Satellite Radio: Out of the Car and Under Fire by Richard Siklos
Source : New York Times
December 11, 2005
In the early 1990's, when the pioneers of satellite radio raised the first of the billions they needed to get their ventures aloft, the premise was fairly simple: create services that would be to old-fashioned radio what cable television was to broadcast TV. That meant providing scores of niche radio channels with high-quality signals in exchange for a monthly subscription fee. By blanketing the nation with signals beamed from on high, there would be no need for all those transmitting towers, no utter dependence on advertising and no pesky etiquette rules from the Federal Communications Commission to observe. And, the early prospectuses argued, there was a huge, natural market of people who spend hours in their vehicles, often bored out of their skulls.
Skeptics - let me raise a hand - observed that in most cities, there were many more channels of radio available free over the air than there were TV stations when cable came on the scene. Moreover, if the objective was to provide entertainment choices to the millions of commuters and professional drivers on the open road, there was already a popular alternative to listening to the radio or singing show tunes out loud: playing CD's and cassettes in car stereos.
Today, Sirius Satellite Radio and XM Satellite Radio, which went public in 1994 and 1999, respectively, have yet to make a penny in profit but together are approaching 10 million subscribers, most paying nearly $13 a month. Doubters, deal with it: Satellite radio looks as if it is here to stay.
A landmark event in the industry's evolution is approaching in January, when the radio jock Howard Stern moves from his longtime home at Infinity Broadcasting, now part of the Viacom monolith, to Sirius.
But while Mr. Stern's well-compensated antics are sure to gain plenty of attention - and, Sirius expects, a bump in subscribers to gain ground on the larger XM - an equally controversial new act is appearing on satellite radio in the form of portable receivers.
Like Mr. Stern's arrival, these new gadgets from XM and Sirius show how far satellite has come. But they also show how far all media businesses have to go to fulfill their digital potential. The new players, the XM MyFi and Sirius S50, are really the equivalent of what TiVo's and their ilk are to television: digital recorders that let music lovers record any song for future listening.
We'll leave it to the gizmo gurus to compare the virtues of the new gadgets, but they operate off the same idea: both XM and Sirius offer 100-plus channels, so why not let listeners keep their favorite songs or shows handy? Why not enjoy the satellite service if you are in a tunnel or leave your car to go into a basement gym for a workout?
Most conveniently, midway through a song on one of the satellite radio channels, a listener can press a button and record it in its entirety; it is automatically sorted by artist. (The Sirius machine even has a clever little heart graphic that pops up on its screen when you do so, signifying the devotion you have just shown.) And you can even prerecord blocks of programming from your favorite channel - and later fast-forward through the songs and cherry-pick the ones to keep. In the same spirit, you can download MP3 files of songs onto these machines from a computer.
In other words, if the devices work as well as they're supposed to, they represent an intriguing alternative to pay-per-download services like Apple's iTunes and its omnipotent iPod. For executives in the satellite radio industry, of course, this sounds like a no-brainer: they are merely mirroring the evolution of the cable model. To some music industry executives who regard this as yet another way for people to circumvent paying the full price for their songs, it looks like another potential doomsday device.
Not surprisingly, the music industry is starting to make a ruckus - demanding more compensation or contemplating a push to limit some of these features, perhaps by having the recorded songs expire after a set period. The satellite jockeys, on the other hand, say they have not only twisted themselves into pretzels to make these devices legally compliant, but they have also designed them to promote artists and the music.
For instance, both XM and Sirius point out that songs saved on the machines from their services cannot be uploaded to a computer or shared in any way. XM even has a version coming out in a too-clever-by-half partnership with - of all companies - the rehabilitated and revamped Napster, through which any songs saved on the satellite player can be automatically bought through the Web site if the listener wants a more pristine copy or one that can be copied onto a CD or other MP3 player. And XM also maintains that people who use its service buy more CD's than those who don't. Besides, argues Hugh Panero, XM's chief executive, the service falls under fair-use laws.
"What has been disturbing," Mr. Panero said in an interview, "is that the efforts by the music industry of late seem to signal a desire to encroach on a longstanding tradition of consumers to record off the air for their personal use."
At a Merrill Lynch conference in September, his rival Mel Karmazin at Sirius also pointed out that the music industry was already getting a much better licensing fee from satellite than it did from the nation's 10,000 terrestrial radio stations. "When I have lunch with those guys, they're paying for my lunch," Mr. Karmazin said. "I'm not paying for their lunch."
In some ways, the looming debate over satellite radio's new machines is a warm-up for the bigger tussle forming in Washington over whether a coming generation of digital broadcasts from terrestrial radio stations ought to include so-called flags that prohibit or curb the saving and swapping of songs straight off the air.
At a Congressional hearing last month, Mitch Bainwol, the chairman of the Recording Industry Association of America, warned that the use of digital radio to create personal jukeboxes "threatens to rival or even surpass" the loss of sales suffered by his industry with the advent of Napster 1.0 and its Internet file-sharing spawn. The message is: It's theft, and that's un-American.
Lined up on the other side are consumer groups and electronics manufacturers who argue this is just the latest rhetoric intended to preserve the status quo and to stifle innovation and choice. Their message: That's even more un-American.
Where satellite radio is concerned, the pressure to come to the table and to resolve the dispute without a big court battle is urgent. Both Mr. Karmazin and Mr. Panero say they want to be good partners and grow old and rich together with the music industry. Mr. Stern's arrival on satellite radio comes at a watershed moment when both the beleaguered music-makers and the satellite jockeys need to prove that the sky is indeed paved with gold.
