Ford Motor Company (F) Earnings Call Transcript & Summary

Yes. That's about right. So there were roughly 47 FCC licenses in the New York DMA. And because of the multi-casting capability of HD Radio, a single frequency can now carry up to 4 audio channels. So we don't -- we haven't added more stations. We've added more content within that broadcast range of frequencies.

Yes. And out of curiosity, how well are those sort of substations, I call them, for HD? How well are they doing? How much do they get listeners?

Yes. Nielsen does track some HD2s, HD3s. They have to do separate encoding so they get picked up in the ratings books. But a number of them are starting to appear in the books and are generating revenue and becoming an integral part of a local station -- of local stations' business. But admittedly, we did have this issue of the chicken and the egg, where we had the stations on air long before we had a critical mass of receivers in the market. We're now at 70 million cars, and we actually track HD Radio equipped vehicles by DMA. So I can tell you with a fair degree of certainty that about 1/3 of the cars registered in the New York DMA have HD Radio technology. So as a result, we finally now have capable receivers, where the station can now convert them to listeners. And a lot of stations are doing promotions, not explicitly stating this, but the intent is tune over, don't tune out. So stay with radio. Go discover what other programming we have. Don't go off to Spotify. Don't go off to Pandora. Stay with radio. Tune over to the next -- the HD2 or even the DAB, BBC 7, for example.

Right, right. Great. That makes sense, yes. And this might be something we can drill into a little later if we have time, but I often forget. You mentioned earlier in the conversation about making sure people are aware of these technologies. Yesterday, I was driving, testing this Mercedes, and it has the touch pad. And one of the things that I don't like about it is sometimes my hand will graze the touch pad and I'm on a different station, you know? It's just easy to swipe back to the station. But yesterday, I was really just listening to this interesting thing about barbecue on America's Test Kitchen and I switched and it was a Cajun music program, which I was really interested in. So I wasn't even aware that, that was on the adjacent channel. We can kind of talk a bit about that in a minute, but I think it's a good segue. And Scott mentioned this earlier about -- with the dashboard getting more and more crowded with content, how are OEMs and Tier 1s looking at the technology moving forward? I know Scott said, which we all know, OEMs are looking at how can you save money. As I mentioned, we're -- I'm seeing less and less CD players -- or almost no CD players in new cars. I'd like to hear a bit about how the OEMs are looking at it because I wouldn't think that a tuner, at least from my perspective, would add weight or complexity or cost. But I'd love to hear how the OEMs and Tier 1s are looking at this technology moving forward.

Yes. Well, it adds all of those, actually. And yes, I mean, that's the reality. I mean the vehicle line owners, whether it's a Mustang or an F-150, honest to goodness, they can tell you down to a washer exactly how much every single piece costs on that vehicle. And if you can go to them and say, here's how we can take x amount out of every single vehicle, I mean, just -- you just even think of the F-150 line, right? I mean #1 selling truck for 42 straight years. If you could save $1 on every single one of those, they're going to try to do it, and that's how manufacturing works. So it is the reality. And as I mentioned earlier, there have been like the BMW 3 Series, the i3s that came out, the EV version that had no AM because the frequency was interrupting. And the -- when you start to get down to that level of manufacturing granularity, the biggest caution that I like to share with the radio industry is, again, you've got people building habits before they get into the vehicle. So nobody's going to discover Spotify in the vehicle. Nobody is discovering Pandora in the vehicle. Nobody discovers Tidal in the vehicle. They're using it before they get in. And then when they get in, they just want their habits with them, right? So the radio industry has been able to say, hey, we get 90% of users every single week and every single month. But I would just caution not to confuse causation and correlation. Because the people who are now becoming old enough to drive over the past 4, 5, 6 years never have a radio -- a traditional broadcast radio in their homes. The last Infinite Dial number that they should -- where they asked that question. I think it was a full 2 out of 3 respondents between the ages of 18 and 34 said they have 0 radios in the home. And so all that means is that if somebody is building their habits, especially as a child, of listening to their favorite content on a streaming service, and they never recognized radio for what it's worth and what it actually can deliver, when they are then old enough to get into a vehicle, they just expect to bring in their habits with them. And now that the connected vehicle is so prevalent and getting bigger, that's very easy for them to do. So the biggest fear for the radio industry from my vantage point is that people just won't see it because they're not going to build the habit in the vehicle and then go off and buy a radio to put in their home. They're listening on their devices and they're bringing that into the vehicle.

