iPhones, FStream and the Death of Satellite Radio 397
Statesman writes "Only a little over a year ago, the
FCC approved the merger of XM and Sirius
satellite radio companies and the combined stock was trading at $4 a share. Despite being a monopoly — or perhaps because of it — the company is failing. They are losing subscribers, the stock is now trading around 22 cents a share (a 97% decline), and they have written off $4.8 billion dollars in stock value. So, what happened? The CEO is blaming pretty much everyone except himself and his business model. But is pay-for-bandwidth even a viable business plan anymore? With millions of iPhone and gPhone users out there, free streaming audio applications like FStream, and thousands of Internet radio stations to access, the question is: why would anyone want to pay for proprietary hardware and a limited selection of a few hundred stations all controlled by one company?"
Read on for the rest of Statesman's thoughts.
Statesman continues:"It seems like the pay-for-broadcast business model is fundamentally flawed. First, satellite radio is a misnomer; if you are listening inside a big building, chances are you're really using WiFi radio, not satellite, which requires line-of-sight to the sky. In this mode, XM/Sirius offers less selection and higher cost than an iPhone and streaming audio client. Second, a monopoly is a monopoly. Sure, you can get dozens of ClearChannel stations in some markets, but after a while it does not matter whether they are country, top 40 or easy listening. They all have the same format of hypercharged 'personalities' and lots of ads. By contrast, the iPhone and streaming client can access thousands of stations from thousands of providers worldwide. Finally, you may say that an iPhone and service agreement are expensive compared to a satellite radio subscription, but if you already have the iPhone, the cost of adding a stream audio application is zero. And the iPhone is cheap compared to a cell phone plus an MP3 player plus a laptop plus internet access. Bottom line: a year after being granted monopoly status, Sirius is all but bankrupt and the satellite radio business model is dead. Time for the FCC to think seriously about making better use of this bandwidth."
Aw... (Score:5, Insightful)
That "lots of ads" thing? Nope, no ads. That's one benefit of paying for the service. The jocks do push things they think are of general interest, like football scores and who is playing who and where, so it isn't entirely noise-free, but it is close.
Another benefit of radio over the iPod is that you're connected to the real world; if something happens, you hear about it. There are situations where that might be important, and there are situations where it certainly is at least desirable.
Satellite radio is, on some channels, uncensored. That's something I treasure. Important for listening? No, not really. But it is very nice to hear people speaking and performing without the government muzzling them. Particularly in the case of rock, where profanity keeps a very large number of tunes from ever getting on standard radio (if they ever deviated from their playlists, as if that'll ever happen.)
There are very large areas of the country where there is no service you can use to receive radio. You can't use an iPhone within hundreds of miles of where I live (they locked it to AT&T, and AT&T isn't very interested in Montana); and road trips are eight, ten, even twelve hours, during which we are almost pitifully grateful to have XM/Sirius. There's no digital service you can use to connect to the Internet barring a satellite connection on the roof of your vehicle. Which, of course, is what the XM/Sirius widget is in the first place. It just connects to them instead of the Internet, that's all.
We do have one (yes, that's *1*) FM station we can hear, as long as we're within 30 miles of town or so. We get the farm report, some country, some top 40, "auctions" of local goods and services, and the one thing I am grateful for, the lost pets report. Someone found my cat once. One of the charity things I was involved with brought PBS radio here; I contributed a few grand, they put up a translator, and if you're within, oh, five miles of it in the right direction, you can listen to PBS via FM. Having put money into it, you'd think I'd listen, but I'm somewhat conservative on many issues and frankly, they drive me a little nuts.
At night, we can hear quite a bit of the broadcast AM band, but that's really deteriorated into far left and far right and wackos, with a sprinkling of country (which you may enjoy, but no one in my family does.)
Now, I certainly recognize that if they can't make a viable business out of satellite radio, it is going to go away, but when urban dwellers generalize as if the entire country has access to the amenities they do, well, I'm afraid that's not the entire picture. It'll be a real loss for us. We have satellite radios in all our vehicles in the family, at work, and in my home. The day they go dead will be a day of mourning around here.
Because we have cars? (Score:5, Insightful)
No!? Really? (Score:3, Insightful)
Why was this suprising? Remember the days when cable didn't have any commercials? Now it's just like regular public TV except there is more "Adult" content.
