Throughout our history, new technological developments are constantly making existing products and services obsolete. The laundry list is endless, but here’s just a few:
Application-specific software coupled with a low-cost general purpose personal computer was the death knell for companies making standalone calculators, word processors, and typesetting and graphic design equipment.
The market for Hayes modems appears to have tanked shortly after the 1997 acquisition of US Robotics by 3Com Corp. (Nasdaq: COMS). It seems they didn’t see or didn’t believe DSL, cable modems, and/or WiFi were much of a threat.
Music delivery has evolved physically over the years from records to 8-tracks to cassettes to CDs and is now just a bag of bits called an MP3 file.
Have you seen a “floppy drive” on a computer lately? The combination of reliable high-speed communications coupled with portable flash drives spelled their death knell.
Mosaic and, later, Netscape opened the Internet to the unwashed masses and essentially spelled the end for AOL’s walled-garden online service.
Those same processes are constantly at work, and today one of the areas most at risk is satellite radio. As has frequently been the case in the recent past, the death blow will be delivered once again by the Internet in combination with high-speed mobile wireless networks.
Back in the 1990s, when the idea of satellite radio bubbled up, the concept was certainly an attractive one: no advertising; channels dedicated to specific user tastes; and available virtually anywhere. What’s not to like? At that point in time, the Internet was still largely a text-based medium, fixed broadband was still pretty much a dream for most of us, and most wireless technologies were still analog, slow, and expensive.
Today, XM Satellite Radio and Sirius Satellite Radio are in the process of a well publicized merger that I think is born from the harsh realities of their separate experiences. Over the course of the last 10 years, their proprietary networks have managed to attract only 17 million subscribers. What’s rather ominous from an outlook perspective is that, in reality, this was the easy money, the low-hanging fruit. During that same period they have collectively burned through $3.6 billion in cash and taken on $2.8 billion in debt. It would seem that the allure of the service is neither as hot as some had anticipated nor is the dissatisfaction particularly high with commercial over-the-air alternatives.
While satellite radio has stumbled through its first decade, what has changed rather dramatically has been the competitive landscape. In this area maybe the single most important change has been the advent of streaming media for almost every taste available via the Internet. Whether it’s listening to broadcasts of my college alma mater’s volleyball games, Gregorian chants all-day-everyday, or the dulcet tones of your favorite politician from the floor of Congress, it’s available. But what’s more important to recognize is that the experience is a completely user-driven/user-controlled process and does not require a service provider to determine what content will and will not be offered. The end-user is in control, not the service provider, and, historically, that has been a huge catalyst for success.
However, content availability is only one side of the equation. To complete it we need a delivery mechanism, and that’s where mobile wireless comes into play. While it’s already available to some degree today, I think that the game really changes in 2009. Our current 3G cellular networks do have modestly higher data speeds. However, at this point most data subscribers are using the services for their functional aspects, as opposed to “entertainment.” That’s not to say that entertainment is unheard of but just that it is not the bulk of the usage today.
I think this begins to change with the rollout of Mobile WiMax in volume next year and with LTE (Long-Term Evolution) on the cellular side a couple of years later. Today’s 3G solutions do have limitations on bandwidth due to their voice-centric origins. WiMax and LTE are designed for wireless broadband and will not be forced to constrain bandwidth under normal circumstances. Furthermore, you will see efforts by the interested parties (e.g., Intel Corp. (Nasdaq: INTC), GSM Association (GSMA) , etc.) to incorporate the technology into vehicles, first as after-market add-ons, later as OEM options in the same way as that of today’s satellite radio providers. (See Clearwire: We're Ready for Primetime, AT&T & Verizon to Use 700 MHz for 4G , and Sprint, Clearwire Create $14.5B WiMax Giant.)
For an example of just how changes like this may well be received, check out this article from the Radio and Internet Newsletter.
I am certainly not suggesting that satellite radio will disappear from the landscape on a specific date. For the near-term there will always be some who want an advertising-free environment and others who need to hear a shock-jock demonstrate his command of four-letter words. What I am suggesting is that the window has closed on satellite radio. Their proprietary, single-use networks will struggle to compete with an open, multi-purpose network and all that the Internet provides. Along with that struggle, investors have to seriously question the combined companies' ability to ever generate cash, let alone reach profitability as currently constituted.
The advantages offered by XM and Sirius have been rendered moot by another series of technology changes. The same cycle that has taken place in the past is in process yet again. More importantly, the process will continue to work its magic so long as there are scientists, engineers, and other visionaries who think they may have a better idea. For now, XM and Sirius are little more than dead companies walking.
Where I live there are only 2 or 3 AM and FM stations, and they have a range ofonly a few miles. A couple reduce power after dark and have a very limimted range. During my 12 mile drive to work I have to switch to three different translators to listen to NPR. If nothing else, to be able to listen to the same station more than 10 minutes straight is a nice benefit.
The idea of streaming internet audio in my car is ludicrous. Like Ted Kennedy for President, it is a fantasy that will fade in to harsh reality west of the Hudson River. I routinely drive 4 or 5 hours straight on our interstates witout 3G coverage.
I have been very suspect about the delay of the Sirius and XM merger. I would have thought that FCC politicians were more media savvy and the bureaucrats more technology savvy than to not recognize the competitive threats against satellite radio. I’m hoping that the new naysaying about it being a dying technology due to the overwhelming emerging competition will finally be heard so they stop the blah-blah-blahing over why these two programming entities can’t merge. I guess that WiMax and LTE will not be widely available to the average North American motorist until 2015. My iPOD offers me the option to provide my own programming, but only of what I already know and have. It can’t offer me new suggestions, or samples of alternative options. Before Newt Gingrich, PBS offered decent music programming, but not since he cut funding and I left Boston have I found decent regular radio options.
I have found satellite radio to provides acceptable programming in areas not covered by decent radio stations otherwise – off-grid in the back woods and on extended drives, or even local Ottawa drives. The Internet has more variety, but when will it be available where I go. I have found few cities that truly offer decent programming for someone looking for good new music in categories like World music, New Age or what used to be called New Wave in Boston of the 1980s. Sirius and XM each have an option or two. Together, I may really have some good commercial free options and variety.
The government is great at worrying about the little things while ignoring the bigger things that payoff better.
In my opinion, the MP3 player is going to hurt Satellite radio the most. Why would I want to pay a subscription fee to hear "commercial free" radio (my definition is back to back songs, which it is not), when I can spend the money on MP3s of the songs I like that I can easily listen to anywhere?
The only thing truly unique are the shock jocks, since they are not being regulated and can get away with a lot more. However, sooner or later the FCC will stick there nose in and make them clean it up.
I'm going to wager that you haven't taken the time to try out XM or Sirius. While your technological viewpoint is well put, it's the exceptional content that sets satellite apart and will make it a success once satellite radios are standard features in cars. I recommend giving it a month trial. You'll be hooked.
Besides, if satellite radio wasn't a legitimate threat, would the NAB, governement and Washington lobbyists be wasting so much time to stop the merger? I think there are a few more important things that the government should be concentrating on (like steroids in baseball...)
Think of satellite radio as an automotive radio. In the car, streaming an internet channel isn't simple and the equipment you need doesn't come with the car.
Yes, mobile broadband internet is appealing. Does it replace satellite radio? Probably not for a while, it just makes it cheaper. Meanwhile, GPS navigators are tapping into satellite traffic downloads.
So, until I can get a mobile broadband card for $15 a month, I'll stick with XM.
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