Terrestrial Radio’s Pains Create Opportunity. Will Sirius XM Seize It?
It is no secret that terrestrial radio is suffering. Across the board, ad revenues are down to such an extent that even huge companies like Clear Channel are feeling the pain. Powerhouse radio stations like WBCN (credited with launching bands like U2 and the Police in the U.S.) in Boston are going silent. With all of these changes opportunity is created. Readers here will come to an immediate conclusion that Sirius XM would be the biggest benefactor, but that may be a bit premature.
Yes, Sirius XM offers compelling content, and yes, the satellite radio provider will fill a need, but the audio entertainment landscape is full of would be competitors that give consumers several things to consider. Taking a look at what is happening in Boston can give a good idea of the shuffle that may happen in many markets. Consider this:
– Boston Rock Staple WBCN goes Silent on 104.1 FM, but “relaunches” as an HD2 channel on HD Radio.
– CBS Radio takes their popular Mix 98.5 slot on the FM dial and changes it into a sports station called “The Hub”. This channel will compete head to head with WEEI 850 AM, which has been a monster of a station for years in Boston.
– CBS moves their Mix station to the 104.1 slot on the FM dial.
– WBCN launches a campaign that basically states the rumors of their demise were unfounded, and that they are very much alive on 98.5 HD2. They give away an HD radio every hour for four straight days to promote the changes.
– Free Form BCN, a channel programmed by WBCN’s original programmer gets exposure on HD and shows that HD radio can promise more depth in radio.
What has transpired in Boston is a rebirth of terrestrial radio on HD, and the thought process behind this campaign is quite impressive. CBS Radio has figured out a way to make HD Radio relevant in Boston, and whether by design or by accident, it may be something that in turn gets replicated in top markets across the country. WBCN and Mix were two highly popular FM stations in Boston. In one swoop, the changes have had fans experimenting with the radio dial, and checking out websites that parade an impressive HD line-up.
Satellite radio can respond, but it would take a substantial campaign to counter moves such as those that have transpired in Boston. Terrestrial radio shuffled, offered a solution, and was able to show off the benefits of HD radio in short order. The downside for terrestrial is that HD radio receivers are few and far between, but that dynamic could change at any time. Satellite radio’s response, should they decide to do it, needs to concentrate on the commercial free aspect of the service, and that they offer well over 100 channels of compelling content that covers every aspect of genres, news, and sports. Some well placed billboard and localized television campaigns could serve Sirius XM well to throw a wrinkle into the transitions of terrestrial and HD radio.
Position – Long Sirius XM, No Position CBS
The music is no longer compelling at all. The playlists are shallow and boring. I continue to pay XM every month bit spend more and more time with my iPod on shuffle. I could care less about all of the talk channels and do listen to sports still, but music is no longer a reason to subscribe to SiriusXM.
I have been an XM subscriber since 2005 and a dual sub since 2006 but am contemplating a serious cut back in what I have. How does Sirius plan to keep me? It is always easier to keep the customer that you have than to get a new one to sign up.
Interesting article. I had no idea that HD radio was threatening to turn all Boston Sat. radio customers into HD radio lovers. Wheres your numbers? Not famililar with the Boston market, but everyone can rest assured all the radio in Arizona is in no threat to get better. Still never seen an HD radio, never seen anyone whos owned an HD radio, and have never ever heard it mentioned in a conversation for 35 years now and running.
So your saying because stations on the brink of BK, changed formats out of necessity, and are now generating huge profits?
I mentioned nothing about profits, and I am not saying existing sat customers will drop sirius xm to go grab HD. Where on earth did you come up with that?
What I am saying is that there was a shuffle in the deck in Boston on terrestrial radio, and they have used it to market HD. The move was smart. There was a “problem” and they have offered consumers a “solution”
Sat radio could make a grab during this “transition”, but as yet has not. If you don’t market to the consumers you wont benefit from the confusion that was created.
CBS handled this quite well, and exposed a lot of people to HD in Boston. I am not saying people will run out and buy an HD radio, but if they want their favorite WBCN content, it is a choice they may make.
