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Satellite Radio in Fiscal Trouble
prostoalex writes "It looks like Sirius Satellite Radio is going through its worse times. From the same article XM Satellite does not seem to be doing well either, even with 200K customers. Will it signify the end of the satellite radio?"
Will it signify the end of the satellite radio?
As someone whose has XM I really hope that they pull through. It's one of the best services I've seen in a long time and just about the only way to get some good blues and jazz in your car outside of cd's. I'd pay twice as much for the service just to keep it alive.
Keep Austin Weird!
Well, Sirius has backing to get them through next year if this happens, whereas a vote against it means they exit in early 2003, which I've never understood. I've seen debtholders refuse to sell or accept a lower price, only to see what they had become utterly worthless because the sum of the assets was worth less than the whole.
Personally, I'd like Sirius to keep going, since I signed up this summer and it's great, I scarcely listen to the local radio stations anymore, since commercial free really does spoil you (with the exception of Sirius' own occasional plugs for what's going on other channels)
With luck, enough new cars will sell to help boost the numbers. I think XM indicated they need 2 million to break even and Sirius about 4 million, but don't quote me on that. It's a lean market and people are pinching pennies.
The real barrier to satellite radio isn't your subscription, it's the cost of the special receiver and antenna, which can be about $300 combined, though I know there's a $75 rebate out there for something from Sirius and/or Kenwood.
A feeling of having made the same mistake before: Deja Foobar
AP has a story published Oct. 21st about how local station(already has a huge market share) can now broadcast digital radio. Why buy a subscription for a satellite radio signal instead of catching a free local stream?
Another thing, most people listen to the radio for local weather and traffic conditions. Satellite radio doesn't supple that need.
Here's the AP story:
Digital Radio May Give Shot In Arm To AM, FM
Some Stations Will Broadcast With CD-Quality Sound
A few months from now you'll be able to hear AM and FM broadcasts like you've never heard them before.
Some stations will broadcast digital signals with CD-quality sound.
Dennis Wharton with the industry trade group, the National Association of Broadcasters, said stations are already buying the equipment needed to transmit these signals.
He said it'll mean local radio won't become a second-class communications service. Wharton said digital radio will allow stations to compete on an equal footing with cable and satellite-delivered radio services.
In order to hear digital AM and FM broadcasts, you'll need a special radio. But you'll still be able to hear analog broadcasts on the radios you have now.
You say things that offend me and I can deal with it. Can you?
ok, so XM is expensive, that's true. And all things being equal, it's very tough to make it up on volume when you're loosing money on each transaction. I currently have XM, and to be honest, I don't know if I'd buy it again, but I do love having it
That being said, here are three reasons to get it:
So, reasons not to get it?
If you blog it...
There is, IMHO, no chance for Sirius & XM to survive as presently organized. XM needs over one million subscribers to break even - they have 200,000. Sirius has similar needs, but not nearly as many subscribers. Does this mean that things are hopeless ? No. Their orbital assets are real, and have real value. Just like in the case of Iridium, the initial investors will take a bath (those that didn't cash out) and the reborn companies will be able to make a profit.
Remember, in the Satellite world, bankruptcy can be part of the business model!
I bought an XM radio kit with some of my signing bonus last year. Since I was going to commute one hour each way down the interstate, I justified the cost to myself as a nice way to have better programming for my commute. The station guide seemed interesting enough...I could get BBC radio, CNN, CNet, a channel of standup comedy, selections of music that interest me, and so on. The $10 each month seemed very reasonable for commercial-free options that I'd enjoy.
So, I bought the kit and I installed everything as per the manual. I activated my account. I got everything in order. I started listening that night. It was really cool to be able to get a continuous mix of house techno and, with the spin of the dial, CNet news. I loved that, if I wanted a laugh in the morning, I could listen to comedians with talent instead of shock-jocks with carnival barker voices. Everything was all well and good...
And then two weeks went by, and I still couldn't keep a signal over my commute. I also started noting that I couldn't keep a signal in-town all that well. I also made a couple drives through the major metro areas of central Florida and could not keep a signal. This started becoming frustrating. It was about this time, though, that I noticed the programming wasn't all that good. The comedy channels just played the same handful of routines by trite comedians over and over again. The 80's station wasn't really covering what I wanted to hear, either. Slowly, the stations I was enjoying just became boring.
After letting XM take two weeks to try and resolve their issues, I called again, only to be told by the support rep that there were not any such problems and that everything was my fault. I explained my configuration to her and she agreed I hadn't done anything wrong. I told her that XM had been given a month of opportunity to communicate with me and hadn't done so, and so I needed to cancel my account. She then asked me to hold the phone for a minute. When she came back, she reported that there was indeed a problem in my area and, if I could just sit tight a little bit longer, it'd be fixed.
