The Shine Is Off Sat Radio
February 19, 2009 at 5:06 AM (PT)
Satellite radio began life with advantages, writes BILL VIRGIN in TODAY's SEATTLE POST INTELLIGENCER, with momentum and publicity that traditional broadcast radio could only envy: high-profile deals with former radio mainstays such as HOWARD STERN and major league baseball, the allure of hundreds of channels offering niches and genres no longer heard on the airwaves, a lot of it commercial-free, and access to potentially millions of new customers through agreements with auto manufacturers to put satellite-radio receivers in their vehicles.
But barely seven years after the service's introduction, the industry is down from two independent, publicly traded companies to one company whose stock has been driven down to 16 cents a share and that had to turn to a satellite-TV operator, LIBERTY MEDIA, for a capital infusion to avoid bankruptcy. That followed by less than a year the combination of former satellite radio competitors SIRIUS and XM, also a deal that was not done from a position of strength.
Broadcast radio still has mammoth headaches -- the collapse of advertising revenue, competition from personal music devices and the Internet, declining listenership among younger audiences -- but as it turned out, satellite radio isn't one of them.
Poor Timing On Launch
FISHER Hot AC KPLZ/SEATTLE's KENT PHILLIPS cites three reasons for problems. One is the economy. "What a rotten time to launch a service you have to pay for when you can get it for free," he says. Indeed, XM started in late 2001 (SIRIUS followed shortly thereafter) as the economy was stalling, and the combined companies are now trying to persuade people to pay for their services in the midst of a much worse recession.
Beyond that, "The programming wasn't that much different," he says. "A lot of the '70s and '80s channels were just a repeat of what you get for free." And with budget cuts, some of the early offerings have been cut back.
Finally, "long-range, the Internet will supplant it," PHILLIPS adds. After years of fits and starts and fights over issues such as royalties for music played on Internet stations, listening and advertising support are finally growing. "The numbers are very strong for streaming," he says, and because they are, "now you can monetize it." Furthermore, when cars come equipped with WiFi, WiMax or some similar wireless Internet technology, those streams will be available in-vehicle just as traditional broadcast radio is now, he says.
Although SIRIUS XM says it has 19 million subscribers, SANDUSKY RADIO/SEATTLE GM MARC KAYE says customer figures have been pumped up by free year-long service that buyers of new cars got. The most recent earnings release from SIRIUS XM shows a conversion rate -- how many of those who signed up for paid subscriptions when the free service expired -- at just under 50%.
The huge point of differentiation, he adds, is local content. Listeners don't object to commercials if the programming it pays for compels them to stick around. "Localized radio," KAYE says, "has a lot to offer."