Nick Isaacs
MUIN 280 - Cunningham
2/27/12
Research Paper #1

Satellite Radio: Past, Present, and the Future

Satellite radio, also called digital radio, is a relatively new technology to hit the audio broadcasting industry. Satellite radio is transmitted from 22,000 miles above the earth through a multitude of different satellites stationed over the United States (Bronsor, Howstuffworks.com). Through means of digital transmission the signal received and heard in satellite radio is often regarded as superior to the traditional radio experience. It emerged in 2001 with Tim McGraw being the first one to ever broadcast live on the newly developed system. It has been highly regarded as just a trend and having been invented in the wrong decade, however the major provider claims to have 20 million subscriptions to their radio programs (SEC, Form 10-K). While that is a substantial number of subscribers the technology has failed to capture the market as a whole. Its availability has been undermined by a monthly fee around 15 dollars, which has done a good job inhibiting ambitions to jump onboard this new advancement. Digital radio is a great invention however it is seen more as a prestigious service than it is as the next major form of radio for all. Two major players throughout its existence, Sirius and XM, have controlled digital radio since the beginning of its popularity. The two companies were the only two licensed for the rights by the FCC to broadcast radio by means of satellite (Hart, Washington Post). This was to ensure that a monopoly would not occur, however in 2007 competition was practically eliminated and Sirius merged with XM to form Sirius XM radio. The commercialization of satellite radio was quick to rise and it found its way into consumers lives fairly hastily. It was quickly integrated into the automobile industry and has become a key music component to a vast amount of car companies. Nearly every car company offers Sirius XM as an addition to their cars, which has helped popularize satellite radio and make it a household name. Sirius and XM established themselves as a company and upcoming technology very well. By infiltrating the automobile industry they allowed the companies to let people test their product through sneaking the cost into the transaction of the vehicle. This maneuver allowed the masses to hear this new form of digital radio and provided ample time for the listeners to get hooked within its superiority. Digital radio did not necessarily have the time for the creative anarchy stage of its existence to get out into the public, but other forms of satellite radio began to pop up in other mediums. The most popular alternative satellite programming was Music Choice. Music Choice, which signed deals with cable companies and was acquired as part of a cable television deal, provides much of the same qualities Sirius XM does but in the comfort of ones home. Because Sirius and XM both controlled the licenses for broadcasting through satellites it did not allow any other competition to infiltrate the scene and try to undermine either of the two leading companies’ progress. To make matters worse within the first six years of satellite radio even being broadcasted the competition merged and formed a monopoly. Although monopolies are not always the best for consumers it saved both satellite radio companies from going under. The superiority in quality to the FM format is not the only thing digital radio companies used to pull their listeners in. In order to get the masses hooked on this new technological advancement they featured commercial free programming. This major benefit appeals to consumers much more than traditional radio means and allows an escape from the badgering marketing ads one hears on the radio today. It does not stop there either; the radio companies also included exclusive deals with talk show hosts such as Howard Stern and other celebrities to broadcast only on their stations. This upper hand took these popular personalities off the terrestrial radio waves and into the digital cloud of satellite radio. However, the current state of digital radio is not as good as they may have predicted during its birth years ago. According to Andrew Sorkin of The New York Times, “Sirius XM, which never turned a profit when both companies were independent, is laden with $3.25 billion in debt.” Pursuant to their annual report as of 2010 the revenue of Sirius XM was $2.817 billion, however they only netted 43.06 million of that (SEC, Form 10-K). The radio industry produced about $18 billion a year with terrestrial radio companies comprising of about eighty percent of that number. This makes terrestrial radio the all time competitor for satellite. While there is only a small sliver of that $18 billion that is left to divide there still is a substantial amount of money going into the satellite radio industry. Regardless of any portion they may be able to carve as of now the business is still suffering. At the rate in which Sirius XM is progressing they will not last. All things held constant, it would take about sixty-five and a half years to just recoup