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Satellite Radio May Fail?
There's no assurance that AM and FM will be revitalized, but the billions put in satellite may not pay off: Let's be clear that this blog isn't a toadying, pro-radio-station outlet. There are good stations and bad, and I generally love free over-the-air music, and am pleased that HD Radio is starting to become a reasonable way to listen to more radio that I already like. (I'm an NPR junky, so I can get three channels instead of one from my local broadcasters.)
But this article in Slate explains why satellite radio broadcasters may be in for it. While AM and FM have decades of investment and an idea of what they need to spend in the future to keep up, satellite broadcasters have spent billions to make hundreds of millions, and have billions in commitments to sports leagues, Howard Stern, and others that has to be redeemed, too.
Slate says that while subscriber numbers do continue to climb, that hasn't led to profits because of the high-cost proposition that satellite broadcasters have. And automakers, which have been one of the key ways in which subscribers have been acquired through activated radios with trial subscriptions in new cars, are less likely to offer these incentives in the future.
XM said it would move from 6m to 9m subscribers in 2006. But Slate notes that the company added just a net of about 1.2m subscribers so far this year (7.2m total) and is now estimating just 8.5m by year's end--which seems hard to reach. In third quarter, they added 286,002 net subscribers even though they had 868,0007 new subscribers, because so many customers canceled subscriptions or didn't sign up for service after trials. (XM and Sirius count subscribers who activate free trials.)
Sirius had 3.3m subscribers by the end of 2005, and recently revised its subscriber numbers down. They think they'll hit 5.9m to 6.1m by the end of the year, down from 6.3m predicted in August. Their third-quarter net subscriptions was 441,101, with an average monthly churn of 2 percent. Two percent means that perhaps 100,000 people pull the plug each month. That kind of churn rate is not at all unusual but it has to be countered by an increased rate of new subscribers.
Both companies' cash reserves are dwindling, with $352m in cash in Sirius' coffers and $1b in debt; XM has $285m in cash.
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Comments
Glenn, I like this site and feed.
Slate's article ignores possibilities with microminiaturized receivers -- portables so far have been clunky. Once a receiver is in a cellie one questions benefits of carrying around thousands of one's own. (I have 9,000 but often prefer to let someone else do the picking and mixing.) At least in urban areas, it'll be possible to get personalized playlists streamed from the millions in the libraries of XM and Sirius, by Wi-Fi, GSM, WiMax, etc. -- satellites not needed. Of course, perhaps some other provider will eat their lunch...
[Editor's note: This is a superb point. Internet radio is a huge competitor to satellite and digital. It's interesting how some FM stations have built worldwide audiences, too. KEXP-FM in Seattle gets about half its donations outside its broadcast listening area--gf]
Posted by: fluxam | December 10, 2006 5:10 PM