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Internet Killed the Satellite Radio Star
theodp writes "As Sirius XM faces bankruptcy, Slate's Farhad Manjoo reports that the company has bigger problems than just the end of cheap credit. While it has what seems like a pretty great service — the world's best radio programming for just a small monthly fee — Sirius XM has been eclipsed by something far cheaper and more convenient: the Internet. Load up Pandora or the Public Radio Tuner on your iPhone, and you've got access to a wider stream of music than you'll ever get through satellite. So forget the satellites, the special radios, and the huge customer acquisition costs, advises Manjoo, and instead focus on getting Howard Stern, Oprah, the NFL, and MLB on every Internet-connected device on the market at very low prices."
Yawn, who would have guessed?
Bankrupcy? Yawn. If the company collapses and goes out of business it will mean a short outage. There is just too much hardware out there for it to die... SOMEONE will pick up the pieces at fire sale prices and yeah, quality will probably go down, but satellite radio is installed in too many cars to completely die out. Howard Stern will go away, but hundreds of channels of ad-free music will survive. (although I've noticed the DJs still talk over the beginning of the songs...just like real "free" AM/FM radio)
What percentage of radio listeners even have an iPhone, or any portable device capable of radio reception at non-extortionate rates? Too small to even matter.
Satellite radio has its own problems but the iPhone isn't one of them.
The most important part of satellite radio is *mobile* access. Automobile. Essentially the same market that AM/FM stations have.
Let's look at what he's saying one by one:
1) The bulk of the article compares the iPod with Satellite Radio and says they're competing for the same market. Hmmm. Maybe so, but how many people have iPod docks in their car?
2) The idea that satellite radio is somehow a big market when streamed over the internet. Then he compares it to the huge number of free, high-quality internet streams and declares that Satellite Radio is too expensive. It doesn't even make any sense.
3) He chooses to dismiss the payments by satellite radio to car makers. He says if they got rid of that then they could charge less for the internet streams. Seriously man, I think he's retarded.
Let's be real. The *primary market* for Satellite Radio is automobile access. You turn on the music and as you drive all around the country, you get the same music/talk/news whatever. And what's more, it's a great application, too. Everybody who gets satellite radio, if they enjoy it, never listens to AM/FM again in their car.
If Satellite Radio was all set to rely on the Internet for it's delivery mechanism, then the whole reason for Satellite Radio disappears. Satellite Radio isn't about content it's about a delivery mechanism for content that doesn't require any infrastructure beyond the satellites themselves. The problem isn't that it competes with an iPod (doubtful) or that it doesn't come over the internet (goofy), its that the infrastructure set up by Sirius/XM is too costly. These guys took a bet on an adoption rate that hasn't happened.
This article is so dumb that it reminds me of a letter to the editor (true story) about 35 years ago. We were going through an energy crisis and the local paper wrote an editorial that said we need to begin seriously moving to solar. A few days later, a woman wrote in that it seemed like a poor idea because if we used solar power, we'd simply use up the sun quicker and then it would be really dark.
It demonstrated that the person writing the letter was clueless about what solar power was or how it even worked. Farhad Manjoo makes the same mistake. He has no idea what Satellite radio is, and why people want it. So he
I had satellite radio, but ended up ditching it along with a few other things. We decided that we were being economically bled to death my numerous little services, none of which were too bad individually but collectivity they ate up our budget.
- Sirius
- DishNetwork
- Land-line telephone
- Internet service
- MMO fees
- Cell phone
- GameTap
- FilePlanet
The list goes on. Eventually we were able to eliminate, consolidate, or reduce many of these fees. We safe a lot of money each month now. I now try and avoid anything that has a recurring monthly service, at least not unless it replaces something else. Business should realize that, in these tough economic times, people are going to take a hard look at where there money is going. Month payments don't have an end in sight, there's no payoff.
Thanks,
Bruce
Sattellite radio is wonderful in the car. Oh well.
I am very small, utmostly microscopic.
Not to me. Radio should continue to be free.