Since television replaced radio (and newspapers) as the dominant source of information, radio has been about the automobile.
Who were the dominant radio personalities? The morning and evening commute djs.
Even before sat. radio came along, the terr. radio field was too crowded. I knew a fellow who owned a half dozen radio stations in the 90s. He once told me the only way he made any money in radio was when he sold a station to one of the national media companies.
Terrestial radio is going to continue to shrink. There just is not enough ad. revenue out there to support the number of stations on the AM & FM bands. Ask anybody who has sold radio time.
I’m in the Reno/Sparks/Carson City media market. In Reno alone, there were 25 stations, now 18, and that’s still too many.
On the subject of HD radio, what it has to offer is really for home listening. As someone who has traveled for a living for far too long, the idea of paying for high quality sound in a vehicle, amongst 18 wheelers, cars with bad mufflers, and just an overwhelming number of cars on freways, is downright laughable. Add to that the limited range of the signal and it’s not for anyone who travels, or commutes a long distance.
Having said all that, terr. radio, am, fm, or HD, will still be there but the economics, particularly of this point in time, are going to make it much smaller.
A big question is is how far will CBS, NBC, Clear Channel, et al, go to rehab this old horse, called terrestial radio?
ABC got smart and sold their radio business a few year ago.
The other counter in Boston is radio stations offering ad free radio in the morning hours. This is the highest # of listeners and is direct competition to sat rad.
CBS handled it well? How do you know that, they can shuffle and reshuffle all night long but the reason for the shuffling in the first place was that they were losing money. Until they prove the reshuffle has done anything for their bottom line this is all just guess work.
Rich…..
Think about it this way.
WBCN was the dominating Rock station. Mix 98.5 was the dominating pop station. WEEI is the dominating sports station.
They shifted their rock to HD, shifted their mix channel up the dial, and offer up a sports radio station to compete with WEEI.
Rock fans will seek out a solution. That solution might be HD. Mix fans will move up the dial AFTER being exposed to a new sports radio station.
The point here is that they are taking action, and this action gets consumers out of their comfort zone and thinking about new things.
I understand radio is losing money. ALL radio is losing money (including satellite).
Sirius XM fans seem overly sensetive to any other medium, but the fact is that other mediums not only exist, but have large audiences. From a business standpoint what CBS did makes a lot of sense if you think about it.
I am not saying that the content is any better for you or me, but for many, the content offered on terrestrial radio is enough. Satellite needs to figure out how to convince those listeners that they are an inexpensive alternative that has many benefits that make the cost worth while.
You mention the bottom line. I did not go into the bottom line or profits. I was writing about the creation of an issue that presents opportunity to shift to new things. Terrestrial radio made moves in Boston to accomplishes that. From that perspective, it is a smart move. Only time will tell if the move translates into dollars.
Picture a powerful terrestrial radio station in your market and what happens to those listeners if there is a change.
I am not overly sensitive myself, I actually never purchased the product, (though I did check out the website and it does look interesting), I am a stock holder though.
That aside, I see where you are coming from, thanks for the explanation. I guess the shuffle could work or not but not be a bad idea either way.
Tyler, after reading your article I really think if this is a threat to Sirius Xm they should fight fire w/ fire. Terr. Radio is going to do what they can to survive and this is a case of sink or swim. So they are being innovative and give them the credit they deserve for trying. But it seems their backs are somewhat against the wall and in a weakened state. So again I bring up the idle Sat. Radio radio situation that could be used to strike while their on their knees. Bringing these 15 to 20 million idle radios into direct competition w/ ter. radio is something that should be strongly considered. As you have made it clear to me that adv. dollars are weak at best and Sirius Xm has air space they still need to fill which I understand. But 1st of all we are talking nationwide coverage and even if the adv. dollars Sirius Xm can generate hardly covers the cost of this format I still think it is viable and here is my take. Sat. Radio is not a simple, easy to understand product (ask the general public). So what you do is offer a version of Sat. Radio that is 1st of all limited in content and has sponsorships. You then add promo spots educating the listner on what all Sat. radio really can offer for the price of a basic subscription. Now what you are also doing is putting a hurt on Terr. radio due to the new direct competition on the “FREE” side of radio. Talk to people on the streets and you know as well as I do that most people do not have a very good grip on what Sat. Radio really has to offer. Sirius iserts plugs that lets listners know about the other channels that are offered,why, because they must feel a need to educate their own existing subs! “OUT of SITE OUT of MIND”.Yes, details would have to be worked out to pass the FCC bar. But if worse came to worse you charge a buck a year or some other creative way to get past that issue. Think about your Am/Fm dial, how many diff. formats are offered on talk & music? Set up the Free format w/ 12 channels or so. Know if we are worried about the existing sub getting upset that Sirius Xm is commercial free ,it still is, to the listener that pays for his or her subscription. So if some one so irrational can’t understand that and drops thier sub. then they truly are irrational. To boast that your listeners will possibly double will not only make Sirius Xm a more house hold brand, but strengthens the company overall image & impact.
