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Sirius XM on a modest comeback but does it matter?

howardsternRecently, rumors began floating around that “American Idol” was considering Sirius XM radio host Howard Stern as a possible replacement for irascible judge Simon Cowell, who is leaving TV’s No. 1 show at the end of this season.

This generated a raft of media stories and Stern on his radio show seemed to relish the attention, gabbing about it for hours, throwing patented (and sometimes profane) insults at host Ryan Seacrest and new judge Ellen DeGeneres. This might all be just idle talk but it’s the most attention Stern has gotten in years.

And that says a lot about Sirius XM. Satellite radio was the darling technological innovation of 2002. Bullish Wall Street analysts predicted the services would have 40 million subscribers by 2010 and significantly eat into AM/FM radio listening and revenue.

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That didn’t happen. Satellite was soon supplanted by the iPod and online services such as Pandora and last.FM. Free AM/FM survived.

But imposing piles of debt and sky-high costs to pick up programming such as the NFL, Martha Stewart and Oprah Winfrey kept both XM and Sirius entrenched in the red. The two services were forced to merge in 2008. Subscriber numbers stalled at 19 million. Sirius XM a year ago was on the verge of filing for bankruptcy.

Liberty Media, led by John Malone,  swooped in and effectively saved the company. It has since raised subscriber rates, reduced costs and pulled Sirius XM from the financial brink.

“Both XM and Sirius were basket cases,” said Robert Unmacht, a media consultant out of Nashvile for IN3 Partners. “They spent like drunken sailors. But Liberty is fixing it.”

He thinks satellite gets a bad rap compared to media delivery company Netflix, which has only 12.3 million subscribers but gets a lot more acclaim and respect. The difference: Netflix makes money.

Sirius XM not only has lost billions but has never made much of a dent in AM/FM radio. Sirius XM won’t say how many local subscribers it has, but given the population of metro Atlanta, it’s likely to be in the 300,000 to 600,000 range. That would be a smaller audience than many local Atlanta radio stations such as Project 9-6-1, Kicks 101.5 and Fish 104.7.

“Sirius XM has not had an impact from a sales perspective,” said Paul O’Malley, general manager for True Oldies 106.7 and Kicks 101.5. “At the end of the day, people like and want their local station with local personalities and local information.”

[Local radio has been hardly immune to multiple competitive and structural shifts in media consumption since 2000. It has lost more than 20 percent of its listening time to other mediums over the past decade and revenues are down more than 30% from its peak around 2006. Last year, radio revenues fell 18 percent to $16 billion, according to Radio Advertising Bureau. How much of that is due to satellite radio? Relatively speaking, not that much.]

Atlanta resident Todd Cannon has been a satellite radio fan since 2003 when he considered it “the coolest thing in the world.” But despite owning 3,000 shares, his attention has started to wander.

“I find myself occasionally listening to Internet stations on my iPhone in the car,” said Cannon, 34, an operations director at an accounting firm who also worked at Atlanta top 40 station Star 94 in high school. “I just want to hear stuff that’s better than the product they’re putting out.”

He worries that once broadband becomes commonplace in car dashboards, “satellite will become increasingly irrelevant.”

Indeed, Sirius XM still has a whopping $3.2 billion debt burden, more than two-thirds of the company’s total market capitalization, according to this Marketwatch story. It’s not out of the woods yet.

And there’s a debate whether Stern possibly leaving in 2011 will impact Sirius XM. I know one local radio Stern fan who would drop Sirius XM in an instant if he left. Stern did bring in enough subscribers to Sirius in 2005-06 to justify the hundreds of millions the company spent on him at the time. But I’m not sure whether his departure would be a net gain or loss for Sirius XM.

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19 comments Add your comment

Surprised

February 19th, 2010
4:41 pm

Shocked, really. I love my XM and detest local radio. I can’t imagine anyone preferring free radio once they have tried XM. Can’t we just let AM and FM go away with print newspapers? Oops – sorry AJC!

Of course, the article cleverly left out the red/black numbers for radio stations. A quick check showed Clear Channel operating in the red. How about a representative sample of how other radio operators are doing?

jackman

February 19th, 2010
5:23 pm

I’ve had Sirius for about 5 years and have loved every minute of it. With local radio full of taking morons and commercials, I don’t understand why anyone still listens. Other options like internet radio may impact Sirius/XM in the long run, but that will take years. Terrestrial radio is the latest medium to face the executioner. Their clock is running and dramatic changes will have to come to survive.

