Last week Mel Karmazin of the newly merged Sirius XM was quoted in several publications on the bright future of his company. He made several particularly interesting statements during the interview.
According to Mediaweek, he stated that 96% of his company’s revenue will come from subscriptions. Translated, I would say that means he’s pretty much rejecting the ad model. This is a new direction for XM and Sirius – they have been actively pursuing ad dollars, however successfully, at the network radio level. It makes sense – I never thought you could run ads on a service after charging subscribers a monthly fee and get away with it with your listeners.
So this means Sirius XM is a subscription based service, and largely takes them out of play for ad dollars. Relying on subscribers to pay a monthly fee as well as purchase dedicated hardware is a losing plan, when today’s consumer is surrounded by more and more choices everyday of ways to listen to great, deep channel programming such as Pandora, and great devices like IPhones to listen with.
Studies have shown that listeners are quite willing to trade listening to an audio commercial for free content, it’s the minority that will pay a premium for commercial free content. As commercials become more targeted and more relevant to the listener, the willingness of consumers to tolerate those commercials will increase.
According to Karmazin, satellite radio’s audience stands at 19.5 million. According to Arbitron’s Infinite Dial Study, awareness of Satellite Radio has been flat for three consecutive years. The biggest source of new customers for satellite radio comes from new cars being sold – so this recession is doubly bad news. I’d be willing to bet that satellite radio has peaked, and the future is flat, if not slipping.
A Bigger Pie
Internet radio’s audience is 54 million and growing. The number of devices that can stream Internet radio is also growing rapidly, and accessibility is increasing as well. Both XM and Sirius stream their programming online for subscribers. But they should do more to convert listeners to online listeners and start making radios that can access internet radio. And while they’re at it, how about letting listeners choose between an ad-supported model or an ad free subscription model? Sounds like a better formula to me…