Satellite Vs. Radio (The Next Round)

Sirius and XM are proposing a merger of equals.

Sirius CEO Mel Karmazin would come away as CEO of the new entity (whatever it is called) and current XM Chairman Gary Parsons would be chairman of the merged satellite company. That's assuming the FCC approves it. Assuming the DOJ approves it. And that's a lot of assuming. I've seen reporting that predicts an early closing on the merger. On that one, we'll see what happens.

What we know is that a combined company could save billions and billions of dollars. That alone should have investors jumping for joy. These bleeding companies could be profitable as one. No doubt.

I'm more interested in how satellite radio could compete with terrestrial radio -- or as some in the industry like to call it -- "local radio" going forward. To date, neither satellite service has been much competition. Satellite is offered by paid subscription. Radio is free and heard everywhere. Satellite customers would total about 15 million when a merger took place -- a nice number but nowhere near radio's large audience.

Still, you've got to look at the potential of one satellite company vs. an entire radio industry if these strategies were embraced:
  1. Satellite radio could put pressure on terrestrial radio if it had a realistic plan to attract young listeners. Hint: this does not mean putting on a few more cookie-cutter music formats. It means understanding the demographic (the iPod, downloading, mobile generation that radio lost and satellite never found) and devising an entirely new form of programming.
  2. New marketing efforts would be necessary to attract the next generation. This demo doesn't have the monthly fees to get the service. Time to get creative.
  3. Satellite radio has to stop competing with terrestrial radio. Terrestrial radio, by the way, has to finally recognize that except for its ego, satellite radio is not its major problem. Losing the next generation is.
  4. Satellite radio can be local radio with FCC approval to use its repeater network. The NAB has always been fearful of this and both sides have said that it would never happen. Didn't everyone also say a merger of the only two satellite companies would never happen? Anyway, if satellite radio can get permission to unleash their local repeaters as local "radio stations" then it, too would be "local radio". That's why the NAB wasted no time asking the FCC to reject the merger. Satellite as a local operator, too, is an awesome prospect. A national platform and a local platform.
  5. Programming is going to have to be better. This is not to say that each satellite network doesn't have its own unique programming, but it's not enough. Not different enough from terrestrial radio except for no commercials. It's an opportunity to relaunch as something "better" than radio not just in fidelity but in programming. This opportunity may have been missed when the two services launched, but it better not blow its second chance.
  6. The merged satellite company is going to have to add commercials to its music channels. Maybe not now. But it's coming -- along with monthly fee hikes. There will be some subscriber defections but if 1,2,3 and 5 (above) can be done, listeners will accept a few commercial minutes an hour providing that the satellite service has outstanding and desirable programming. Content is key (ever hear me say that before?). Oh, if 4 above is accomplished, Katy bar the door because satellite as one platform will be a local competitor to commercial radio with far less costs. Isn't that strange to say? Satellite radio could be a platform that operates with less expense than terrestrial radio stations, but one platform operated efficiently trumps all.
  7. And, those commercials that will be added to each hour cannot be the kind that you hear on the satellite channels' non-music stations now. Satellite radio could and should pioneer inventing the commercial of the future (we have done some work on this in my USC Music Media Solutions Lab and yes, Virginia, young people like some commercials but what they like doesn't presently air on radio stations). If satellite radio just takes the kind of commercials that flow out of all terrestrial stations, it loses. It degrades the product and makes it harder for customers to pay for a service while they are forced to listen to commercials. HD TV stations wouldn't do analog commercials on an HD channel (I know, I know they do, but they won't). They need a whole new kind of commercial in HD format. Same for satellite radio -- a whole new kind of commercial born of satellite radio.
  8. The merged satellite services need to have a real game plan for Internet and mobile content. What they've got presently isn't getting a ripple of notice out of the next generation. By putting resources into a) understanding and b) looking for opportunities in Internet and mobile, satellite becomes a launching point for a very substantial radio platform.
  9. The combined satellite company must become a hit-maker. The disappointment in satellite radio is that it has had so little influence on popular music sales (duh, one reason is that they have so few of the music downloading next generation listening). But it's going to have to be a force to reckon with in music. What radio is slowly losing, satellite must win -- the music buying public. Terrestrial radio could be like AM -- for talk stations. But satellite -- although it may carry talk -- must be a hit-making music giant.
  10. This is purely personal -- lose the word "radio". It's satellite. That's enough. The word radio has negatives. Ask the next generation -- the ones you're going to have to attract. Just call it whatever you want to name it and the word "satellite" -- sans radio. (When I worked with legendary PD Paul Drew when he was doing the Drake format at WIBG in Philadelphia, Paul would forbid us from saying the word "radio" on the air. We were the "Big 99" -- not radio. CLKW was "The Big 8" not a generic radio station. Same for all the successful Drake RKO stations. Paul was right and anyway I wouldn't dream of crossing "The Chief"). And, Toyota does call a Camry a Camry car. Toyota is enough. Or Camry is enough.
That's this fella's formula for winning the day when the XM and Sirius merger is approved.

Oh, and by the way, you can go up to nine of the strategies listed above and insert "terrestrial radio" where I wrote satellite radio and substitute "satellite radio" where I wrote terrestrial radio and it changes everything -- terrestrial radio will be reinvigorated and of course, terrestrial radio doesn't need local repeaters -- they are local repeaters.

So, the real race is ready to get underway. Don't fear this merger. Welcome it. The satellite networks may not be competing with each other any longer, but terrestrial and satellite will -- finally.

Start your engines -- the first platform to win the next generation -- wins the medium.