I disagree with adding in free sat channels. Sirius is on the brink of proving that their model works. Just like Cable TV, Sirius will prove that its pay model is the best way to provide the best content and best experience to millions of customers (ALL OVER THE WORLD).
I think a free model would backfire, and it puts Sat radio in the same place that free radio is in today.
I think we will see a turn around in the very near future. Sat radio is reaching critical mass in cars, when customers will not have the expense of buying the radio invially and getting it installed. Also, with many of the finacial problems addressed, I think they will start to market again.
I see nothing but upside for Sat Radio right now.
Your right, Sat radio needs to have two versions. One free with commercials and exclude the premium content. One with premium content(Howard, NFL, NBA,etc.) and no commercials. Terr Radio is on its knees and if Mel had any sense he would enact that business plan. The add dollars for radio is 19.8 billion dollars. Oh and the Sat radio infrastructure is already built. No static and the channels are always the same no matter where you go. Also, I heard that Sirius/XM has a patent that would allow them to regionalize their commercials. HD radio is a long ways off and as far as I know their penetration rate in new cars is quite low. I like that part about you added about a dollar a year, I was thinking the same. In addition, you would gain valuable consumer information when they sign up. Oh did I already say 19.4 billion dollars.
Oh-oh ‘Cheerleaders’, the stock pps is moving in the ‘WRONG’ direction today !!!
😉
I agree with Tyler on this one. I never beleived that the merger between Sirius and XM would create a monopoly. Sirius will need to work hard to maintain and grow its market share, which is very small right now. They must compete with these types of moves to capture more share.
This is one area where a small investment would go a long way. Think about how pissed people were when Sirius and XM consolidated their line up and made changes! The same thing is happening in Boston right now and there is most likely a large percentage of frustrated and upset customer (What! You’re telling me I have to buy I new HD radio to keep listening?…Forget that, I’ll just activate the Sat radio that’s already in my car).
I think Billboard in large cities would be awsome….I’d focus on those who have radios already in their card, but have them inactive.
JamesPS, understand your concerns to activate idle radios to a degree. I don’t think your’e watering down the product. Yes Sirius Xm is making headway, but the product can be marketed internally at low cost by using the format( or something on the order of what was in my reply to Tyler). Also the I-phone appl. should be free, what Sirius should be after is more subs. not adding cost to existing subs. the I-phone appl. is a way to get people on board w/o out buying extra equipment and giving existing customers another way to access their content. We the people that follow the stock and are subs know the product, but we take for granted that other people outside the box know of it too. They do not.
I hear you on the iPhone App. I’m totally pissed with DirecTV right now because they are nickel and diming me to death. 5 bucks for each receiver. 5 bucks for DVR service. 10 bucks for some HD channels. thats $25 and it doesn’t even include any channels.
I agree that you should be able to get two devices for the initial price. I think they run into problems when people sign up their friends on their account. If I could have unlimited access to the Internet App. What stops me from sharing with everyone.
Someone needs to WHISPER THIS IN MEL’S EAR!!!
Terrestrial radio is on life support because it is dull, repetitive, and exceedingly narrow in scope. The localized nature of it — the basis for its entire advertising model — is particularly shallow and uninformative. The same local “information” can be gleaned from any number of web sites.