This model was doomed for failure the moment it left earth.
Re:Aw... (Score:5, Insightful)
The real problem with satellite radio is that since it competes mainly with free services (i.e. regular radio) it cannot raise its prices to bring in enough capital to cover the costs and there are not enough users, who like you and your family find it useful, to allow the service to make up the difference in volume.
While I doubt satellite radio is doomed in general, the Sirius/XM companies are. They have too much debt and don't bring in enough revenue to cover operating costs and debt retirement. I have the feeling that'll turn out like Iridium where the initial company goes bankrupt and another company steps in to buy the whole thing at some really reduced cost and then can operate the service without the debt of the initial startup costs. (Iridium was bought for $25 million after $6 billion of capital costs were sunk into it. Only then did it become profitable for the owners).
XM is more than just satellite radio (Score:5, Insightful)
I've got XM weather in my airplane (via a Garmin GPSmap 496). So do lots and lots of other people. There's no terrestrial replacement for that. I won't fly without it any more, as it allows me to keep an eye on the weather myself while I'm in the air.
I also have had XM radio in my car since December 2001, and love it: you don't have to go hunting around for decent programming every time you drive out of a station's coverage area on a road trip.
XM is worth every penny of the subscription fee, to me.
Sirius XM is NOT a monopoly (Score:5, Insightful)
...a monopoly is a monopoly.
This is a tired and wrong argument. From wikipedia: "Monopolies [wikipedia.org] are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods." There are PLENTY of viable substitute goods (iPods, terrestrial radio, etc), plenty of economic competition, and Sirius XM lacks the pricing power of a monopoly. The mere fact that they use a satellite to transmit their signal directly to customers does not make them a monopoly by itself. If satellite were the only way to reach all or even am economically significant fraction of customers then it would be a credible argument.
Our federal government took over a year (far too long btw) to review the case and came to the correct conclusion that there is no monopolistic power here. Customers are free to use any of the numerous alternatives and there is ample customer churn for Sirius XM to back this fact up. There is no compelling argument to be made against the merger and it is reasonably likely Sirius XM will go bankrupt no matter what happens thanks to the downturn in the auto industry.
Sirius XM may go out of business. Their revenue model has always been questionable and they have spent money somewhat recklessly. Their debt load is what ultimately might kill them. They have a decent product but that by itself is never enough. They are not and never have been a monopoly. There simply are too many other options.
Howard Stern (Score:2, Insightful)
You could say the same thing about a Jaguar (Score:1, Insightful)
Not every single successful business model is based on gaining critical mass, and appealing to a majority of the public. It's called a niche market. How many customers is enough to survive? There's no clear answer.
Not so (Score:5, Insightful)
XM/Sirius' stock is trading in the trash because they have over $1 billion in debt that needs to be refinanced next year and there are substantial fears that they won't be able to obtain such financing in the current market. If they are unable to obtain the financing they need, then the stock will be worthless. It's a pretty easy explanation.
The summary indicates that the submitter has no idea about satellite radio. I don't have one, nor have I ever had one, but even I can see through the faults in his explanation. Listening in a building does invoke the terrestrial rebroadcast, yes, but only a tiny fraction of satellite radios are portable. The overwhelming number of units are permanently installed in cars.
"Proprietary hardware?" Seriously? Satellite radio gear is manufactured by Alpine, Kenwood, Sony, Pioneer, and most of the smaller car audio names and is available as OEM equipment from nearly every car manufacturer. The iPhone is, near as I can tell, available from one vendor. If subby is perhaps using the words "proprietary hardware" to refer to the encrypted stream that is beamed from XM/Sirius, I might point out that the iPhone suffers from similar problems; please tell me how to use an iPhone with Verizon, or for that matter, how I keep Apple from remotely disabling FStream if they decide to do so.
