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.

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.

XM vs. Sirius Satellite Radio

Coke vs. Pepsi, McDonalds vs. Burger King, Yankees vs. Red Sox are all examples of some of the most well known rivalries in American culture. Is it time to add XM vs. Sirius to this list? Well, the significance of this rivalry is certainly up for debate, however there is no arguing that it has been bitter battle to this point.



I am of course talking about the satellite radio space, where subscribers receive hundreds of programming options with CD quality reception all across the country. XM and Sirius have many similarities, such as programming and hardware options, making it difficult for consumers to decide between the two. If you’re a Howard Stern junky or addicted to the NFL then Sirius is likely your choice. If Oprah is more your speed or you can’t miss an MLB game then XM Radio is the better choice for you.

So who is winning the satellite radio battle in terms of market share? Well, currently XM has 7.1 million subscribers to Sirius’s 5.1 million. But, who will be winning after the holiday season and into next year? The number of people visiting both Sirius.com and XMRadio.com can be used as a proxy for the future market share of each product. Historically, each site has received similar amounts of people per month, indicating an equal level of consumer interest in both brands. Interesting to note, last month, at the height of the 2006 Holiday shopping season XM and Sirius experienced their largest differential in site traffic ever! While XM skyrocketed past the 1.4 million mark, Sirius hovered to 1.1 million.

When Sirius signed Howard Stern as their marquee radio personality in 2004 they did so with the expectation that he would boost subscriber numbers and thus gain market share on XM. While the signing of Stern definitely increased subscribers, it is clear now, 2 years later, that XM remains the industry leader. With 2 million more subscribers and 350,000 more people visiting their site in November, 2006, it appears the XM’s number one status is secure.