Sirius challenge: Stern competition by Grant Robertson
Source : Globe & Mail
December 21, 2005
Sirius Canada Inc., which launched satellite radio this month, is about to face competition from an unlikely source — its sister company in the United States.
Plans by New York-based Sirius Satellite Radio Inc. to add controversial talk show host Howard Stern to its lineup on Jan. 9 could put the Canadian company, which is not picking up the program, in a fight for listeners with its part-owner.
Although Canada's new satellite radio industry is expected to diminish much of the grey market that thrived over the past few years, where listeners tap into U.S. signals, Mr. Stern's show threatens to lure Canadian listeners away.
Analysts estimate there are as many as 60,000 grey market listeners in Canada who subscribe to U.S. satellite radio. Converting that audience to Canadian subscriptions is now a key job for Sirius Canada and Canadian Satellite Radio Inc., operator of the XM network.
Both companies were granted licences by Ottawa in the fall and have started operating in the past few weeks.
“The Canadian owners of the XM and the Sirius franchises have an important stake in making sure the Canadian grey market subscribes to Canadian service,” said Jeff Leiper, an analyst with Yankee Group in Ottawa, which tracks the sector.
Grey market listeners subscribe to American providers through U.S. addresses and receive more channels than the two Canadian services. Although receiving the signals contravenes Canadian law, the radio sector is nearly impossible to track compared with the satellite TV market. It's a potential audience loss that Canadian companies would like to avoid.
“In the first couple of years, even 20,000 or 30,000 people is still a significant drain on revenue.” Mr. Leiper said.
One Sirius Canada customer, who declined to be named, said he is considering switching to the U.S. service to pick up Mr. Stern.
Over the past two decades, Mr. Stern has become a broadcasting juggernaut and one of the largest single draws on radio. Known for his lewd conduct on air, which is laced with toilet humour and sexual references, he has drawn more than $2-million (U.S.) in fines from U.S. regulators since the 1980s.
But the show also raked in $100-million in advertising revenue for CBS radio, that network said. His switch to satellite radio came after Sirius in New York offered him $500-million over five years to produce programming for two channels, as well as increased freedom to say what he wants. Mr. Stern's old program was picked up by FM stations in Montreal and Toronto in the late nineties but eventually was dropped.
Mr. Stern's impact on satellite radio has been significant. When the lucrative contract was signed in 2004, Sirius had just 600,000 subscribers in the United States then but its numbers have grown quickly. Some analysts have suggested that as many as two million fans could follow Mr. Stern to Sirius over the next few years. The company has 2.2 million subscribers now, less than half of XM Satellite Radio.
An Internet rumour this week that Sirius Canada is planning to add Mr. Stern to its lineup this spring was denied by the company Wednesday. A spokesman said Sirius Canada will be reviewing that policy, but there are no immediate plans to pick up the show.
While satellite radio programs aren't regulated by the U.S. Federal Communications Commission, the show could run into problems in Canada, where the CRTC has control over the licences.
Luring grey market subscribers is a big prize for Canada's two providers early on. Mr. Leiper of the Yankee Group estimates the industry will attract 50,000 new subscribers by the end of the first quarter. Only half of the grey market is expected to convert during that period, leaving roughly 30,000 Canadians still receiving the U.S. signal.
