followthemedia.com - a knowledge base for media professionals
Big Business

Satellite Radio – Running Out of Cash and Time

Everybody in the satellite radio business is an innovator. Investors will endure innovators and their endless requests for cash only so long. Consumers like innovators until the next innovator comes along.

old WorldSpace logoWord comes that WorldSpace has, again, run out of money. Investors have poured fortunes into this satellite radio business that first got off the ground in 1990. Founder Noah Samara had a notion that radio channels beamed from the sky would, for parts of the world suffering with moribund terrestrial broadcasting, offer something better, faster and smarter. Moreover, a fee could be attached, either from the listeners for tuning in or from broadcasters needing broad coverage.

WorldSpace targeted developing regions; Asia, India, Africa. There has been some subscription success in India although, technically, WorldSpace has no license there. The Chinese government would even have the discussion. The Middle East is also on the agenda…later.

Targeting Africa made sense, given the geographies and mostly boring government controlled broadcasting. Indeed, WorldSpace served, for fee, as a re-broadcaster for international channels looking for opportunities other than short-wave. But subscriber fees from Africa haven’t materialized.

WorldSpace operates two elderly birds and has one on the shelf that could be launched – still with last century’s technology – if sufficient cash can be found for a launch vehicle and the insurance. Noah Samara has had an uncanny ability to pull WorldSpace back from the financial brink. Something ‘innovative’ has happened in the last few days as the company now calls itself 1worldspace, one way to clear off old debt.

A new strategy targeting Europe will turn things around, they say. On release of first quarter financials (July 1) WorldSpace indicated it would begin offering services in Italy, where they have a deal with Fiat for factory installed receivers, “sometime” next year. The financial report showed 171,000 subscribers, US$3 million revenue and US$36.8 million loss.

Others picked up on the idea of targeting Europe. Madrid-based Ondes Media announced its plans, receiving licenses in Spain and the Netherlands and even a deal with Toyota for factory installed receivers. At the moment Ondes Media is still building its headquarters. 

And that’s the point. Satellite radio’s moment as a widely used platform never arrived. Terrestrial radio broadcasters in Europe, exceptions being the UK and Denmark, have found little consumer interest in moving from the FM band. The offering needs to be quite special for people to buy a new kind of receiver. Lacking ideas on that front broadcasters want governments to shut the FM band, forcing people to migrate to a new platform. In fact, they already have. Count the number of MP3 players and mobile phones. Last Friday (July 11) Apple began offering an iPhone firmware update configured with AOL Radio and Pandora, two sources of internet radio channels.

Automobile manufacturers have a keen interest in providing sufficient dash-board entertainment and information to keep customers attention. But high oil prices, hence high fuel prices, are affecting consumer choice. Did you notice the General Motors announcement yesterday? People aren’t buying new cars like they used to and car-makers are, well, adjusting. You know it’s serious (sorry) when executive bonuses are cut. For the foreseeable future, all auto executives will be focused on energy saving vehicles and saving their own jobs. The satellite radio companies are also targeting a rather unique niche market – business travelers and long-haul trucker – with everything from Bloomberg News to real-time weather and traffic reports. 

In the US the two satellite radio companies – both losing money hand over fist – are trying to merge into a bigger satellite radio company monopoly losing money hand over fist.  In theory, one merged entity would benefit from lower operating costs and, left unsaid but understood, increased fees from listeners. It’s more likely that in recession-immersed America consumers will just say no, throwing that $15 per month toward the mortgage or the rent…or food.

But that deal has been in trouble from the moment it was announced. US telecom and media regulator Federal Communications Commission (FCC) was forced to hold public hearings – when US law establishing satellite radio was written one provision was that there would be no monopoly. Competition authorities waved the deal on and stock traders cheered it on but consumer advocates and terrestrial broadcasters vowed to kill it.  

In order to get the deal done, FCC Chairman Kevin Martin has agreed to a wide variety of add-on “compromises.” The most recent would mandate HD radio reception capability, which uses the FM band, in all satellite radio receivers. General Motors and Toyota objected. When it comes to radio, the car guys rule. 

Both Sirius Satellite Radio and XM Satellite Radio have been serious (sorry) innovators. Sirius CEO Mel Karmazin paid for top talent and exclusive program franchises. XM also bought top talent but concentrated on an incredibly wide variety of music channels. But, seeing the handwriting on the wall, XM’s chief programmer Lee Abrams withdrew in March to join the newspaper publisher Tribune Company as chief innovation officer. Innovators like standing on the edge of an abyss and wiggling their toes over it. Investors are happy to watch but unless the cash arrives on time they’ll be the first to give that mighty shove. XM, by the way, capitalized on technology created by WorldSpace.

Investors, stock traders and attending accountants are happiest with companies having scalable services. Niche markets are, for them, painful. That’s unfortunate. Mass media markets, so last century, may never return.

 

 


related ftm articles:

For Those Who Think Satellite Radio is the Second Coming…
Our media world is just one big laboratory now. Experiments are continuous. All the new platforms are getting the test; sometimes in public, sometimes not. Here are early results on the Stern trial.

WorldSpace Seeks Partners to Bring Satellite Radio to Europe
Satellite radio pioneer WorldSpace wants to launch a European subscription radio service in 2007

The Bird's The Word
Radio broadcasters visiting the Le Radio conference in Paris this week were all atwitter when TDF radio director Alain Delorme suggested a pan-European satellite radio service might soon be launched.


advertisement

ftm resources

no resources posted as of July 15, 2008


ftm followup & comments

no followup as of July 15, 2008

no comments as of July 15, 2008

Post your comment here

copyright ©2004-2008 ftm partners, unless otherwise noted Contact UsSponsor ftm