How Does iBiquity Stay Afloat?

Many have pooh-poohed the “investigatory action” by a law firm looking into the degraded reception characteristics of HD Radio receivers in certain models of high-end vehicles. The pre-suit, I will admit, is a fishing effort – but then again, some spelunking efforts actually make for justice.
This first quasi-legal shot-across-the-bow to HD Radio is not directed at the originators of the technology – iBiquity itself. But there are two ways in which, should this legal effort gain momentum, could hurt iBiquity badly:
1. Receiver manufacturers, sniffing even the hint of pending litigation about the claims-versus-quality of HD Radio, will take a full pass or further delay adoption of the technology. Why rope yourself, knowingly, into a possible lawsuit in the future?
2. Manufacturers countersue iBiquity for false advertising et cetera. HD Radio’s proprietors have made claims about the technology that simply do not hold up, as this legal probe demonstrates. The fact that there may be enough pissed-off HD Radio listeners down the road will make manufacturers point to the real culprit – the maker of the proprietary HD technology itself – and attempt to shift all blame to iBiquity.
In fact, were these legal-fishermen really looking for good bait, they’d take a hard look at iBiquity itself. Then again, it’s not a fat target, so to speak.
Since 2000, the year of the company’s founding, iBiquity claims to have spent $150 million on research and development dollars. The company was not founded with much direct capital, but rather “sweat equity” from its predecessors (USA Digital Radio and Lucent Digital Radio), as well as stock-transfers from its supporting broadcast companies.
To date, the Corporation for Public Broadcasting has given member-stations approximately $50 million in HD Radio “upgrade” grants (some of them of the matching variety).
iBiquity has also raised somewhere north of $150 million in direct cash investments from a variety of venture capital firms, many of which have given through multiple rounds of funding.
iBiquity claims there are “nearly 2,000” stations broadcasting in HD nationwide. Given that many are a) public radio stations, which negotiated a bulk license-deal through the CPB and; b) stations who took advantage of early-adopter discounts, let’s gratuitously estimate iBiquity’s pried $30 million out of broadcasters through license fees (an estimate of $15,000 per station for 2,000 stations).
iBiquity claims 3 million HD receivers have been sold to date, the per-unit license fee for each is not disclosed. But hell, let’s be generous again and make it the company’s gross revenue $10 per radio for another $30 million in licensing fees generated.
In total, based on research and informed projection (since iBiquity is a private company, and press details of its fiscal status are few), the proprietors have “earned” around $300 million over the last 10 years, with more than half of that spent at the point of or before the company’s founding.
iBiquity’s last reported cash “burn rate” was in excess of $2 million a month; that has likely come down somewhat in recent years.
Just do the math. With 115 employees scattered among three states, the burn rate is still likely to be pretty high. It’s like iBiquity is has a money-tree stashed somewhere.
Here’s where a lawsuit would be an excellent strategy. If a crafty firm went after iBiquity for making a defective product, or for deceptive advertising, the weight of legal action might just be enough to bring this albatross crashing down.
Too bad there’s no money in it.