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| Which
vendors are still active
in the Internet radio space? Our new "RAIN Vendor
Guide" will reveal the companies that have at
least a limited marketing budget and want your business
in 2002! |
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BY BOB BELLIN
FOR RADIO AND INTERNET NEWSLETTER
Lately, there's been a stream of prognostication, reports,
and projections about satellite radio from Wall Street. Not being
one to buck established trends, it's time for me to jump on the bandwagon
with what I hope is some objective and analysis of my own. The subject?
You guessed it…satellite radio!
It works!
First, some really good news -- by all accounts the technology
works.
Don't laugh, that's a big deal. If reception had proven unreliable,
all bets would have been off for Sat radio. And the truth is, no one
knew how well it would work. Congratulations are in order to the engineers
that designed XM. Sirius' roll out hasn't happened yet, but if XM
can make it work, it's reasonable to presume that they can too.
Is it viable?
Now to the important questions. Will this concept attract enough
subscribers to turn a respectable profit? If so, will both companies
thrive or only one? If only one survives, which one will it be?
Because they've already launched, I'll start with XM. They
get an "A-" for their technology because it functions well.  The
actual service gets a lower grade in my opinion. In fact, I think
they missed the mark by a considerable distance (that's why I'm inclined
to give Sirius the edge, but more on that later) and it's a real shame.
The wrong formats
What are XM's mistakes? For starters, they're in many of the
wrong formats. Why do I say that? My sense is that their format menu
represents the daydreams of XM's management, not the researched preferences
of likely subscribers. The 12-34 demo has always comprised the biggest
segment of the music market. There's no reason that shouldn't be the
case with Sat radio, yet a disproportionate number of XM's formats
are gold-based offerings aimed at baby boomers. Add all of the news
and talk channels to the mix and you have a product that doesn't seem
to be targeted to the largest potential audience for this medium.
So what will work for satellite radio? Formats that are too
narrow in their scope to make sense for a local radio station, but
could build a nice sized national platform. Formats that evoke enough
passion from their fan base to get a decent number of partisans to
fork over the subscription fee.
Might Internet radio preferences provide
a clue?
I don't know specifically what those all of those formats are,
but Internet radio might be a good place to look for some hints. Its
listeners are mostly younger, music/tech heads with a propensity to
pay the
freight for broadband. They seem to opt for trance, electronica, hip
hop, rap, dance and indie/college band stuff.
That doesn't mean that XM shouldn't include traditional formats
targeted at older listeners, but that the focus should be based on
the most likely subscribers as determined by research -- and it's
my strong sense that right now it isn't.
Let's not forget that satellite-delivered formats have already
failed on terrestrial radio, back when it was just called radio (remember
"Format 41?"), proving that local elements actually mean something
to people. For that reason, national versions of pre-existing local
radio formats probably won't pry the genie out of the bottle for XM.
Commercial load
Problem number two for XM is commercials.
Terrestrial radio has added a lot of commercial units and
people have noticed. It's one of, if not the biggest, complaint that
comes up repeatedly in research. A radio system with "no commercials"
has much more appeal than one with "fewer commercials on most channels
and no ads on the others…check with our guide to see which channels
feature what…"
It's hard to believe that if consumers would pay $10/month
to have "fewer commercials" that they wouldn't pay a few dollars more
to have "no" commercials." Sirius is betting on that. Commercials
could cost XM more in subscriber revenue than they'll take in selling
ads.
Why just the car?
Problem number three is the focus on the car. Less than one-third
of all radio listening is done in the car, contrary to
popular belief. Satellite radio has a much better chance if it can
replace radio, rather than just be an adjunct to it. Work and home
options have to be available at little or no additional cost for that
to happen, which means charging each user one subscription fee no
matter how many receivers they own.
There's a reason why most ISP's abandoned a metered payment
system for a subscription-based, "feels free" system. There's also
a reason why few believe any music download business that doesn't
allow portability (CD burning and downloading to portable players)
will succeed. Combine those concepts and a "feels free" subscription
model that supports and encourages portability makes more sense for
Sirius and XM than their current plans.
Usability
My last point is a minor one, but why are both of these services
giving their formats names like "The Bone," "The Bridge,"  and
"Fred?" (The format channel designated by the logo at left is
a dance music channel). Descriptive format names might not be as cute,
but they'll show potential subscribers something they might like more
efficiently. Just what does "Fred" mean to you?
Bottom Line on XM: A consumer
product like XM where billions of dollars have been spent on deployment
should be more content-focused.
What should Sirius do?
What about Sirius? I've always believed that the second of
these services to launch has the advantage. Sirius is in the position
to address many of the product mistakes that XM has made and they
should look consider doing the following:
1) Adjust their format offerings to reflect the researched
preferences of likely subscribers.
2) Hire some more experienced programmers to program those
formats. Despite all the hype, neither company's programming staff
reads like "who's who" of recent ratings success. Many top
programmers have lost their jobs due to consolidation, and others
are overworked and unhappy.
3) Adopt a subscription model that allows users to log on from
any receiver that supports Sirius. Permitting only one log in per
user at a time would keep people from sharing passwords and gaining
free
access.
4) Get involved in making the process easier for consumers.
