehicle with the premium surround sound feature at 400 dollars, nearly 80% of those are willing to pay 800 dollars for a branded system," said Lawrence Wu, senior director of automotive emerging technologies at J.D. Power and Associates. "This suggests that automakers and audio suppliers could add value to their products for consumers, while increasing their returns. While we have seen the availability of branded sound systems increase the past few years, it's evident from this research that there is sufficient consumer demand to warrant equipping a much broader vehicle segment base."

Consumers still express more interest in satellite radio than HD radio prior to the introduction of price, but interest falls below HD radio at the realistic market price of 12.95 per month for satellite radio. The study shows that more consumers are willing to pay a one-time fee as opposed to paying monthly for the service.

"Even though satellite radio is at an advantage over HD radio by offering commercial-free content and coast-to-coast coverage, interest in HD radio is higher than satellite radio after the introduction of price," said Wu. "In general, consumers would rather pay once for a feature and have been reluctant to embrace subscription fees. This is evident in the trade-off exercise in this year's study in which almost twice as many consumers chose lifetime (life of vehicle) satellite radio with a one-time 499 subscription fee compared to a one-year option."

RBR observation:
It's all about offering the listener more and better choices. We think once the majority of HD stations and HD receivers offer Multicasting, it could tip the scales away from satellite. Through innovative FM multicasting formats, traditional radio can theoretically match the offerings of satellite in decent-sized markets. And it is free. Certainly, ad campaigns educating the consumer on multicasting are needed-especially for the Christmas shopping season! The FCC needs to act decisively on approving multicasting as well. That will give more manufacturers and stations the green light they've been waiting for.