Which Analogy for Satellite Radio?

It's hard to know precisely what to make of the recent plummeting of SiriusXM's stock to less than $1. In current circumstances, investors clearly are worried about the company's ability to refinance its debt. In a broader context, it is hard to figure out the size of the opportunity.  In February 2007 about 3.4 percent of radio listening was garnered by satellite radio.

In some ways, the value proposition is simple enough: "satellite radio will do for radio what cable TV did for television choice." These days, some appear not to be so sure, as Arbitron and Edison Media Research shows continued growth in usage and ownership of various forms of digital audio platforms, including online radio, iPod/MP3 players, and podcasting, for example. 

 

That study shows 13 percent of the U.S. population age 12 and older have listened to online radio in the past week; up from eleven percent in 2007.  On a weekly basis, online radio reaches more than 15 percent of 25- to 54-year olds.

But iPod and portable MP3 player ownership now is up to 37 percent of respondents. 

Audio podcasting usage continues to increase, with 18 percent of respondents reporting they have, at some point, listened to an audio podcast; up from 13 percent in 2007.  About nine percent say they have listened to an audio podcast in the past month.

Radio is more than music, but there is growing evidence that the Internet is gaining on radio as the medium to learn about new music. In 2008, radio is mentioned as the medium “you turn to first to learn about new music” by about half of consumers (49 percent), with Internet at 25 percent.  In 2002, radio was mentioned by 63 percent as they way they learned about new music, while only nine percent said the Internet provided that function.

So in a broad sense, the headwinds satellite radio is facing might include a change in the way people listen to music, something that has happened many times in the past. 

That still does not speak to the other major function of radio, which is news and other non-musical programming. It still does appear that satellite radio has an opportunity there. Today's satellite listeners are heavy listeners to radio in general including AM and FM radio. Satellite listeners spent an average of 33 hours a week with radio compared with the typical listener who listened approximately 19 hours a week to radio. Also, people who listened to satellite spent more time with AM or FM radio (14 hours) than they did with satellite radio (10 hours 45 minutes) or Internet (8 hours 15 minutes).

Still, one has a disquieting sense that some of the entertainment function once provided by radio now is supplied by other media, ranging from Internet-delivered radio, MP3 players or even non-music or non-news pursuits such as gaming, social networking and other diversions. 

The point is that the "satellite radio will do for radio what cable TV did for television" analogy might not be quite apt. The satellite radio analogy might instead be likened to a scenario where cable TV launched after Internet-delivered video already had begun to take hold in the market. The answer is not completely clear yet, but unlike cable TV, satellite radio has several other competitors for the music delivery portion of its business.