Saturday, March 29, 2008

XM/Sirius Merger Comment

OK, I’ll bite.

Satellite radio has a two-fold problem. First, you have to subscribe to its service, and many people aren’t compelled to pay $13 a month just to listen to the radio, even if it might sound better. Second, you have to have a special radio to receive satellite radio, and not everyone has one or even wants to get one. The status quo is just fine, thank you very much. Besides that, why should I pay for something that I already get for free? These are fundamental obstacles that have to be overcome.

Neither does the public have the motivation to find out about satellite radio. Indeed some people think satellite radio is a rich kid’s toy and in fact their personal financial priorities may prohibit the buy-in and subscription. Satellite radio is a niche product that may not be suitable for a segment of the public for a whole host of reasons. I’m sure there are other factors, but these are the ones that pop into my mind when I think about it -

So if I were the King of Satellite Radio, what would I do?

First of all make certain that every new car that is sold has a satellite radio in it. This is already being done to a large degree.

Second, give those new car owners a darned good reason to subscribe after their 3 month gratis subscription runs out. Create a special price for first time subscribers as a buy-in initiative.

Also, a limited number of satellite “free to air” channels would do. One country music, one pop music, one classic rock, and one news and information channel. These would be just a tease at what’s available if you “subscribe today”. The free-to-air channels would also self promote the subscription services, as well as horizontal and vertical promotion of programs available on other channels (things you can only hear if you subscribe!).

I would also make the Free to Air channels commercial. Sell airtime, just like it’s being done on the conventional FTA AM and FM channels, and create a revenue stream.

Third, I would make subscriptions less expensive (see below). This would encourage more people to subscribe because the price of entry is not so formidable. My theory is that someone would be more likely to pay $5 a month than he would be paying $13 a month for similar services. More subscriptions even though at lower price will yield more overall revenue.

Fourth, I would have a tiered service package available. Something like this –

* Select any 25 channels $6 / month

* Select any 50 channels $7 / month

* Full service, all channels $13 / month

* Premium packages prices al-la-carte

Add a “family” subscription rate for each tier that is attractive enough to keep those unused satellite receivers activated.

[In my own case, I have two cars with XM receivers, but only 1 car is licensed! Wouldn’t XM be happy if I picked up a license for that 2nd car? In my own sense of value, I think $13 a month is expensive, and the additional expense of a second receiver is out of the question! If they said $13 a month for two receivers, I might consider that.]

Fifth, I would eliminate duplicated services on Sirius and XM. This would help reduce the number of transponder channels required and thereby reduce the overall operating cost. Also combine the studios, technical plants, business operations and combine staff where possible, to reduce overall headcount.

Sixth, I would eliminate “marginal” channels to reduce operating cost and transponder expense. XM has channels that I would never consider listening to, and I suspect that there are numerous channels that have very limited listenership. Sirius and XM both have channels that fit this category. Just because you can broadcast 100 channels doesn’t mean it is a good idea, especially when some channels have few if any people listening. Trim 20% of the channels now offered, eliminate the duplication of channel formats, and use the additional transponder space for new and more innovative services.

Seventh, Sirius and XM have to do a much better job keeping subscribers. They are LOUSY at keeping subscribers, and their customer service (XM anyway) is really bad. How do you keep subscribers? See above.

Eighth, receivers must be made more flexible. My Honda car radio is forever bound to XM. What if I wanted to someday change to Sirius? I can’t because my receiver won’t allow me to change. Wouldn’t it be nice if I could change between XM or Sirius channels at the press of a button? Wouldn’t it be nicer if I could have pushbutton selection of a mixture of XM and Sirius channels on the same radio?

The whole idea is that in order to survive, you must have many more “ears” tuned in than there are now. To collect more ears, you have to make it a) more interesting and compelling than it is now, b) lower the entry cost and lower the periodic cost, and c) make it easy to get started and easier to stay “in”.

There is a parallel factor, and that is the proliferation of FTA stations. But that’s a topic for another day. My “radical” opinion is that there are two many stations on the air today, with little to offer. Only a few make money and the others are barely getting by. Reduce the number of channels and everyone benefits; too much choice is not always a good thing,

Well now home entertainment was my baby's wish
So I hopped into town for a satellite dish
I tied it to the top of my Japanese car
I came home and I pointed it out into the stars
A message came back from the great beyond
There's fifty-seven channels and nothin' on

Lyrics: Bruce Springsteen, “57 Channels (and Nothin’ On)”

I’m just sayin’,

Dave M//

1 comment:

Russell W. said...

I have a lot of thoughts about satellite radio, where do I start:

* Satellite will never kill terrestrial radio. Two things will smother it first: 1) personal media players, and 2) the industry itself.

* One appealing thing about satellite is that it's more family-friendly, and gives you MUSIC in the morning. Most commercial stations have given up music in favor of often raunchy morning shows. Some people don't like toilet humor, especially with their chirren in the car. Advantage: satellite.

* I find it puzzling how the NAB has been so puffed up against the Sirius/XM merger. If anything, a monopoly satellite service would be highly likely to raise prices and reduce services, alienating their customer base. Shouldn't the NAB be ROOTING for that to happen???

* I work in radio (public radio) and yes I have a Sirius subscription. Two of 'em, in fact (one for each of our cars). Does this mean I'm betraying terrestrial radio? Of course not. I wonder if the GMs of KARK, KATV and KTHV have cable service at home?

* Do I listen to Sirius all the time? Of course not; my wife listens way more than I do. In town I'm usually listening to my own station...

* ... but when I'm going to and from Alabama each month to see my son, Sirius is my best friend. I'm hooked on the Radio Classics channel (118). OTR shows, 24/7. I'd pay just to have Radio Classics ALONE. Jack Benny weekdays at 5 PM. Life is good.

* What does make me cringe is when I see NPR competing with its own member stations. The highly-popular "Car Talk" each Saturday morning is fed live to Sirius at the same time it's fed to our stations! Ain't too crazy about that part.

* I think "Free To Air" is a no-brainer. Put the "basic" stuff on there, and have it advertiser-supported. Then tease for the "premium" services.

* Don't get rid of the 'niche' channels -- that's satellite's ace in the hole! Throw 'em overboard, and that would make Sirius/XM no different from terrestrial radio, which has shot itself in the foot (if not heart) through its over-researched music and over-leveraged clusters.

* A la carte? Great idea. Many people who have satellite radios like more than one kind of music. While it's good for whatever musical mood hits, I doubt 99% of XM or Sirius subscribers listen regularly to more than a dozen or so channels, myself included. Lower the price and more will come on board.

* Even if I don't like a channel, I'm glad it's there for others to enjoy. Sirius has a liberal talk channel, and two conservative channels .... everyone is happy. (I don't like talk shows too much, tho'; music and OTR are my elixirs while on a lonely interstate)

Who knows what this merger will hold. I do know a couple of things: if they raise the rates, I'll howl. If they get rid of Radio Classics, buh-bye.

In the end, I do have my Sirius baseball cap (got it as a subscription bonus). That'll become an instant collector's item. :-)