XL Cover Story: Why Satellite Radio Is Beaming

Producers, DJs and commentators have found their bliss in generating creative, daring and commercial-free programming. Did we mention it's uncensored?

• Chart: Comparing Satellite Radio Services

San Marcos-based singer-songwriter Terri Hendrix and her performing-producing partner, Lloyd Maines, spend countless hours on the road together, crisscrossing the country in Maines' white Chevy Tahoe. According to Hendrix, they listen to XM Satellite Radio "nonstop," even the XM Kids channel.

Real estate developer Mitch Whiddon burns about three hours a day commuting to and from San Antonio for a project he's building there. He also cranks Sirius' blues channel, or Sirius Disorder -- an eclectic, free-form channel -- or occasionally some comedy to make the miles fly faster. When Austin sound engineer Johnny Medina's not on the road with Marcia Ball, he gets his news fix via regular doses of XM's CNN, CNN Headline News and BBC World Service channel streams. When he craves tunes, he punches up XM's Bluesville (where he's likely to hear his boss), or Boneyard (where stadium rock and hair metal live, for those who still throw devil's horns in the air) or the Deep Tracks album cuts channel.

"I love listening to satellite radio," Medina says. "It's just really handy. I like the fact that the news is right there at my fingertips 24 hours a day. Something could happen and I could immediately turn on the satellite radio and get the latest information available."

These radio lovers are among a rapidly growing group of consumers who have decided to ante up $12.95 a month to one of two providers (XM or Sirius), plus equipment costs. In return they receive commercial-free music channels, uncensored lyrics, comedy and talk, and specialized niche programming that they can't tune in to anywhere else in the age of conglomerate-owned, terrestrial-based broadcast radio. Not having to poke the radio signal seeker every time they travel through a different town is an added bonus, though most satellite subscribers talk rapturously about content and forget to mention the joys of satellite radio's nearly uninterrupted signals.

Neither service's signal is perfect; obstructions can still get in the way. But users report that satellite radio is a heckuva lot better in stability and sound quality than even FM radio -- and with XM's 150 channels and Sirius' 120-plus, there's no question that satellite offers far more programming diversity than even the biggest radio markets.

Right now, only 6.2 million people subscribe to satellite radio -- an infinitesimal number, compared with the number of radio listeners overall (95 percent of people ages 12 and up). But the number is growing fast. XM, which began transmitting in late 2001, now has 4.4 million subscribers and just raised its year-end subscriber estimate from 5.5 million to 6 million. Sirius, which had the double disadvantage of following XM out of the gate by several months and of initially being more expensive (XM has since raised its price from $9.99 to $12.95 per month), now has 1.8 million listeners and just upped its year-end prediction to 3 million.

That figure could leap even higher when Howard Stern hits Sirius' airwaves in January; no one's sure exactly how many of his legions of addicts will decide they can't live without their "king of all media" -- especially once the shock jock's insulated behind a microphone that the Federal Communications Commission can't silence.

Like cable television, satellite transmissions are not currently regulated by FCC censorship rules and, therefore, are not threatened by hefty fines or license revocation for offensive material. Also like cable TV, satellite radio stations can be blocked to protect sensitive ears.

And Stern's getting not one, but "plural" channels, according to Patrick Reilly, the company's senior vice president for corporate communications.

XM's recent shot in the arm was the acquisition of Major League Baseball; it also scored comrades-in-shock Opie & Anthony to counteract the Stern effect. Sirius has the National Football League, National Hockey League and National Basketball Association, and will acquire NASCAR racing from XM in 2007.

The two services have been locked in content wars since before they began streaming their signals, and mouthpieces for both companies spend way too much time dissing the competition, despite their overall similarities. But regardless of who has what, it's safe to say that for satellite radio manufacturers and the companies themselves, the holiday season is going to be a very good one.

A little history

Since its birth as a commercial entity in 1920, radio has provided the soundtrack of our lives. From early mystery and comedy shows to sports play-by-play to major news events to paradise by the dashboard light, generations of listeners have associated some of their most significant memories with radio, and we identify with its voices in a personal way. Nearly all of us spend at least a fraction of our day listening to some form of it -- Internet and doctors' waiting rooms included.

