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Out of this world: XM, Sirius and satellite radio

By Jon Johnson, November 2004

Hundreds of miles above the surface of the Earth, five satellites circle the globe. Their purpose isn't particularly different from dozens of other communication satellites which relay commercial, military or private data signals from one point on the Earth to another.

The difference in this case is that these particular satellites are the first to relay commercial digital radio broadcasts from studios to customers who pay a monthly fee to receive those broadcasts, much as satellite TV broadcasts have done for a couple of decades now.

Currently those customers are almost entirely based in North America, but in the coming years the customer base will expand to other countries as the networks begin to pay for themselves.

These satellites are owned by two competing companies, XM (which owns two of the satellites) and Sirius (which operates three). Each company is currently offering approximately 120 channels of CD-quality digital broadcasting for a monthly price of about $10-13 per company (not counting the cost of the receivers, which are unique to each company).

Although it's still early, it could well be argued that satellite radio provides the first true revolution in music broadcasting since the arrival of video music channels like MTV and the now-defunct Nashville Network in the 1980s.

The major players in the broadcast industry seem to think so, anyway. Broadcast giant Clear Channel has invested heavily in XM, and recent rumors abound that another media powerhouse, Viacom, is very interested in acquiring part or all of Sirius.

Since satellite radio - like cable TV - isn't answerable to the Federal Communications Commission, at the very least these media giants could avoid the sorts of massive fines for indecency on the public airwaves that have been handed down recently, to say nothing of the opportunity to no longer be beholden to advertisers.

XM - which began broadcasting in September 2001 - currently offers 6 country music channels: America (primarily '70s and '80s country, with an emphasis on traditionalists), Nashville (top 40 country from the late '80s to today), X Country (alt.-country and contemporary traditionalists), Hank's Place ('50s and '60s country), Bluegrass Junction (all bluegrass, all the time), and Highway 16 (contemporary top 40 country). In addition they list The Village (folk music) with their country offerings.

The five channels offered by Sirius - which began broadcasting in July 2002 - are similar, including New Country (contemporary country hits), Prime Country ('80s and '90s country hits), The Roadhouse ('40s, '50s and '60s country), Outlaw Country (alt.-country, served up with occasional helpings of rockabilly), and Bluegrass.

In addition, Sirius carries a simulcast of WSM-AM's regular broadcasts and also offers Folk Town for folk music enthusiasts.

Finally, both companies carry channels for the long-haul trucking audience, largely made up of country fans, though neither channel should be considered a strictly music channel. Sirius has the Sirius Trucking Network, which mixes a talk format aimed at a trucker audience with some music (a mixture of country, southern rock and classic rock).

XM features Open Road, which gathers together trucker radio's Three Kings on one channel; Dave Nemo, Bill Mack, and Dale "The Truckin' Bozo" Sommers for a mixture of talk, trucker industry news and music.

Is one company likely to dominate the industry anytime soon? The general consensus at the moment seems to be that it's too soon to tell. Both companies offer about the same number of channels at the same price, though XM currently has a much larger subscriber base, partly due to its rollout nearly a year ahead of Sirius.

April Horace is a financial analyst at Janco Partners, a Colorado-based investment banking firm, and follows both XM and Sirius very closely. Asked if one company is in a stronger position at this point, Horace replies, "Well, stronger is a relative term. Both of them have adequate funds. Both are strong on cash flow. Both are very strong with content offerings, albeit they're differentiating themselves now."

Given the striking differences between satellite radio and AM/FM, the first question one might have might be how satellite radio is programmed differently from traditional analog radio.

"With great joy," says Scott Lindy, the director of country programming at Sirius since May 2004, and formerly the program director at WPOC in Baltimore. "I'm used to programming 12 or 13 songs an hour, and I've programmed rock, CHR (contemporary hits), A/C (adult contemporary) and country. And (now) I've had to figure out how to program rotations and categories of music without any commercial breaks. What do you do with that extra 17 minutes per hour? There's no model for that. I can't imagine what I would have to do (now) if I had to add traffic, commercials and things like that."

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