Satellite radio customers beaming
Before last August, Tom Kiefer regularly turned off the radio during his commute to Omaha to teach philosophy at Creighton University. A sophisticated music listener who had worked in record stores, Kiefer preferred road noise to what he could get on the airwaves.
In the last eight months, however, he rarely turns off the radio in his car. He's yet another enthusiastic convert to satellite radio.
"It is the greatest thing ever," said Kiefer, who had a Sirius satellite radio installed in his car in August. "I know that sounds corny coming from someone with a Ph.D. in philosophy. But it is the greatest thing ever. It makes driving so much easier."
People like Kiefer have made satellite radio one of the fastest growing new technologies in history.
With more than 5 million subscribers in its first three years of operation, satellite radio is growing faster than did cell phones and has some analysts saying it could someday equal or even surpass the 90 million subscribers to cable television.
Much of satellite radio's growth has come via word of mouth, as subscribers tell their friends about the service and let them hear what either XM or Sirius, the competing satellite services, offers.
"This is the evolution of the art form," said Sirius programmer Jeremy Tepper. "I'm a fan of community radio and college (radio). If you live in a city with a great college radio station or a great community station, you're in the coolest club in town. If you have satellite radio, it's like South By Southwest all the time."
Tepper was in Austin, Texas, for the annual music conference when he dropped the SXSW reference. But the analogy holds up.
With each of the satellite services offering more than 60 music channels, fans can surf around and find something they want to hear — just like the SXSW attendees who drift (or sprint) from club to club to catch an interesting band, often hopping from genre to genre in defiance of the rigid, narrow formats that have come to dominate terrestrial radio in the last decade.
"It's the serendipity of it," Kiefer said. "When I was channel surfing the other day, I came across an old James Gang song I hadn't heard in 10 years, then I caught Radio Budapest on the world news station, then got some old jazz standards. It's like channel surfing on TV, only way better."
That variety has impressed E.J. Marshall, program director at Kool 105.3. A local radio veteran, Marshall has programmed active rock, top 40 and oldies in Lincoln and has listened to his friends' satellite radios.
"I like it," Marshall said. "You hear a lot of songs you don't normally do. If there's a specific format that I want, I can get it. Like comedy, I can't normally get that on air or I can't find it. What's missing from XM and Sirius is the locality (personalities, events, news) of it."
The mantra of "local, local, local" has been the standard response of broadcasters facing the satellite radio challenge.
"They said 8 tracks were going to kill radio, then it was cassettes, then it was these CD things," said Gary Buchanan, president and COO of Lincoln-based Three Eagles Communications. "(Radio) is not going to go away. If radio stations stay live and local, then they'll win. That's the key."
For example, Buchanan, whose company owns 44 stations in Nebraska, Iowa, South Dakota and Minnesota, including KFOR, KFRX, ESPN 1489 and 95 Rock in Lincoln, said he was in Mason City, Iowa, during a huge storm.
"It was local radio that got me through it," he said. "I deem that way more important. It will be interesting to see what happens."
Both satellite radio services offer the radio version of The Weather Channel and each has traffic and weather for 20 major cities. But satellite cannot offer local news, local talk or local sports programming.
However, satellite radio programmers maintain that music radio gave up much of its local flavor when stations began broadcasting shows done by DJs in one city to many markets, a money-saving measure called "voice tracking" in broadcast lingo. For example, Clear Channel station My 106.3 (KLMY 106.3 FM) in Lincoln uses Lyman James in Wichita, Kan., to cover its 3-7 p.m. timeslot on weekdays, and Three Eagles' KFRX currently is voice tracking 10 a.m. to 3 p.m. weekdays with a DJ from a sister station in Minnesota until it fills it with a local personality.
"A long time ago, terrestrial radio relinquished the concept of local radio with voice tracking," said Jessie Scott, who programs XM's XCountry channel. "But in the old days, you had a flavor of the city on the radio. What our neighborhoods are, are the niches. It doesn't matter where you live, if you like that kind of music, you're part of our neighborhood. The neighborhood is alive and well, it's just niched."
Developing those niches is one of the joys of working at satellite radio, Scott said. That process stands in sharp contrast to terrestrial radio, whose programmers can only choose from a list of a few hundred songs for a specific format sent down from the headquarters of the media companies that have bought up stations since the 1996 federal radio ownership deregulation.
"Even if you're a programmer (at terrestrial radio), you don't have that much freedom," said Tobi P., who programs XM's XMU channel and serves as its primary DJ. "But if you're a DJ, you get your log and you play what you're told to play. Nobody's telling me ‘You can't play that, you have to play this.'"
