• by Ken Liebeskind , January 8, 2002

First there was terrestrial radio. Then Internet radio. Now there’s satellite radio.

Satellite radio, with programming beamed to special radios from space, started getting some attention late last year. Two companies, with their own stations and stations from third party providers, offer it. And yes, there is such a thing as satellite radio advertising.

The donwside of the proposition is that listeners must buy radios for more than $200 and pay subscription fees of $9.95 a month or more. But on the upside, they get a high quality radio product with 100 station choices, a clear digital signal and the opportunity to listen to stations coast to coast, unlike other radio.

First off the block was XM Satellite Radio, headquartered in Washington, D.C., which started in two markets in late September and within six weeks was national. The reason for the gradual introduction was hardware availability, according to Steve Cook, senior vice president of sales and marketing. Yet he believes the six-week introduction was very fast.

The company offers 100 channels, including in-house music channels and news and talk channels from third party providers, including Fox News and CNN Headline News. The stations don't have call letter names, like terrestrial radio, but format related ones, such as Hank's Place for traditional country music and the Decade Channel for oldies.

Most of the music channels are commercial free, but 66 channels play commercials. The stations are running five minutes per hour, with a goal of ten, Cook says.

The strong point of satellite radio advertising is its ability to target. With a wide range of specific formats, it's possible to reach virtually any demographic, from Hispanic women to urban African American males, Cook says. The company provides advertisers with a list of stations and they select which ones they want to run on.

Satellite radio is also sold on a national basis, not local like terrestrial radio. Since the same stations are heard everywhere, every ad is national. Thus ads are sold only to national advertisers. Among the first clients are Allstate Insurance, AT&T, Radio Shack, Sears and Red Lobster, Cook says.

Rates are slightly higher than network radio. "Network can't guarantee placement, so they discount the price. We can guarantee when they run, so we charge a little more," Cook says.

XM's prime competitor is Sirius Satellite Radio in New York, which begins broadcasting in three markets on Feb. 14. It will also offer 100 stations, including its own music stations and news and talk stations from ABC, CNBC, Bloomberg, ESPN and more.

Ads will be played on 40 stations for six minutes per hour, says director of talk/sales partners Elana Sofko. The company has a number of charter advertisers she wouldn't name, but said they include pharmaceutical, credit card, financial services and automotive companies. Like XM, it will sell advertising targeted to demographic and even psychographic audiences. Advertisers may buy ads for individual shows as well as stations, she says.

The problem with satellite radio advertising now is the small audience it will reach. XM says within six to nine months it will offer Arbitron-like numbers to advertisers, but it can't do it now and hasn't released any audience figures yet.

"Advertisers have been very understanding about what to expect from us since the audience starts small," Sofko says. "They're buying into a concept." The benefit to advertisers is being the first on the block to be involved in the medium, which generates excitement, like the first banner advertisers on the Web, perhaps.

Both companies are working with rep firms to sell advertising, XM with Premiere Network Radio, a division of Clear Channel, and Sirius with Jones Media America, the leading radio rep firm. Premiere declined to comment for this article.

Amy Niles, the director of satellite radio sales and marketing at Jones, says the company has been working on satellite radio for a year. "We're developing the category. It's not as simple as selling regular radio. We're working with advertisers to get them to think in a new way. It's a learning curve for all of us."

She is very positive about satellite radio, lauding it for its sound quality and diversity of programming, which she calls amazing. She also thinks it's a promising advertising medium. "It will get more into the heart of companies," she says. "Different people will embrace it."