It’s looking like Sirius Satellite Radio’s buyout of XM Satellite Radio will go through, with last week’s surprising decision by Democratic Federal Communications Commission commissioner Jonathan Adelstein to vote for the merger if certain conditions are met. That would seem to give the merger the three-fifths majority it needs, with two commissioners already voting for its passage. Adelstein wants a guarantee that a quarter of the resulting company’s satellite capacity would be given to minority-owned and public-interest broadcast, as well as a six-year price cap on subscriptions. Commissioner Kevin Martin had already recommended passage of the deal, which would create a monopoly in a struggling field, and it received a Justice Department okay in March. But there’s still a lot of lobbying ongoing, most notably by the National Association of Broadcasters, which is fiercely opposed to the idea. Just how this will affect media buyers and planners also remains to be seen. Though the advertising market for satellite is relatively small, as many satellite-only channels are commercial free, there are also opportunities for sponsorships and other promotions. Michael Harrison, publisher of Talkers magazine and Dennis McGuire, vice president and regional broadcast director at Carat, talk to Media Life about satellite’s future, its measurement, and its implications for media people.
What does the proposed XM-Sirius merger mean for media buyers and planners?
MH: I think it would keep satellite radio in business longer than [they would be] otherwise. What it means to planners is secondary, because if we don’t have satellite radio then there’s no issue whatsoever.
This is two giant enterprises that are carrying far too much weight to be in competition. But they operate on different appliances with separate business models.
In the end, it would mean buyers and planners would still have those options available.
Do you foresee more ad-buying opportunities at all?
MH: It depends upon if one and one equals two, or if it equals one-and-a-half or three.
Remember, these are unlimited numbers of channels [on satellite], so it all depends on whether the merger results in more or fewer channels. My feeling is it will result in fewer, only because it will be more corporate than it is now, and those things tend to lean toward what are their biggest hits.
The first thing that tends to happen when a corporate entity puts out a lot of a variety is it sees what rises to the top and then it focuses on those things.
DM: It would give us another opportunity to try. Our goal is to do the best possible job for our clients. We’re proud of and happy with our relationships with terrestrial radio networks, and I fail to see why we can’t build such relationships with satellite.
But the question is how can we use it the way the system is set up now?
What will be the biggest change for the two if they merge?
MH: I think that the biggest change is it would aid the survival. So survival would be the change, but secondly, it will perhaps create an opportunity to consolidate resources for better programming. People could get, say, both Howard Stern and Oprah.
DM: If they were to put it together, they’d cut duplicated services and streamline operations to make themselves profitable. They could then get involved with a third-party measurement service to provide data and go out and aggressively sell on a network basis, and even spot basis, if they can channel feeds into specific markets, but I’m not sure they can do that yet.
What effect, if any, will it have on terrestrial radio?
MH: The only effect that satellite has had to this point is to give terrestrial programmers a kick in the can to do better programming. The programming on satellite has been superb, and it has inspired terrestrial programmers to do a better job.
Whether they have or not is yet to be seen, but the buzz satellite has created has gotten under the skin of terrestrial programmers, and that’s a good thing.
Other than that I don’t believe it’s had any effect, because it has not been the primary problem facing terrestrial radio at this point, just a small part of a whole spectrum of problems.
DM: Terrestrial radio is local, part of the lives of the people who are listening to that station. You’re comfortable with the personalities on the station, you trust them. So this wouldn’t have much of an effect on that.
I don’t think it would take listeners from terrestrial radio, but I do think they’d still be able to increase satellite subscribers. If it does go through, and they cut back expenses and fine-tune their programming, I think it will be more a force to be reckoned with, and much more so on a national basis.
Will we see more big-name talkers, in the vein of Howard Stern, move to satellite if the merger goes through?
MH: Maybe.
The companies that own terrestrial radio and the contracts are not going to roll over and play dead that easily.
Also, I don’t know whether or not there will be the money. I don’t know if there’s enough money at this phase in satellite, be it merged or each on an individual level, to continue to make those kinds of deals.
I gather there would be some new talent brought aboard, but I don’t know if it will become a trend.
DM: I don’t see a rush of it yet, not at this stage. There are personalities who have been building a brand over the course of years, so I don’t think there would be a rush to get on satellite. If they’ve been building the brand on terrestrial radio, most wouldn’t want to give that up.
Still, some will likely jump ship, especially if the price is right.
Do you ever expect satellite to reach the mainstream?
MH: No. I think that satellite radio is already doomed to become obsolete within the next few years based on the same problems facing terrestrial radio, which is the rise of the internet and a new form of broadcasting called the media station, or web sites designed as a combination of radio and TV stations in one.
There’s no way that something that comes from a satellite and requires a special receiver will be able to compete with the internet, which will be ubiquitous in just a couple of short years.
Every broadcast company will have an opportunity to be its own Sirius- or XM-type company. The biggest problem facing satellite broadcasters is that it’s on satellite, and uses a special appliance. It’s not subscriptions fees -- people will pay for premium content -- but beyond that I think the media station, meaning a web site with “stationality,” branded to target audiences, will be the undoing of both licensed AM/FM radio and satellite radio. It will replace both of them in far shorter time than conventional wisdom seems to indicate.
DM: Satellite has to really do an all-out effort to provide accountability to the radio industry [if it’s going to become mainstream]. Taking into consideration that you can do niche marketing with it, you have to have a way of measuring listenership.
We’re all looking for ways to reach an audience, and in the past I’ve said you should make a radio network buy, try to shave off some dollars and then go to satellite and ask, “what can you do in the way of special promotions?” But my base buy will be on the radio networks.
However, I cannot in good judgment go in and put a high percentage of dollars to satellite unless there’s a way to show a greater depth of listenership information.