That includes everything from making sure that the receiver interfaces
are easy to operate and intuitive to demystifying the format names.
5) Market the heck out of 1-4.
XM is touting the fact that they've hit their subscriber targets,
but I've been told that Wall Street actually expected more. Sirius
has an opportunity and they'd be wise not to blow it.
Room for two?
Can both services survive? In football terms, It's first quarter
and XM's first possession doesn't look too impressive. I don't see
enough differentiation between the two options, so I'm inclined to
believe that they'll just split the pie evenly and that the pie probably
isn't big enough to support both XM and Sirius.
Better conceived and designed programming would help both companies,
but I'd give a retooled Sirius an edge over a retooled XM because
you only get one chance to make a first impression. My feeling is
that ultimately, there's room for one but not two. How things get
to that is anyone's guess.
One final question: Why exactly, shouldn't these services be
allowed to offer local programming on repeaters? The NAB (as expected)
is lobbying against it, but why is this different from adding UHF
to VHF, or FM to AM, or original cable channels to both of them, or
satellite TV to all three? In each case, the predicted death of the
original medium proved to be widely exaggerated. Despite each company's
fervent denials concerning local programming goals, I'd bet that both
are planning on it for the future.
Should they succeed, forget what I said before, there's room
for more than two. If I'm right, this fight will heat up and be really
interesting to watch. |
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BY PAUL MALONEY
Netscape cofounder and current Loudcloud chairman
(and inventor of the revolutionary Mosaic browser -- which arguably
breathed life into the
World Wide Web as we know it today) Marc
Andreessen will keynote the NAB 2002 New Media Professionals
Conference in Las Vegas this spring.
According to the NAB website (here),
Andreessen will explain the early adoption stages of the Internet
by comparing it to that of the personal computer. He believes that
(and promises to explain how) Internet technology is still an important
tool for businesses to improve relationships with customer, partners,
and employees -- as well as streamlining the business process.
Andreessen created the first Mosaic browser prototype while
still an undergraduate at the University of Illinois.
After graduating, Andreessen helped launch Netscape Communications,
eventually becoming CTO and executive VP of products there.
He moved on to America Online, where he was CTO just prior to forming
Loudcloud in September
of 1999.
Loudcloud provides Internet operations management for enterprise
companies.
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From USA Today: "I am a front-seat passenger in a BMW SUV,
sampling Sirius Satellite
Radio, one of two upstart outfits
(along with XM Satellite Radio)
banking on the conceit that your frustration with conventional radio
will entice you to pay for a new form of the medium...
"At their booths during CES, Sirius and XM each paraded
a series of headline acts: Sheila E., Eddie Money and Blues Traveler,
among those representing Sirius; k.d. lang, Lauryn Hill and Quincy
Jones on the XM team...
"It would be unfair, of course, to pick a satellite
winner after only a few hours checking out their services on the
road. Sirius isn't even fully optimized yet. All of the company's
music channels are currently operating...only half of Sirius' 40
talk, news
and information channels are on the air so far...
"Subtle impressions of the two services do emerge. On
the surface Sirius seems, well, more serious. The Sirius Gold channel,
sporting the best music of the '50s and '60s, pretty much serves
up songs back-to-back with little fanfare. The comparable oldies
station on XM tries to set a nostalgic tone with period radio ads
(Slinky) and news spots (the death of Winston Churchill, man lands
on the moon, etc.). I liked this extra relish, but I suspect not
every listener will. Fact is, I get warm and fuzzy feelings from
both XM and Sirius..."
"Long-term, I can envision a cell phone-type business
model in which radios are given away or subsidized, provided you
sign a subscription contract. For now, if you're a music maven,
chances are you already schlep a boatload
of CDs, thus lessening the chance that you'll face long
stretches of road without melody. You might even burn your own disks.
"And lots of people are wedded to local
radio for traffic, weather and
sports talk...if you use those functions very often,
you're defeating the reason to get XM or Sirius in the first place."
Read this piece in yesterday's USA Today, or click
here.
...
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...
Risking that this will come off as needlessly snotty,
but does anyone else note a difference in caliber of the headline
artists that represented the two companies at CES? The rosters
read like career achievement Grammy nominees on one hand --
and the Nevada County Bushwhacker Days festival lineup on the
other.
The columnist does bring up a very interesting point
about free or "subsidized" equipment. Cable boxes
(for those that still need them), cable modems, and satellite
TV equipment is either basically free or really cheap. Giving
customers with two financial "hurdles" (equipment
costs and subscription fees), while alternatives exist (personal
music collections, local news sources), might not be a viable
solution for satellite radio. -- PM
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| Feb. 7-10, 2002 |
RAB
2002: Orlando, FL |
| Feb. 20-24, 2002 |
Gavin
Seminar: San Francisco, CA |
| Feb. 21-23, 2002 |
R&R
Talk Radio Seminar: Washington, DC |
| Mar. 1-3, 2002 |
ConXis:
Conference and Expo for Internet Streaming: Rosemont,
IL |
| Mar. 14, 2002 |
16th
Annual Bayliss Radio Roast: New York, NY |
| Apr. 5-8, 2002 |
Broadcast
Education Association 2002: Las Vegas, NV |
| Apr. 6-11, 2002 |
NAB
2002: Las Vegas, NV |
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