---- Booth was a patriot ----
Approximately 25% of Americans own portable standalone MP3 players, 76% of households in the U.S. own a portable electronic device many of which are capable of playing music (such as a PSP, phone, blackberry, etc.), 99% of American households have televisions in them, Americans own more than 1 billion radios with free AM/FM broadcasts to receive, Americans also play tons of video and computer games, Americans go to the movies, and the form of entertainment that Americans prefer most according to most recent studies...reading.
Sirius-XM has to compete with EVERYTHING, not just other forms of audio broadcasts like internet radio or over the air AM/FM radio. Every activity you do other than listen to Sirius-XM is in direct competition with Sirius-XM, the less you find yourself using the service, the less likely you are to renew the service, and that's if you get it in the first place.
If you have a short commute to work, is paying for a monthly radio fee worth it? Probably not if you only listen to a few minutes of radio. And if your commute is long, is satellite radio better than free radio? The talk shows have commercials on both, so unless you really want to listen to a Sirius-XM exclusive broadcaster, the answer is no again. But what about music? Sirius-XM has commercial free (for the most part) music, AM-FM does not. But with CDs and I-PODs (through car speakers) you can play your own music and audio books or whatever commercial free and you control the entire play list.
And once you leave your car, Sirius-XM offers almost nothing that is worth paying a monthly fee for, unless you crave their exclusive talk radio content like Howard Stern. All of the sports game radio broadcasts can be gotten with a superior service (like MLB.TV for professional baseball) or for free over AM-FM. And out of your car you've got the other alternatives, TV, movies, video games, reading, that studies show most Americans prefer over listening to any form of radio whether it's AM-FM or satellite.
Sirius-XM also spent enormous amounts of money securing exclusive contracts with radio businesses and entities. Howard Stern cost Sirius over $500 million ALONE and they gave him over $100 million in stocks that is now worth next to nothing. Factor in the costs of hiring Oprah, Martha Stewart, Jamie Foxx, the NFL, MLB, NASCAR, etc. and you have another major reason why the business is going under. Even more ironic was that Sirius and XM when they were competing against each other spent so money to OUTBID each other for these exclusives and now that they are MERGED TOGETHER they are stuck with each others' MASSIVE DEBT from taking on these insanely burdening contracts and the entire reason that they spent so much money in the first place is not a factor any longer. Sirius spent $500 million to get Howard Stern instead of XM (who offered significantly less according to Stern) but now Sirius-XM is the same company.
Another reason that Sirius-XM is in the tank is because car sales are down. Many car dealerships had deals with either Sirius or XM (and now with the new merged company Sirius-XM) to include a satellite radio with a new car with two or three free months subscription. The idea was that people would get used to having the satellite radio in their vehicle and they would continue to subscribe. But auto sales are down and this model of placing radio units in news cars has gone away for the most part leaving another dead end for Sirius.
With the economy going sour continually, how many extra subscribers does Sirius think it's going to get? Mel Karmazin, CEO of Sirius, keeps lowering projections of new subscribers every month. And the number of users canceling their subscriptions must also be getting higher considering the economy as well.
Fact is that Sirius has $3.5 billion in debt. If they declare bankruptcy is allows them to void their expensive c
That's the only place I listen, too. I work out of my vehicle and my job covers several states. Sometimes there are no radio stations worth listening to in the small towns where I work. I like XM for the talk and news, not so much for the music. It's nice to be able to listen to Coast to Coast AM when I'm leaving home at 3 in the morning and driving 2 or 3 hours to work. Talk radio is more entertaining than music sometimes.
Sure, if I worked in a big city I could use my laptop to listen to streaming radio online, but that's impossible when you're in the middle of nowhere.
Cut myself off...
"He has no idea what Satellite radio is, and why people want it. So he"
So he imposes his own idea of what the market is (which is quite simply, incorrect) and then has a way to make a satellite service that works in any part of North America and turns it into an urban service that will stream audio to me as long as I'm very near a 3G cellphone service.
Just. Dumb.
"I do miss Howard, but I hope that he'll go online once Sirius XM goes tits up."
Howard Stern became non-entertaining right around the time that Sirius made him extremely wealthy. His rants against *the man* were entirely too forced when he actually became *the man*.