By this point, I'd given XM a month, and I needed to return the radio soon or I wouldn't be able to get a refund from Best Buy. I cancelled my account and took the radio out of my car. I was a little disappointed that I lost my alternative to crappy commercial radio, filled with advertisements, music I hated, shock DJs, and insipid conservative commentary on the news stations. Then I discovered I really rather enjoyed the one alternative I had left- NPR. I started listening to Morning Edition and All Things Considered over my commute, both of which are pleasant and informative shows, and both of which are provided commercial-free.
So, I save my $10 every month and, every third month or so, I use the money to treat myself to a new audiobook or a couple of CDs when I want an alternative to NPR. I really have to say, if you're going to get XM just to have an alternative to standard radio, see if there aren't some local or public stations you like first. Here in Tampa, we have something like two NPR stations and a local, commercial-free station that runs some excellent world news, commentary, and music you'd never find even on XM.
as someone who both has XM radio and is an installer in the mobile electronics industry, I'd have to say that XM is going to be around for a while, but Sirius may simply be a transient company.
The real question here seems to be "what is its attraction?" To answer that I'd have to say that most of the hype is more or less true. To compare choice in music between your local FM station and a satellite station, ask yourself what you hear most on your local FM station.
I'll use rock stations as a case study. More than likely there'll be one or two rock stations in your area if you live in a major market. I know in philadelphia the only way I can tell the difference between the two rock stations is by the talk shows that they air. Both stations pretty much play the same set of alternative, a little bit of guns and roses, and then a touch of heavy metal thrown in for good measure.
XM radio has the advantage over this setup simply because one company controls 10 rock stations, so they can coordinate music coverage between the stations and they can specialize in genres of rock. For instance there is one station that only plays alternative, another that plays folk rock, one devoted to heavy metal, and another just for hard rock. There is a channel devoted only to unsigned bands, then another that adopts the format of a university radio station; playing only the newest music and underground rap.
Local radio stations have to compete with each other and they are only given one channel with which to work. Therefore, they will have a tendency to stay in the middle of the road and go with what the focus groups tell them. That's why your local rock station predominantly plays what most people will like. That's why they sound the same.
Thinking about satellite radio in terms of local stations is why many people draw such damning conclusions. Its much more like a webcast: stations thrive on specialization and expert knowledge of a genre.
And as for commercials, you get on average about 1 commercial every 20 minutes. Compare that to 5 in a row every 20 minutes on local radio.
The huge up-front expenses are not really the problem for XM and Sirius, since they are now sunk costs. As Sirius stockholders are now finding out to their chagrin, such sunk costs can we wiped away with the stroke of a pen. These costs would be a big deal for anyone who wanted to build yet another new satellite radio network, but I don't think that's going to be a problem any time soon.
To just stay in business (as opposed to saving the shareholders' investments), all the satellite radio companies have to do is cover their operating expenses, although that seems difficult enough so far.
First of all, XM is a Sony operation through-and-through. The main reason XM is doing so well is that Sony has pumped a bunch of money into it, knowing up front it'll run at a loss for a long time. On the other hand, Sirius is an independent business with all the attendant risks and concerns. Unfortunately Sony is a giant, monopolistic bastard of a company who pimps cheap junk at ridiculous prices, so you can guess which side I root for in this battle. :)
Second, there is the satellite problem. Sirius placed a small number of satellites in very high orbit. This means each satellite can cover a relatively wide portion of the Earth's surface. Also, these satellites are in a more stable orbit so they have a longer life expectancy. Launch costs were higher, however. Conversely, Sony opted for low-orbit satellites. This means the launches were cheaper, but the life expectancy is lower, and each satellite has a much smaller area of coverage, meaning Sony had to use significantly larger numbers of satellites.
Worse yet, the XM satellites are unexpectedly having problems holding their orbit, so they're using fuel at roughly 3X the expected rate. This is one of XM's largest problems. Sony faces having to replace the satellites YEARS earlier than expected. I don't remember the exact figures to replace the satellites, but the price tag was vast -- like $700M or $1B or something equally insane.
Third, there is the ground station plan. Both systems use a network of repeater stations. These (combined with receiver onboard buffering) ensure you have a steady signal when you drive through an underpass, for example. Amazingly, Sony only has 75 repeater stations in the US, all near major cities. The Sirius plan calls for 2,500 repeaters spread somewhat evenly throughout the country. I don't recall how many Sirius currently has, but it's already much more than XM.