That's certainly the case at Sirius' Outlaw Country, which Tepper programs in conjunction with Steven Van Zandt, guitarist in Bruce Springsteen's E-Street Band, who also programs Sirius' Underground Garage channel.
Both channels have the same philosophy. "The idea is that it doesn't matter if the music was made 50 years ago or five minutes ago, we play it," Tepper said. "Independent labels, major labels, it doesn't matter, we play it."
Some believe that iPods and other digital music devices that allow listeners to program hundreds or thousands of songs and listen to them in a random shuffle undercuts satellite radio by personalizing the concept of depth and variety that drives the new technology. But Tepper said that view overlooks one of the drawbacks of exclusively using an iPod to listen to music.
"People are addicted to their iPods," Tepper said. "You're a programmer of your iPod. The difference is, for the average music fan, you are limited by your own record collection. It gets old. Each one of us is updating your iPod for you each time you listen to the radio. We're programming your iPod."
During and after a SXSW panel discussion last month, the Sirius and XM programmers appeared to be friendly rivals. All said there was room for two competing satellite companies — a duopoly — and expressed respect for their competitor. And all clearly targeted terrestrial radio as their primary rival.
That said, there continues to be furious competition between them, particularly in the area of sports programming.
Last year, Sirius shelled out $229 million for a seven-year contract to carry National Football League broadcasts of every team and every game, then spent $107 million to steal NASCAR broadcasts from XM, beginning in 2007.
To counter Sirius' football and NCAA basketball tournament offerings, XM paid $650 million for an 11-year contract to carry Major League Baseball games.
Like cable television, satellite radio isn't bound by Federal Communications Commission regulations. That means disc jockeys can say anything they want — a lure that allowed Sirius to land the biggest fish in the radio pond, controversial "shock jock" Howard Stern, who is getting $500 million over five years to bring his act to the satellite.
Sirius is gambling that Stern's legion of fanatic followers will sign up for millions of subscriptions. Stern sees the change as a move to freedom as well as a financial windfall.
"I have millions of dollars of fines against me, and this is my way of checkmating the United States government and saying ‘You know what, I've got somewhere to go. We're going to build a new future. This is the beginning of the new age," Stern told David Letterman in a recent appearance on his CBS-TV late night show.
Unhindered expression is another reason that comedy is one of the most popular offerings on both satellite services. The raunchy material that is the stock-in-trade of most comedians in the post-Richard Pryor era couldn't be played on terrestrial radio — even if there was a comedy format in that narrowly defined world.
The niche marketing of satellite is perfect for comedy, and the lack of regulations lets the f-bombs and sex jokes drop as fast as the comics can spew them out.
Of late, politicians, including veteran Sen. Ted Stevens (R.-Alaska), have made noises about extending the FCC's regulatory power to cable television and satellite radio.
But the satellite radio folks aren't worried about a coming government clampdown. After all, they say, cable and satellite customers are paying for the programming and there's considerable question as to whether it would be constitutional for the FCC to regulate the enterprises.
There's also a practical consideration in their confidence. Satellite radio, most likely, wouldn't be at the forefront of any fight to extend regulations. That spot would go to cable television, which isn't likely to go down easily.
"I think HBO's going to give them a big, tough fight before they get to XM and Sirius," said Elise Brown, a Sirius DJ who doubles as a public relations representative. "It's such a nonissue … It won't fly."
But Buchanan said even if satellite radio isn't regulated, personalities like Stern won't necessarily be an advantage to the services.
"Another issue I'm concerned about is the shock jocks, Howard Stern and people like him," he said. "Imagine what it is going to be like on the air and what type of things are going to be said. How many adults with kids in the car are going to listen? What type of demographic are you going to draw?"
As a terrestrial broadcaster, Buchanan is concerned about demographics. For satellite radio, Scott said, those kinds of broad audiences aren't necessary. The people who want to listen to shock jocks are just part of satellite audience mixture, she said.
Stealing the popular Stern is the highest-profile attack by satellite radio on commercial broadcasters. But the growth of satellite radio has pretty well ended the "no one will ever pay for radio" brush-off.
With more than 200 million listeners nationwide, commercial radio isn't in any danger of fading away any time soon. But terrestrial radio is now paying close attention to what XM and Sirius are up to and, in some cases, making some changes in response.
"I think it's a wait-and-see type of thing," Marshall said. "I think we need more reaction from (commercial) radio. We need to do a better job of promoting ourselves. There's not so much a banding together to get the message out that (commercial) radio is still here and a valuable service for you."
Neither XM nor Sirius has yet come close to turning a profit. Both suffered through years of waiting for the FCC to divide satellite band width and get their satellites in the air. XM got there first, launching in 2001. Sirius started up in 2002.