What does XM/Sirius have to offer? For one, clean integration in your car. Car interface for an iPhone involves either a crappy little FM transmitter that will inevitably result in crackly, washed out audio on any channel or hardware-specific add-ons that work with some models of stereo but not others. If you're talking about an OEM XM/Sirius-capable radio in a recent model car, getting satellite radio is as trivial as calling a phone number. If you're talking about a car that lacks XM/Sirius hardware, then we're talking about installing new gear, which is essentially the same level of cost outlay and difficulty as adding iPhone playback. There are a few cars/aftermarket car stereos that have aux-in jacks, but those are pretty unusual. I would imagine that the ease of use in finding a radio station is probably lower on, you know, a radio than on some device that needs to be plugged into my car and have special software started up before I can browse for my preferred station.
I won't even get into the comparison between the $30 data plan on an iPhone (in addition to the standard voice plan) and the $6.99 a la carte pricing on XM/Sirius (for those who aren't interested in many of the stations).
Simply put, XM/Sirius isn't a "pay for bandwidth" service any more than Cable TV is. By the article's logic, the fact that I could go hook up my computer to my TV and use YouTube and Hulu and Netflix instant play means that the cable company is trying to sell me nothing more than bandwidth (over which similar shows tend to flow). It couldn't be further from the truth. XM/Sirius made some fundamentally, seriously bad business mistakes, starting with the fact that they didn't pool their resources and launch one company in the beginning. Launching (ultimately) redundant satellites, installing (ultimately) redundant terrestrial rebroadcasting towers, bidding against each other for radio "talent," etc. didn't come cheap, and much of it could have been avoided if one company launched in the beginning. On top of that, they forced potential subscribers to sit on the sideline until they figured out who was going to "win." Now, add in the fact that a huge amount of their debt is coming due at possibly one of the worst times to try to deal with it, and you've got a recipe for disaster.
But seriously, don't try to tell me that there's no good reason to use a $7/month radio service when a $30/month iPhone is just as good if you don't even grasp why someone might choose one over the other.
Re:Aw... (Score:1, Insightful)
So the 8 folks living in Montana may have trouble...ok...great...
Statesman's thoughts are just really way off. Just like real estate is about location, location, location, media is about content, content, content.
The fact is the proliferation of many technologies from streaming audio to that AUX IN line in your car have allowed listeners to get the same content XM/Sirius provides for FREE.
Its not about iPhones vs satellite radio. Satellite radio has always had this stigma around it:
I'm going to pay $13/month because some satellite radio DJ creates better iPOD playlists than me? Seriously.
If they can get more exclusive content like Howard Stern (whether you like him or not is not the issue) then I can see paying for a subscription.
But as it stands, I'll stick with my mp3 player, burned CDs, and NPR if I want to listen to something while driving.
News flash -- it's not always the CEO's fault (Score:5, Insightful)
I know it's incredibly in vogue these days to blame everything on selfish people who make more money than you, especially the evil CEOs, but sometimes companies fail and it's not the CEO's fault. The best covered wagon CEO on earth couldn't figure out a way to beat the Model T.
Satellite radio is caught between a rock and a hard place. The RIAA wants their cut of royalties for the music XM / Sirius plays, and wants XM to police things so people don't rip music off their streams (which never happens in practice anyway because the stream quality's not good enough to incite enough people to want to do that). That costs a lot of money. XM / Sirius don't make a lot of revenue from ads, so they have to make it from subscribers. Logic dictates that one way to increase the subscriber base is to offer discounts -- but that presents them with cash flow problems while maintaining (or increasing) maintenance costs on that larger subscriber base.
Some of the subscriber attrition can be attributed to folks with multiple radios shutting one of them down to help save money in an economic downturn. I have two older radios -- one in the car, and an XM PCR in the house. Since I can get the XM stream via PC anyway, I recently shut down the PCR.
The ONLY thing keeping them afloat right now are deals with high-profile comedians and pro sports. Period. And they have to pay those folks boatloads of money to play at all. As wireless Internet becomes more ubiquitous and more and more of the premium content is available via Internet (Sunday Night Football via NFL.com is a perfect example), sat radio will finally be killed off.
It was a great idea in the pre-wireless days, but satellite radio is going the way of Iridium Phones.
Re:You could say the same thing about a Jaguar (Score:3, Insightful)
Having to merge with other failing British auto manufacturers, then outright nationalized by the British government, then spat out and bought up by Ford, then sloughed off to an Indian car company hardly seems like a "successful business model".
