The Infinite Dial

This week we are pleased to have a guest posting from Jack Taddeo on what the future holds for Satellite Radio. Remember, if you have something to contribute to the Infinite Dial, just pop me a note! Now, here's Jack:

Hello from snowy Chicago!

Some of you know that I have been a bit of a hard head when it comes to satellite radio and its perceived threat to radio.  We've had discussions on the subject in perceptual meetings or over coffee in your break rooms. I maintained that the satellite radio guys were not a long term threat.
 
I was honestly not sticking my head in the sand as much as I was sitting there saying to myself "the math doesn't work".   I've also said (privately and in the trade press) that the best use of XM and Sirius bandwidth is not in what amounts to playing records without any commercials in between.  Why?   It just never made sense to me.   They’ve launched several satellites including, in the case of XM,  2 replacements for premature failures.  (I would love to have been on the call to the insurance company!)  They build a bunch of studios for production along with a broadcast center then locate it on two of the most expensive chunks of real estate on the planet  (New York and DC). They pay a ton of money for content (Stern, NFL, CNN, etc.) then charge 12.95 a month for the service.  It doesn't add up. 
 
HBO has arguably one of the best brands and delivers on their promise of quality content year after year.  They charge about the same amount of money as XM and Sirius.  Which one do you think gives more value for the dollar?  Their call letters are HBO.
 
So, if you're in a segment that loses a billion dollars a year, and your business plan actually shows that the more subscribers you add the more money you lose, what do you do?  You wake up and realize that you are in the MOBILE entertainment business, not the anti-radio business. 
 
Bandwidth is bandwidth.  Does it make sense to use all of the technology, satellite space and expensive corporate digs to "play records"? How about using the same bandwidth to send video entertainment?  Think there are many SUVs and minivans out there with back seats full of DVDs to keep the kids entertained?  You bet.  Any reason they wouldn't want to watch all of the top-rated shows on Nickelodeon, Disney Channel, Discovery Kids, PBS, etc. while they are in the car?  No.  And that is just the lower end of the market. 
 
Enter Sirius.  In one quiet announcement they've said a mouthful.  First, satellite radio isn't a big enough deal for them to base their future on. Second, they want to be out in front of XM.   Third, they realize that content is king and that they can get great content with built-in demand from other sources without having to produce it in-house.   And finally, they need to make a course correction and they need to make it now if they are going to avoid another ambiguous year.
 
Back to my original position on satellite radio.  The bandwidth is worth more than what they are using it for presently.  So Sirius is going to wake up and start using its transmission system for something besides a place out of the rain for radio haters.  And they don't even have to merge with XM to do it.
 
FROM INSIDE RADIO:
Mel Karmazin says Sirius will break into TV in 2007.
He tells the Reuters Media Summit that Sirius will begin announcing content deals next month. And Karmazin expects Sirius will offer a live TV service to cars by the end of next year. The service is likely to begin with kids' channels and would be ad-supported.
 
-Jack

If you'd like to comment on this article, please feel free to post here or contact Jack directly at jtaddeo1 at earthlink dot net.