Future of Radio, Satellite, Terrestrial, Internet

Feb 18, 2009 by Paul White

In my position I have an interesting view of the world.  I don't get out much, except for going to the gym.  Most of my days are spent online working on my client's websites, and keeping up on new technologies.  I am part programmer, part artist, and part hacker. This gives me a unique perspective into how everything ties together.  In 2005 I predicted that Satellite Radio was never going to make it.  In 2007 I predicted Obama would be our next president.  I am not claiming to be the oracle of Omaha ( Warren Buffet ), but I have more predictions that may affect many in the radio business.

Satallite Radio's Birth and Future

It all started with a good intention.  Commercial free content brought to everyone via Satallite. People pay a small montly fee to get access to over 140 stations.  XM was born, and then a couple years later Sirius started up.  However getting people to subscribe was not going to be an easy task.  You needed a special tuner, and in some cases you had to spend extra money to have the antenna mounted on your ride.  So just to start you were out some $300 just to get the ability to subscribe.  Subscriptions were about $10 / month.  Intially getting people to buy Satalite Radio was an uphill battle.  I know this for a fact. During the Rise of Sirius and XM, I worked at Best Buy in the Car Audio Installation department.  This was the Best buy in Overland Park, Kansas ( 2nd highest income per household by county in the country ).  I started working early November through March.  During those 5 months our installation bay installed 2 of them.  Mean while we installed about 1000 non satallite head units.  So yeah, people were not digging satallite radio.

If people's car already had satallite radio and didn't need to buy the extra equipment, then they would be more likely to subscribe.  So XM and Sirius got the car companies to preinstall the tuners at the factory.  This helped a little but still people didn't subscribe.  So next they decided that every new car would come standard with satalite radio and it would have a free 6 month subscription included.   This helped alot.  Now both companies were racking up subscribers in droves.  But one interesting fact that often is not discussed was that when the free period ran out, people did not renew.  So the next step was to get better content.  Surely getting some popular talk show guys on the air would increase subscriptions.  Howard Stern was paid a huge amount of money.  If I recall it was something like 500 million ( including stock value ).  During these times Satalite basically dug themselves into a hole financially trying to provide fancy content.  Eventually both XM and Sirius Merged, and now they have 19 million subscribers.  How many of those are paying vs on free intro plans is unknown.  But I suspect the figures are not good. 

The weakness in the business model.

As of today. They have 19 million subscribers, buy they have absolutely no way of knowing how many are listening, and what they are listening too.  So for that fact they aren't much better than Terrestrial Radio in the numbers game.  Each station has one signal that is sent nation wide,  there is no way to broadcast local advertising specific to geographic locations.  When my wife used to travel for her job we had Sirius.  I remember listening to a talk comedy station, and the DJ asked people to call in and voice their opinions.  Nobody called in, because obviously very few people were listening.  So here we are today stock price has dropped, and the company is in shambles. Even though they got a loan to keep going.  I don't see any other path but Chapter 11 in their future, with chapter 7 following 6 months after that. 

Internet Radio is on the rise

If you still don't know what internet radio is, goto shoutcast.com.  After being there for 30 seconds you will understand.  Basically all you need is an internet connection ( via cable modem, Dialup, DSL, or even Cell phone ) to enjoy the tunes on internet radio.  As I sit here right now writing this article there are 265,995 people listening to internet Radio from 25,283 stations.  How many listeners do you have listening?  The truth is you don't know.  Nelson Ratings and Polls may be nice, but they will never be as accurate as internet radio.  On internet Radio if your DJ said something to piss off listeners. you could see a drop in listeners happen immediately.  This allows stations to make immediate changes giving listeners what they want on demand, instead of waiting for polls to come back.

Remember back when MP3s were starting to catch on.  The music industry didn't think much about it at first. but then eventually Napster made pirating music easy so anyone could do it.  Some 80 million people were using napster to share music.  Internet Radio could have the same impact on Local Radio Stations.  People now could setup their own radio stations out of their house.  Even though the average cable modem could only support up to 4 listeners due to upload bandwidth restrictions.  The newer high speed connections such as Verizon's Fios can support up to 2Mb's second, which could server music to 20 listeners.  Even though these numbers don't threaten local radio.  There are thousands of these little stations to choose from, and some can serve over 10K listeners at once.  Now I know what you are thinking.  When people are in their car they are listening to local radio or CD's / IPOD.  Manufacturers are now starting to make head units that support internet radio.  They use your cell phone's data connection, to get online and tune in.  Some cell phones even support dual voice and data at the same time.  Once manufacturers get this process to be so simple that even senior citizens are able to figure it out, local radio will be in trouble.

Unless...

Local Radio makes a push to broadcast over the internet.  Many stations already support this, but those who don't may get left in the dust.  Communications are rapidly changing.  When I was a teen back in the 90s.  Kids in high school would have beepers.  By the time I graduated we all had cell phones.  Now 10 year olds are running around with their own cell phone, and they are getting online with them too.  Cell phones today can do more than computers could 10 years ago.  Sony has a cell phone coming out that shoots 12 MP images, surfs the web, supports 3G speeds, watches TV.  Ohh yeah its makes call too.  When a person has that much information in the palm of their hand why would they turn on their radio?  Stations need to get themselves out there, join all the social networking sites,  support every device possible with your station websites.  Maybe even port the website for Iphones, and Cells.  Remember content is king. 




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