Feb 25 2007
You may have heard that satellite radio companies XM and Sirius announced a plan to merge on Feb. 19, after striking a 13 billion dollar deal, provided they pass the FCC regulations. The merge will be saving both companies billions of dollars, but the real question is, will it matter? I have yet to this day to understand why these companies, both investing ludicrous amounts of money over the last six years without profit, believe they have ever had, or will have, a fighting chance in the radio industry. These companies together have already spent billions of dollars, and their combined losses for 2006 are expected to be 1.7 billion. Their business plan based their success on gradually making profit, but during that waiting period, technology continues to grow, and their technology will become obsolete. Here are 5 reasons why I believe satellite radio will fail in the future.
Satellite Radio is Expensive
The costs for each company for satellites alone, and then the launching of those satellites, has been over a billion dollars. You don’t have to be a rocket scientist to know that is an expensive way to broadcast, and in turn, subscription fees rise. Also, satellites only last 15-20 years.
Technology Will Soon Change The Radio Industry Forever
Wifi will find its way to the car, and once any station around the world can be accessed, demands will change in the radio industry. One of satellite radios biggest pitches is commercial free radio. That’s great, but you will soon be able to get that service for free. There are stations all over the world that are listener supported, and in general, better radio stations than well let’s say, anything Clear Channel Radio produces. Clear Channel was at a point where almost 25 minutes out of an hour’s worth of broadcasting, were commercials. After getting the criticism they deserved, they cut back on this time slightly, but still, it helps remind the listeners what these station owner’s are really about–making money, not the listener.
Once listeners can access more stations in the car, these big corporations, including XM and Sirius, will have big problems competing, with their current business models. XM has about 170 stations, and Sirius about 80, but the average listener will probably only have several stations that are really compatible with them–with Wifi, people will be able to find stations even more personalized to their needs.
Did Somebody Kill The Radio Star?
Yes. The DJ has been dying a slow painful death for years. Mp3 players give you something that no radio station can offer- the ability to completely control what you are listening to, when you want to be listening to it. Some people enjoy having a personality, and hearing a variety of different music hand selected by another person, but the average folk is perfectly content with listening to their own favorite tunes. Even online radio is changing, with companies like Pandora, making it so you get a personalized selection of music based on your rating habits of other songs–also, you can skip a certain amount of songs per hour, if you don’t like them.
XM and Sirius Are Not Flexible Enough
Or at least, haven’t been. If XM and Sirius want a fighting chance, they are going to have to get “Sirius.” I am not all that impressed with their services, and haven’t seen much creativity on their end. Sirius, trying to define itself as the HBO of radio, picked up Howard Stern for a handsome sum of $500 million dollars over 5 years. He might draw millions of listeners a day, but apparently that’s not going to be enough to save satellite radio, and anyone who is a big enough fan of Stern’s to pay to listen to him would have already taken the leap. XM took on sports coverage such as MLB, college games, and the PGA tour in hopes of getting customers. What’s going to happen when you can access those games via Wifi in your car though? I know there are other talk show hosts, such as Oprah (XM) and Martha Stewart (Sirius), but it is unlikely that big names alone will be able to keep satellite radio floating. If the merger does go through, the company will have to find their niche, and a reason why people should actually go satellite– convincing them will be difficult.
Am I Really Getting What I’m paying for?
Well, let’s put it in perspective. For a $12.95 subscription you are only paying 43 cents a day. Seems like a good service for that kind of money. But then if you look at Rhapsody, which gives you access to millions of songs that you can upload onto select MP3 players for $14.99 a month, you are only paying 7 cents more a day. Some people don’t like the idea of “renting music” because you lose your library if you stop paying the monthly fee, but what do you call radio? At least with Rhapsody, you have access to pretty much any song you’d hear on XM or Sirius radio, and have unlimited access to the songs whenever you choose to listen to them. By the way, I use both Rhapsody and Napster’s music service, and as of right now, I would recommend Rhapsody over Napster, but that’s for another post.