Has Sirius XM Become Like Clear Channel – Can They Become Better?
When satellite radio was Sirius and XM, consumers flocked to it. Those that began to despise Clear Channels homogenized model had a new solution, and were able to hear a variety and depth in music that had been missing for years. Sirius XM became of breath of fresh air and consumers who subscribed became passionate fans. They were hearing not only the popular music, but the second third, and sometimes fourth tier of music that simply was not getting airplay elsewhere.
It was a delicate balance. The satellite radio companies needed to play enough popular music to satisfy the masses, but also enough of those tracks from off the beaten path to differentiate themselves and provide a compelling reason for people to tune in. Of the two satellite radio companies at the time, XM seemed to dig deeper into their music library than Sirius, which went a bit more mainstream. One defense for the company is that with each song they play, a royalty must be paid. It makes it hard to cater to a specific audience because the cost/benefit analysis simply does not support it. The least listened to channels indeed have passionate fans, but the numbers do not justify the costs.
The challenge these companies began to face was getting to profitability. Playing deeper song lists, while impressive and appreciated, was not bringing in subscribers at a pace that would prove out the business model. In addition, the competitive forces of the satellite radio landscape had the companies spending large amounts of money on non-music content like the NFL, Major League Baseball, Oprah Winfrey, and Howard Stern. These programming costs hit the bottom line, and certain sacrifices began to occur. We saw some channels disappear from the line-up of both companies much to the chagrin of the passionate fans that were so appreciative of the breadth of music that was available. Less mainstream genres like jazz, blues, and punk suffered, but also the deeper tracks that were enjoyed on other more mainstream channels suffered as well.
What was happening quietly, and what passionate fans hated to admit, was that Sirius and XM were becoming more and more homogenized just like the Clear Channel satellite radio fans loved to hate. Sure there were still no commercials on Sirius and XM, but those gems in the playlists and on the channel line-up were vanishing.
The costs of satellite radio, and the intense competition between Sirius and XM took their toll. The company’s were existing, but in the opinion of music aficionados, they were a shadow of what they once were, and headed in the wrong direction.
Then the merger was announced, and a ray of hope began to glimmer for satellite radio’s most passionate fans. With a merger happening, perhaps the company could get back to its roots and once again be the music content differentiators. Unfortunately the merger process took much longer than anticipated with the costs and impact of a lengthy merger nearly bankrupting the company. Deeper playlists and diverse content would have to wait in favor of cost controls and new negotiations.
In effect what we had over the past two or three years was a satellite radio service that seemed to be dying from the depth and variety perspective and getting on its feet from a business perspective. With Satellite Radio 2.0, there is serious potential that Sirius XM can veer back onto a music programming path that will make those passionate disappointed fans happy again.
Mel Karmazin announced that satellite radio 2.0 can potentially bring an additional 40 to 50 channels into the line-up. This gives the company room to add additional channels that can go deeper in playlists. It also gives them potential to bring back some of those long lost channels that people loved. In addition, a modest price increase may be in the cards. This would solve the cost/benefit issue, and perhaps allow the company to shine once again.
Karmazin oft speaks of the massive amounts of revenue that Sirius XM will be bringing in. While investors love to see that number grow, there is a consideration that needs to be made. I feel that investing some of that revenue into bringing back the original reasons for satellite radio is prudent, and will not hurt the bottom line in a meaningful way.
We oft hear the term that content is king. Long ago that saying applied to the music programming as well as the outstanding sports, talk, news, and sports line-up. Over the past few years the content advantage has shifted away from music and simply to the non-music side of the business. The competitive landscape has had an impact on the music side with competitors giving passionate fans access to the deeper music that Sirius XM no longer delivers (or at least less so). What happens when these competitors get into talk, sports, news, and more and they have some of the same content Sirius XM has?
With Satellite Radio 2.0 Sirius XM can set the bar like never before. They can deliver the functionality, depth, and variety that can not be matched. They can once again stand tall and proudly say content is king and have that term refer to their entire suite of channels rather than simply the content other do not have.
