Are You Sirius?

Satellite has been getting all the space. Or so it seems. The well financed U.S. satellite radio services XM and Sirius have been getting a tremendous amount of press despite an almost non-existent subscriber base. A reported $100 million promotion budget couldn't hurt. Company spokespeople have reportedly tossed out projections of a 45,000,000 U.S. subscriber list (are you sirius?). Now that the future of radio is on the near horizon, let's take a closer look.

September saw the launch of the 71-channel XM satellite service in San Diego and Dallas. Of course, not too many listeners were tuned in given that the current subscriber base is approximately 400 people. In other words, less than six people per channel. There are substantial barriers the services must overcome in order to become a significant force. First, a $12.95 (U.S.) monthly subscription fee may not be a huge obstacle to truckers, but will the average listener be willing to convert? Especially given the fact that conventional radio remains readily available and free. Remember that cable music-only services have performed dismally, having made virtually no impact to date on tuning (per capita hours tuned) to conventional radio. A desire for less talk doesn't mean no talk. People want human contact.

The other consideration is the fact that satellite services are national in nature. While the FCC has granted special temporary authority to the satellite broadcasters for terrestrial repeater buildout (the NAB has appealed this decision), there will be no local origination or spots. In the past, listeners have consistently expressed their preference for local radio. Local traffic, weather, and news are vital components of what the average listener seeks from radio. Just compare the tuning to any out of market station (with a strong signal and a similar format) to that of one originating in market. The local hero almost always wins. Even more significant is the importance of local ad revenues. I would suggest that, in order to survive, the satellite services will have to access these local revenue pools. What will conventional broadcasters have to say about giving away these dollars?

So, it seems that the success of satellite in the U.S. is a question mark. In Canada, it is currently out of the question. Satellite will be grey market only since the CRTC has no plans to grant licenses in Canada. GM in the U.S. has announced plans to include XM as an option in two of their models next year. This does not apply to GM in Canada.

On a completely different front, the talk about Internet tuning seems to be subsiding.

Perhaps as a factor of so many dot com bubbles bursting. Or perhaps it's the fact that when total listenership numbers were reported, the number one station in the U.S. didn't have enough tuning to make it comparable to a tiny Toronto station. And, of course, the Internet tuning is dispersed over such a broad area, it is virtually worthless from a retail standpoint. This isn't to say that using the Internet for promotional purposes doesn't remain extremely important for stations across Canada. Many stations are exploiting the web in a very efficient fashion for contesting, listener feedback, cross-promoting advertisers and upcoming features, and providing streaming.

So where are we now? In Canada, the success of DAB is critical to broadcast owners as the only way to protect the value of their properties. It is inevitable that AM and FM must give way to superior technology. Current license holders are the first to be granted DAB licenses by the CRTC. Owners thereby continue to hold and control an extremely valuable portion of the broadcast "real estate". DAB is up and running in Toronto, Vancouver, Montreal and Windsor, with Ottawa set to go by early 2002.

Digital Radio Roll-Out Inc. (a consortium of major private and public broadcasters plus a number of smaller private broadcasters) has begun a comprehensive engineering study which will lay the groundwork for new digital audio broadcasting (DAB) stations to serve the major population corridors in Canada. Covered by the new services will be all markets between Toronto - Windsor, Toronto - Ottawa, Toronto - Montreal, Montreal - Quebec City, Calgary - Edmonton, and Vancouver - Greater Fraser Valley.The planned expansion will add a series of markets including Hamilton, Kitchener, London, Cambridge, Guelph, Cornwall, Calgary, Red Deer, Edmonton, Quebec City, Trois Rivieres and Chilliwack. Duff Roman, president of DRRI, declared that "the launch of the corridor studies sets the stage for unleashing the true power of DAB - the addition of value-added datacasting services to accompany superb digital audio delivered seamlessly over vast areas to millions of Canadians."

But that leaves the all-important question of "where are the receivers?" Get ready.

The development of a new cost-effective chip developed by Texas Instuments will allow for new receivers to hit the Canadian market with an under $200 price point in the new year. Moreover, listen for a couple of major announcements at the CAB convention at the end of October. A major auto manufacturer has factored DAB into their plans in a big way. A major retailer is completing arrangements for the introduction of DAB home and portable receivers. I can tell you that by the end of 2002 there will be close to 1 million people tuning in to DAB. And that's just for starters. If you happen to be at the convention, drop by the DAB booth and find out the details.

So, while satellite may have been getting most of the space, Canadians better start making room for their DAB receivers.