The Merger Proves It … Satellite Radio Is A Gimmick, Not A Format

Sirius and XM plan to merge. Details are coming out today. Snore.

I have to put this in my “uncategorized” category because it isn’t really about anything Podcasting (profitable or otherwise) – other than a complete and total validation of it.

When you go into business, you need to ask yourself a simple question:

Who are you competitors?

If you don’t have any, you need to ask yourself this simple question:

What does everyone else on the planet know that I don’t?

When satellite radio emerged, I never “got it.” If you’re gonna pay for new technology and pay for content, why pay to have someone else choose what you’re gonna listen to (and when you’re going to listen to it)? Yes, you got a few gazillion channels, and a few less commercials, but it is still someone else choosing your content for you.

If I wanted that, I can listen to normal radio and not pay for Howard Stern’s retirement fund. Yes, I’ll have a few hundred less channels of garbage and won’t have a cool readout that tells me what garbage they’re forcing down my throat but I’ll also also be twelve bucks better for it each month (which, by the way, is more than pretty much every music subscription service out there).

Yes, the whole “what if I’m someplace that I can’t get radio?” thing – to me that’s kinda like asking “what if I’m someplace where they don’t make me pay taxes?” kinda thing. Count your blessings and do something about it.

Satellite radio is a gimmick – something for people who just want to turn a knob and know that some noise is going to come out. It might be a familiar noise, but it is noise none the less.

It is not a format. I’ve grilled everyone I’ve know, all 4 of them, who have purchased Satellite Radio and have received the following responses

My son bought it for me for Christmas.

I can listen to Howard Stern again.

It came with the car.

and, my personal favorite …

I want to be able to listen to Podcasts.

The future of media ain’t satellite. The future of media is

the content I want

(not type of content, but the actual content)

when I want to consume it

(yup, you can get Stern now whenever you want – as long as you turn on your radio at the right moment)

where I want to consume it

(yes, I can get it in the middle of the country – but I’m in an airplane much more than I’m in Kansas (don’t get me wrong – I’d prefer to be in Kansas))

on the device I want to consume it on

Them Satellite Radio boxes sure are cute, aren’t they?

Satellite radio didn’t get a single one of these right. They have no means to do so – and they never will. It is not the future of anything. It is a gimmick that a chunk of people will sign up for … sure enough.

And Stern will retire a very rich man as a result.

Just don’t call it an industry.

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Please note: I reserve the right to delete comments that are offensive or off-topic.

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  • http://www.peoplesguide.com Carl

    Your comments on satellite radio might apply to those unfortunate enough to live within range of standard FM and AM broadcast stations, but for those of us new-voo Thoreau types who happily live deep in the boonies, satellite radio is the *only* radio… and we happen to love it.

  • http://foroobar.wordpress.com Dead 3.0

    Carl, I couldn’t agree more. Not only does this deal make business sense, it’s an interesting content format. The industry is entertainment and satellite radio is a major player, like it or not. 2007 is the first year OEMs are really going to be pushing it. With penetration rates rising to over 50% by 2010 and trial retention rates at around 50%, what’s not to like (other than high fixed costs)? At least Wall Street agrees with me.

  • http://www.paulcolligan.com Paul Colligan

    Carl,

    Getting people who can’t get radio radio is a service – not an industry. I’m glad tech can bring it to you – I just wouldn’t want to have a business model based on it.

    Satellite Internet is a perfect example. I have a friend who lives “deep in the boonies” who has that as his only option. I’m thrilled he can get it. But we don’t see multiple companies providing satellite internet who are heralding it as this major breakthrough in communication.

    And if two satellite internet companies merged, you wouldn’t hear but a whisper about it in the press.

    Dead 3.0, Wall Street values a lot of companies in some very interesting ways. There is plenty to be made in the stock market with these companies, and as I mentioned, Stern will be making more than a pretty penny.

    But that still doesn’t make it more than a gimmick.

