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When Sirius and XM launched their satellite radio stations, they were certainly offering niche radio that couldn?t be found from their terrestrial counterparts. And because they offered subscription services, FCC regulations didn?t apply, making this new frontier a great alternative for listeners. But times they are a changing. Sirius and XM no longer have to compete with each other - they are now ever threatened by the exploding podcast industry.
Quarterly reporting for both XM and Sirius satellite were issued over the last couple of weeks, with both companies showing larger losses than in comparable quarters a year ago. XM reported on July 27 their second quarter losses amounted to $231 million, up from losses a year ago of $148.1 million. Sirius, likewise, reported to investors of a loss of $237.8 million, up from last year?s loss of $177 million.
Even in light of these numbers, subscriptions to both networks are up. Sirius took the lead during the second quarter, by increasing its subscriber base by over 600,000. No doubt the huge increase Sirius has seen is due in part to the addition of Howard Stern to the lineup since January of this year. When looking at total subscribers, XM still commands 6.9 million listeners to Sirius? 4.6 million.
Both companies remain positive about the overall growth, even though stock prices have slipped. Sirius had a slight boost in July, but is nowhere near the 52 week high attained in December shortly before Stern joined the network. XM, too, has steadily dropped as other outlets have emerged to steal the niche thunder of the two orbital networks.
Compared to the 11.3 million satellite subscribers, eMarketer (www.emarketer.com) claims the total podcast audience for 2006 will be at or near 10 million, and a staggering 50 million by 2010. Libsyn, a podcast hosting provider, claims they had 45 million unique podcast users in the first quarter of 2006. These are staggering numbers that should have XM and Sirius shaking in their boots.
Beyond just numbers of subscribers, there are other factors sounding the death knell for satellite radio and hailing podcasts as the go-to medium for listeners.
XM and Sirius listeners must still pay a monthly subscription fee to access the huge number of channels offered. That, coupled with an initial radio purchase for many, can be more costly in a year than the most expensive MP3 player on the market.
And even with the introduction of portable satellite radios like the Pioneer Inno ($349), Samsung Helix ($399), and Sirius S50 ($299), most subscribers are still listening to programming in the car to and from work. According to ridetowork.org the average is 55 minutes of drive time. This mean popular programming must be confined to a specific time of day to hit the most listeners.
Podcasts, on the other hand, are time shifted. Users can listen to programming at their leisure. The portability factor also plays a huge factor. Listening at work, walking, or in the car, means listeners can enjoy their entertainment when they want.
Recently, Apple announced it has made agreements with Ford, GM, and Mazda to integrate iPods in new automobiles similar to the seamless connectivity found a few years ago in more expensive cars like Audi and BMW. Ford and GM have announced iPod connectivity will be featured in a majority of their 2007 models. This means 70% of automobiles on the road will have iPod support.
Even with hundreds of channels, podcasts can offer much deeper niche programming than satellite channels. Podcasts like Mugglecast and Pottercast, both devoted to Harry Potter, have routinely been in the Podcast Alley Top Ten list for over a year. Other shows like the HDTV and Home Theater podcast, and my own Coolness Roundup podcast (co-hosted with Charlie White), provide very specific content that doesn't necessarily appeal to mass audiences. But these shows have a regular routine audience nontheless. Some of the most popular podcasts have over 100,000 listeners per show. Even the lesser known podcasts can reach over 10,000 listeners each month. Many have estimated these numbers are comparable or larger in size than a single show on satellite.
Beyond bragging rights to the number of subscribers or listeners, there is big money to be made or lost. Advertisers have realized they would rather have their product in front of a specific target audience, instead of competing for listeners in the mass market.
For example, a company that manufactures high definition televisions would be much more interested in advertising on an HDTV podcast that has a knowledgeable audience that is eager to spend money on that product, instead of advertising in the Sunday circular or after the local news. There is more return on the investment. Companies like GoDaddy, Earthlink, Acuvue, Lexus, HBO, Altec Lansing and more have all recognized this fact. It is estimated that in 2006 $80 million will be spent on podcast advertising.
Ad revenue going to podcasts means less money for satellite radio. This may be one of the reasons XM and Sirius have yet to make a profit.
One factor that may save the satellite radio operators is pod fading. Of the hundreds of new podcasts that are created each day, most eventually run out of content and fade away. Satellite radio has been around much longer, and if the companies can get their spending under control they may be able to outlast most podcasts. While podcasting has been around for three years, it didn?t take off until Apple integrated podcasting with its popular iTunes player. Once the shine wears off, will podcasting still be a viable entertainment alternative?
Ironically, Sirius Stars Channel 102 features Adam Curry?s Daily Source Code and a huge block of other podcasts from podshow.com. Sirius may have found the answer to survival ? keep your friends close, but your enemies closer. Both XM and Sirius have begun introducing portable players that allow listeners to time shift their content, and XM has even begun offering their unique programming to cell phone and cable operators.
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