Finally, Something to Listen To
Satellite radio is a cure for the bland sameness of everyday broadcasting -- and it's a real business.
By Jimmy Guterman, Apr 23, 2003
Radio is in the doldrums. The dominant Clear Channel network of stations has enforced a bland sameness coast-to-coast, and the first of the large networks to announce quarterly results this week had bad news. Viacom (VIA) president Mel Karmazin had one word to describe how Infinity, his radio network, was doing: "Disappointing."
Let's go back a generation. The blandness and homogeneity of network television, coupled with an advance in technology, gave cable television an opening. There may be times when it feels like you have 500 channels and none worth watching. But you can't argue with the fact that, despite the mind-numbing shopping channels and endless reruns of Designing Women, programming is more diverse now than it was when only three broadcast networks existed. These days there are hundreds of narrowcast networks, many of which have grabbed thin but lucrative market slices.
Some prognosticators thought Web-based radio would accomplish the same thing, smashing the soporific hegemony of regular radio, but the combination of copyright concerns and relatively low-quality streams has kept that medium from exploding. Plus, any radio medium that doesn't work well in cars is doomed.
That's where Sirius (SIRI) and XM Satellite Radio (XMSR) come in. For two years, they have been battling to solve the problem in a different way -- closer to the cable model. Subscribers pay a monthly fee to receive exclusive programming. Like cable TV, satellite radio offers some interesting advantages over its broadcast rivals: It boasts better reception and a wider menu of offerings -- each hosts roughly 100 channels of familiar (NPR, CNN) and homegrown programming. And with devices like the portable XM Radio, made by General Motors (GM) spinoff Delphi (DPH), it's now easy to bring satellite radio more or less anywhere. (Sirius expects to release a similar portable system midyear.)
It's cool, but is it a business? It sure looks like it. XM, launched nationwide in November 2001, now has 500,000 subscribers paying at least $9.99 a month and projects 1.2 million subscribers by year's end. Sirius has been experiencing some well-publicized financial troubles lately (it was saved by a recent $200 million cash infusion). Sirius charges $12.95 per month (it has no commercials) and expects to reach 300,000 subscribers by year's end.
Regardless of whether XM maintains its lead (likely) or Sirius charges back, that 500,000 number for XM is an excellent harbinger. At a time when many are arguing that the only content that matters is free content, at a time when consumers seem indifferent to new technologies like SACD and DataPlay, at a time when record sales are tanking, here is a new medium so impressive that more than half a million people are already paying for it as an alternative to free radio. It's that good.
What's most heartening is that, so far, the satellite radio purveyors have reached only the early adopters. Radio prices are falling (they're now around $200), and the offerings are expanding. XM is testing its first premium channel; both XM and Sirius have deals with automakers that will make their radios more readily available next year.
If you listen to standard radio, it's easy to wonder whether the format is dead. But just an hour with either satellite service emphasizes that something much better is available -- if you're willing to pay for it. Can 500,000 subscribers be wrong?
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Jimmy Guterman was the editor of Media Grok and its successor, Media Unspun. He has written or edited for more than 90 periodicals (some of which still exist), has written five books (half of which are still in print), and has produced CDs for every major record label (all of which have consolidated). He is the founder and president of a consultancy, the Vineyard Group.