Re:Because we have cars? (Score:3, Insightful)
Re:Sigh (Score:5, Insightful)
Re:Sirius XM is NOT a monopoly (Score:3, Insightful)
Our federal government took over a year (far too long btw) to review the case and came to the correct conclusion that there is no monopolistic power here. Customers are free to use any of the numerous alternatives and there is ample customer churn for Sirius XM to back this fact up. There is no compelling argument to be made against the merger and it is reasonably likely Sirius XM will go bankrupt no matter what happens thanks to the downturn in the auto industry.
Stern made this argument on his show a million times and it still doesn't hold water. Sirius/XM is not a monopoly in the mobile entertainment space, to be sure. You have Ipods, terrestrial radio, etc. However, SiriusXM is a monopoly in the satellite radio space. As competitors, they kept each other on their toes for price and content. Now, they can fiddle with either one at will, knowing that subscribers can't jump ship to a comparable service anymore.
You don't have to be a mathematician or a business major to know that if you have two companies competing and they merge into one, that is the very definition of a monopoly. Federal regulator lapdogs be damned.
Re:Aw... (Score:2, Insightful)
Um, you say that it doesn't compete, and then you go on to list all the ways where XM/Sirius wins the competition for you? That's just strengthening the argument for it competing.
Re:Because we have cars? (Score:1, Insightful)
Right. You would get an iPod just to hear some tunes, not an iPhone.
But the question about satellite radio is, how much more would you have to spend per month to make the service profitable; and would it still be worth it to you at that price?
Re:Aw... (Score:3, Insightful)
Um, you say that it doesn't compete, and then you go on to list all the ways where XM/Sirius wins the competition for you? That's just strengthening the argument for it competing.
What ever happened to basic reading comprehension? For Service A to compete with Service B, they have to have similar offerings. Regular radio has no ability to give traffic/weather reports as soon as you want them (doesn't compete). Regular radio doesn't let you narrowly choose the music you want to hear and it does not let you consistently hear it when you want to hear it (doesn't compete). If regular radio can somehow obtain these features, then and only then will it be competitive with satellite radio. As it is now, regular radio has a small subset of satellite radio's features and while it is monetarily free to you, you do pay for this by having to deal with advertisements.
As far as idioms in the English language are concerned, it's not wrong to say that either regular radio doesn't compete, or that it doesn't compete very successfully. It's wrong when some douchebag like you with a stick up his ass comes around and tries to unsuccessfully apply silly pedantry that would not be necessary if said douchebag had a little more reading comprehension and perhaps a bit more knowledge of English expressions.
Why am I being harsh? Because people like you who worry about distinctions like that can ruin any good conversation and you don't even gain anything from doing it.
Comment removed (Score:4, Insightful)
Re:Aw... (Score:3, Insightful)
"I'm going to pay $13/month because some satellite radio DJ creates better iPOD playlists than me? Seriously."
Yeah, that's actually a big part of paying for Sirius for me. I have just shy of 50GB of music on my computer, but I am constantly picking up on new stuff on stations that specialize in college-syle formats, alt rock, etc. I would spend more than $13 a month hunting and pecking through the piles of pre-determined major label crap that Amazon, Apple, et al are trying to shove down my throat on their sites to find some of the smaller, shinier gems.
Not to mention talk shows with good content and good sound quality, things that tend to come with having salaried talent. Guys like Bubba the Love Sponge and Jason Ellis aren't going to produce quality 4 hour daily shows for the luv or so they can promote their books or try to get traffic to a website...they have other things they could do for money that have nothing to do with keeping me entertained.
Re:Why Pay? (Score:3, Insightful)
I have never understood why anyone would pay for satellite radio programming.
Why? Because it's better. (Or was until the merger.) Better music programming and no commercials.
As far as playing MP3, CD, etc -- that takes planning and effort. With XM all I have to do is flip on the radio and there is (was) music I want to listen to.
Re:Freedom to bitch. (Score:1, Insightful)
In addition, his suggested alternative platform (the iPhone) shares the exact same problems in a different way. Proprietary gadget, limited apps controlled by one company.
THE IPHONE AND GPHONE ARE NOT THE ONLY SMARTPHONE PLATFORMS. STOP PRETENDING THEY ARE. In fact, they have minuscule total market share. This is as ridiculous as calling computers "Windows machines".