Tim

February 19th, 2010
5:48 pm

I have had XM/Sirius for years. Once you have experienced satleite radio you will never go back to AM/FM radio. It would be like giving up cable television with HBO, ESPN, and Showtime to go back to rabbit ears. My favorite station is 202. Ron and Fez noon to 3.

Rod Ho Fan

February 20th, 2010
1:23 pm

If you like Sirius XM then see their “rags to riches” story on DVD. The movie is called “Stock Shock” and it goes over the history, development, and near-death experience of the stock. I did not know the inventor of sirius xm was a woman!–well she is now, at least. DVD is cheaper at http://www.stockshockmovie.com, but the DVD is pretty much everywhere for sale.

Kwmack84

February 20th, 2010
1:56 pm

As I prepare to purchase a set amount of shares of SIRI, only one questions looms in my mind:

WHY WOULD I PAY FOR SATELLITE RADIO WHEN I CAN GET SIMILAR, IF NOT MORE, CONTENT VIA BROADBAND WI-FI?

I already own a fair amount of Clearwire (CLWR) for this very reason, and it’s likely more 4G (or better) services will be entering the market within the next 2-5 years. Don’t get me wrong, I believe satellite radio has a strong platform for broadcasting/data transfer. However, where is the REAL VALUE to the consumer? Premium programming or exclusive contracts(Stern, Stewart, Oprah, etc?) Besides that, my phone does just about everything that Sirius offers already and more (internet, GPS, social networking, etc.), I don’t pay additional fees to use them, and I can use it in my car or carry it on foot; It’s only a matter of time before we start seeing broadband wi-fi-ready auto’s, if it’s not happening already.

Really, what does satellite have to offer that wi-fi can’t, and already does, provide? Concerned SIRI might be one of those tech’s that’s ultimately doomed.

Thoughts?

Thanks, folks. Cheers!

kreedham

February 20th, 2010
7:38 pm

Stern can go! I listened for maybe a year when he first came on and then I just grew tired of him. I honestly don’t think the loss in subscribers will outweigh the money saved. Having said that…Howard knows that they would like to keep him but not at any price. He should sign 1 more 5 year deal and then retire.

The other side is local radio is awful and the playlists on Sirius give you songs you just won’t hear in Atlanta anymore! Still a bargain!

kreedham

February 20th, 2010
7:40 pm

Oh yea…it’s in Howards best interest to work it out. A lot of his pay was/is in stock!

Gary

February 21st, 2010
7:20 pm

I love my XM and have all my presets set to XM channels. So much to choose from and although I love it, I find myself listening to mp3s more and more. The one thing that would get me to drop my subscription is internet radio finally working in automobiles. The wi-fi technology exists and it is only a matter of time. John Malone and Liberty Media are very smart – have been a loyal DirecTV subscriber for 15 years and they are always innovative. If i were them, I would migrate from satellite only and brand it with some wi-fi radio. That is where the business is going.

D

February 22nd, 2010
10:07 am

It’s all about programming and depth of playlist; and what type of listener you are. Local terrestrial radio will always be with us as access to local content is essential to radio. Another factor is that, for many people, radio is just background noise in the car. Those who really acre about a diversity of music will always seek out new sources, and while the selection of channels has been cut a bit since the merger, Sirius/XM still provides a great place to search for music by genre. There are some knowledgeable hosts and programmers that bring more to the table than an i-pod full of familiar tunes. With mp3 players, you hear what you already like. With satellite, you have an opportunity to learn more and expand your borders. I am a huge fan of Pandora, but would see it as a source in addition to Sirius/XM, not a replacement for it. Should reliable, consistent and dependable access to the internet become available, there will be access to a huge number of internet based stations, but currently that is not broadly available. Also, remember most of this listening will be done in a car. It can be distracting enough spinning the dial with Sirius/XM to reach their selection of stations. Think how difficult it will be to safely select from hundreds of internet stations. There are people who spend more on overpriced coffee each month than I do for Sirius/XM – I choose to spend my money on the music. I don’t know if they will survive changing technologies, but I wish them well and hope they will still be here when I buy my next car. It will definitely have an XM radio installed.

