Internet

The Satellite Radio Blues

Why is XM Sirius on the verge of bankruptcy?

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America's only mass-market satellite radio broadcaster nearly went bankrupt last week. Only a last-minute infusion of cash from the cable conglomerate Liberty Media saved XM Sirius from Chapter 11, and there's no guarantee the new investment will be enough for the enterprise to survive. Beloved by listeners and feared by its earthbound competitors, satellite radio offers far more variety than can be found on the AM and FM dials, with hundred of channels offering everything from bluegrass to C-Span to a 24-hour hair metal feed. But that might not be enough to keep the company alive.

Part of the problem, naturally, is the recession. XM Sirius isn't just trying to expand its audience at a time when consumers are spending less. It's bundling its product with new cars at a time when the auto industry is on the verge of collapse. So it's bound to be hurting right now no matter what the long-term radio trends might be.

But there are other factors in play as well, two of which deserve special attention.

The government. In 1997, when the Federal Communications Commission started taking bids for the right to run a satellite radio service, it auctioned off only two licenses. This wasn't because there were just two firms that wanted to try their hands at satellite broadcasting. In addition to the enterprises that eventually became known as XM and Sirius, two more businesses made bids: the Digital Satellite Broadcasting Corporation and Primosphere. But the FCC, playing its role as the zoning board of the ether, decided to allocate only enough space for two companies to compete. So only two groups of people with two business plans were able to try their hands at the medium.

Would another company have succeeded where XM and Sirius are failing? I don't know. The FCC didn't know either when it shut off the spectrum to other entrants. The only way we could know is if those additional broadcasters were allowed to try.

When it became clear that Sirius and XM weren't going to be able to make it on their own, the two firms decided to merge. That gave the government another chance to stand in the way: It took the Federal Trade Commission 13 months to approve the deal, and then the FCC dragged its feet for another four months before blessing the combination. By the time XM and Sirius had permission to marry, the country was seven months into the recession.

The Internet. The government intially approved the idea of licensing satellite radio companies in 1992, five years before it auctioned off the licenses and nine years before the broadcasts began. The technology existed to create such a service even earlier. The delay cost the medium dearly: Satellite radio is a Cable Age technology that didn't launch until the Internet era.

I don't mean it literally runs through cables, of course. I mean it resembles the revolution achieved by cable TV in the '80s much more than the current changes sweeping in via the Web. Satellite radio allows many more media options, but the number of channels it offers is still much smaller than the number of audio sites on the Net. While it increases the number of producers, it does little to break down the boundaries between producer and consumer. And it lets a company with a government franchise make the key editorial decisions. If anything, satellite radio marks a slight step back from cable. If pay TV followed the satellite model, your cable company would own virtually all the channels it offers—and there would be no public access stations in the lineup.

Compared to the broadcasting system that preceded the Cable Age, such a setup meant a sharp rise in consumer choices. Compared to the online world, it seems centralized, inflexible, and closed off to audience participation. The XM and Sirius lineups are wildly diverse when contrasted with the wares on the AM and FM bands, but there's even more available on all those webstreams and podcasts and audioblogs—everything from a Czech country station to an outlet devoted entirely to bellydancing music. Put together, those tiny operations are building a big audience: Internet radio listening has been growing steadily for the last few years, despite some crippling regulatory barriers imposed by the Copyright Office.

And that's not all the disenchanted radio fan can find on the Web. There's also Internet downloading, both legal and illegal, and the ability to play DJ by sharing playlists with your friends. (The iPod now occupies the social space once held by the portable transistor radio.) More than on any other electronic medium, experiences on the Web can be both personalized and shared. Internet access is increasingly portable as well, eroding the last substantial advantage held by traditional (and satellite) commercial broadcasters.

Listeners aren't failing to adopt satellite radio because they prefer AM and FM. After all, terrestrial radio has been suffering too. They're failing to adopt satellite radio because there's even more variety available on their computers. One revolution has outpaced the other.