Both have lost hundreds of millions of dollars getting started. But each is rapidly growing.
Much of that growth of late has come from people who buy new cars with factory-installed satellite radio units. Sirius is available in about 80 different car models, including those manufactured by Ford and Chrysler; XM is in 120 models, including those from Honda and GM. The services are in pitched competition to sign up carmakers. Tests have shown that more than 30 percent of those who try satellite radio in their cars keep the service.
Interest in and subscriptions to satellite radio are growing in Lincoln, just like in the rest of the country.
"I'd say we're installing one or two a day," said Shayne Baldwin, manager of Autosounds of Lincoln, which sells and installs both XM and Sirius. "It's slowly, steadily grown. It's just been gradually building. It's interesting to look at cars — as you drive around, you see more and more antennas."
Many of those who come in to check out satellite radio have heard about it through a friend, Baldwin said. Others develop curiosity through media stories or through advertising. Their biggest question, he said, is cost. A satellite radio system installed in the vehicle runs about $200, he said. Then there's a monthly subscription fee.
Two weeks ago, XM announced that it had added 540,000 subscribers from January through March, pushing the industry total to more than 5 million in just over three years of operation. Both services also are predicting strong growth for the rest of the year. XM forecasts that it will have 5.5 million subscribers by year's end; Sirius, 2.5 million. Industry analysts estimate that by 2010 subscriber levels will be somewhere in the 30 million to 45 million range.
Both satellite companies expect to be making money soon, largely because there's an audience that wants to buy what they are selling — once they are exposed to what's bouncing off the satellite.
"We're selling directly to you, the fan," XM's Scott said. "For us to be effective selling directly to you, we have to get you to love us. If we're doing our job, we'll get subscriptions."
XM
2004 subscribers: 3.2 million
Number of channels: 150
Monthly fee: $12.95
Special features: Major League Baseball, Bob Edwards (former NPR host), Tony Kornheiser
For more information: www.xmradio.com
Sirius
2004 subscribers: 1.15 million
Number of channels: 120
Monthly fee: $12.95
Special features: National Football League, Howard Stern (in 2006), assorted personalities including Joan Jett, Mojo Nixon, Lance Armstrong, Vincent Pastore
For more information: www.sirius.com
Reach L. Kent Wolgamott at 473-7244 or kwolgamott@journalstar.com. Journal Star reporter Jeff Korbelik contributed to this story.
In the last eight months, however, he rarely turns off the radio in his car. He's yet another enthusiastic convert to satellite radio.
"It is the greatest thing ever," said Kiefer, who had a Sirius satellite radio installed in his car in August. "I know that sounds corny coming from someone with a Ph.D. in philosophy. But it is the greatest thing ever. It makes driving so much easier."
People like Kiefer have made satellite radio one of the fastest growing new technologies in history.
With more than 5 million subscribers in its first three years of operation, satellite radio is growing faster than did cell phones and has some analysts saying it could someday equal or even surpass the 90 million subscribers to cable television.
Much of satellite radio's growth has come via word of mouth, as subscribers tell their friends about the service and let them hear what either XM or Sirius, the competing satellite services, offers.
"This is the evolution of the art form," said Sirius programmer Jeremy Tepper. "I'm a fan of community radio and college (radio). If you live in a city with a great college radio station or a great community station, you're in the coolest club in town. If you have satellite radio, it's like South By Southwest all the time."
Tepper was in Austin, Texas, for the annual music conference when he dropped the SXSW reference. But the analogy holds up.
With each of the satellite services offering more than 60 music channels, fans can surf around and find something they want to hear — just like the SXSW attendees who drift (or sprint) from club to club to catch an interesting band, often hopping from genre to genre in defiance of the rigid, narrow formats that have come to dominate terrestrial radio in the last decade.
"It's the serendipity of it," Kiefer said. "When I was channel surfing the other day, I came across an old James Gang song I hadn't heard in 10 years, then I caught Radio Budapest on the world news station, then got some old jazz standards. It's like channel surfing on TV, only way better."
That variety has impressed E.J. Marshall, program director at Kool 105.3. A local radio veteran, Marshall has programmed active rock, top 40 and oldies in Lincoln and has listened to his friends' satellite radios.
"I like it," Marshall said. "You hear a lot of songs you don't normally do. If there's a specific format that I want, I can get it. Like comedy, I can't normally get that on air or I can't find it. What's missing from XM and Sirius is the locality (personalities, events, news) of it."
The mantra of "local, local, local" has been the standard response of broadcasters facing the satellite radio challenge.
