This article has been expanded with more information about the two companies and their corporate histories.
DTS has entered into an agreement to acquire iBiquity Digital Corp. for $172 million.
IBiquity is the developer of HD Radio technology, which is the basis of in-band digital radio transmissions in the United States and in some other countries.
“DTS expects to finance the transaction through a combination of cash on hand and debt,” the company said.
The transaction is expected to close later this year and is subject to closing conditions. iBiquity is a privately held company based in Columbia, Md., with approximately 120 employees. After closing, Bob Struble will continue to lead the HD Radio business for DTS.
In making the announcement, DTS stated, “iBiquity has very successfully driven penetration of HD Radio technology in the North American automotive OEM market. Every one of the 36 major auto brands serving the U.S. market offers HD Radio technology on some of their vehicles, many as standard equipment. The company’s technology was built into approximately 35% of cars sold in the U.S. in 2014, and DTS expects the majority of North American vehicles to come equipped with HD Radio technology over time. The combination is also expected to provide opportunities for additional geographic, service and technology expansion.”
The announcement was made by Jon Kirchner, chairman and CEO of DTS, and Bob Struble, president and CEO of iBiquity. Struble called DTS “a like-minded partner” and said “our employees and customers, who will benefit from the additional scale and enhanced resources of a larger collective company.”
According to a corporate history, DTS was founded in 1990 by entrepreneur/scientist Terry Beard and has its roots in the world of sound for motion pictures, dating to the installation of DTS playback systems in theaters in the days of “Jurassic Park.” Film studios use its multi-channel digital sound. The company got into consumer products with a scalable digital audio architecture called DTS Coherent Acoustics, used in home theater and car audio products, video games and other systems. In 2000, the company began selling DTS hardware and software encoders to content providers. Recording artists, producers and engineers use its multi-channel sound technology.
In 2012, DTS acquired SRS Labs, which makes audio processing and enhancement, as RW reported then. Corporate headquarters are in Calabasas, Calif. And licensing operations in Limerick, Ireland.
IBiquity Digital has its roots in efforts by commercial U.S. broadcasters to explore digital in the late 1980s and early 1990s. CBS, Gannett, and Westinghouse formed USA Digital Radio in 1991; it used an in-band on-channel (IBOC) approach, which was marketed as a way for radio stations to move toward digital on their existing spectrum and on their own timeframe via a “hybrid” approach in which digital and analog signals coexist (until such time as the industry might choose to turn off analog, if ever).
USADR became a separate company in 1998, with backing from 15 broadcast groups; according to a company history, two years later it secured $40 million in additional funding from strategic partners and venture capital firms (see timetable of its early corporate development, right, in an image from the iBiquity website). It later merged with Lucent Digital Radio in 2000, forming iBiquity Digital Corp.
Its HD Radio technology has been controversial within radio over the years, and most of its penetration has been in the FM dial, with only partial uptake among U.S. broadcasters; the AM efforts were sidetracked by interference problems, especially at night. But the technology also has brought multicast channels to FM broadcasters and provided a data capacity that backers say adds to the radio platform's appeal. In recent years, iBiquity has focused its marketing efforts on growing the number of vehicles that have HD Radio receivers, seeking to make the technology as standard as possible in the car environment.
here is a reason why DTS bought IBiquity
According to DTS, its pending acquisition of iBiquity Digital is prompted by the strength of the HD Radio market and what the buyer sees as significant opportunities to expand its audio offerings into the automotive, home and mobile environments.
“DTS has long been at the forefront of the highest quality audio technology, and we saw a similar spirit at iBiquity, [where we saw] an opportunity to revolutionize traditional AM/FM broadcasting and capitalize on broadcast radio’s ongoing digital upgrade,” said Jon Kirchner, right, chairman and CEO of DTS, during a morning conference call. DTS grew out of the cinema sound market, and its current offerings include surround-sound codecs and implementations in consumer gear like Blu-ray players and car audio.
“This transaction extends our reach into the global and growing digital radio broadcast market. We believe broadcast radio has interesting opportunities for expansion in home and mobile markets.”
IBiquity’s penetration of HD Radio technology in the North American automotive market was a compelling factor in the $172 million acquisition, DTS said. On the station side, about a fifth of licensed full-power FM stations have adopted HD Radio, but iBiquity estimates that those account for about three-quarters of U.S. listening, and says it has been making inroads in smaller-market stations as well. Meanwhile each of the 36 major auto brands serving the U.S. market is offering HD Radio on some of their vehicles, and DTS expects the majority of North American vehicles to be equipped over time.
The company also pointed to the power of traditional over-the-air broadcast to provide compelling content and entertainment to listeners. Citing increasing costs that consumers face in using broadband for entertainment, “free over-the-air broadcast radio — upgraded to digital with HD Radio — has an important place in the range of options,” said Kirchner. “This was a natural fit for us,” he said.
Bob Struble, president/CEO of iBiquity, echoed that theme. “I view this as a strong vote of confidence for terrestrial AM and FM broadcasting,” he told Radio World during a phone interview. DTS, he said, is “a state-of-the-art tech company that has looked long and hard at the business we’re developing, one that is based solely on AM and FM radio, and come to the conclusion we’re a valuable asset that they want to have as part of their company.”