Right. Right. That makes sense.

I think that's a -- I mean, it's a good point, obviously, and I think from a radio industry perspective, that's the sort of thing that we need to look at as an opportunity. And what I mean by that is that there are some fantastic radio brands out there that are doing a great job of engaging with younger listeners. Certain types of music stations, and they're doing a great job, not just with live radio but with on demand, catch up and podcasts and what they're doing on other social media platforms. But it's about translating that into a great dashboard experience. And I did want to mention at this point that from a DAB, DAB+ perspective, one of the things that I think is really important is the recent European Electronic Communications Code, the EECC, which effectively requires OEMs to have DAB+ in as standard from the end of this year. Now manufacturers such as Ford actually, Scott, have been leading the way in DAB+ for a long time now. But what it does is that allows -- effectively allows both OEMs and the radio industry to build that hybrid experience with a little bit more certainty. And I think what we're seeing is, as a result of that, a more increased direct engagement between broadcasters and the OEMs so that some of those brands that could bring in some of those younger listeners into the car are trying to understand much more about the dashboard space and work collaboratively and in partnership with them to do so. And that's partly what WorldDAB is about.

Yes. Laurence, you make a good point and it ties into what I wanted to add to this, where as Xperi, we've been working for, I don't know, 15, 20 years to drive down the cost of an HD Radio receiver. We've been making software and hardware innovations with our partners. The European Electronic Communications mandate is actually providing an accelerant to digital radio globally. The reason is we have technology partners like NXP, for example, suppliers into the ecosystem, that have developed a common hardware module that can do both HD Radio and DAB. So in -- collectively, you got Europe and North America, which are roughly about 60% of global car sales. So now you have an opportunity to put one component in cars, get massive economies of scale, reduce the complexity of the manufacturing by building a near global radio product, which will also have the effect of lowering the bill of materials cost. But all of this stuff has to happen because, Scott's absolutely right, the cost of the washer at $0.025 is a meaningful component. And when you're the product owner and you have to manage the overall cost, not only the bill of materials cost, but the integration cost, the production cost, the maintenance cost going forward, if you put something in a vehicle that has a security breach or a high recall or some fault in the software, that comes back to the cost of that platform and the profitability of that platform. So these are things that we're very, very acutely aware to in the work we're doing to evolve radio and serve it with hybrid radio services, where we understand the reliability of what we're putting in the marketplace, not just in terms of content but security and cost effectiveness is really, really critical. So it's really fantastic to see these industries kind of move in kind of lockstep as embracing these new technologies.

Yes. That's a good segue again to -- we have a question from the audience here. Why has there not been a push to include the HD Radio system in all OEM connected technologies?

Well, I can take that. HD Radio, as it was designed, was built on the fundamentals of a market-based transition. So we support analog, digital and then all-digital broadcasting. And the FTC, which is the government agency that oversees the broadcast technologies, actually doesn't have the authority to mandate technology in receiving devices. So we have a slightly different legislative environment between the U.S. and Europe, where the European parliament can do things like this, the European Electronic Communications Code. We can't do that through the regulatory process. It would have to be legislative. So that would actually have to come out from Congress, like it did with the conversion from analog to digital TV, which was a fundamentally different process because there was a big spectrum give-back and the government underwrote a lot of that transition from a hardware component perspective because they were going to be able to auction off the spectrum that they reclaimed from the analog TV space. We don't have those dynamics here because we were migrating an existing frequency to having a more advanced use, and we were doing it in such a way that allowed consumers, broadcasters and auto manufacturers to make the business decision that made sense for them. Now what we've done is driven the conversion costs down dramatically so it's more attractive to all those constituents, and we are seeing the business case rise and the value to the consumers. And we are -- we shipped last year about 10 million vehicles, so about 55% of all new vehicles. And all 44 major brands of car manufacturers support HD Radio, at least as a -- in a trim level, and we have about 100 vehicle models where the technology is standard. So we -- a long answer to a short question, but we have a different regulatory environment. We have different commercial motivations for the people in the ecosystem, and we still have a pretty good application rate and that it continues to grow.

