Satellite eight-track?
by Matt Miller
The deal.com Posted 02:02 EST, 12, Feb 2002
If the Internet is about limitless choice and MP3 audio technology is about customization and portability, then satellite radio is about a modicum of choice on wheels — but with no static. Or, to give these new subscriber services the benefit of the doubt, we might just be witnessing the birth of 100 variations of digital elevator Muzak conceived specifically for the car.
This format and design is tailor-made to frustrate drivers who like to surf radio channels. It's also based on technology and a concept that run the risk of being obsolete before investors can make their money back.
Sirius Satellite Radio Inc. is scheduled to launch its subscriber service Feb. 14 in four markets. Nationwide access is expected in the third quarter.
Sirius follows XM Satellite Radio Holdings Inc., which launched its national service in November.
These aren't overnight sensations. Both publicly traded concerns were founded a decade back. Investors already have bankrolled the two with a total of about $2 billion.
The companies boast of state-of-the-art control centers. XM launched two satellites called Rock and Roll. Sirius shot three birds into orbit. XM and Sirius both offer 100 channels for $9.99 a month or $12.95 a month, respectively. Of those, only 60 are commercial-free.
Judging from the selection lists, many of those channels play to a pretty low and lame common denominator. To name just three on XM: “All Love Songs 24/7,” “The Lounge Lifestyle Lives on” and “The Awesome '80s.” Please.
Grabbing either signal requires specialized electronics. A satellite radio costs at least $300, and one in combination with a CD player runs more than $500. A number of up-market autos will be offering the radios as an option. This gives XM and Sirius a serious headstart on any new technology that follows. How many consumers will activate their radios is, of course, another matter.
Stock and industry analysts argue about which service is likely to wind up on top. The XM crowd is thrilled that its service got a jump on Sirius. They believe Sirius chipsets remain problematic and that the company may have difficulty meeting debt obligations. The opposing camp counters that more car companies have signed up to carry Sirius.
Each has been subjected this month to upgrades and downgrades. The two stocks have yo-yoed.
The implication is that one radio service will end up the winner. That means the other will either go bust or be bought out. One industry executive likens it to the fight between VHS and Betamax.
Even that notion, however, assumes the success of the technology is a given. But that presupposes there are no other alternatives on the horizon that could take out both companies.
It's not a solid assumption. Here are just a few technologies likely to compete for our dashboards: A DVD-like device will enable a dozen CDs to be carried on a single disk. A tiny hard drive, similar to what gives Apple's new iPod its heft, will allow hundreds of hours of music to be stored in the car and played over an MP3 player. Terrestrial services will beam music from a home computer or from commercial services to the car.
Despite major record labels' best efforts to curtail Napster-like services, the days of music downloads aren't about to go away. Eventually, they will come up with a model that embraces our ability to capture and play on command all that's out there.
That leads to the most powerful model of all, what is often termed a celestial jukebox. In a few years, it should be possible to pay one subscription fee that unlocks virtually the entire music catalog.
Consumers will be able to choose, program and deliver individual playlists. Or they'll be able to instruct the services to select music based on highly individual preferences. (“I'm really into music from 1969 today, but can't stand Iron Butterfly and Sopwith Camel. And please go light on the likes of The Mamas and the Papas.”) The services will download the choices onto home, car and portable devices.
Granted, there are two major impediments to all this. The first is the anti-geek factor, which says that only a minority of the populace feels jazzed enough to put together the choices and that most people are too lazy or techno-phobic or busy, or all of the above, to bother.
The second is the cost of new infrastructure capable of delivering all these musical goodies. For a car, that means a widespread, workable mobile broadband. Who knows when third-generation wireless will be available on a scale capable of keeping our cars in good auditory order?
Satellite radio investors must just pray for delays, as analysts now forecast that Sirius and XM will register operating losses until 2006. They predict it won't be until the latter part of this decade that satellite radio really pays off.
A study by an analyst with Landenburg Thalmann & Co. projects 9.8 million subscribers for XM alone by 2010. A Merrill Lynch study predicts Sirius will have hooked more than 19 million subscribers by then.
Don't bet on it. Besides the pitfalls of long-range projections (think Internet revenue), technology should be available that would render subscription radio — even if the stations number in the hundreds — to the ranks of eight-track stereo.
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