    Paul

  • http://www.paulcolligan.com Paul Colligan

    By the way, Doc Searls offer a solid disection of the arguments at hand (as he often does) here:

    http://doc.weblogs.com/2007/02/19#aGroundlevelViewOfTheXmsiriusMergerInTheSky

    Paul

  • http://foroobar.wordpress.com Dead 3.0

    Paul,

    On my blog I’ve provided an argument of why I think the merger makes sense. I agree its easy to arrive at any valuation you want by tweaking the numbers, but satellite radio has huge fixed costs. Like I said, they need to achieve scale to spread out these costs. 2007 is going to be the first year that OEMs really push satellite radio. By 2010 long-term agreements peg 55% of all new vehicles with the product preinstalled. That’s a lot of potential customers. While I think that the 50% trial subscriber retention rate that XM brags about is inflated, even a fraction of that can generate huge amounts of revenue. Think about DVDs or other fast growing consumer techs–for years it was only early adopters as prices dropped and awareness increased. Now look at DVD players. And satellite radio is being adopted faster than DVDs. I think its a valid comparison. My posts on the subject respond to Doc Searls’ arguments. And please, call me Michael.

  • Robert S.

    I generally agree with your comments and the overall business model (or lack thereof). I’m a big satellite radio fan because I live in Canada’s Northwest Territories , where for the most part, you can drive 12 hours and not pick up a single radio station. Forget trying to upload podcasts to my i-pod on a sailboat, 7 days away from the nearest Internet connection

    Sirius’ best target market: truck drivers, and people with long commutes. If you live in the city, and you have digital cable and a selection of 10+ free radio stations, why bother.

    Curtis

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  • sgt888

    OK where do I start. Obviously you have a distinct hatred for Howard Stern and should seek help for that. Get over your jeqalousy of the man and move on. But seriously you have no idea what you are talking about when it comes to Satellite Radio. You are missing the point that most of us satellite radio owners haven’t. We are sick and tired of commercials and we are sick of hearing the same top 20 or 40 or whatever songs 20 times a day. For people who drive coast to coast or state to state it is more than just a convenience to your favorite music station with you the whole ride. Some of us actually like having radio that isn’t censored by the freaking FCC. As hard as that may be to fathom by you and other satellite radio doubters-IT’S TRUE. I guess you have a better alternative? I think not. You know as well as everyone reading this that terrestrial radio is a joke tied down by the music industry. So if you are so smart and you think Sirius and Xm are just a gimmick then what is your alternative. Why do people pay for cabe when they can get regular TV over the air for free? Why do people pay for HD channels when they can get the same channels in the basic package. Answer those questions and MAYBE you will have an idea why sattelite radio is not a gimmick. No one cares about your silly opinion on gimmicks and formats we just want what we want. If you want to stay a slave to the music industry by all means have at it.

  • http://www.findinginnovation.com James Bullis

    I used to commute out of state into a different broadcast area about 4 years ago. Everyday I would have to switch over to the other channels in order to keep the tunes going. It was really annoying so I got XM Radio.

    I really liked it at the time and found some great new music that we don’t get in this area, but I got tired of paying for content I didn’t control. However, I thought that this was music content that I couldn’t get anywhere else in my car.

    I wasn’t really into MP3 players at the time because they seemed bulky and exspensive but I finally decided to shut off the XM radio and get an original Zune. For about the same monthly price I was able to get the content that I wanted, when I wanted it, and where I wanted it. When Zune updated to allow podcasts, a whole new world was opened up. I found myself learning something new on my way into work and back.

    Now I have an iPhone (I still have my Zune though) so I have the same great functionality with less things to carry. I think you are right, it was a gimmick and that is probably why the two need to combine forces.

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  • http://www.gpscardvd.com Car DVD Players

    That's a lot of potential customers. While I think that the 50% trial subscriber retention rate that XM brags about is inflated, even a fraction of that can generate huge amounts of revenue. Think about DVDs or other fast growing consumer techs–for years it was only early adopters as prices dropped and awareness increased.