Marriage of Sirius XM and HD Radio?
Throughout the merger process, HD Radio was a hot topic of discussion. There were proposals brought forth that wanted to mandate that satellite radio would have to include HD technology in every radio sold. Thankfully, capitalistic thoughts won out the debate, and the success of HD Radio would not be hinged on being coupled with satellite radio.
I am always a fan of letting the quality of a product or service, and the marketplace be the judge of whether a business succeeds or fails. To that end, it was always my opinion that HD Radio needed to put together a quality product and market it themselves. To their credit, they forged an early relationship with Ford, but momentum behind that relationship seemed lacking.
This week I found myself in Washington DC in a rental car that had neither HD Radio or satellite radio. I scanned the dial, and settled on a local station featuring Ryan Seacrest. As I listened, I heard spot after spot pushing HD Radio. This struck me as odd, because in other markets, I did not get that same exposure to HD. Then again, I was in Washington DC, home of the NAB, and the battlefront for royalty debates, etc. The ads were compelling enough that if I was an average listener, and a car happened to be equipped with HD Radio, I would likely tune in. I began to consider what that might mean to satellite radio if other markets ran similar campaigns. I quickly dismissed the idea, as in my travels, I had never really seen such a concentration of HD advertising.
Then I got home, and checked my e-mail. Amongst the items in my inbox was an email from Volvo. Knowing the importance of the OEM channel to SDARS, I opened it up and was surprised by what I saw. The advertisement, featured below, boasted that Volvo has established a “New Standard for What Comes Standard”. Among the standard features was Sirius Satellite Radio AND HD Radio. Wow. The two competing services were right there and even on the same line.
For satellite radio investors, the news is a mixed bag. The good news is that this Volvo features SDARS as a standard feature. The bad news is that it also features a free HD Radio service. There was a point in time where Mel Karmazin stated that satellite radio “has to compete with free”. This has always been the case, but HD Radio does have a leg up on AM and FM in that the consumer perception is that it is something new and special. Some will say that HD is simply the same content with a higher sound quality. This is not entirely true. HD also allows for MORE content. Should HD Radio take hold, they can begin to fill up that additional content. Bear in mind that this will take time. Radio stations as well as satellite are having enough trouble selling advertising on the current content load. Adding more channels that are supported solely by ads is a challenge right now. This phenomenon will not last forever though.
Looking deeper, if Ford is a big benefactor of the troubles being experienced by GM and Chrysler, then HD Radio will benefit as well. The ever changing audio entertainment sector will be interesting to watch in the coming months. Clearly HD is not on a record setting pace in gaining market share, but they have laid out a foundation that makes it viable. Only time will tell if HD will demonstrate success, or impact SDARS substantially.
Position – Long Sirius XM, No Position OEM’s
I am afraid Sirius management doesn’t know what it is doing, so whatever the others are doing is irrelevant. They have advantage in content over ANY free service, one which could be leveraged to any carrying media, and sold overseas as well. I hear no vision and see no execution capability, but I do see many questionable decisions being made on the programming side. The stock keeps going down because sub retention will only go further down.
As a long time commuter, both locally and when in other cities, I just don’t get the oversold (WAY oversold, in my opinion) of “HD” radio. NAB’ers have attempted explaining the “benefits” but it never sinks in.
With all the distractions – passengers, mobile phone, vehicle and road noise (even if, in a “high-end” vehicle, that noise is “only” white noise) – I just don’t see the benefit. Now, at home, that would be a different story but, then, we really don’t listen to the radio (other than our satellite) when at home. Don’t bother trying to explain, I’ve been listening to NAB propaganda for, what, the last 4 years and it still has sunk in!
Thanks for the good article.
I give credit to Sirius management for all they’ve been able to accomplish with the merger, the recession, the potential bankruptcy, and so on. I’m thanking my lucky stars that I have any potential whatsoever to make back the shit-ton of money I stuck in this speculative stock.
The management is the reason we all have the potential. And, I agree with you Jo, the content is the other reason. Probably like all of you, I feel total misery if I have to listen to regular radio. It’s just flat-out terrible. And I don’t sweat HD much either, since it’s going to be the same garbage with a higher-quality sound.
Right now, as Mel said, this company is all about getting profitable. They’re not focused on growth (hence the lack of advertising), but more on minimizing churn and cutting costs. They can’t really feel comfortable to drive growth until they have the money to do it. They’ve borrowed too much in the past, and have continually had their back up against the wall because of it. In the end, I think Mel is the man that will pull Sirius and all of us through.
I have HD in my home and satellite in my car, if you really think HD radio is going anywhere but to the trash heap of failed electronic components littering the American landscape at a Salvation Army near you I suggest you get one. They don’t work and drop out constantly and the sound quality is not a big improvement if there is any which is usually the case. Satellite works very well and the content is head and shoulders over the same old krap you’ll find on HD (if you are lucky enough to actually live close enough to a transmitter so that it comes in without dropouts). Maybe people in Washington DC equate HD with “something new and special” (if they don’t own one which will quickly change that perception) but those of us in the rest of the 99.9% of America have never heard of it and if we did we don’t care. Satellite has nothing to fear from HD, it is already a dead product walking that’s just too stupid to lie down. Satellite’s real enemy is it’s continually worse and worse programming and especially the introduction of ads into a pay service which should not have ads at all.