And I think just to -- sorry, Doug, just very briefly, I should mention that there is a read across from what WorldDAB does on DAB+ and HD. And one of the current initiatives that we're working on with the North American Broadcast Association, and some of you here may know the excellent David Layer, who works at the NAB, is to take a set of user experience design guidelines that we put together collaboratively between broadcasters and car manufacturers in the DAB space and apply that to the North American market with HD such that we've got a level of commonality in approach that may help to bring about that kind of scale that the question alluded to. I just wanted to mention that.

Yes. Yes. Sure. Well, I was thinking, too, Joe, and correct me if I'm wrong again on testing vehicles. I love when Toyota does this specifically, and probably others do as well, where you can get connected services like weather and traffic and things like that and other content through HD Radio. I know the question was why -- has there been a push to include HD Radio in all OEM connected technologies. But I think that's a great technology because I personally don't see the sense in paying a subscription to get some of this information from a car company. So I love it when -- and Toyota even gives you the option to download this data either through their in-car module, DCM, they call it, or through HD Radio. So I don't know if that's kind of pertinent to the conversation, but I think that's a good example of how we're getting these other...

Yes. Again because HD Radio is digital, you can push all kinds of information over the pipe. And the question is, what information makes sense for broadcast? Audio is an obvious use case. Graphic weather, again, those are very obvious use cases as well. But I think -- and we've seen those are pretty well established. We see some experimentation going on in Australia with that over DAB. But the interesting thing for broadcast is, are there other applications outside of the car? So we're looking right now at things like smart hot water heaters, smart city infrastructure. How do you deal with peak usage on power grids? There's actually use cases now where you can use radio to signal devices to turn on and keep the water or charge the battery. There's a real concern about power grid management as e-vehicles come online. And all of a sudden, everyone shows up at home at 5:36 o'clock and plugs in their cars. What does that do to the grid? And can you -- so there's a lot of other use cases out there for digital. But I will tell you, in the hybrid world, we're looking at how those services really coexist because you can do a lot with data with very little bandwidth over a connected back channel. Audio is still a bandwidth hog, but some of these data services may, in fact, be better served over IP.

I see. I see. Yes. I was going to ask that about -- that, too, is how can radio participate in leveraging data from connected cars? You sort of touched on that, but I would think that you have this device in the car, digital, that you can have all sort of options. I don't know if that's something that the panelists can speak on from, I don't know, IoT and smart city type of things to different kinds of data that can maybe make a car owner's life easier or to add to capabilities that OEMs can provide.

Go ahead.

Scott?

Yes. I mean there's near term and there's far term, I think. The near term is some of the low-hanging fruit about what -- just the ability to access data in the first place, right? There's a lot of data that's generated by a vehicle and its occupants. And a lot of that, at the most basic level for radio, can be extremely valuable in the advertising world, the ability to know how many people are physically in that vehicle because you know how many seatbelts are buckled. You're able to say we know exactly -- not only do you know where a vehicle is because of GPS, but you can pull the heading and know where they're going. A few things, like even sharing -- again, at the user level, with approval, sharing routes. Insane. The thing that I hear all the time is just-in-time advertising and right amount of time content. So if you know that the person is driving to work, it is typically a 40 to 45-minute drive to work, deliver 40 to 45 minutes' worth of content. Don't get them started in an audio book or don't give them a podcast that's 1 hour and 10 minutes. Those type of things. If you know where they're going, if you know what they're listening to, you can throw up specified and personalized advertising that's more pertinent. And so instead of just a CPM model, now you're in a CTA model and you're actually getting true value. And now you're getting end-to-end clarification of when somebody is doing something, the idea to be able to say, "Okay. We know we served an ad for Home Depot, and we know this person saved it while they were in their vehicle." And then we know that person went to Home Depot, not 20 minutes later but over the weekend. So that kind of attribution. So the immediate -- there's a lot of ways to just jump in and get your feet wet with the data today. And honestly, I think in the long run, to be really involved in data is, to be perfectly honest, going to be readdressing the use of radio spectrum. I think at a much, much higher level than talking about radio itself. At the actual spectrum level, as Joe has touched on and Laurence has touched on, there's now this ability to push large chunks of data through that spectrum. So again, getting away from the term radio and getting into understanding of broadcast spectrum that they own so much of, being able to really use that in a proper way can open up just unbelievable channels for the radio industry.