“Radio,” as it is now, encompasses much more than the traditional “broadcast” model. Not only do I pay for Sirius XM (including the $3 a month iPhone premium subscription), but I also decided to pay for premium subscriptions to Slacker, Live365 and Last.fm. With an iPhone or similar device, each of these is accessible in the car and, contrary to one of the above postings, listenable even on the freeway. This is all about choices, and lots of them, which terrestrial radio simply has never offered because of a business model built on advertising and the corresponding narrowcasting that comes with it.
I do not expect that many people are willing to pay for each of the subscriptions that I now have, but a basic Sirius XM subscription is the price of, say, four or five lattes a month. That is not a whole lot of dough, particularly given the lack of advertising and the panoply of choices offered. Advertising thus is not the way to go on Sirius XM. That is the problem with terrestrial radio. It leads to niche programming, narrow formatting in a manner delivers (supposedly) the most ears to the advertisers and the corresponding stilting of content. The pay model has worked for cable. It will work for Sirius XM, as well.
I think people are missing my point. I’m saying that the idle Sat Radios could be used as a marketing tool. I’m talking 2 completely different formats from the same company. When I’m turning on the idle radios for free, they would be a small group of channels to go head to head w/ Ter. radio. They would have some type of sponsorship or commercials and half of which would be promoting Sirius Xm’s content (that will not be received as part of this free model) to entice the listener to become a sub. ( paying) customer. Also Sirius would be putting a hurt on Ter. radio because it is now in direct competition w/ their commercial based format (which would make Clear Channel & the rest of the NAB rat pack crap their them selves). I’M NOT PROPOSING ANY CHANGES W/ THE CURRENT PAYING SUBSCRIBER WHAT SO EVER!!! As Sirius Xm’s penetration rate improves so will the number of idle radios (it’s just the way the biz model is set up) and it needs to be dealt with. What will Sirius do when they have 40 million subs and 60 million idle radios? There has to be some common sense brought into this model! I would have to believe it would be a shock to everyone including Wall Street if this were announced. But after digesting what this really is all about I truly believe this would send the stock to new levels. It would make this company more dynamic and main stream. It would become the 800 pound Gorilla in the audio entertainment room. It’s time has to come, it’s just a matter of when.
SirusXM will not ignore millions of sat radios in cars waiting to be turned on. So they are activated with national commercials and SiriusXM starts collecting the advertising dollars.
They can add drive time DJ’s to the free commercial service if they desire.
It just makes sense.
imho
vaporgold
I am with you. 19.4 billion in add revenue and you take down terr radio. I actually wrote siriusbuzz two weeks ago with your exact plan. I suggested they research it and write an article. It’s so easy to see, I hope Mel sees it.
As stated already this is an interesting article. I have not read about the ultimate audio solution which I recently invested in ($130) which is an all in one Radio Kit for your vehicle. I recently purchased a JVC receiver for my Tacoma truck and installed it myself. It comes with HD radio, USB, aux input and Blue tooth and SATRAD hookups. I have a SAT receiver that I use thru the FM which satisfies my Sirius XM taste. I hook up my Ipod when I want to listen to certain music via my own playlists and when they start having HD stations worth listening to I have that ready to go in the receiver. Since HD radios are not common I expect that more and more folks may purchase and install the ‘all in one unit’ as I did. Keep in mind, the auto industry will continue to have SATRAD and most likely HD radios installed from the factory which will continue to give consumers many options to choose from especially if it comes with an aux input. Just like cable TV have folks that will pay to subscribe to HBO, Showtime, Cinemax, NFL package (provide you have DirecTV) and the NFL network based on their tastes the audio entertainment industry is like TV with the exception that SATRAD is the only pay for content service. That content is not for everyone just like HBO, Cinemax, etc is not for everyone – you get what you pay for if that is in fact what you want.
Long Sirius
why pay for satellite and why pay for an HD receiver when you can get similar if not better content (music, sports, talk) via streaming? much cheaper – in fact, you already own the computer or smart phone (or your employer is providing it).