March 25, 2008
XM, Sirius Deal Approved by Justice Dept.
The FCC still needs to approve the merger by the two satellite radio broadcasters, XM and Sirius: This merger has a few major impacts on terrestrial radio, especially HD Radio broadcasts. First, the merger presumes there's enough competition to make it reasonable to allow the two firms to join. The firms argued that Internet radio and HD Radio and "iPods" were enough competition to provide choices to consumers and keep prices lower. Without them competing with each other, they could focus more on making better, cheaper equipment and providing better programming. (It's true that the two firms' doomed themselves by spending ridiculous sums of money for exclusive sports deals--billions in all--without anything like the revenue curve from those customers to justify it.) The other impact on HD Radio is that the final agreements will likely require certain gimmes to the terrestrial radio world. I'm not sure what those will be yet, but it's likely that XM and Sirius will have to stay out of certain businesses and give certain assurances about their behavior backed by fines. Of course, the biggest irony of "satellite" radio is that so much of it is beamed from ground stations. Yup, that's right. The satellite operators are allowed to rebroadcast on the ground, and they do in cities where their satellite signals would be just barely above the noise threshold.January 1, 2008
iBiquity Suggests Satellite Merger Requires HD Radio Requirement, End to Exclusive Deals
iBiquity has a neat card up its sleeve regarding the potential XM/Sirius satellite radio merger: The developer and licenser of HD Radio technology wants the FCC to require that digital AM/FM be a required part of new satellite radio receivers if the merger is approved. The company has no opinion on whether the merger itself should be approved or not, but they believe a merged entity would drown out HD Radio, if given the chance. They also want an end to exclusive automotive relationships that may have discouraged carmakers from adding HD Radio as an option.
July 3, 2007
Finally, Some Sales Numbers
The Washington Post rounds up the state of HD, and reveals some sales: The HD Digital Radio Alliance, the broadcasters group promoting the new standard (and a rather bland set of not-competitive-in-each-market secondary FM broadcasts) said that about 200,000 HD Radios were sold in 2006 and 1.5m are expected to sell this year. I find that rather hard to believe given cost, availability, and anecdotal reports from retailers and manufacturers. Still, alliance has little reason to inflate this figure, because if they have, other retail sales tracking will eventually reveal that.
HD Radio can't reach a mass audience until it's built into mobile devices and found as a cheap or default feature in factory-installed mid-range cars.
March 23, 2007
Sirius, XM Applaud IBOC Decision
As might be expected, the two satellite giants love the HD Radio decision: Sirius and XM need to demonstrate a strong set of competitive markets to their offerings in order to convince the FCC and other governmental bodies to approve a merger. While castigating HD Radio as a not-even-also-ran in the past, they now must praise it. There are some ownership overlaps, with Clear Channel having investments in both iBiquity and XM.
February 19, 2007
Sirius, XM Merge
The two satellite radio providers can't go it alone: XM and Sirius will merge as "equals," the press release says, with a combined value of $13b and net debt of $1.6b. The FCC chairman Kevin Martin has previously signaled that the existing licenses precluded this sort of merger. However, presented with a fait accompli and the potential for two spectacular bankruptcies, coupled with the robust competition of Internet radio, the future HD Radio challenges, and iPods--the FCC will likely give in, with conditions.
What this merger does is stop the crazy race to the bottom in which both companies bid huge premiums to obtain exclusive programming from the National Football League and Howard Stern. Future deals are much more likely to be made at market rates comparable to those provided on exclusive deals among terrestrial broadcasters.
The two firms combined have $1.5b in revenue (in 2006), and 14m subscribers, and it's unlikely there will be many overlaps between the two companies. It's not clear at all what programming will look like in a combined entity, in that it's possible receivers could be redesigned to handle all XM and all Sirius channels, with overlapping programming reduced, and more regional channels introduced.
December 8, 2006
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.
July 27, 2006
XM Radio Takes another Hit
The folks at XM are suffering: The Wall Street Journal reports on the larger second quarter loss announced yesterday, and a cut in the estimate of new subscribers in future quarters. XM lost $232m (including $105m in charges), while revenue grew to $228m. In the same quarter a year ago, the firm lost nearly $150m on $125m in revenue, so this is actually a much larger set of expenses despite increased revenue.
In early 2006, they forecast 9m subscribers by year's end, but now are looking at 7.7 to 8.2m. They have just crossed 7m paying customers. Apparently, some XM radios may work outside of FCC regulations, and the company has had to remove these radio from retailers.
XM and Sirius are relevant to the HD Radio market, because the word has been that satellite was so far ahead of terrestrial digital radio, that HD would be too little, too late, especially with the over one year of delay in seeing multiple, affordable desktop HD Radio receivers hit the consumer channels.
It would appear that perhaps it just costs too darned much to get paying subscribers for a very expensive to operate satellite service. As HD Radio receivers start appearing in quantities of, say, a million on the market, we'll then see whether XM and Sirius can actively compete against free radio at digital quality. It's going to be interesting. With losses of this scale, XM can't operate indefinitely. Their future should be spelled out by the end of the year.