iBiquity sale to DTS

DTS, Inc (NQ:DTSI) is to acquire iBiquity for $172M USD.  This was the headline about the middle of last week.  With that announcement, we get to see some of iBiquity’s financials; revenue of $40-50 million this year with a margin of 30-36%.

My question is, who or what is DTS?  DTS was initially known as Digital Theater Systems, Inc.  They specialize in digital surround sound technology, by developing or acquiring companies that created various CODECs and surround sound technology.

35mm film audio macro

An image of 35 mm film showing four audio formats, from left to right: SDDS (blue area to the left of the sprocket holes), Dolby Digital (grey area between the sprocket holes with the Dolby “Double-D”), analog optical sound (the two white lines to the right of the sprocket holes), and the DTS time code (the dashed line to the far right).  The DTS time code syncs picture to a CD-ROM that contains the surround sound sound track.

DTS continues to develop surround sound technology and makes money by licensing that technology to consumer and professional audio clients.  According to their 2015 Q2 financials, they are on track to make $140-145 million this year with a 25-30% margin.

My next question is, what does this mean for HD Radio?  It is much harder to answer this question, but here are some general observations:

  • DTS is a publicly traded company.  Financials and other information are a matter of public record.  It seems likely that the operation will be more transparent.
  • DTS operates with higher revenue and lower margins.
  • DTS has a high interest in mobile markets; devices and dashboards.
  • DTS has a history of continued development and marketing of technology it owns.

There are a couple of different scenarios possible; the first is business as usual. I think this is the least likely situation.  IBiquity as a company and HD Radio as a technology basically flat lined ten years ago.  A successful company like DTS would not likely purchase something that does not have growth potential.

Second possibility, DTS will keep the same licensing structure, but upgrade the HD Radio technology.  From a audiophile’s perspective; HD-1 sounds good, HD-2, 3, and 4 channels not so much.  This is especially true as more channels are added and the same size pie (aggregate digital bandwidth) gets divvied up into smaller and smaller pieces.  One area where HD Radio could shine is to get rid of the HD2-4 channels and create an IP multicast system.  IPv6 has greatly improved multicast performance which might enable a free data stream download, minimal data back haul via mobile data for an interactive, low data usage digital experience.  That would free up a lot of translators.

Third possibility, DTS will reduce the licensing fees for broadcasters and consumers and accept a lower margin on existing technology.  DTS will use HD Radio as a route to get their technology into dashboards, which is where they see their future profits.  Remember, the self driving car is only a few years away and mobile entertainment will be all the next rage.

As far as AM HD Radio goes, I don’t see anything happening with that.  Medium wave broadcast channels do not offer enough bandwidth to facilitate reliable digital transmission.

In any case, for better or for worse, change is coming to terrestrial radio.

Norway says “Goodbye, FM”

Norway will switch off its national FM networks in 2017, according to the Ministry of Culture announcement.  In the place of analog FM will be DAB.  The aim is to have the migration to DAB completed by December of 2017.  According to the article, approximately 54 percent of households and 20 percent of automobiles have DAB radios.  What is left unsaid is the 46 percent of households and 80 percent of automobiles that do not have DAB capable receivers.

I am sure that in the ensuing year and a half to two years, those numbers will change somewhat.  It still seems to me that there will be many people who will likely not have a DAB radio in their car before the analog switch off.

Judging by the comments on the Slash dot story, many are not happy with this decision.  Perhaps the most telling comment is this:

This is just Norway going off on its own crusade urged on by commercial interests of 10+ new channels, fuck whether it makes sense to throw out millions of radios… I expect this to lead to a massive interest in building out 3G/4G coverage as ex-FMers give DAB the middle finger.

Yup, that sounds about right.

I don’t know much about radio in Norway, but it if is anything like radio here, good programming trumps technical do-dads and and fancy gimmickry.

HD Radio development Stasis

I have been working on an HD Radio installation these last few days.  This particular installation was manufactured by Broadcast Electronics.  Some 13 years into the HD Radio development cycle and the implementation still seems like a kluge to me.  To get some idea; to transmit a digital HD Radio with added sub-channels, the following equipment is needed:

  • HD Data importer, off the shelf computer with a sound card and specific software from iBquity.  This is used to import the audio for the HD-2 and HD-3/4 channels.  Runs on Windows (Win 7), Linked to the exporter via IP ethernet
  • HD Radio exporter, another specialized computer with a sound card.  Frames the HD Radio data and adds PID, etc.  Runs on Mandrake Linux, communicates with the exciter via data connection.
  • HD Radio exciter; like other exciters, generates RF and modulates it.
  • HD Radio transmitter; essentially an FM transmitter designed to run as a linear amplifier.

The HD Transmitter part can come in several configurations, including low level combining, high level combining or using a separate antenna for digital and analog signals.

Broadcast Electronics HD Radio transmission system
Broadcast Electronics HD Radio transmission system

None of this is news, of course.  My point is, after ten years, there does not seem to be any further development in HD Radio technology.  In the mean time, competitors are not standing still.  The mobile wireless industry has evolved several times during the same time period; 3G, 4G and LTE have been successfully deployed and widely adopted by mobile phone users.  Truly, mobile data is the real competition to terrestrial broadcasting.

The HD Radio transmission process is an overly complicated patchwork of hardware and software.  The importer in particular seems substandard.  It’s function is to run a bunch of small programs, each doing some small part of the importing process.  The web-admin used Internet Explorer, who uses Internet Explorer anymore?

Since the HD Radio inception, little or no further development seems to have taken place.  There are features, such as album art, program data, traffic data, etc but the system interface is weak, the hardware clunky, the data paths fragile, the operating system outdated, the typical installation is a compromise between cost and available floor space at the transmitter site.

HD Radio is also expensive to deploy and proprietary.  There is little compelling reason to listen to HD-1 channels because the programming is identical to the main analog channel.  HD-2, 3 and 4 channels seem to be mostly used to generate translator feeds, which again, are available with an analog radio.  This use of HD Radio actually damages uptake because, If all the HD Radio sub channels are available on FM analog frequencies, then why even bother with an HD Radio receiver?

Thus the forces at work in the development of HD Radio seem to have reached equilibrium:

Consumer apathy + expensive deployment = 16% uptake on FM and 6% uptake on AM1

The digital radio roll out has been stuck at those levels for many years.  Unless something changes, FM HD Radio will be limited to translator program origination and distribution.  AM HD Radio will go the way of AM Stereo.

1: FCC data on HD Radio deployment; 1,803 of 10,727 FM stations and 299 of 4,708 AM stations have installed HD Radio as of December 31, 2014.