Wednesday, October 22, 2008

The Radio Week That Was 10/21

The story that stood out was all the changes in the creative teams in satellite radio as XM and Sirius began the meat of the merger. When you stand back and look at the 2 services XM really put up a lot more into the music channels than Sirius. Sirius really ramped up the expenses when they lured Howard away and paid tons for sports rights. The bidding wars for content were mostly to impress Wall Street at any cost and we all know the costs are rather high.

The music channels were really a bargain. Most just had a programmer and maybe a jock here and there. XM was more focused on trying to bring in some unique formats and building on Lee Abrams theory (a well founded one) on 4 types of programming that addressed listeners who were casual to rabid. XM spent a lot on imaging the stations, running special programs and profiles, having artists stop buy, covering live tours, and keeping the music channels pretty active. Sirius pretty much pressed play and ran with 1000 in a row on a group of stations that really just covered the basic format food groups we have in most major markets.

XM felt that the music channels brought in around 70% of the subscribers and a wide range of people. Sirius was a lot more focused on the talk side and 'Howard's World.' The one problems there is where is the growth? How many more Howard Heads do they expect to find willing to pay out for the service? Yes, lots signed up when he moved over, but the fans are either there or not by now. You don't see a bunch of 22 year olds with their first job and car jumping all over signing up for Howard.

The sports channels probably still have growth in them - they have all the major sports covered and there are plenty of fans. The talk channels are OK, but there aren't any big hosts here and in most markets the talk fans have a wide range of choices in many cases on regular radio.

The new programming order with the merged services is mostly living on Sirius' energy. And in the music side it's pretty much just the basics. The huge Washington HQ for XM is probably pretty much a ghost town as the world now revolves around just delivering the hits.

For the terrestrial radio side it's good news. There will still be 2 services to choose from for a long time splitting the effect and now we don't have much on the 'music side' to compete with. No doubt with the slump in car sales and the new opportunities for 'add on gadgets' from sync systems with I Pods to WiFi to navigation aids and more video options. It also looks like the next big deal in cars will be more centered on MPG than so much focus on the dashboard.

You also have the debt issues with the merger and Sirius/XM needing to raise a ton of money in 1st quarter. They really can't really move to just 1 audio service and then use the band width to venture more into video for a new revenue stream - you still have over 1/2 of XM people to service and the receivers are not compatible.

It all adds up to a very tough business model. While Mel may dream of being the leading content provider in audio as he claimed in one of the addresses around the merger - it's not going to happen without some creative people and unique programming.

While satellite radio's impact on terrestrial radio has gotten past the peak it's now going downhill. It's likely that these moves could steepen the slope. For 'regular' radio we still face lots of challenges, but it looks like satellite radio is in the rear view mirror. If you're looking for some really talented people there's even more to choose from.

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