Movies didn't kill it. TV couldn't kill it. Not eight-tracks, cassettes, CDs or even MTV could kill the proverbial radio star, the free airwaves that supposedly belong to us, the listening public. It would take an act of Congress -- specifically, the Telecommunications Act of 1996 -- to give radio the ammunition it needed to shoot itself in the foot.

The act relaxed ownership limits and set off the frenzy of station buying and selling that resulted in the formation of gargantuan conglomerates, most notably San Antonio's own 800-pound gorilla, Clear Channel Communications Inc., which has shouldered most of the blame for the death of individuality, the proliferation of bland, repetitive programming and a bottom-line-led overabundance of commercial assaults each hour.

Clear Channel has instituted a "Less Is More" initiative to cut back from a high of about 18 commercial minutes per hour, but the perception remains that stations air too many ads. An Arbitron/Edison Media Research study released in May showed that 34 percent of radio listeners think radio has more commercials now than last year, though that figure is down from 41 percent in a 1999 study. Forty-seven percent said they believe the commercial load has not changed in the past year; only 13 percent said they detected fewer commercials. And 47 percent said they would listen to a radio station more frequently if it had fewer commercial breaks.

Despite the efforts of broadcast radio owners to preserve a decades-old hold on listeners, the demand for a commercial-free satellite option has been building.

How it works

Unlike terrestrial radio, which still relies mainly on earthbound antennas and analog airwaves for transmission, satellite radio signals are sent to orbiting units -- XM has two, adorably labeled "Rock" and "Roll;" Sirius, itself named after the dog star, has three. The satellites then beam digital signals directly to radio receivers or to terrestrial "repeaters," which help transmit the signal in obstruction-filled urban areas. You'll still experience the equivalent of dead air when you drive through a tunnel, but there's none of the crackle and fading that occurs with terrestrial radio. You can conceivably drive cross-country and never change the channel. (And for those long hauls where staying awake is an issue, a good dose of comedy works far better than caffeine.)

Regardless of whether they're in-dash installations, "plug-and-play" portable models or home units, satellite radios also provide digital information displays to let you know what you're tuning in (a situation that could cause you to start eying other radios with a futile expectation that similar information will appear -- although a few broadcast stations do transmit the data to your car's tuner). You'll still be able to receive broadcast signals through your car or home stereo; unfortunately, you can't get an XM-ready receiver and decide you want to change to Sirius, or vice versa. When the companies were awarded their operating licenses by the FCC (which did have jurisdiction over granting these $80 million "digital audio radio service" licenses), they were mandated to create a universal receiver, but don't hold your breath. There's little incentive for them to do so, even though many listeners -- particularly sports fans -- have expressed interest in having both services.

So what's the attraction?

"I like the wide range of music," says Hendrix. "They are free-form, meaning they play, for the most part, what the heck they want."

She and Bourgeois both love the song- and artist-ID service. "In the front seat, I keep a pen and paper so I can make my CD buying list based on what I've heard," Hendrix says.

She also appreciates satellite from an artist's perspective. All too familiar with how hard it is to get airplay in an era of narrow formats and shrunken playlists, Hendrix says she received a nice boost in CD sales after doing a live performance on XM's X Country. That channel contains special programming titled "The X in Texas," including a monthly show, "The Armadillo Radio Hour," recorded live at Threadgill's.

Whiddon says he also likes getting exposed to new artists he'd never hear on terrestrial stations.

"Sometimes they get a little talky," he notes, "but at least you don't have anybody hammering at you. You can go for 15 or 20 minutes without hearing a voice."

Of course, the lack of commercials on music channels has strong appeal. (Initially, only a portion of XM's music channels were commercial-free, but the heat of competition apparently caused XM to follow Sirius' noncommercial lead.)

In addition to niche musical formats, such as blues, that couldn't possibly survive on terrestrial radio -- except, perhaps, in two-hour chunks once a week in the graveyard zone or as a volunteer-DJ public radio show --satellite radio gives listeners something else: personalities, a seemingly endangered species outside of the talk-radio realm. Both XM and Sirius have taken care to hire air talent and programmers who were once giants of the airwaves, but had been strangled by the noose of conformity to tighter formats, or pushed out to make way for younger, cheaper, more compliant talent, or who simply didn't enjoy doing radio anymore because the creativity had been sucked out of it.