The first question at the beginning of this article was whether or not Sirius XM had become like Clear Channel. The answer, from a music selection standpoint, is that they have gotten dangerously close. Compare the variety and song selection on iHeartRadio (a Clear Channel company) to what is played on Sirius XM, and I would venture to say that even the most passionate investor in this company would have to admit it.
The second question was can they become better. The answer to that is a resounding yes…IF THEY CHOOSE TO. Satellite Radio 2.0 is the game changer. More channel variety combined with added features and capability give Sirius XM the tools needed to win back that passion some consumers lost. Certainly the company can not fully satisfy everyone in every way, but the uniqueness of satellite radio got lost somewhere along the way. It is time to bring it back.
Position – Long Sirius XM Radio
I’m glad you brought this up.
However, one thing I think you are omitting and/or slightly whitewashing is that a lot of this came about BECAUSE of the merger, not before it. I did not notice a major shakeup until after the companies finalized their merger. It seems that XM cared more about Music and Sirius cared more about exclusive big names.
This pruning of the channels appeared to occur in late 2008. Sure, some genres were cut earlier, but not in the way they are now. Mergers might make sense to stockholders, but consumers more or less tend to suffer for it. That’s water under the bridge, but I’m sure reader who are writing in more on the consumer side instead of the “let’s get this stock back up to the 2001 level” will agree with this.
I think the main reason they went with the Clear Channel model was the dependence on the OEMs. Maybe they thought it was drivers who are their bread and butter and thus treat it like regular radio. That’s what worries me about SXM–the dependency on the OEMs for revenue. It makes them vulnerable–by dropping the wide playlists that people who pay $15 a month for would normally like better, it says we care more about the 3 month freebies the big companies pay for. I worry that if Internet Radio becomes a reality for the car, SXM will lose it’s only clear advantage.
My biggest concern right now is that Sirius XM has talked about 2.0 without a lot of details. If all they plan to do is add 30 Internet Only channels, that’s not enough. Time and Place shifting, total personalization, unique technology driven features are becoming more common. And adding channels won’t change the CC like mentality of the current PDs.
I want to hear more details about “2.0”. Hopefully they’ll provide some.
I think they’ve been focusing on survival, which your kind of hinting at, that they could not focus on the depth. But now, its all changed and I think they will do just that: increase variety and depth. Good article.
of course. fixing the balance sheet is priority #1. give em one more year of streamlining and programming flexibility will only be natural.
I sincerely hope that if this 2.0 radio comes to be that it will some how be bringing Cinemagic back on satellite radio soon!
In 2003, I became a customer of XM Satellite Radio. I had weighed both of my options (Sirius and XM) and elected to go with XM. I enjoyed the commercial-free channels, the baseball games and a channel that I came across that was dedicated to movie soundtracks called Cinemagic. In the time that has followed since the merger, most of the “commercial-free” channels now have DJs, who proceed to talk over the music before it is over, as well as before the song starts.
As of July 1, Cinemagic was taken off the satellite radio and made an “online-only” channel because of SiriusXM is required to have a certain number of “minority-owned” stations. Is this the 2.0 that is being referred to?
In the time that Sirius has been the sole option for satellite radio, I have been treated rudely by customer service, had stations moved twice which makes them exceedingly hard to find, had channels removed completely and seen additional charges (U.S. Music Royalty Fee, online access is now charged for) and had numerous other problems. I used to have three radios, then it became two, now it is down to one. Frankly, by the time 2.0 comes out, you may not have any satellite radio customers left.
There are too many other options to have to endure being treated like dirt by someone that you are paying to for a service that they seem barely able to provide.
You talk about bottom line costs: yet, the 80’s channel used to be just fine, yet for some reason, Sirius had to go out and hire all of the old MTV VJs. Really? How much did that cost?
I wish XM had been able to hold the line against Sirius, but Sirius may be their own worst enemy.