The benefits of HD? I would bother to explain to others…
It is not primarily about quality, but about band width of analog transmission vs. digital. in HD they would be able to fit many channels in a a narrow spectrum, thus offer selection unavailable today in FM. BUT, the real threat to Sirius is WIMAX down the road, rather than HD. If they do not take a preemptive strike at internet-based broadcasting, they will be KO’d in a blink when wireless internet technology matures. The sad thing is that they have all the tools to prevail, but seem to insist on driving the company to the ground with uninspired management. If this Mel does not go, it is a big SHORT.
“It is not primarily about quality, but about band width of analog transmission vs. digital. in HD they would be able to fit many channels in a a narrow spectrum, thus offer selection unavailable today in FM.”
Really? I suggest you educate yourself about HD, it takes up MORE bandwidth than analog and what does it offer? i and rarely 2 lo-fi channels besides the main lo-fi channel. If it just broadcasts one main channel with no side channels it sounds halfway decent, although it still drops out, interferes with other channels and has lousy range. When it has one side channel both sound bad and three? forget it, telephone quality sound. HD is no competition for anything, it’s dead in the water. Now a few free satellite channels? That is a good idea because satellite offers much better programming than anything on traditional radio and best of all it very rarely drops out.
With 10-20 million satellite radio receivers sitting in cars — unactivated, a wasting asset, Sirius XM has been foolish not to offer a few “free” channels, even one channel with commercials, including commercials for Sirius XM subscriptions service — with no commercials on the music channels.
Its been Mel’s biggest failure and for that lack of vision, he should be replaced. Maffei wasn’t on the Board for more than a week and he started talking about it. How about him as Mel’s replacement?
These idle radios have me puzzled? I realize ad dollars are short, but I would think that Sirius Xm has to be thinking of a way to power them up. The only excuse I can muster is 2 fold. 1st they are waiting for the economy to kick in and 2nd they have a certain number they feel they need to reach(of idle radios) to market a free commercial based format. I do wonder if they are aware that Sat. Radio is still somewhat a vague product to most consumers. I have to believe when the economy shows some signs of recovery they will come out with a grand scheme that covers all the bases(marketing and implimenting multiple ways of recieving their content) to put Sirius Xm finally in it’s proper status as the pinacle of audio content bar none. This would hopefully be a tiered structure that offers content at differant price levels that even includes the free commercial limited foramt. If they position themselves properly they would be the 1st choice by far, in delivery of quality of audio content.
A few issues
1. Censorship. A promo channel would need to follow FCC regulations.
2. How many program cxhannels do you offer? A rock one, a country one, a rap one, a jazz one, a top 40? Soon the consumers that did not want satellite radio after their promotional subscription will say they are getting enough with the free channels.
3. If you put commercials on such channels, how do you call yourself a commercial free music service? It is a mixed message, and mixed messages are never good.
4. A small sample does not do the full service justice.
5. Ad sales are down so much that they can not even sell all of the space they currently have. Listen to Fox News in off hours and hear all of the “brought to you by the ad council ads”. Diluting the ad space further needs to be done very very carefully.
There may be a day when they get to some ad based stuff, but that is still a ways off IMO. They are better to turn all radios on for a couple of weeks each quarter, and let people experience the real product.
Siruis-XM already has some ad based stuff, one of the political channels I USED to listen to had ads every 5 -10 minutes just like regular radio in fact it was worse I think. I liked the channel a lot but couldn’t stand the ads so I haven’t listened to it lately. If Sirius-XM expects to stay around they need to stay ad free as how many people are going to pay for a service that is supposed to be ad free when it has ads?
“There may be a day when they get to some ad based stuff, but that is still a ways off IMO. They are better to turn all radios on for a couple of weeks each quarter, and let people experience the real product.”
The above might be a good idea as the only reason I have Satrad is because I bought a new car with a free three month XM subscription. I liked what I heard although it was better before the merger, but it is still far better than regular radio and the reason I’m a subscriber is because I had a chance to listen to it for a while for free. I was also ready for something new as HD interference on the AM band also pushed me in this direction as the the AM band is so full of noise courtesy of AM HD that it has large unlistenable chunks with barely discernible stations buried beneath a loud whoosh sound.
1. No problem, Mel knows how to comply with FCC
2. Start with one or two (most popular formats), add more if it works
3. You brand it separately. Sirius/XM still remain subscription services, the free channel(s) is branded differently.
4. It need not be a “sample”, its another channel(s) available that gets the listener to turn on the satellite band, listen to music that has less commercials than terrestrial, but more than the subscription services. It not only drives some additional ad revenue, it is used as a vehicle (in the vehicle) to advertise commercial free music and other subscription channels, relentessly.
I would agree with turning all the radios on periodically, but communicating when that happens to those owners could be difficult — how do they know when its turned on? One of the advantages of having a free channel(s) is that its always on — it can be used to promote those times when you can truly sample the full Sirius/XM subscripton service.
A big problem Sirius XM has with getting people to activate those radios sitting idle is communicating with them — that is the main purpose of the free stuff with ads — it becomes a route to their ears, and hopefully their pocket book.
It won’t compete with the subscription service any more than terrestrial does today. In fact it becomes even more direct competition with terrestrial.
My experience with “marriage”, leads me to recommend, “shacking Up”.