Friday, June 21, 2013

Sirius XM Satellite Radio: Post Merger

It's been a while since Sirius and XM merged. A few things have changed, but most things have stay exactly the same. Before the merger was approved, there was a lot of talk about how it would make things so much better and lower costs for the consumer while providing more channels and content.

It is a sticky situation because they were originally two separate services which used different bandwidths. The problem is that old XM radios must still pick up the XM service and vice versa for Sirius radios. They don't want to anger current customers who have old radios by requiring them to buy new equipment so they have to keep the services separate. This means that there is too much redundancy in the two services that would not be there if they could merge the two into one chunk of bandwidth. For instance both Sirius and XM need a music channel for new country songs. Customers of both services want this so they need to have it on both. Before the merger there was a new country station on both services. Now that they have merged, they operate one single station but they broadcast it simultaneously on both services. So for arguments sake, lets say that each service can provide 50 music channels and 50 talk channels. So in total that could be 200 channels but since most of the channels are broadcast on both that means that there are must less individual channels. So instead of having a total of 200 channels, there are only a total of 125 individual stations. Of course, these numbers are totally made up but the idea is the same.

However the two services are not exactly the same. Instead they have slightly different channel lineups to fit different tastes. But since some of the channels are more popular than others, especially certain sports and talk stations, they broadcast the most popular ones on both stations. There are many differences with the talk channels on the two services. They do allow you to get the most popular XM stations that are not available on Sirius and vice versa, but they require you to pay more to receive these channels. For instance if you like Howard Stern and you have XM you have to pay extra. If you have Sirius and want to have all the sports channels that are on XM you have to pay extra. So while the most popular channels are broadcast on both services they require you to pay extra if you want some of the extra channels. This is not fair to the consumer as they are being broadcast to your device but they block them out unless you pay for them. They said it would be cheaper for the consumers and that they could buy channels 'ala carte' meaning you could pick individual channels that you want and only pay for them. Well this is not possible right now. You have to pay the standard fee, which is about $16 a month if you pay annually. If you pay monthly the price goes up. If you want to get the best of XM of best of Sirius packages you have to pay extra. If you have additional radios, you have to pay extra for each radio. If you want to be able to listen to satellite radio on the internet, either through your computer or portable device like tablet or phone, you have to pay extra. Before the merger, internet streaming used to be free. So instead of providing more to their customers for less, they are providing the same for more or and if you want additional channels you have to pay even more. I can understand why there is some redundant channels on each service and some unique channels on each. But I can't understand why they don't provide all the redundant channels for free. Well I do know why and the reason is MONEY. And I also don't know why they now charge for streaming when it used to be free. Ok I do know why, and again it is for the MONEY.

When Sirius and XM were applying for a merger they had to convince the government that it was in the best interest for the consumers and that it was not a monopoly. The two companies told the FCC, the FTC and whatever other governmental agencies that they would provide a better service for the customers if there was one satellite radio company than if they remained competitors. But so far they haven't made it better at all. All they have done is consolidate all the channels and make some additional channels available to customers for a monthly fee. So in the end they just added a few premium channels to each service, and by premium I mean you have to pay for it. They haven't made anything cheaper for anybody. And I think if they were still competitors there would be a lot more innovation in the market. