Satellite Radio Falls on Deaf Ears


Appealing to today's youth may be an even bigger challenge for XM and Sirius than winning FCC approval of their merger

My 17-year-old ought to be the target audience for Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR), the two competing companies that now are asking the Federal Communications Commission for a green light to merge. After all, she spends much of her life with an ear glued to anything that will satisfy her urgent need for the soothing vibrations of Blink-182, the White Stripes, and a bunch of other groups that may have come and gone by the time you read this. Apple's (AAPL) iTunes is the start page on her computer, and she plugs her iPod into her 1999 Jeep. Her computer, well, that plays tunes as well, usually when she's cramming for a test.

But ask my Madeline whether she'd like a subscription to one of the satellite radio companies and you'd get a blank stare. Tell her that it costs $12.95 a month, and she'll quickly calculate that it's the equivalent of 13 iTunes downloads. In short, the folks who think they'll one day make a market out of signing legions of folks who want crystal clear radio signals might just as well try to sell Madeline a landline telephone. You're yesterday's consumer product even before you've found a market. A decade or so after opening business, the two services have, they say, around 14 million subscribers—or a little more than half the number of folks who bought iPods from Apple in the past quarter.

Small Numbers

Fellas, take it from me: For Madeline and most of her generation, satellite radio just won't be a player in the entertainment arena. The question facing the FCC is whether the two companies should be allowed to merge. But the larger issue facing shareholders, customers, and the entertainment industry is whether the whole premise of satellite radio makes sense.

Indeed, in a world where media moguls have forever declared that content is king, the notion of paying for radio has proven for perhaps the first time that the king can be trumped. Badly. Technology, folks, has felled the mighty this time around. Sure, satellite radio can offer tons of channels—130, in fact, on Sirius and 170 on XM. You want easy jazz, rough talk, music from the '60s or '70s, even sportswriter Tony Kornheiser, it's all there for the taking. But it is being delivered to me when XM or Sirius would like me to have it, on their schedule, with their editors doing the selections. For a generation that has grown to rely on MySpace, MyTV, MyEverything, what satellite is offering is your programming.

Josh Bernoff, Forrester Research's (FORR) savvy new media forecaster, last year did a survey that found that only about 13% of those asked really want satellite radio, a number Bernoff opines would head south in a hurry if the two services started selling ads. He figures that by 2011, about 32 million folks will be satellite radio subscribers.

Their Way

Bernoff doesn't necessarily share my downbeat assessment of satellite's future—he rightly points out that people will still pay for convenience, quality, and choice—and he figures wall-to-wall Howard Stern, easy listening, or other types of music qualify on all scores.

He may have a point. There are plenty of those out there who want to hear their radio sans advertising, in a nice, crystal clear sound, without the crackles. But I take my cues from Madeline, whose generation represents the future of the media business. And they want their media in a much more convenient form than Sirius and XM can give it to her—like now. If they want to hear Howard Stern (and, thank goodness, Madeline doesn't) they want to download him, or get a podcast of his latest show. And if they want music, they want it on their own terms, whether it's in a car, a laptop, or from those iPod headsets that seem to dangle from the ears of everyone under the age of 35.

Yes, yes, I know that the satellite boys understand all of this: They offer online subscriptions, specially made radios to deliver their signal. I get it. But Madeline won't. And that's the problem, guys.

Grover is Los Angeles bureau manager for BusinessWeek.

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