Managing Editor Jesse Walker is the author of Rebels on the Air: An Alternative History of Radio in America (NYU Press).

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  1. “Jesse Walker describes the barriers regulators have put in the new medium’s path”

    Where? Link please.

  2. From the headline I thought he was going to be on a satellite radio show.

  3. My 2008 Chevy Impala came with XM radio. I was happy to get it. Out here in mid MO, the FM selection is, well let’s call it “limited”. I got 3 months with the car and I bought another year bundling discounts and gift certificates.

    But on the whole I’m disappointed. There are about 100 channels that will slice and dice rock and roll for you. But there’s only three for Classical and three for Jazz. That’s pretty slim pickings. And don’t even get me started on News.

    They have ZERO acceptable news channels. Listening to the audio portion of a news broadcast intended to be viewed on television just pisses me off. Bloomberg is not bad, but it it’s off the air two thirds of the day, and it still has too many commercials.

    And there’s a one in five chance that when I start my car the radio will tune itself to the all advertisements all the time channel.

  4. We wouldn’t need satellite radio had clear channel not completely ruined the FM band.

  5. I’m still hoping against hope that satellite survives. I can’t use internet radio in my car, and terrestrial radio in my area is unlistenable. Sirius destroyed what made the music channels good on XM after the merger, but they’re still better than FM. Also, I can’t live without Ron and Fez, noon to three.

  6. I’m still hoping against hope that satellite survives.

    I am too, but mostly because I am hoping my Sirius shares will somehow claw their way back out of the toilet.

    IMO, one of their big problems is the up-front cost for receivers. Yeah, they are in new (GM) cars, but if you want to get a receiver for your existing car, it will cost plenty. They should adopt the cell phone model and give away cheap receivers in exchange for a commitment to service for a certain length of time. They would get a lot more people willing to give it a try that way.

  7. Not been impressed with the offerings on satellite. Internet radio suits me better, costs as much as the computer I already have.

    I’d like to see it survive. But I need a reason to justify purchase of a satellite radio. That reason does not currently exist.

  8. I am too, but mostly because I am hoping my Sirius shares will somehow claw their way back out of the toilet.

    Ditto…

    Although I do wonder how smart it is for them to be raising rates for a service that really is unnecessary for a huge chunk of their subscribers during an economic downturn.

  9. Chris-

    Agreed. Satellite radio is ideal for me. I love getting ACC hoops and football, as well as the music channels.

  10. Too bad they don’t have a BBC channel.

  11. We wouldn’t need satellite radio had clear channel not completely ruined the FM band.

    You know what ruined FM? Fucking Jurassic Rock. There are like 6 stations I get that play nothing but the same stale garbage that they’ve been playing for 25 years. I don’t want to listen to Journey and Foghat, you fucking imbeciles. I want to hear Kings of Leon and The White Stripes and Queens of the Stone Age.

  12. also New Rock, which ate the stations that used to play good alternative. The ruination of FM doesn’t bother me much, tho, what with the world having mp3s and CD burners.

  13. I would never have argued that there was a point to buying into sattellite radio for home use (DirecTV was already piping out music before XM & Sirius, IIRC), so I don’t really see that as an argument. I always viewed it as a car/motorcycle/mobile medium, and as Berez mentions above, in-car internet isn’t quite there yet. Even using a cell phone as a data modem won’t get you reception everywhere, and I’m not sure that data rates are competitive.

    That limits the market to people who really love having the service in their car (like me), or people who spend lots of time in the car. There just might not be enough of us around. I also share the opinion that XM’s stations went to shit after the merger. I grew up listening to AC/DC, but I really don’t need a frickin’ 24/7 AC/DC channel (or Elvis, or whatever else they’re pumping out now). I’d rather have more jazz, or get back The System, which was my primary fast-driving-on-the-freeway station.

    Cheers,

    D-FENS

  14. also New Rock, which ate the stations that used to play good alternative.