Yes. It sounds like it. Laurence or Joe, do you have anything to add to that?

Well, I do. I'm not -- I think that what Scott described there, certainly in the near term, I think, is really exciting. And we've been looking at some of those future use cases with Joe and others within WorldDAB around a personalized experience. And I think what we see is the ability to deliver those, but only through partnership. So I think the -- that personalized experience, where you can have that sort of time-bound, journey-based tailored content served up to you, I think, is really, really exciting. The ability to look at what other people are listening to in the car and dive into their content in a way that -- where everyone's listening to their own thing in their own seats. But one of the things that I wanted to touch on just that we're doing, which I think is really important, is around metadata. And we have a -- only -- this is only going to be delivered if the broadcasters are really focused on delivering the right kind of metadata such that their collaboration is going to work and we can deliver those rich experiences. So we're just embarking on a campaign just to raise awareness, the importance of having that automotive, optimized metadata available, that only once we have that is going to help deliver those kind of experiences. And many broadcasters are brilliant at this already, but we've still got a bit of a job to do to bring others up to speed. So it's a campaign that we're embarking on, and it's really important. But I think that personalized experience is -- and when it's linked to data is one of the most exciting opportunities we can exploit.

Yes. I'll definitely echo Laurence and Scott's points there. You may know -- many of you here on the call may know this, but Xperi recently merged with TiVo. We retained the name Xperi, but it's really a combined company with an amazing IP portfolio and a suite of products and services that I'm super excited to have the ability to work with and bring to the broadcast radio industry. One of those assets is probably, I'm a little biased, the best-in-class music metadata catalog in the world. I mean what I have seen from our metadata and how deep it is, I mean, we have -- for an individual piece of music, we can tell you the producer, the backup vocalist, the session players. I mean it goes far beyond what you might think of as traditional metadata. And when I look at that as an asset that we can bring to the broadcast radio industry or radio industry to help them annotate their content to create their personalization, to create the rich user experiences, to do the recommendations, to really get underneath the programming that they're offering and unlock all kinds of potential -- and I mean, and our metadata is used by Spotify and Deezer and Apple. I mean it really is just fantastic stuff. But broadcasters need that. They need the metadata because if you think of all the new digital platforms and where we're going with voice user interfaces now, all of those platforms, Amazon Alexa, Siri, everything else, the reason they work is there's metadata tied to the underlying content. And so broadcast radio is absolutely going to need this, not just at a song level that we can deliver but at a daypart and a show level. You -- Doug, you talk about NPR shows. Segment by segment, they should be building, and thankfully NPR is, rich metadata describing each of those segments in morning edition, each of those segments and all things considered so that you can help with discovery, enable the personalization and also support these voice interfaces that are going to really become critical in the car.

Is this metadata that your company is developing? Or is it third party?

Well, the metadata that we develop, we do in partnership with the record labels. So there's an exchange of data. But what we really do is editorial hand curation, integration with other sources. But then we do share that metadata back. But the end product is ours, retaining ownership to that, but we sublicense things like cover art. And we have Getty Images for artist bios and we have lyrics and things that we don't uniquely own, but the -- what -- the aggregation and the editorial around all that information is our product.

Okay. Yes, I'm very familiar with what Gracenote does and their play in it. Just curious if they were involved. It sounds like they are in some way.

