After years of audience stability in radio, listeners are impatiently switching off far more quickly than they used to. Listening has slipped 11 percent since the early 1990s, according to Arbitron audits.
Critics blame the economics of corporate consolidation and the pressures on managers to take few risks and stick to programming that pleases advertisers by drawing the largest possible audience. Commercials now take up to a third of every hour. There is little room for niche formats like all-opera.
Two rival startups, XM Satellite Radio Holdings Inc and Sirius Satellite Radio Inc, hope that listeners -- especially motorists -- are dissatisfied enough with mainstream radio to pay for a 100-channel menu of varied music and talk.
The competing services will each offer a different array of mostly commercial-free music channels, with musicians and disc jockeys who are specialists in genres ranging from symphonic to Tejano music compiling the play lists and serving as hosts.
Each service will also offer an array of commercially sponsored news and information channels devoted to a particular subject like religion, comedy or theater. The nonmusical programming is obtained in alliances with established broadcasters and entertainment sources. Only some of the channels will be original content, like the programming developed by National Public Radio exclusively for Sirius.
By delivering a digital version of an old medium, XM and Sirius hold the promise for signals that never fade from coast to coast.
But succeeding will not be easy. To become profitable, each company says it needs 4 million subscribers by 2004. This will require matching the growth of satellite television while creating programming with the originality of HBO, cable television's standout programmer.
Also, the business could start more slowly than anticipated if the radio receivers perform poorly or if reception crackles in cities. "I think they have a real marketing challenge convincing people to spend US$130 a year," said Paul-Jon McNealy, a Gartner Group analyst, who says satellite radio will shortly face competition for dashboard space from other broadband services.
Other analysts, though, are optimistic, forecasting higher profit margins in satellite radio than for cable or satellite television.
"This isn't a slam-dunk, but this is as close as you can get," said Michael Alpert, a Washington satellite consultant.
XM intends to charge subscribers US$9.99 monthly, while Sirius will charge US$12.95. In addition, customers will be required to buy new radios and receivers costing hundreds of dollars, although satellite-ready radios will become available in some new cars next year.
XM expects to start first, on Sept. 12, with broadcasts from its Washington-based studios to San Diego and the Dallas-Fort Worth area. The New York-based Sirius plans to start by the end of the year.
Each company expects to spend US$100 million over the next 18 months on advertising to build brand awareness.
The companies promise CD-level quality. To hear it, listeners must retrofit their cars with top-end US$300 radios that are equipped to decode the satellite signal along with an antenna and a receiver that together cost about US$240.
Satellite-receiving radios offered as a factory-installed option will first be available in some 2002 Cadillacs. Subscriptions are to be included in the car's financing from General Motors, which owns 12 percent of XM's stock.
RSS