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Why Radio is Afraid of Sirius and XM Print E-mail
Wednesday, 30 June 2004
Satellite radio is quickly becoming the hot feature in new cars and many audio/video components. With about 1,000,000 subscribers for Sirius and over 2,000,000 for XM, there is no question that consumers are starting to vote with their wallets, proving they will pay a nominal fee for musical entertainment that is much better than what traditional radio companies are broadcasting on your local FM and AM stations. But it is at the local broadcasting level, the traditional turf of AM and FM, where the two satellite players may be headed despite their denials and current FCC regulations prohibiting such competition.

Both satellite players use terrestrial repeaters (similar to cell phone towers) in major cities to bolster reception of their signals. A spokesperson for Sirius tells AudioRevolution.com that Sirius has terrestrial repeaters positioned on top of buildings, including the McGraw Hill building in Manhattan and on top of a medical building near the 405 freeway in West Los Angeles. In the case of Sirius, these repeaters reach five to 10 miles in range and help broadcast Sirius’ signal into the hard-to-reach canyons of Los Angeles, as well as into the cement super-structures in New York.

Some repeaters have the potential of more power – a lot more power. Several years ago, reports from Inside Radio, a leading radio industry trade publication, said that some of XM’s terrestrial broadcast capabilities in cities like Boston are as much as 50,000 watts, meaning they could compete with the strongest FM stations and have exponentially more power than a smaller repeater. Thus the concern that has the radio industry up in arms. Under this scenario, the satellite providers are just an FCC ruling away from being competition for the local ad dollar. This would be catastrophic for terrestrial radio, which depends largely on local, not national, revenue to make its profit.

Battles have already been fought in the trenches. WVOX/WRTN New York owner William O’Shaughnessy has already issued the call to fight. He has appeared before Westchester County zoning boards to argue against allowing such repeaters to exist – all this in defense of the local operator – which could be another victim if satellite broadcasters are someday allowed to fire up their repeaters.

No less than the radio trade organization NAB was an early accuser of satellite radio’s intentions. Powerful chairman Edward O. Fritts came right out and said it – satellite radio wants to get into the local radio business. While XM and Sirius denied it, there is a general feeling among radio broadcasters that they would not be surprised to see their satellite competitors try to win regulatory changes that would allow such competition.

Sirius says it is not in its business model to get into the regional broadcasting business and that it is more focused on streaming video for backseat entertainment systems, as well as music in surround sound. However, with both satellite radio companies able to go to Wall Street to easily raise capital, one could see how XM or Sirius might ultimately get interested in buying up a terrestrial station in a major market or two in order to broadcast their entire lineup of stations, possibly on a more regional basis. Sirius says that its radios, at this point, wouldn’t know to look for a regional feed over the national satellite feed, a technical problem that likely has a feasible solution.

What traditional radio does best in the world of advertising is reach customers locally and regionally. The satellite providers are starting to legally provide traffic for major cities, which possibly points towards their interest in providing more local content for their users. The traffic move could also simply be a way to keep their new and existing subscribers from having to flip-flop back to terrestrial radio to get critical traffic information. This is not dissimilar to TV satellite operators. When satellite television was able to provide local channels, new subscribers signed up by the millions. The satellite music companies would likely to see the same kind of bump. They also could sneak in local ads that could potentially generate hundreds of millions of dollars of revenue.

Terrestrial radio mega-companies like Clear Channel and Viacom are likely to fight satellite’s move to regional broadcasting with every ounce of political juice they have. After spending on FM stations in the late 1990s like a wealthy couple bidding on an ocean view/ new construction house in Manhattan Beach, the radio groups have been unwilling or unable to provide compelling content to keep their existing listeners tuned in. In order to cut costs, many stations have tried to play “voice-tracked” content feeds from other cities, which critics say make the stations sound nearly identical in every city. That’s identically sterile and boring.

One thing is for sure, satellite radio companies – especially Sirius – know how to program a format that sounds great when traditional radio is easily 10 to 15 years away from its last successful FM format to lure in new listeners. No matter if you are listening to the radio in the car, streaming Internet radio or pulling down tunes from the bird – listeners still want to hear great entertainment. Right now, on that front, satellite is kicking radio’s ass.

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