Satellite radio has gained more than nine million paying subscribers in four years, and is now putting a crunch on the traditional broadcasting market. HD Radio and HD2, also known as multi-casting or supplemental audio channel broadcasting, offer a multitude of new opportunities for North American broadcasters faced with fierce competition.

"Fear of satellite radio is prompting an unprecedented level of cooperation among broadcasters in their efforts to launch HD Radio and HD2," says Frank Viquez, director of ABI Research's transportation practice. Viquez adds that HD Radio multi-casting is especially attractive to broadcasters because of its ability to divide the radio signal into separate audio channels, allowing new programming opportunities. "Traditionally, many stations with dual formats have been forced to split their programming according to a certain time schedule; thus HD2 offers them many new possibilities."

The downside is, HD2 cuts down on actual bandwidth available to each "channel", lowering the quality of the overall end product. Much as satellite radio is offering a myriad of channels with mediocre quality. The upside is, switching to HD Radio digital broadcasting costs stations relatively little, often requiring minimal additional equipment, and software upgrades.

As we've seen lately, and should see more throughout the remainder of 2006, broadcasters are currently in an aggressive HD Radio roll-out phase. One of the biggest HD2 proponents has been Clear Channel Communications, which has launched HD2 in more than 100 stations across 25 markets in less than one month. There are currently more than 300 stations broadcasting in HD2.

Viquez observes that "While specific revenue and business models have yet to be defined, the broadcast content on HD2 will vary from station to station and by market. However, we can easily imagine broadcasters offering specialized channels that feature little or no commercial interruption, 'pay-per-listen' events such as concerts or other special events, or new formats that target a very specific demographic audience." Just bringing AM sound quality up to par with that of analog FM is, he believes, enough to open new possibilities for AM broadcasters alone.

The real question remains, will any of this encourage sales of HD Radios to consumers.