    Compare Radio & Records’ “Rock”, “Active Rock”, “Alternative”, “Triple A”, and “Canadian Rock” charts. IMO, it’s better for “Alternative” when it has less overlap with “Rock”/”Active Rock”. (There is also a separate “Christian Rock” chart, but it’d put me over the link limit.)

    I want to hear Kings of Leon and The White Stripes and Queens of the Stone Age.

    I’d prefer, say, Over It, Yellowcard, and Hawthorne Heights. 😉

  15. I’d prefer, say, Over It, Yellowcard, and Hawthorne Heights. 😉

    Are you home sick from school?

  16. Are you home sick from school?

    If that were the case, I would instead have said something about “My Chem” (i.e., My Chemical Romance).

    I just happen to be particularly into some forms of power pop and pop-punk. (How about some old Lemonheads, Hoodoo Gurus, Blake Babies [covering the Grass Roots, no less], or Plimsouls?)

  17. Where XM and Sirius both went wrong was that they felt they needed to control the entire satellite radio experience and charge subscribers for the privilege. I have to believe that satellite radio could be profitable if it was (a) free to the end consumer; and (b) programmed not by Sirius, but by an array of broadcasting companies.

    If satellite were free and based on an open standard, so that any radio manufacturer could build satellite into their radios, it would become just another band of radio, like AM or FM, albeit a national one. The value of an AM or FM station in a single market can be tens of millions of dollars. Imagine what the value of a single station that covered the entire nation would be? With 150 of these stations to sell, Sirius XM could operate their satellites and collect carrying fees from broadcasters. And it would get them out of the business of programming radio stations and dealing with finicky customers.

  18. Jesse–Why no hate for the NAB? God knows those rent-seeking fucks deserve nothing less than an onslaught of berzerkers for how they have tried to kill satellite radio at every step.

  19. Well, I guess it is now or never to approach them with my all trivia channel idea, prizes would be awarded at a random point every hour. That prize bell would get the trivia geeks slobbering good.

  20. The value of an AM or FM station in a single market can be tens of millions of dollars. Imagine what the value of a single station that covered the entire nation would be? With 150 of these stations to sell, Sirius XM could operate their satellites and collect carrying fees from broadcasters. And it would get them out of the business of programming radio stations and dealing with finicky customers.

    Actually, Clear Channel had some of its terrestrial stations (most notably, L.A.’s KIIS and Nashville’s WSIX) offered via XM, while various other station groups and program producers have, at some point, produced their own channels for either Sirius or XM (especially, as referred to above, when it comes to News and Talk programming).

  21. Why no hate for the NAB? God knows those rent-seeking fucks deserve nothing less than an onslaught of berzerkers for how they have tried to kill satellite radio at every step.

    Ask and ye shall receive:

    Let it be known that 80% of the reason the government fucked so hard with satellite radio is pressure from the protectionist NAB. The other 20% is the usual inertia of central planners. Fie on both.

  22. Too bad they don’t have a BBC channel.

    Yeah.

    If only.

  23. Sirius has not proven that it is a going concern yet. After years of hunting, this dog has not come back with a rabbit yet. Don Imus showed us that when he did not jump to Sirius after leaving MSNBC. To learn more go to http://www.newyorkshockexchange.com

  24. I am not in my car enough to enjoy sat radio. When I was driving truck over the road, the owner had XM in every new truck he bought and it was mighty fine to have.

  25. Who wants to listen to the same damn radio station everywhere they go?

    If I want to listen to the same music all day, every day, I have MP3s.

    Come to think of it, just listening to my MP3s and MiniDisc, I carry around a wider playlist than anyone on satellite radio seems to have.