Lady Strange

February 22nd, 2010
11:43 am

I just recently got an XM radio and I think it’s great. The local stations don’t play enough varity for me and I hate the morning talking instead of music. I will keep my XM, the monthly fee isn’t too bad cause I don’t need Stern or any of those, just music for me.

Kenneth Keith

February 22nd, 2010
12:11 pm

There are 2 reasons to have satellite radio. Travelling without having to lose and find stations, and Howard Stern. If you want Howard’s orginal material you have to liten to satellite, the music can be had any number of ways.
The worst decision XM made was hiring Oprah Winfrey. They paid her millions for nothing, just rebroadcasts of her tv show that you can watch for “free” on tv. Putting an interior designer on her channel has got to rate with the worst decisions ever made in radio.

Vince

February 22nd, 2010
2:30 pm

You referenced a report in 2002 that predicted 40 million subscribers for 2010–that was way before the economic meltdown happened, so I’m sure lots of folks didn’t hit their numbers they expected 8 years ago. Another report came out in 2005 that said Sirius/XM would hit 20 million by 2010–it also predicted 9.5 million HD Radio subscribers as well. I would guess there’s not even a million people that listen to HD Radio.

Harry Grundle

February 23rd, 2010
12:27 am

If you listen to Atlanta talk radio and enjoy it, you’re a mouth-breathing retard. A simpleton.

“I’m Herma Cain, amemeber me?

We gonna stimalat the economa! We gonna Learyn sumpen.”

Braves fan in Fla

February 23rd, 2010
12:36 pm

Love my XM!!! The diversity in channels. Radio Margaritaville, classic rewind, 80s, 90s, Alternative radio and EVERY baseball game.

As someone said before..once you try it you will never go back to the endless commercials and useless babble on AM/FM channels. It is so nice to hear music in the mornings instead one of those AWEFUL morning talk shows.

Marie Woodall

February 23rd, 2010
5:30 pm

Why did they have to drop 50’s on 5, for Malt Shop Oldies. I’d rather listen to Pat St. John, along with the oldies. Get rid of Howard Stern, he is such an embarrassment to humanity.

jamij

February 24th, 2010
1:13 pm

Ditto what Kenneth said. Who in the world wants to listen to Oprah on the radio, much less see her on television. She is the most overrated person in the world…..GAG
My honey is huge Stern fan, we’ve had Sirius since it was a baby, and still a subscriber.

Zach

February 26th, 2010
4:25 am

I’m an XM subscriber so let me chime in with a perspective a lot of XM (and former XM) subscribers have. When Sirius took over XM — and make no mistake, it was a hostile takeover — we lost deep playlists and channel and after channel of “Just Music”. Now, we get Sirius’ idea of great radio: FM-like shallow playlists, chattering voicetracked DJs and constant promos for other music channels. I’ve stopped listening to the music channels because the music got worse and the interruptions got more frequent. I basically pay $13/month now for Opie and Anthony.

PS, to Marie Woodall: Malt Shop Oldies is only on DirecTV. DirecTV dropped Sirius XM because of all the listener complaints! What you’re hearing is a commercial and interruption free service from DMX called “Sonic Tap”. If you miss your 50’s on 5 you’ll need to go buy an XM or Sirius radio.

Hank

February 28th, 2010
5:57 pm

Had XM for 7 yrs. Two boomboxes, one for home and work/40 minute commute. Love it. So much to choose from. Feel like Real Jazz, Smooth Jazz, Country, Christian Contemporary, 80’s, Dan Patrick, FOX News, Rick and Bubba, Mad Dog Russo? on and on…I have the family plan and pay $11 for the 1st and $6 for the other unit. I grew up listening to AM radio long distance and today to have all these channels crystal clear in my office and then on the road, rain, sleet or snow….Awesome…
I admit we have been thru alot on the XM side. There were a couple of channels that I really miss and DJs too. But, as local radio goes thru this change again maybe it will find itself because it lost itself for many, many years….

Ben

March 11th, 2010
5:49 am

I believe if listeners wanted to be challenged, amazing channels like Beyond Jazz, Real Jazz and especially Fine Tuning would have delivered the needed numbers and more importantly the fans that would have remained. Those fans are still asking why.