MUSIC FROM THE HEAVENS Satellite radio gaining popularity, but market impact remains unclear Jay Wilson – Decatur Daily The owner of two local radio stations and the manager of four corporate radio stations insist they are not worried about satellite radio taking listeners and profits.
Both said listeners would not pay for music, talk shows and news when they can listen to free content.
Satellite radio experts, however, say AM-FM radio owners are concerned. They admit theirs is an infant industry, noting that satellite radio added 2.3 million subscribers last year. They are looking at growth potential.
The two satellite companies added a combined $311 million in revenue in 2004. The oldest company, XM Satellite Radio Inc. based in Washington, D.C., increased its revenue by 166 percent over 2003. Sirius Satellite Radio's revenue jumped 419 percent. Its home base is New York City.
Last week the two were trading in the $30 and $5 range respectively on NASDAQ.
The companies are attempting to change the radio industry. Both offer listeners more than 100 commercial-free channels of music, sports, news and talk radio via satellite.
"It's another voice out there, but to be brutally blunt, we've seen no impact from it yet," said Bill West, general manager of Cumulus Media Stations of North Alabama.
Cumulus owns and operates stations in the Decatur area, including 104.3 WZYP and AM 770 WVNN.
David Butler, XM Radio's director of corporate affairs, said satellite offers programming that standard radio cannot.
"XM offers a wider variety of music and artists that you simply don't hear on AM and FM radio," he said.
West said the public doesn't necessarily want to hear music just because it is seldom heard. He said his stations play music that listeners want to hear.
"I think (satellite radio) has some programming problems," he said.
Alvin Abercrombie owns Hartselle's WQAH FM 105.7 and AM 1310. He agreed with West.
"So far it hasn't had any effect," said Abercrombie.
Abercrombie and West, who are in different radio worlds, said satellite systems appeal to drivers making long trips. They said local drivers are not as impressed.
"Most people are not in their cars for longer than about 30 minutes at the most," Abercrombie said. "Traveling salesmen or truck drivers might like it."
Wide range
Because the signal is beamed from a satellite, a person could drive cross-country listening to the same program. The signal is everywhere, according to a Sirius spokesperson.
West and Abercrombie said AM-FM reaches far enough for their listeners.
XM's Butler doubts that, and he said satellite radio's seemingly never-ending range is just one of many selling points.
"One of the most appealing things about XM is the commercial-free music," said Butler.
Satellite charges about $10 per month if paid one year in advance, about $13 if paid monthly. The fee keeps commercials off satellite radio's music channels. This doesn't sway Abercrombie.
"I wouldn't be surprised if it (satellite radio) didn't just go away," Abercrombie said. "People don't want to pay the $10 per month. They want to hear local programming, too."
Abercrombie said XM and Sirius would eventually air commercials because so few people will pay the fee.
West's parent company, Atlanta-based Cumulus, owns the second largest number of radio stations in the country. He said he rented a car with satellite radio installed on a recent business trip. He drove the car for about a week and decided the service was not worth the cost.
Content
That said, he acknowledged that satellite radio had affected his station's content.
"We had never gone away from our local programming, but satellite radio rejuvenated our attitude about it," he said.
Realizing that satellite could be a potential threat, West said Cumulus decided to concentrate on the things local stations do best.
"As for local radio, it's been a positive," he said. "It taught us that we needed to go back to our roots. We start and end the day with a local voice."
West said XM and Sirius couldn't warn listeners if there was a tornado down the street, and they couldn't support the local school systems on air.
"It's made us better," said West.
Unlike the traditional radio managers, Decatur resident Whitt Roby believes satellite is the future. Roby chipped in to give his father-in-law satellite radio for Christmas.
He said people would pay for the service.
"The quality of the product is hard to beat," said Roby. "You have an unlimited selection of music, news, comedy and talk radio."
Perhaps Abercrombie and West were right about the importance of local radio, though. Asked to choose between local and satellite, Roby said there is no choice.
"I think there is a need for both," he said. "If I had to make a choice, then local would have to stay."
Jim Collins, Sirius Radio spokesman, said with only about 4 million subscribers between Sirius and XM, satellite radio is in its infancy.
That's fewer than the 5 million to 6 million listeners West said Cumulus radio stations in Atlanta reach in a week. The Decatur area stations reach about 400,000 weekly, he said.
When West says satellite radio's number of listeners is miniscule compared to AM-FM radio, Collins agrees.
"Four million subscribers is nothing," he said. "But when you start adding up the market, there are over 350 million potential subscribers. Is local radio concerned? Yes."
Collins said satellite radio does not want to replace local radio. He said Sirius and XM are supplements.
Financial infants
Financially, XM and Sirius are, as Collins said, infants. The companies are developing and XM is about a year ahead of Sirius. The companies have added subscribers in different ways.
As the first satellite company, XM had the advantage with automobile manufacturers. Half of XM's subscribers are people who purchase a car with XM.
Sirius added most of its subscribers through retail outlets like Circuit City and Best Buy. Sirius has grown slower, but Collins said the company would catch up as it adds automobile manufacturers.
Abercrombie is in an ironic position because he also owns Abercrombie Chevrolet. GM puts XM radio in its cars and trucks. Abercrombie is selling satellite radio even though he owns two radio stations.
If satellite is meant to supplement AM-FM radio, Abercrombie has the best of both worlds. |