Plus, he stopped putting effort into the show. Fridays off, long vacations, "Best of Howard Stern" but with the really controversial parts taken out (when you're *the man*, you don't risk your money being controversial), I assume he got married to the broken down model/girlfriend, whining about how his 4-day a week, 4 hour a day was just too hard on him anymore, Richard & Sal being the most creative on the show, fake "artie must be banned because he threw a CD" nonsense. Seriously, if Howard did that stuff when he was on FM, he wouldn't have lasted a week.
Perhaps the show has gotten better in the last 12 months, but I took the advice of the true believers, and *just stopped listening*.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Ford Prefect is from a small planet somewhere in the vicinity of Betelgeuse.... he has considerable difficulty understanding why humans tend to continually state the obvious, such as "It's a nice day", or "You're very tall", or "So this is it. We're all going to die", or "expensive subscription services are going to lose massive amounts of business during an economic downturn when cheap and free alternatives with more selection are readily available."
"3G wireless works just fine in the car"
Not really. The appeal of satellite radio on car trips is that even when I can't get cell phone service at all, I can get Satellite radio. If you just drive 10 minutes to work in the suburbs near a city, then perhaps your idea is fine. But the bulk of the U.S. does not get 3G service. Then you'd have to deal with the issue of how you tie your smart phone into the sound system of your car. While this is conceptually easy, from an infrastructure standpoint, you'd have to get all cell-phone makes agree they will support bluetooth streaming of stereo sound, you'd have to get the carriers to agree to allow this to happen, then you'd have to get the automobile manufacturers to tightly integrate this capability into the sound systems. Not to mention the man/machine interface that would support tuning stations inside an automobile without fiddling with a smart phone. These problems will take years to solve.
I don't think smart phone data plans allow the kind of access that would let you stream audio hours a day. Seems to me if significant numbers of people started streaming media on their smart phones everywhere, 3G service capacity just isn't there to support more than a handful of users. You'd end up with higher rates on your smart phones, or they plans would get severely curtailed, or both.
I think what's likely to happen here is that Sirius/XM will declare bankruptcy, and force the banks to restructure the debt. I'd hate to be holding a lot of paper for Sirius/XM right now; you'll be lucky to get 25 cents on the dollar.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
I think a lot of people here don't quite understand that once you get out of the city, there is no 3G data plans, there is no radio to speak of, and when you can get some reception, the AM/FM dial only has local sports & information on it. And yes, there are iPods, but when you spend a lot of time in your car, you've listened to your 10G of music for the hundredth time, you'd actually like to be surprised by music you haven't heard of before.
It's also fair to say that many people here believe that everybody is willing to pay thousands of dollars for a cell phone data plan simply because they do, but that's not my main point here... ;)
You were mistaken. Which is odd, since memory shouldn't be a problem for you
"However, what we need is a mesh network, because otherwise we will lose net neutrality and then you'll be back to having to listen to clearchannel because no other kind of internet radio will work on your mobile internet connection any more."
Congratulations. You said the magic phrase, mesh networks. Now here's another magic word, latency. And another, monopoly. See the problem now? Remember it's not really "your" mobile network.
go to a car radio place, and ask options.
So now I'm supposed to buy a new car stereo with a 3.5mm audio input jack for the owners of each of these vehicles. Sticking with FM radio is much cheaper than that.
If you want the data plan that is sold separately.
And t-mobile.com just told me the cheapest data-only plan is $39.99 per month plus various taxes and unfunded-mandate-cost-recovery fees. It's cheaper than AT&T, which charges $20 more than that, but still much more expensive than satellite radio.
Just like your ISP is separate from your phone, and cable
I don't understand. In my area, the phone company offers DSL and FiOS, and the cable company offers cable Internet. Everyone else offers dial-up, which doesn't work too well for Internet radio.
You're right that 3G coverage and radio selection out in the middle of nowhere sucks. And there is a market for people who're willing to pay for Sirius/XM because of that.
The problem is this market isn't big enough to pay Sirius/XM's costs. That's why they've never made a profit, and likely never will. And with the credit situation the way it is today, the life expectancy for companies that constantly lose money is not very long.