their debt at the speed they are profiting off radio. That just is not a feasible number to work with and the next best thing will inevitably replace this technology. In February 2009 Sirius XM started preparing for bankruptcy and began to hire the appropriate lawyers for a Chapter 11 suit (Sorkin, New York Times). That demonstrates that the decline or possibly even death of satellite radio is imminent. Internet radio and streaming have become much more popular forms of accessing music within the past few years. It has grown particularly due to the use of smart phones and the free access that most of the providers allow. These competitions have hurt the incentive for potential customers to acquire subscriptions for Sirius XM. Due to the rise of these new technologies satellite radio has taken a huge hit in which it most likely will not recover unless they can manage to create a reasonable competition. In order to do so their innovations must be as accessible as other Internet radio services and give users as much freedom as other mediums. Despite the decline Sirius XM has some tricks up their sleeve to attempt to regain control and compete with other technologies such as Pandora, Spotify, and even Apple iPods. According to Sirius XM’s quarterly earnings call they said: “SXM 2.0 is a major upgrade and evolution of our satellite- and internet-delivered networks that span our hardware, software and audio and data content. We are rolling it out in phases, bringing more content and capabilities to our satellite platform, while also employing connectivity technologies such as WiFi, Bluetooth and the Internet to create exciting complements to our core radio services.” (White, Mashable.com) While these innovations to their service are definitely beneficial, they still require a paid subscription where other technologies allow free use in addition to premium plans. Satellite radio does possess some aspects that are not shared in Internet radio however. These perks do make the subscription fee feel worth the price if used and applied correctly. Besides the exclusive content and the wide availability, digital radio possesses human interaction that out trumps the dully-programmed Internet radio any day. The large diversity of stations allows listeners to listen in on live coverage of concerts, check the traffic, check the weather, and even chime in on emergency broadcasts that are specific to a local region. (King, kingofalltrades.com)This human interaction provides a certain different type of fulfillment for listeners and will not be traded for Internet radio by many. Through the decline of the satellite powerhouses a variety of outcomes could potentially take place. Digital radio has a much wider broadcast range and can be received all across the country with no interruption to the signal. Terrestrial radio signals do not have that same luxury and do not provide the same clarity or quality as satellite. One possibility is that if digital radio companies such as Sirius XM were to collapse there might be a chance that long time FM radio stations would take over the satellites in orbit. By doing so the stations could transmit their programs to compatible cars throughout the entire United States and up their advertisement funding dramatically. Another option, give Sirius XM users the same benefits as other services such as Pandora, Rhapsody and Spotify without raising the price. This would eliminate the requirement for multiple subscriptions and give Sirius XM users an added incentive considering the radio services they gain. Overall, satellite radio has definitely found its place among American culture. Although currently it is a service of prestige, it is in such a state of flux that it will be hard to determine exactly what the outcome of it may be. Its only major company is currently on the road to a pending bankruptcy that may slow its rise, however the technology itself is something that needs to be examined. A technology that would allow everyone in the country to tune into the same radio show from anywhere is truly remarkable and embodies what some of the fore founders of radio believed and wanted. The tools are all here for satellite radio to be bigger than it currently is, it’s just up to us to use them.
Works Cited Hart, Kim. "Satellite Radio Merger Approved." Washington Post. N.p., 2008. Web. 27 Feb 2012. http://www.washingtonpost.com/wp-dyn/content/article/2008/07/25/AR2008072503026.html?hpid=topnews King, . "Sirius XM vs. Pandora." King Of All Trades. N.p., 2011. Web. 27 Feb 2012. http://www.kingofalltrades.com/2011/10/03/sirius-xm-vs-pandorainternet-radio-apples-and-oranges/ Sirius XM Radio Inc., Initials. "Form 10-K." SEC.gov. SEC, 2010. Web. 27 Feb 2012. http://www.sec.gov/Archives/edgar/data/908937/000095012311014617/y88211e10vk.htm Sorkin, A., and Z. Kouwe. Sirius xm prepares for possible bankruptcy. N.p., 2009. Web. 27 Feb 2012. http://www.nytimes.com/2009/02/11/technology/companies/11radio.html?ref=technology

White, Charlie. "Sirius XM to get Pandora-like Upgrade." Mashable. N.p., 2011. Web. 27 Feb 2012.
http://mashable.com/2011/08/05/siriusxm-newfeatures/