Saturday, September 13, 2008

Satellite Radio -- does it have a future?

Dumb question, that. Of course, everything has a future, even if it consists of ceasing to exist. That still qualifies as a "future." But I don't really think a new, combined Sirius/XM is doomed to failure, as many terrestrial broadcasting wags suggest. Latest? INSIDE RADIO gushing about the stock price sinking below a buck:

Sirius drops below $1 as subscriber growth evaporates. Selling a pay radio service is an uphill battle in a decent economy, but when things get tough as they are now it’s an even steeper climb. That’s one reason Sirius XM Radio says it will add only two million subscribers next year, bringing it to 21.5 million users — it’s smallest increase ever. Its stock closed at 98 cents yesterday — its lowest level in more than five years.

I can see a number of obvious reasons for pessimism about the satellite service's future.

  1. INSIDE RADIO is probably correct about economy worries preventing some folks from buying a radio and contracting for a subscription. Poor new-car sales is probably a bigger factor. That tail wags the dog of subscription radio.

  2. Many savvy potential subscribers are probably waiting for the next shoe to drop. Will the combined entity offer channels a la carte so subscribers can pick Channel 18 Spectrum and Howard Stern from Sirius and whatever sports franchises they want from XM? And will those who have already signed up have the same privilege? As an existing DirecTV customer, I did not have the option of upgrading to a free HD receiver/DVR, like someone coming new to the service does.

  3. Maybe most importantly, though, is the quality of the offerings. Most music channels are a jukebox. Subscribers quickly tire of hearing song after song after song with no entertainment value...or even someone telling us on many channels who the artist is or why we should care...between those songs. Listeners still want warmth, companionship, and a reason to listen besides song after song after song, even if those songs are not necessarily available on terrestrial radio. An iPod full of my favorite music is far cheaper and more portable than an XM/Sirius receiver and antenna, and it sounds just as good if not better.

So, we'll see what the future holds for satellite radio. Some suggest they will begin offering some content free. I already get a bunch of XM channels on DirecTV--not really free since I pay for the service, but they are there at no additional charge.

They may start making Howard Stern and other top content available on terrestrial radio for an hour or two a day, or on a one-day-delay basis. They'll charge stations for the privilege of carrying that content or make advertisers pay for the additional audience or both. (Note that a huge part of Howard's compensation is Sirius stock and he has to be miffed at where its value has gone. I'd imagine he would be amenable to doing whatever it takes to get the arrow pointed back upward, even if he had to clean up his act a bit for a couple of hours a day. Some even maintain he has lost his edge, even though he can say or do about anything he wants on the bird, because he can't tweak his nose at the FCC anymore.)

Just like regular over-the-air broadcasters, the sat guys will one day have to realize that they are purveyors of content, not satellite receivers and little, bitty dishes. How they deliver that content--via satellite, from a tower on a hill, over cell phones and PDAs, by strands of wire, or wrapped in butcher paper like a fresh halibut steak--is immaterial. People will still pay for content that inspires, warms, entertains, informs, or makes us laugh. And we'll pay with a check each month or by putting up with commercials. So long as a content provider can get enough people to do either (or both), the future will be bright for that entity.

Don Keith

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