Yes. Gracenote would actually be an alternative. There's 3 major suppliers of music metadata around the world, Gracenote, TiVo and a company called Music Story. And that's a whole another session on the difference between TiVo metadata and Gracenote metadata and Music Story.

Yes. Yes. Yes. I could go really deep on that. So that's a good idea for another webinar. We only have a little over 5 minutes left. We do have another question from the audience. The question is, will AM radio be part of connected technologies?

Well, I can speak for our platform, and the answer is yes. And it's yes with a bit of a caveat. Absolutely, AM HD Radio. Analog AM radio in a hybrid world is a little more challenging to enable because one of the things you need for connected or hybrid radio in the analog domain is an identifier for the frequency. And in the FM world, we have RDS. In HD Radio, we have something called SIS. And in DAB, there's a multiplex identifier. There's a scheme that allows you to identify definitively what audio frequency and programming you're listening to so that you can match it with the accurate and correct IP-delivered metadata or enhanced data or even the stream of that station. With AM analog, there is no equivalent data service in the analog domain so the level of precision for hybrid radio and analog AM is a little challenging. It's something that we've been able to address in our system, but I'd say it's not a universal -- universally given fact that AM can be or will be supported in all hybrid radio platforms.

Okay. I think that covers most of my questions. Well, actually, I have one that -- and you touched on this a bit, but how can radio leverage podcasts and streaming content to increase listenership? I think, Joe, you mentioned earlier about how iHeart is doing some of that and I've sampled it when -- in different vehicles, I would say. And I know Subaru does a great job with their STARLINK system and making a lot of that available and others. So if we can kind of wrap up with that, we got about 3 minutes. Maybe do a quick lightning round if anyone has got anything to add on that.

Well, I'd let Laurence take a first crack at that because they've done a lot on their Radioplayer platform.

Well, I think the first thing that I would say is that, to a certain extent, podcast is radio, right? I mean it's crafted audio with a human connection. So it shares a common definition in terms of what radio is. And what we're seeing is that most of the major broadcasters, certainly the ones that we deal with, are making great on-demand and podcast content alongside live radio and being very clever about how that's presented to provide additional listening sessions for listeners to move on to the podcast content using the same personalities, the same strength of brand and then shifting them back to live radio as well. And I think the challenge is in terms of that sort of personalized experience in the car is to get the user experience right and the user journey right. So just to take an example, when you start to think about voice and accurate search around podcast content in the car, that brings with it its own unique challenges, but it's a massive opportunity. And thinking about how you can provide that sort of tailored stream -- hybrid stream of live radio and podcast content is a challenge. So it's really important for the radio broadcasters. I think it's certainly a growth area, but I think it's really important that those -- the live radio aspect and the on-demand and podcast aspect are linked together in some way, and that will be the next challenge for the dashboard.

Yes. I think the only thing I would add is it's a cross-promotion, cross-platform opportunity. And if we go back to Scott's comment about, what do you call it, the user -- I wrote it down here. They bring their habits into the car. And if broadcasters are able to offer rich content, let's say, on Alexa or on a connected smart TV in the home, they can use that engagement with the listener to build awareness for their programs. And when they get into the car, at least today, drive them to their linear offering. And in the connected car of the future, have that same level of engagement and interaction that they have in the home.

Well, great, guys. We're -- I think we're going to wrap up. We just have a few seconds left. Really appreciate everyone joining us today. Laurence, Joe and Scott, thanks so much for your insights. Thanks for joining us.

Pleasure.

Thanks to the audience for joining us. I wanted to, before we leave, make sure that if you enjoyed this webinar, please join us at TU-Automotive Detroit, ADAS & Autonomous Vehicles, WardsAuto Interiors and the UX Conference on August 18-20 and -- part of our summer Festival of Automotive. And we also have [indiscernible] webinar follow-up. So look forward to seeing everyone there and -- or at least virtually there. So again, thanks to our panelists, thanks to our audience and look forward to engaging with you guys in the future.

Thanks, Doug

Thanks for having us.

Take care.

See you, Doug. See you, Scott.