…in the sky with diamonds (the XM and Sirius Satellite Radio Merger)

Any time two rivals come together to form a pact one must always consider the broader picture of what the union would mean. There are any number of differing opinions and viewpoints in the current case of XM and Sirius in the satellite radio world. Their situation as both content providers and as delivery platforms was plagued from day one with controversy and there is little surprise the threat of a merger is continuing to generate that.

One must consider the uniqueness of what both satellite radio companies were trying to do. Most paid delivery systems focus on selling their delivery platform and license the content they delivery. This can be seen in the cable and satellite television model as well as with ISPs and even now in the mobile telecommunications industry. Furthermore, most of the top content providers are focused on the generation of top quality programming and license the bulk of the delivery to other resources. Those that do provide delivery platforms are part of a free-for-the-user network and subsidize the delivery with advertising. For satellite radio, it functions two-fold competing both as a delivery platform and a content generation vehicle and excels as neither.

In dissecting satellite radio’s delivery problems first, the historical subscription model is noteworthy to understand. Subscriptions for the publishing world, for example, result in under thirty percent of revenues, with the bulk of their operation budget coming from the sale of advertising and the balance from newsstand and alternative sources. Furthermore, other complimentary delivery platforms such as cable and satellite television, similar comparisons can be made with under half the operating budgets being generated via the subscriptions. Even other subscription based music services, such as Rhapsody, subsidize their subscription revenues with a la carte consumer services and paid advertising in order to maintain revenue streams. Mobile telecommunications uses a similar multi-tiered model of subscription, a la carte and partnerships. Satellite radio however derives the vast majority of its operating budgets solely from subscriptions. With the overhead in operations satellite carries it continues to be impossible to bridge the income to expenses gap to create profits.

Secondly, in relation to the delivery system, both companies maintained exclusive propriety technology the consumer was required to purchase in order to enjoy the services. The difference here is in similar delivery platforms, such as cable / broadband television, the receiver box is rented rather than purchased. The rental allows more flexibility for the consumer and less perceived upfront investment costs, even though the equipment is usually proprietary. Similarly, ISP services allow rental of the connection equipment, such as modems, routers, etc. In the case of mobile telecommunications where phones and other devises are purchased there is an interoperability function and the ability to take your devise from provider to provider in most cases, so the investment takes on a different meaning to the consumer. The exclusivity factor plays a role in consumer adoption and assisted in the lower than expected usage.

The sales of the receiver units also pose another problem. Upon their initial introduction competition in the devise world was relatively low. Therefore, electronics retailers could focus more on selling the units as a ‘hot new technology.’ However, since their introduction years ago new hipper technology such as digital cameras, portable digital music devises and HDTV are attracting customer attention on the store’s floors. Similarly, the lucrative partnerships with the automobile industry that preloaded vehicles with the receiver and complimentary trial service have lost their luster. Dealers are now touting audio jack inputs and wifi connectivity rather than satellite radio in order to move cars off the lot and are focusing more on subscriptions for GPS and emergency services (such as OnStar by GM). The lack of sales focus deteriorates the importance of the unit and therefore the service meaning more unfulfilled free trials and an even greater number of trials not resulting in re-subscription.

Thus far, the focus was on service delivery via either in-dash or in-home reception and not as a multifunctional concept. Services are not bundled with other mobile devices (such as phones or media players). Existing units are only semi-mobile themselves moving from home to auto but hardly the type of

Delivery is only half the picture. The rest is content. For other delivery platforms that charge, the content they are licensing is built on partnerships allowing for greater marketing despite the content being available in some cases via multiple delivery channels. For satellite radio, the content is primarily exclusively their own and is only marketed via their own channels not through a network of partnerships.

Of course, satellite radio has some pretty entertaining content, however, the premise of the content is hindered in three ways. First, and most obviously it is live pure audio. Second, it is conventional in nature. Third, it is paid.

In a world of on demand multimedia, generic audio in a live format is not as riveting as the competition. Traditional broadcast radio suffers from these same challenges in vying for the ears and attention of the audience. Competition for entertainment attention comes from all arenas as multitasking gains even greater penetration. Mobile competition comes from the completely customizable digital music player as well as any number of hand-held entertainment devices such as phones and gaming units. In-dash competition for drivers comes from traditional radio, digital music players, phones and more, plus the passengers now have greater access to entertainment consoles Home competition comes from all of the above as well as the internet. As entertainment and connectivity continue to proliferate all elements of our lives and has become more multimedia in nature than every before. Nothing about satellite radio stands out in the grander scheme of multitasked entertainment when considering the plethora of other options available at any given time.

Just the “share of ear” competition is incredibly fierce, things become more complex when introducing the interactive aspects. The fact is, the content of satellite is extremely predictable in nature because as a user of satellite radio you can do essential one thing, listen. Granted you have an array of listening choices but even they really boil down to either music or talk programming as it occurs in real time. Nothing more. Due to any number of licensing and technology issues you cannot record and replay programming. You cannot directly interact directly with the content in any way or customize it for yourself, such as cross program channels, focus the programming based on personal preference or even rate or review the content itself. You cannot link to purchasing content. You cannot easily “share” the content with adjoining listeners or your peers or friends who might become future users.

The concept of joining the two companies is being questioned because they are both satellite radio providers. However, in the grander scheme, satellite radio is not a fledging business model. The theory of competition between then has not resulted in lower prices, greater services or a stronger consumer perception of the format. A better scenario would be for them to pool their collective resources and better leverage their content and delivery systems if they are to survive into the future of entertainment content and delivery.

First and foremost, they must be aware of wifi proliferation, and how that will effect their usership as it relates to how they will compete with traditional broadcasters that already acknoladge the wifi revolution and are working on their streaming online signals rather than trying to adopt a less consumer friendly HDFM band. Secondly, they should consider leasing their broadcast-width to other content providers and adopt some of television’s cable and satellite conceptualism in order to better diversity the content and broaden their appeal.

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About thedoormouse

I am I. That’s all that i am. my little mousehole in cyberspace of fiction, recipes, sacrasm, op-ed on music, sports, and other notations both grand and tiny: https://thedmouse.wordpress.com/about-thedmouse/
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