AMS News

Thursday, February 9, 2006

Broadcast radio's nagging question: How big will satellite grow?

Louisville Courier-Journal

You could have gotten the impression from the media coverage of Howard Stern's move to satellite radio that all ears are on the shock jock.

Not quite. But Sirius and XM, the two satellite radio companies, are adding subscribers at a good clip. Sirius, which ended last year with 3.3 million customers, says it will have 6 million by year's end. (Sirius is the home of Stern's program.) XM satellite already has that many and expects to have 9 million by 2007.

That's still a tiny fraction of the estimated 200 million people who listen to broadcast radio every day in this country. Satellite radio isn't even a blip on the Louisville-area ratings radar, said Kelly Carls, a vice president for Clear Channel Radio. Its influence so far is minimal when those 9 million subscribers are spread across a country of 300 million people.

But broadcasters are clearly concerned about how big that blip might grow in the future. American Media Services, a radio industry group, had a survey conducted about the Stern hype and says his effect is clearly exaggerated.

Actually, the questions the Roper pollsters asked seemed to focus more on satellite radio than the shock jock specifically.

They found that 82 percent of those surveyed said they aren't likely to sign up for satellite radio. Does that mean 18 percent are? That's a lot of people. The poll also found that 64 percent said they are listening to radio about the same amount as or more than five years ago. Does that mean 36 percent aren't?

Polls and statistics are often confusing. Sometimes they find what the people paying for the poll want them to find by the way the questions are phrased.

But in this case they're right on the money if the purpose was to emphasize that people aren't abandoning broadcast radio for satellite in huge numbers.

The media survey says most people balk at the idea of paying $50 to $150 for a receiver and $13 a month. That's not surprising, either, even though subscribers can get more than 120 radio channels, some of them commercial-free. Many broadcast stations have cut back on commercial glut to counter that commercial-less appeal.

Keep in mind that a lot of people said they wouldn't pay for cable channels or satellite dishes when they came on the scene, but about 75 percent of them are doing so today.

Will satellite radio enjoy that same growth? Probably not, but if just 25 percent or 50 percent eventually subscribed to satellite radio, it would have a huge effect on broadcast stations just as cable has had on TV outlets.

Like it or not -- and Sirius loves it -- Stern has already had a big effect on the satellite radio business. His grandiose departure from regular radio to satellite created a big buzz about the business with people who would never even have listened to Stern.

They migrated to satellite when they found they could get the round-the-clock jazz or easy-listening formats abandoned by broadcast stations. Sports fans liked the idea of having lots of pro football and basketball available at their fingertips. It's perfect for people who travel a lot and are stuck in their cars for long periods.

It's hard to imagine what isn't on satellite radio as new channels are added every week. One thing that isn't available is local news, weather and traffic reports, except for the 20 largest cities. You can't find out if the freeway has ground to a halt if you're listening to Stern spout off.

Stern has already paid his way, according to Sirius executives, who say the big subscriber increase he brought in will just about pay his $100 million-a-year salary. Some analysts question the economics of that equation. Sirius originally said it would have to have a million people sign up just to hear Stern and won't say if that happened.

Stern wouldn't appear to have much growth potential. Most of the people who couldn't live without him are probably already on board. Recruiting new listeners will be hard.

The real growth in satellite radio, which you can install in your home or car or carry between the two, will probably come in new-car sales.

Both satellite companies are doing deals to have their receivers offered as optional equipment on new cars just as regular radios have been in the past. The temptation to fork over the monthly fee will be greater once the unit comes with the car.

There's a market among Americans who have a hunger for electronics and who are willing to add another $13 a month to the growing list of cell-phone and cable fees they pay.

The wake-up call for broadcast radio stations isn't Howard Stern. He's just another gaudy float in the passing parade. What they need to do is unearth the local roots that used to make them so valuable and attractive to communities instead of just being conduits for syndicated radio piped in from somewhere else.

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