• by Paul Gough , August 6, 2003

In a surprising development, an unintended application of satellite radio broadcasting could morph into a new form of media - satellite video - that might even compete with traditional forms of TV advertising.

While satellite radio developers don't have any immediate plans to add video channels to the hundred or so audio channels they currently feed, at least one confirmed it is in talks with major kids TV programming purveyors such as Cartoon Network, Nickelodeon and Toon Disney to stream their video content to satellite radio subscribers equipped with TVs.

"We are being pushed, quite frankly, by the car manufacturers to provide video in vehicles, particularly in the back seats of Dodge minivans," Joe Clayton, Sirius' president and chief executive officer, told analysts during a conference call Wednesday.

Clayton confirmed Sirius was pursuing the concept "in hardware terms" and an initial foray into kids cartoon programming appears feasible to steam due to its lower bit rate using the satellite radio bandwidth already approved by the FCC.

Tim Hanlon, vice president and director of emerging contacts at Chicago-based Starcom MediaVest Group, said it's not a leap to see both satellite radio companies easily morph into other things. The bandwidth that delivers audio can also stream stock quotes, other text and, of course, video.

"Satellite radio to the car is the beginning of a much, much bigger opportunity. And . does it have to be just audio? Does it have to be just the automobile? I think they're quickly answering that question. Does it have to be real time," Hanlon said. He predicted that the technology would grow to include not only reception of video but the ability to time-shift audio programming like TiVo and ReplayTV provides to television. Already, Hanlon noted, satellite radio has expanded portability beyond the automotive market where it started.

One buyer, who asked not to be identified, said the possibility of satellite video fit into the new "anytime, anywhere" reality of media. But it was yet to be determined whether or not satellite audio and video would survive. That, the buyer said, would depend not only on whether advertisers latched onto it but whether consumers would stay with the technology and whether the companies could survive long enough to see a brighter day.

The buyer said that, for satellite radio at least, clients were interested in the concept and the opportunities. Hanlon described the mostly clutter-free environment in sharp contrast to radio today. But Hanlon and another buyer said that one of the key challenges from the planning and buying community is the lack of measurement.

"It's still relatively new, and a little unproven from an advertisers' standpoint," said Maribeth Papuga, director of local broadcast at MediaVest Group in New York. Both XM and Sirius offer some type of commercial availability on their networks, with XM opening a little less than half of their music streams to a limited sponsorship (less than two minutes an hour) and Sirius keeping their music streams commercial free but offering spots on the talk streams.

XM is unquestionably the leader in satellite service, with 692,253 subscribers on June 30, adding more than 200,000 subscribers in the second quarter and more than 135,000 subscribers in the first quarter. Sirius said Wednesday that it 105,186 subscribers on June 30, up 55% in the quarter.

"It's one thing to have the subscribers but it's hard to tell who's listening to what and how long," Hanlon said.

Papuga said the measurement question isn't just about satellite radio. Other emerging forms of media, including Internet streaming, are struggling with the question. But she said that for buyers, who have a budget and goals and something to accomplish for their clients, it's hard to do anything more than a test in spending on satellite radio.

"You really can't justify it" without the measurement, Papuga said. Arbitron has conducted custom studies for XM in the past to measure audiences, and satellite radio has even come up on the diaries that Arbitron receives from its panels, particularly in New York City.

If the technical hurdles are cleared and satellite video becomes a viable option, Papuga sees a media that could accomplish creative executions of advertising, more than audio or video are now.

"If they've got the power to program this vehicle, they could probably do some amazing things that no one's ever thought of," she said.

But that will be in the future, both satellite streaming providers and the media agencies agree. Sirius spokesman Jim Collins said the future of satellite video streams will depend on what the automakers want to do with video in automobiles and, eventually, market demand.

"It's too soon to tell where that's going to go," Collins said. "We believe it will happen. Our automotive partners have told us that they believe it will happen and they are doing things along those lines."

Perhaps the same could be true about satellite radio itself.

"Most of the advertisers you see [on satellite radio] are kind of taking it on faith or belief. All new media platforms are that way. It takes pioneers to grow with the platform," Hanlon said. "But how do you measure it? Those issues are not going to go away."