Though Sirius has concentrated more heavily on hiring name personalities such as Stern, Martha Stewart and Lance Armstrong, who has a weekly show on the Faction music channel, XM has some heavy-hitters, including longtime public radio commentator Bob Edwards. Edwards made the leap a year ago and says, "In many ways, it's been the best year of my life, professionally.

"The atmosphere, the support of top management, the resources we've had to work with," he adds, "you have just a very, very happy little group here working on this program and we really can't believe our luck. And I think that is terrific for the creative process, to be able to experiment and try new things. That's what you get with a new startup. It's the way it was for me at NPR 30 years ago. You're more daring and you sound it.

"There's also that underdog thing," Edwards says. "What can we make of this? Can we change people's listening habits and fire their imagination?"

That excitement is evident to anyone who's visited either XM's snazzy Washington, D.C., digs or Sirius' Rockefeller Center studios in New York and seen the expressions on employees' faces. As Edwards indicates, happiness is putting it mildly. Blissed-out -- from top management on down -- might better define the mood.

Medina has seen it firsthand. He got to meet the programmers of all three of his favorite music channels at XM's studios.

"I could tell that they didn't want to be anywhere else than where it was that they were -- at work, sitting at their chair, playing records, talking to the listeners -- and they loved it, and that really means something to me," he says. "And it translates to us in some way. I'm not sure how; is it in their words or the way they say it or in the texture of their language? But it's a very satisfying sound coming out of the radio. It feels great. It's comforting."

That comment might silence critics who argue that satellite can't succeed because it lacks the local flavor of broadcast radio. The reality is, in the age of increasing syndication and voice-tracked shows recorded by jocks who are nowhere near the cities where they're being heard, in the age of Internet and Podcast communities, terrestrial radio has lost some of its local immediacy. And satellite radio is fostering its own communities; bands tell tales of meeting fans who drive hundreds of miles to shows after learning of a pending performance via satellite radio.

Clearly, subscribers become loyal quickly. Chance Patterson, vice president of programming operations, reports XM's "churn rate" of dropped subscriptions is only 1.3 percent; Sirius' rate is a nearly neck-and-neck 1.4 percent, according to its just-released spring-quarter financial statement.

Should broadcasters feel threatened?

"I used to listen to KGSR and I don't anymore," confesses Whiddon, who reports he'll probably sign up for XM as well when he gets around to buying the Infiniti sedan he's had his eye on.

He's not alone; a Paragon Media Strategies study released in July reported that 44 percent of satellite radio listeners say they spend less time tuned in to broadcast radio than they used to.

But Dusty Black, a Clear Channel regional vice president and market manager of the company's Austin radio cluster, says satellite is currently a minor concern.

"Certainly, we take everything seriously," he says, "but for us today, satellite, while it's a competitor, is a really very distant fourth or fifth compared to what we really consider to be challenges for us."

Those would include iPods, video games and "all the (kids') programs on their computers and all the different distractions, whether it's cable TV or whatever."

"We're more concerned with our own product," he adds. "We're reacting to stay competitive in the marketplace. I don't necessarily see it as against any other medium."

Room for both

Jay Clark, executive vice president of programming for Sirius, insists, "We don't want anybody to misinterpret that we think we're gonna bury terrestrial radio, because terrestrial radio always morphs and does what they have to sustain."

Besides, like broadcast TV, it's still free.

"The good news," Clark adds, "is that terrestrial radio is starting to look within itself and say, 'OK, maybe we were playing too many commercials and maybe we do have to take a look at our programming more intensely.' "

Observes guitarist Little Steven Van Zandt, who designed Sirius' Underground Garage and Outlaw Country channels (in between tours with Bruce Springsteen, his acting gig on "The Sopranos" and his weekly "Little Steven's Underground Garage" syndicated broadcast show): "Movie people thought TV would be the end of movies. It's never that way, and in fact, usually helps the old medium as well when a new medium starts."

He predicts satellite will actually expand radio listenership overall, even though it might decrease individual market share somewhat. Adds Van Zandt: "I think the excitement about satellite right now is going to cause a lot more people to come back to radio, which is a good thing for everybody."