THE ATTACK FROM OUTER SPACE Chris Byrnes On I-40 near Jackson, TN, there is an XM billboard which reads "How Did We Get 100 Channels Way Out Here? Satellites. Big Freakin' Satellites".
Two years ago, I was in Washington DC and was invited by an Australian friend of mine to tour the XM facility. Jeremy Millar was one of the early programmers to create 30 of their mainstream formats. It truly was an amazing facility, but what struck me was that all the money had been spent building huge boardrooms and palatial offices. The rows of control rooms had no equipment in them, and the gossip was that the Arab investors had turned off the tap.
After months of speculation that they would never get this thing off the ground, XM Satellite Radio is now a reality and these people are getting serious about encouraging consumers to sample their product. America's first nationwide digital satellite radio service, already has more than 30,000 subscribers paying $9.95 a month, making XM the fastest-selling audio product of the last 20 years. The compact disc player sold 7,800 units in its first 60 days, and the DVD player sold 8,600 units in its first 60 days.
XM Radio is broadcasting 100 channels of digital music, news, sports and children's programming direct to cars and homes via satellite and repeaters to ensure seamless transmission. The channels originate from XM's broadcast center in Washington, DC and uplink to two Boeing 702 satellites one called “Rock” and the other “Roll”. They are the most powerful commercial satellites ever built and provide coast-to-coast coverage.
Now that XM feels the product is right, they are rolling out an impressive billboard and magazine campaign. For example, there is a very classy double page spread in the February issue of Playboy Magazine. The copy clearly positions it as a cut above regular ol' radio. I knew that Greg Gillispie, our Rock Consultant, had trained the Playmate Radio Team last summer, [Greg gets all the tough jobs!] so he would know whom to call. A couple of phone calls later I was told the double page ad cost $160,000. The circulation of Playboy is 3.2 million, but it’s audience, the total number of people that read an issue is 10 million, because each issue gets passed around to about 3 other people beyond the subscriber/purchaser. That means it only cost 1.6 cents per person to spread the message about our new competitor.
I've already heard from a few people how cool this new medium is. A friend of mine got it installed in his car, and says it’s better than CD’s because he can quickly surf hundreds of channels until he finds a song he likes. XM proved one of the hottest Christmas gifts, according to a survey conducted by the Yankee Group. XM and Sirius were the hottest exhibits at the recent Consumer Electronics Show in Las Vegas.
The Regent VP of Programming Bob Moody e-mailed me saying “I've had XM in my truck for almost a month and I promise you that terrestrial radio has a big problem. If your station is nothing more than a jukebox, a bigger and badder jukebox just hit town."
Clearly the XM people are very serious about eating into the time people spend listening to terrestrial radio stations. I was told that their goal is to have a 1% share for each channel. As you know they offer 100 channels so you do the math.
The early adopters of XM also seem very happy. In a customer satisfaction telephone survey recently conducted for XM by Greystone Communications, a media research and planning firm, 94 percent of respondents rated XM's overall service "excellent" and 92 percent called the sound quality "excellent." And 99 percent said XM was a "good" or "excellent" value at $9.99 a month. How would your station rate in these areas in your market if you conducted a customer satisfactions survey?
Since their launch, XM has created over 90,000 hours of radio for its music channels alone, playing more than 1.4 million songs across every genre. It has more than two million songs in it’s music library, one of the largest collections on the planet. In addition, XM has recorded more than 40 live performances, interviewed more than 160 celebrities and artists and archived more than 1,100 interviews with musicians recorded over the years.
XM was named "Product of the Year" by Fortune, "Invention of the Year" by Time and won Popular Science's 2001 "Best of What's New" Grand Award in the electronics category. XM won several awards at the 2001 CES, including "Best of CES" in the automotive category.
The people at XM are selling the benefits of their service as “a new audio experience on your radio dial with the unmatched clarity of all-digital sound from coast to coast. And it's freedom - from static, from distortion, from that frustrating feeling when you drive out of range in the middle of an exclusive interview or a new song you've been waiting to hear.”
Sony, Alpine and Pioneer offer a broad array of XM radios including models that will easily enable any existing car stereo system to receive XM service. General Motors in November rolled out factory-installed Delphi-Delco XM radios in Cadillac DeVille and Seville models, and will expand to more than 20 GM models this year.
I sent the XM people an email asking when they intend to expand outside of the USA and they responded saying “Currently, XM Satellite Radio is only available in the 48 contiguous US states. We are not licensed to provide service outside the United States, but we’ll keep you informed as to any future plans to expand our service area into Canada, and beyond.”
Clearly this service, if it survives could become a real threat to terrestrial radio in the USA. With only 30,000 subscribers their monthly cash flow will be less than $300,000 and I’m guessing their costs are going to be much higher than that. However if their $16 million advertising campaign works for them, then it might take more than People Meters and good consultants to hold up the ratings story for terrestrial radio.
In my opinion it will be the radio stations that are working hard today to be truly entertaining, compelling and memorable, that will survive this full on frontal attack. It will be the stations that own the local position and are always the “go-to” station for the local news, information weather and traffic. Stations who ensure their air talent are plugged into the community and market their benefits to their target audience with a religious-like commitment, are the ones who will still be here to fight another day. |