Fourth, of course, is the question of content. Sirius costs a bit more than XM, but it's also largely commercial-free. Sony charges you a not insigificant amount for XM, and then they sell advertising on almost all their stations anyway.
Fifth is the availability issue. Since XM is a Sony-funded effort, it was available everywhere almost from Day One. However, Sirius has a ramp-up plan which targets major cities first, then rolls out to everyone else over a 12-18 month period. This may be important to frequent travelers.
Sixth and finally, speaking of frequent travelers, another post pointed out that people like truckers are a prime target market for satellite radio. Interestingly, there is another important target market mentioned in the articles, but overlooked here so far (I think) -- ships. Merchant ships and cruise ships are potentially a HUGE market for satellite radio. It turns out that XM was very heavily focused on land-based use, and their offshore coverage is largely accidental. Because of this (and XM's use of low-orbit small-footprint satellites) XM coverage doesn't extend very far into the ocean. However, Sirius took that market into consideration when they planned their service, and their coverage extends quite far out to sea. Again, unfortunately, I forget the exact numbers, but the difference was serious, like 20 miles compared to 400 miles.
It's my opinion that Sirius is the better technology for these reasons and others (even ignoring my intense dislike for Sony), but we all know how often Joe Sixpack pays attention to little details like that.
Again, that was all from memory based on information I read almost a year ago, so please don't beat me up if I got any of it completely wrong (and please correct me). Hope you found it interesting.
Slashdot quality declines as the number of hot grits posts decreases. - Provolt's Law, Apr-09-2005
Well, two of your reasons are wrong.
Sony, Alpine, and Pioneer all make FM-Modulated XM receivers that will work with your factory deck.
Sony makes a home piece for XM. Looks just like the car piece (the overgrown radar detector). $299 MSRP. You can buy a "car kit" for $170 or so that is the FM Modulator. So... $470 for both the home and the car.
I like XM, and I hope it succeeds. Please get your facts straight before howling.
"If there's hope, it lies in the proles..."
Um....well, the auto makers may have big pockets, but they have a deal to put receivers in their cars, one assumes they got the year's programming for free, and the receivers at a cheaper rate...not a deal to give XM and all money.
Yes, but there is no money in the short term, or even the medium term. Let's see, starting sometime next year XM gives free service so lots of people with new GM cars. That doesn't cost XM very much money (they might have product support costs, but they should be low, right?). For a year after that they have no extra money from those people. Then, after over a year they can start getting an idea about how many people keep the subscription.
Think about that.
We are still over a year from them getting money from the GM deal, and more importantly over a year from finding out how much money they will get from the GM deal. Do they have money to make it that long without going into bankruptcy?
How does that makes sense (to XM, not the listening public!)? It wouldn't make money for XM, and it would make the XM subscription slightly less valuable in as much as people that like the publicly funded stations would then have something they could listen to "whenever" without paying XM for anything!
A lot of you are missing the point! There have been too many posts here about the virtues of "digital radio" and how it is going to kill satellite radio.
Satellite radio is appealing to people who live in cities with crappy local radio, or none at all.
It is VERY appealing to people in Clear Channel controlled cities that are sick of listening to the same crappy music over and over again with stupid syndicated drive-time radio shows. It is also appealing to people who are sick of hearing 10-minute blocks of commercials on local radio stations.
It is also VERY appealing to people who live in areas of the country where there is limited or no decent radio service. It is also very appealing to cross-country truck drivers, people with long commutes in areas with bad radio reception, and for recreational use in areas with bad or no radio reception.
All "digital radio" does is allow you to get the same shitty programming in areas that already have decent radio reception, but with much better quality. In other words- digital radio does almost nothing to compete with satellite radio.
All digital radio really does is allow the company that is licensing the technology to make a butt-load of money, while it allows the FCC to drool over the possibility that it can eventually get back radio bandwidth by forcing people to go "digital" in 5-10 years (just like they are trying to do with TV now).
I think in the long run that anything digital is a good idea, and I like the idea of digital radio in the future (although I don't particularly like the current plan for it).
I don't believe that hailing digital radio as a satellite radio killer in the next couple of years and extolling its virtues as a "free" service is valid. One of the biggest advantages to digital service is it can be much more easily controlled by the source than an analog signal. Sure- it's free now because there is no way to control who listens to it. What happens when all radio is digital? Do you honestly think it will be free then? In the mean-time- how do you think all these "free" radio stations are going to pay to upgrade all their equipement for digital service? Yep- more commercials. A lot of people complain that there are more commercials on TV now than ever before- ever wonder why? Sure, we can chalk a lot of it up to greed, but we also have to look at all these TV stations that are now being forced by the FCC to upgrade all their equipement to digital/HDTV.