Podcasting Killed the Satellite Star

When satellite radio was approved (spectrum allocated in 1992 and XM and Sirius applications approved in 1997), it was hailed as a big breakthrough for the industry. Markets with little diversity would have access to all sorts of music. Vertical markets that heretofore could not be supported through commercial radio and only got small slices (or none) of NPR became whole channels. The consumer would be served and all boats would rise. A little over ten years later, the two entities have merged into one and the market is waning. According to Business Week, Sirius XM will end 2008 with 19.1 million subscribers with a paltry 7.9% growth anticipated for 2009.

What happened? Digital music became portable. This all happened because of the MP3 format. First developed in 1987, it reached the market in a meaningful way in 1999 through SubPop, the first to distribute tracks through the MP3 format and a number of MP3 players. Later that same year, Shawn Fanning introduced a file sharing program called Napster. This blew the music industry away. It was all considered illegal until 2001 when Steve Jobs introduced the iPod which supported iTunes, the site put up by Apple to sell licensed music to the consumer. The rest as they say is history.

Today, Apple has sold 174 million iPods. The company is expected to sell 21.7 million in the fourth quarter alone, equivalent to or higher than the entire subscriber base of Sirius XM. While the market for podcasting is still tiny at about $250 million in 2008 according to eMarketer, the reality is that the availability of cheap or in many cases free (to the consumer as they often play music on their MP3 players that they have ripped from CDs they already own) music has replaced many other sources of music. Whether as a personal device, in the car or in the home, iPods and other MP3 players are the device of choice today for music listening.

As I was writing this, Sirius XM revised its forecast for 2009 downward to just 20.6 million. The Detroit bailout is good news and bad news for them. The hiatus in manufacturing also means a hiatus for Sirius XM as a big part of their volume is in new cars, including rentals. The bailout does help OEMs like Sirius XM to survive, however, through trickle-down economics.

Satellite will never be the shining star that investors once hoped for, however. The advent of personal portable music that is customizable plays to the same market that Sirius and once competitor XM had hoped for. The expansion of the iPod/MP3 player market into phones, plug in systems to play at home, cars with jacks built in, etc. means that iPods and generic MP3 players will be the hardware format for sound in the future. Music, news, features, etc. RIP, Sirius XM. It's only a matter of time.

10 comments about "Podcasting Killed the Satellite Star".
Check to receive email when comments are posted.
  1. Scott Curtis from Studeo, December 23, 2008 at 4:49 p.m.

    That is a naive comment Giuseppe. Satellite radio is an excellent format. Their sports programming cannot be beat. The guest hosted shows are quite excellent as well. For me however, (and I pay for 2 subscriptions) all I listen to is Howard 100 and Sirius XMU. The blog radio shows on the latter are simply phenomenal. It is so forward thinking --nobody on terrestrial radio is doing anything close. Forget about the sports programming which I think is unbeatable for a diehard fan, if we only talk about music, for those who are serious about music, who want to discover new music, who are completely unsatisfied by FM there is no better format than satellite radio.

    I keep hearing people around say that you can discover anything online nowadays but to that person I ask: What are YOU doing to discover new music? Nobody is doing anything. We're too busy! I am a music fanatic but I don't spend a ton of hours scouring the web looking for something new. I listen to blog radio on XMU and visit a few blogs and I discover enough music through those means that I can run my own music discovery blog. iPod/MP3 does not provide that. It just doesn't and I wish it did. I wish podcasting was taking off but it isn't. If you want a forward thinking podcast might I recommend my own!

    Hope to see you there Guiseppe.

  2. Hugo Ottolenghi, December 23, 2008 at 5:03 p.m.

    Video (MTV) was supposed to kill the radio star. MP3 players and, later, iPods were supposed to kill radio. But now we can get XM Sirius in our car, through DirecTV and via the Internet. Unlike newspapers, I think that the satellite people have figured out which business they are in. One day, when the world is Wi-Fi and I'll be listening in my car to music through my iPhone, I suspect that the programming will still be there.

  3. Scott Curtis from Studeo, December 23, 2008 at 5:21 p.m.

    Those internet radios companies like Tivoli are making are pretty cool. I see that subscription models are a little more difficult for people to accept but eventually all music will be available via subscription anyway. As long as the content is deemed valuable people will pay.