"They said 8 tracks were going to kill radio, then it was cassettes, then it was these CD things," said Gary Buchanan, president and COO of Lincoln-based Three Eagles Communications. "(Radio) is not going to go away. If radio stations stay live and local, then they'll win. That's the key."
For example, Buchanan, whose company owns 44 stations in Nebraska, Iowa, South Dakota and Minnesota, including KFOR, KFRX, ESPN 1489 and 95 Rock in Lincoln, said he was in Mason City, Iowa, during a huge storm.
"It was local radio that got me through it," he said. "I deem that way more important. It will be interesting to see what happens."
Both satellite radio services offer the radio version of The Weather Channel and each has traffic and weather for 20 major cities. But satellite cannot offer local news, local talk or local sports programming.
However, satellite radio programmers maintain that music radio gave up much of its local flavor when stations began broadcasting shows done by DJs in one city to many markets, a money-saving measure called "voice tracking" in broadcast lingo. For example, Clear Channel station My 106.3 (KLMY 106.3 FM) in Lincoln uses Lyman James in Wichita, Kan., to cover its 3-7 p.m. timeslot on weekdays, and Three Eagles' KFRX currently is voice tracking 10 a.m. to 3 p.m. weekdays with a DJ from a sister station in Minnesota until it fills it with a local personality.
"A long time ago, terrestrial radio relinquished the concept of local radio with voice tracking," said Jessie Scott, who programs XM's XCountry channel. "But in the old days, you had a flavor of the city on the radio. What our neighborhoods are, are the niches. It doesn't matter where you live, if you like that kind of music, you're part of our neighborhood. The neighborhood is alive and well, it's just niched."
Developing those niches is one of the joys of working at satellite radio, Scott said. That process stands in sharp contrast to terrestrial radio, whose programmers can only choose from a list of a few hundred songs for a specific format sent down from the headquarters of the media companies that have bought up stations since the 1996 federal radio ownership deregulation.
"Even if you're a programmer (at terrestrial radio), you don't have that much freedom," said Tobi P., who programs XM's XMU channel and serves as its primary DJ. "But if you're a DJ, you get your log and you play what you're told to play. Nobody's telling me ‘You can't play that, you have to play this.'"
That's certainly the case at Sirius' Outlaw Country, which Tepper programs in conjunction with Steven Van Zandt, guitarist in Bruce Springsteen's E-Street Band, who also programs Sirius' Underground Garage channel.
Both channels have the same philosophy. "The idea is that it doesn't matter if the music was made 50 years ago or five minutes ago, we play it," Tepper said. "Independent labels, major labels, it doesn't matter, we play it."
Some believe that iPods and other digital music devices that allow listeners to program hundreds or thousands of songs and listen to them in a random shuffle undercuts satellite radio by personalizing the concept of depth and variety that drives the new technology. But Tepper said that view overlooks one of the drawbacks of exclusively using an iPod to listen to music.
"People are addicted to their iPods," Tepper said. "You're a programmer of your iPod. The difference is, for the average music fan, you are limited by your own record collection. It gets old. Each one of us is updating your iPod for you each time you listen to the radio. We're programming your iPod."
During and after a SXSW panel discussion last month, the Sirius and XM programmers appeared to be friendly rivals. All said there was room for two competing satellite companies — a duopoly — and expressed respect for their competitor. And all clearly targeted terrestrial radio as their primary rival.
That said, there continues to be furious competition between them, particularly in the area of sports programming.
Last year, Sirius shelled out $229 million for a seven-year contract to carry National Football League broadcasts of every team and every game, then spent $107 million to steal NASCAR broadcasts from XM, beginning in 2007.
To counter Sirius' football and NCAA basketball tournament offerings, XM paid $650 million for an 11-year contract to carry Major League Baseball games.
Like cable television, satellite radio isn't bound by Federal Communications Commission regulations. That means disc jockeys can say anything they want — a lure that allowed Sirius to land the biggest fish in the radio pond, controversial "shock jock" Howard Stern, who is getting $500 million over five years to bring his act to the satellite.
Sirius is gambling that Stern's legion of fanatic followers will sign up for millions of subscriptions. Stern sees the change as a move to freedom as well as a financial windfall.
"I have millions of dollars of fines against me, and this is my way of checkmating the United States government and saying ‘You know what, I've got somewhere to go. We're going to build a new future. This is the beginning of the new age," Stern told David Letterman in a recent appearance on his CBS-TV late night show.
Unhindered expression is another reason that comedy is one of the most popular offerings on both satellite services. The raunchy material that is the stock-in-trade of most comedians in the post-Richard Pryor era couldn't be played on terrestrial radio — even if there was a comedy format in that narrowly defined world.
