Friday, May 22, 2009

Recession killed the radio star

The radio business has been struggling lately, to say the least. Traditional, terrestrial radio hasn't found a way to successfully box out competition from Sirius XM Satellite Radio (NASDAQ: SIRI), internet streaming radio, iPods, and other sources.

old valves radio

Plus fewer people are in their cars driving to work lately, so the ratings numbers are down. Not to mention the monotonous nature of much of today's music (or maybe I'm just old . . . get off my lawn, you Jonas Brothers, you!) It's no surprise, then, that the radio advertising business recently saw its worst quarter in history.

The Radio Advertising Bureau said yesterday that combined national and local ad spending dropped 26% to $2.8 billion during the last quarter. Network radio dropped 13% to $238 million while off-air revenue receded 12% to $264 million. The one silver lining was digital platforms (online, streaming, and HD Radio), which collectively saw revenue jump 13% to $101 million. Bottom-lining the numbers to reflect all segments of the traditional radio business, revenue dropped 24% to $3.4 billion during the latest reporting period.

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Why The iPhone Won't Save Sirius XM

Like many media companies, Sirius XM (SIRI) is hoping Apple's (AAPL) iPhone can provide a new growth market. That is why it is working on an iPhone app, due sometime this spring. But being the umpteenth radio app on the iPhone -- with a monthly fee -- is not going to be the satellite radio company's savior.

Why not? The same reasons we listed last summer when word of a Sirius iPhone application first reared its head.

1. The iPhone -- and any cellphone -- is hardly an ideal device for listening to the radio in your car, where Sirius shines. After you figure out how to hook it up to your car stereo system, relying on AT&T's cellphone network signal to reliably deliver an uninterrupted
audio stream could be a losing proposition.

2. Besides Howard Stern, there is not much unique Sirius content worth paying for to listen to on your iPhone that you can't get from other radio sources. An 80s station is an 80s station, no matter the source. (Even Sirius XM partner Major League Baseball will be offering its own live radio feeds of games this year via its iPhone app.)

sirius xm iphone star player

3. There is plenty of other ways to listen to music on the iPhone that don't require a subscription fee, including its built-in library (now with over-the-air downloads), and free apps from Pandora,, AOL/CBS radio, etc.

Cellphone owners have been able to stream satellite radio content for years, and that hasn't done much for Sirius or its former rival XM.

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Sirius iPhone Application

Sirius announced plans today for an application to stream its satellite radio service to the Apple iPhone and iPod touch. Sirius XM CFO David Frear made the comments on its earnings conference call, which covered Sirius's fourth quarter results. The company reported a fourth quarter net loss of $245.8 million on revenue of $644 million.

iphone sirius xm

Back in 2006, we asked if satellite radio could survive the onslaught of iPods and podcasting. Pods and podcasting threaten the future of satellite radio. A large portion of both companies subscribers has come from people that purchase cars with pre-installed satellite radio. More and more cars have iPod support, which cuts into XM and Sirius subscriber growth. Internet audio in the form of podcasts and streaming audio also offers a free alternative to the services.

Satellite radio's value was based on its coverage and its range of content. At this point, people are overwhelmed by the range of content that's available on the Internet. Devices like the iPhone can bring podcasts and Internet radio to you wherever you take your phone. Is the Sirrius iPhone app too little, too late?

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