  4. Patrick Fitzgerald, December 23, 2008 at 6:27 p.m.

    Everyday in a some industry news letter, we read again and again that the public prefers an ad supported model and will tolerate advertising in order to keep the content free. For all of it's problems terrestrial radio is living proof of this. Decades old reports of the death of radio are still all around, yet no media has weathered the assaults of so many alternatives. In fact MP3's and alternate music sources are not the biggest competitors for audience share of mind; the cellphone easily take more quarter hours of attention than any alternative. There are two primary problems that will be the death of Satellite Radio; One it is being run and programmed by radio people. They have taken the same operating model and altered the delivery technology. The expectation was that the audience had a strong preference for higher quality audio. Strong enough to pay a monthly subscription fee; wrong. Secondly it is programmed by radio people. Satellite is more of the same, it just sounds better and there are no commercials. This is not a sufficient value proposition, there is no differentiation in the content, save for some of the spoken word formats. Howard Stern has proven to be one of the few products which provided a sufficient proposition for people to pay.
    I have many years of experience in radio, I said from day one that this was a bad idea and that they should quickly come up with some other use for the spectrum they over paid for. I only hope that Howard Stern learns to embrace the internet before the satellites come tumbling back down to earth.

  5. John Fredette from Alcatel-Lucent, December 23, 2008 at 7:10 p.m.

    I have three subscriptions to Sirius and have had them for years. I am glad of the merger with XM because I am hopeful it will make the company stronger financially.

    I believe that most people who pooh-pooh satellite radio are people who have not tried it. I love the music and the voice programming. I DO NOT have time to record all the music I would like to hear. I appreciate the relative narrow-casting that Sirius-XM provides.

    When my car is in the shop and I have a non-satellite radio I realize again how much I DESPISE terrestial radio. All those commercials and that innane blather. Give me a break.

    One of my best friends is a major cheapskate but he loves his Sirius-XM for the talk channels. He is happy to pay the price.

    Frankly, I question the objectivity and/or motives of anyone who disses satellite radio.


  6. Tim Gordon, December 23, 2008 at 8:57 p.m.

    Talking to a long-time radio friend this week who follows the inside track on satellite pretty close. He predicts that XM/Sirius will close within a year, as they are deep in debt and subscriptions are waning.

    The merger was sold on the idea of more programming and lower rates. I'm not a subscriber but I'm told that channels are dropping and prices are rising (or will soon). Too bad, I'm always for variety and if I drove a lot I'd put it in my car.

    I listen to tons of music at home and have converted old vinyl albums to digital - my iTunes is playing music 24/7.

  7. Scott Curtis from Studeo, December 24, 2008 at 11:56 a.m.

    Patrick, the content is not the same. Not not not. You need to listen to sat radio and you will recognize it is not close to the same programming.

    John, I wouldn't call it narrow casting. Unfortunately Disorder is no longer around but I know no other place that played what they played, online or off.

    Tim, supposedly there will be an a la carte subscription coming this spring. I'm not sure how much they'll actually let you bring the price down because the truth is I could take 5 channels and never look back. 98% of my time is spent between two. If the price comes down that might help though I'm not sure a company bleeding money will be farsighted enough to see it that way.

  8. Jim Dugan from PipPops LLC, December 25, 2008 at 7:34 a.m.

    If you don't think SiriiusXM is worth it, then you've probably never listened for long.

    How can you now appreciate Bob Dylan or Tom Petty spending an hour spinning tunes that they like with their own history or perspective on them?

    Pat St. John is one of the best announcers, along with Earl and his 'tuneage' - I won't even rent a car that doesn't have the service.

    I can go from Blues (Channel 74) to a relaxing Spa (Channel 73) and even, this week, flip over to some great Hannakah music (Channel 3).

    Various talk shows are a click away - 24/7 music is a bit much.

    Hey, how about a way that the iPods could combine with Sirius and we could all get 'Serious' while we're on the go having all of the options?

    By the way, those who might start searching on the internet for music, a good friend here in Orlando just completed a very special site at that runs music from special artists we all know and remember. Check it out.

    Everybody have some Happy Serious Holidays!

  9. Kevin Horne from Verizon, December 29, 2008 at 1:04 p.m.

    Tim Gordon said: "Talking to a long-time radio friend this week who follows the inside track on satellite pretty close. He predicts that XM/Sirius will close within a year, as they are deep in debt and subscriptions are waning."

    So they would simply go out of business before they considered becoming sponsor- or ad-supported?

  10. Jason Heller from AGILITi, January 2, 2009 at 3:17 p.m.

    Great post Dave.

    However, as a marketer, I don't think it was as much podcasting that is killing sat radio as much as it was the pay-for-play model + new hardware barrier (for content that ultimately you can get elsewhere). Ultimately a good value proposition killed by the average consumer being exposed to so much free content. I also think podcasting is a an overhyped format/medium that will see it's day more so on the mobile platform as the use of the current and next generation of devices becomes more ubiquitous in the average consumers' lives (but that's a whole other topic).

    As a consumer, I loved my XM subscription, well, I still do , but got really pissed that they killed the old school hip-hop channel this year. Ironically I am sitting here listening to the Time Warner music channel on my TV instead while working. Yes I can get all of this online in some form, I have ripped the hundreds of CD's in my collection, but there is a) the convenience of just turning something on and having it stream, and b) the "ah ha moment" of hearing that unexpected track you haven't heard in a while that I really appreciate.

    Thanks for the stimulating topic.

Next story loading loading..