The niche marketing of satellite is perfect for comedy, and the lack of regulations lets the f-bombs and sex jokes drop as fast as the comics can spew them out.
Of late, politicians, including veteran Sen. Ted Stevens (R.-Alaska), have made noises about extending the FCC's regulatory power to cable television and satellite radio.
But the satellite radio folks aren't worried about a coming government clampdown. After all, they say, cable and satellite customers are paying for the programming and there's considerable question as to whether it would be constitutional for the FCC to regulate the enterprises.
There's also a practical consideration in their confidence. Satellite radio, most likely, wouldn't be at the forefront of any fight to extend regulations. That spot would go to cable television, which isn't likely to go down easily.
"I think HBO's going to give them a big, tough fight before they get to XM and Sirius," said Elise Brown, a Sirius DJ who doubles as a public relations representative. "It's such a nonissue … It won't fly."
But Buchanan said even if satellite radio isn't regulated, personalities like Stern won't necessarily be an advantage to the services.
"Another issue I'm concerned about is the shock jocks, Howard Stern and people like him," he said. "Imagine what it is going to be like on the air and what type of things are going to be said. How many adults with kids in the car are going to listen? What type of demographic are you going to draw?"
As a terrestrial broadcaster, Buchanan is concerned about demographics. For satellite radio, Scott said, those kinds of broad audiences aren't necessary. The people who want to listen to shock jocks are just part of satellite audience mixture, she said.
Stealing the popular Stern is the highest-profile attack by satellite radio on commercial broadcasters. But the growth of satellite radio has pretty well ended the "no one will ever pay for radio" brush-off.
With more than 200 million listeners nationwide, commercial radio isn't in any danger of fading away any time soon. But terrestrial radio is now paying close attention to what XM and Sirius are up to and, in some cases, making some changes in response.
"I think it's a wait-and-see type of thing," Marshall said. "I think we need more reaction from (commercial) radio. We need to do a better job of promoting ourselves. There's not so much a banding together to get the message out that (commercial) radio is still here and a valuable service for you."
Neither XM nor Sirius has yet come close to turning a profit. Both suffered through years of waiting for the FCC to divide satellite band width and get their satellites in the air. XM got there first, launching in 2001. Sirius started up in 2002.
Both have lost hundreds of millions of dollars getting started. But each is rapidly growing.
Much of that growth of late has come from people who buy new cars with factory-installed satellite radio units. Sirius is available in about 80 different car models, including those manufactured by Ford and Chrysler; XM is in 120 models, including those from Honda and GM. The services are in pitched competition to sign up carmakers. Tests have shown that more than 30 percent of those who try satellite radio in their cars keep the service.
Interest in and subscriptions to satellite radio are growing in Lincoln, just like in the rest of the country.
"I'd say we're installing one or two a day," said Shayne Baldwin, manager of Autosounds of Lincoln, which sells and installs both XM and Sirius. "It's slowly, steadily grown. It's just been gradually building. It's interesting to look at cars — as you drive around, you see more and more antennas."
Many of those who come in to check out satellite radio have heard about it through a friend, Baldwin said. Others develop curiosity through media stories or through advertising. Their biggest question, he said, is cost. A satellite radio system installed in the vehicle runs about $200, he said. Then there's a monthly subscription fee.
Two weeks ago, XM announced that it had added 540,000 subscribers from January through March, pushing the industry total to more than 5 million in just over three years of operation. Both services also are predicting strong growth for the rest of the year. XM forecasts that it will have 5.5 million subscribers by year's end; Sirius, 2.5 million. Industry analysts estimate that by 2010 subscriber levels will be somewhere in the 30 million to 45 million range.
Both satellite companies expect to be making money soon, largely because there's an audience that wants to buy what they are selling — once they are exposed to what's bouncing off the satellite.
"We're selling directly to you, the fan," XM's Scott said. "For us to be effective selling directly to you, we have to get you to love us. If we're doing our job, we'll get subscriptions."
XM
2004 subscribers: 3.2 million
Number of channels: 150
Monthly fee: $12.95
Special features: Major League Baseball, Bob Edwards (former NPR host), Tony Kornheiser
For more information: www.xmradio.com
Sirius
2004 subscribers: 1.15 million
Number of channels: 120
Monthly fee: $12.95
Special features: National Football League, Howard Stern (in 2006), assorted personalities including Joan Jett, Mojo Nixon, Lance Armstrong, Vincent Pastore
For more information: www.sirius.com
Reach L. Kent Wolgamott at 473-7244 or kwolgamott@journalstar.com. Journal Star reporter Jeff Korbelik contributed to this story.
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