Recently, 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.
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.