Satellite’s now an afterthought in the era of digital radio
And it's not because it hasn't been successful. Subscribers are way up.
February 24, 2017
By the editors of Media Life
They don’t think of satellite radio.
Once the shiny new thing in radio, which scared terrestrial radio stations to death years before Pandora became their preferred bogeyman, satellite radio today is an afterthought in digital radio, and that’s largely because it’s no longer sexy and fresh. It’s been around for 15 years.
Yet in many ways, going under the radar has been good for satellite. After a few stumbles during the mid- to late 2000s, before and right after Sirius and XM Radio merged, the medium is now in surprisingly good shape.
SiriusXM Radio ended 2016 with 31.3 million subscribers, up 6 percent over the previous year, and hit an all-time high in total revenue. Stock rose 10 percent and is currently at a 10-year high.
It’s projecting to add another 1.3 million subscribers in the coming year, and its churn rate, or the rate of customer turnover, was just 1.8 percent last year.
“It’s already pre-installed in many cars,” notes one buyer. “That makes it convenient, and it’s not too expensive.”
A dimmer future?
Still, many buyers are unenthusiastic about satellite radio. They say its success won’t last for the long term.
Their complaints? Sirius XM doesn’t have a lot of advertising, of course. Most music channels are commercial-free, which is one of the things it emphasizes in luring in customers.
They also complain satellite is not customizable enough. On-demand music is the hot thing now, as Spotify has proven, and while you can choose your channel on satellite, you can’t choose the songs.
Plus, it’s not very portable (you have to pay extra to listen outside the car, either online or with an app on your phone). In fact, buyers predict internet radio could someday soon replace satellite as the preferred car install.
“People are so connected to their phones/mobile devices that they have/will become the go to media device—period,” one buyer says.
“This is especially true now that more and more automobile manufacturers are including Apple Car Play and Android Play as standard equipment.”
While buyers may still have reservations about the medium, there’s no disputing its immense advertising growth. Ads remain a very small part of the company’s $5 billion in revenue, about 3 percent, while subscriptions make up 87 percent.
But ad spending is growing much faster than subscribers. The past two years spending has seen year-to-year quarterly growth anywhere from 18 to 31 percent.
The service has added more spots to sell, mainly on sports, news, talk and entertainment programming. But it has also raised prices, buyers say.
Buyers say the most expensive inventory is a live read on Howard Stern’s show, with prerecorded spots costing on Stern about a third as much.
The sports channels get a lot of direct response advertisers. The most popular sportscasts include NASCAR and March Madness, while Mad Dog Radio with Chris Russo is the highest-priced sports show.
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