Are you submitters doing this just because Nokia, SonyE. and Samsung aren't American? I'm serious. What other reason could there possibly be?
Big Mistakes (Score:3, Insightful)
As a Sirius subscriber, I'm still left shaking my head regarding the channels they nixed as opposed to the ones they kept. Rather than consolodating the ones that were basically duplicitive of each other, they killed the unique ones. This was a boneheaded move.
They did drop their most unique and niche content - the stuff that customers can't get on terrestrial radio. For example, they still have several channels of "rap and hip-hop", while killing the one disco/R&B channel. My wife was really pissed about losing her disco station, which is one of the big reasons for getting the service in the first place. So, it's back to the CDs for her. She may keep the service for Stern, but isn't sure yet.
The key to making the service viable is to carry a larger diversity of "niche" channels, not a bunch of "mainstream" ones that mainly compete against terrestrial radio or even each other.
The entire business model needs to be rethought. Right now, it's based on lock-in of subscribers who obtain expensive radios and would lose their entire acquisition investment if they drop the subscription. That risk deters potential customers from even considering the service at all.
A few non-subscription channels, even if they are somewhat bland "mainstream commercial" content, removes that disincentive. Those who want the unique content will subscribe, those who don't won't, but at least get some revenue from advertisers on the "free" channels. The more listeners, the higher the advertising revenues.
Pay for commercial-free and unique content with the assurance that the equipment will still have some limited functionality minus the subscription would work much better.
One other opportunity that Sirius could persue is to act as a "content originator" for a network of terrestrial broadcasters, especially those adding HD Radio. Offering them the content at a lower cost than they would incur by hiring DJs and sharing ad revenue could work as an additional income stream.
Attack the market in multiple directions at once rather than just being a one-trick-pony is the real key to success.
Re:Aw... (Score:2, Insightful)
The majority of Americans are not the same group as the majority of the people you know.
Re:Aw... (Score:3, Insightful)
Since you're posting on Slashdot, you're already not the primary target demographic of satellite radio. Broadcasters want to reach the Average Joe who listens to radio for pop music, background noise, and the occasional sports updates. They don't want better content, they just want more content and they want it to be easy to get. For Average Joe, satellite *is* competing with regular broadcast radio and self-contained MP3 players.
A co-worker of mine bought a brand-new monstrosity of an SUV to drive herself 15 miles to work every day. It came with a free three-month subscription to XM radio. She went on about how great it was and all the channels that were available and so on. I had to carpool with her for a week and do you know what she listened to every single day? Oldies. In Detroit, a city with like 500 oldies broadcast stations. Except one day where she listened to a sports channel because she's a Red Wings nut. I wish this person were the only example like this that I can think of.
I will say that satellite radio raised the bar a little bit in terms of content quality, but not enough to make any lasting difference. I predict that once iPod Mania settles down a bit, streaming Internet radio will be the next big thing because setting one up is easy and cheap. And with a good broadband connection you have not a handful, not dozens, not even hundreds, but thousands upon thousands of "stations" to choose from for your listening pleasure. But if, and only if, we can keep the RIAA from trying to destroy it with abusive and absurd royalty rates like they're trying to do right now.
Couldn't agree more (Score:4, Insightful)
If Sirius goes under I am going to be one seriously sad panda. Radio in my part of the country is fucking dire.
I find it hard to believe people don't think it's worth $13/mo, honestly.
Re:Aw... (Score:2, Insightful)
How many are there that really want to listen to that kind of trash?
Thats why nobody broadcasts it. Its a very small market.
Re:Aw... (Score:3, Insightful)
Ditto. I was in San Diego when I got Sirius. I was sick of hearing the same 10 songs over and over on every FM channel. Plus I'm a fan of both Stern and Bubba.
I listen daily. And when I'm somewhere without line of sight to the sky, I stream Sirius from their website.
I bought a lifetime subscription. I now pay Nothing for the service. So for me there is no way FM can compete. There's is not cost issue. I'll listen to whichever has the best content.
As for ipods.. Those don't ever play anything new. Those don't play live talk shows. Those don't play sports, weather, BBC Radio, etc, etc..
Re:Aw... (Score:1, Insightful)