  26. I’m not sure there was enough emphasis on the iPod in this article, from a car point of view. Before, with CDs and tapes before that, there was a fairly limited number of songs you could play, unless you enjoyed changing tapes a lot. Even cars with a 6 CD changer, while able to hold a couple hours of music, is limited by the number of songs on one disc and thus limits the amount of songs you can randomize at one time. With an iPod hookup, you can have days of music randomizing, and if you want that Jazz “radio station”, voila. And much easier just to change playlists than change CDs. You can even download podcasts ahead of your trip/commute if you crave the talk radio.

    And I agree with the others who’ve mentioned not being in their cars enough… while some do have long commmute times that could make satellite radio worth it, I’m sure the amount of people who do AND are willing to pay for it can’t keep a large business afloat.

  27. I almost exclusively listen to Pandora off my iphone when in the car. I get 3g access when I drive around Tucson, and I still have the music on the ipod when I go out of 3g service. I only listen to FM radio if it’s not worth my time to plug my phone in and choose the application if I’m just going to the store. Satellite radio has awful playlists. You turn on a ‘classic rock’ station and hear all kinds of bullshit that’s anything except classic rock.

  28. KD: I see the Internet and the iPod as part of the same personalization phenomenon. I lumped the iPod under the Internet heading in the article because so much of people’s pod music comes from online.

  29. I drive over 20,000 miles a year for my job and can’t imagine not having satellite radio. You can’t listen to internet radio in your car.

    I agree with the comment that they need better news channels, I will generally still tune in local AM stations if I want a news update. Competition would certainly refine the product.

  30. I got XM when I purchased a new GM car in late 2007. The 13 dollars a month I pay for it is the best money I spend all damn month. When they merged with Sirius, I was a little worried that formats would change for my favorite stations. But Sirius-XMU still plays the best indie, and now I have 24 hours of Little Steven’s Underground Garage. Basically, I drive down the street and cum buckets. No commercials on the stations I listen to, no interruptions, no bullshit. I’m discovering new music all the time. And when I am home, I can listen to it on my computer with the no additional cost online service. Satelite radio is god. In fact, I would pay double for it. My AM/FM choices include Classic Rock, which is good, but not when its the same 15 songs on loop, “Positive Alternative”-read: Christian Rock, and average pop and modern rock shit, that I don’t have the patience for.

    My question is, why does the FCC have anything at all to do with Satelite Radio? Are public airwaves being used in delivery of these services? I’m asking because I honestly don’t understand…

  31. It pains me to say it, having been a huge XM fan, but in the aftermath of the emasculation of XM’s niche-oriented programming by Sirius, many of us have found an alternative that may still prove to have some link to the satellite business.

    slacker.com is a service with 40 company-programmed FREE channels but a potentially infinite list of user-programmed ones. The music is free on the Internet via the web player, and can be cached via USB, WiFi or mobile data network on either your iPhone, blackBerry, or Slacker’s own G1 and G2 handheld players, complete with artist biographies and album reviews.

    You only get 6 skips an hour on the free service and commercials (which are few and far far between), but for about $4 a month those limitations go away, and for about $8 a month, you also get the ability to save songs to the portable.

    There is an exodus of former XM fans who have done a yeoman’s job of recreating the deep playlists on this service. Plus the system allows you to tune your stations along a continuum from popular to fringe music.

    I think these guys have done a great job of thinking in a new way about how to deliver music to people who may not want to take the time to build playlist after playlist. Hence their company name.

  32. I forgot to explain my enigmatic satellite comment. Apparently the Slacker folks have developed a car kit that uses a satellite-delivered data service to refresh the station caches on the players. I will laugh if they’re using SiriusXM’s stream to do it, though I have the feeling that they might be willing to take the money from wherever it comes. They’re already delivering traffic and weather data to cars and airplanes via XM. Bits are bits.

  33. “They’re failing to adopt satellite radio because there’s even more variety available on their computers. ”

    Bull. There is more than enough content on Sirius/XM. The only thing lacking on my radio is enough favorite channel capability.

    Are you kidding? Radio is for drive time, not sitting on your butt in front of a computer.

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