High-definition digital radio receivers are rolling out at the world's leading retailer. And yes, you should care. This morning's announcement by Wal-Mart (NYSE:WMT) helps vindicate terrestrial radio's nascent effort to matter in the digital age.
More than 1,100 radio stations are broadcasting in digitally crisp HD. More than half of those stations have taken advantage of HD2 multicasts, through which a radio broadcaster can send different signals on the same radio-band frequency. In other words, that 91.7 frequency on your FM dial that currently plays oldies can be used in HD to also send out a heavy-metal or talk-show format.
Wal-Mart's role here is important, because the HD broadcasts would be meaningless if consumers weren't snapping up the appropriate receivers. Companies such as Citadel (NYSE:CDL), Cumulus (NASDAQ:CMLS), and Entercom (NYSE:ETM) are counting on HD radio to win back the 13.6 million subscribers who have switched over to satellite radio.
Here is where the timing of Wal-Mart's push gets interesting. The discounter will be initially stocking a JVC model for cars, which is where the strength of Sirius Satellite Radio (NASDAQ:SIRI) and XM Satellite Radio (NASDAQ:XMSR) can be found. If Wal-Mart's ability to market to the masses is successful, one can imagine thrifty new car buyers opting for an HD receiver instead of paying for their factory-installed satellite-radios and the subscriptions that come with them.
HD radio is not as good as satellite-radio programming. You won't find commercial-free music or the likes of Howard Stern or Oprah Winfrey on terrestrial radio. However, the new platform improves on the aural quality and programming selection of conventional radio. It is also free. And the price tag alone makes it a compelling choice for audio buffs looking to shave $13 a month off their budgets.
So this will be bad for Sirius and XM? Not so fast. Remember that XM and Sirius are in the process of convincing regulatory forces that a merger would not create a monopoly. With Wal-Mart selling HD-capable auto receivers for less than $200 a pop, the satellite stars can now point to the incoming threat of HD radio as the perfect reason to snuggle. Even if HD radio proves to be a legitimate competitor, the cost savings to be realized by the combination of XM and Sirius would be significant.
That JVC unit may be one of the countless SKUs stocked at a Wal-Mart Supercenter near you, but it's more than that, too. If you've got an ear for entertainment, it is the next chapter in one of the more important media stories of the year.
Wal-Mart has been singled out as an Inside Value stock pick. XM is a former recommendation of the Rule Breakers newsletter. Check out either service free for 30 days.
Longtime Fool contributor Rick Munarriz has probably spent more at Wal-Mart's online store than at its offline empire in recent years. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
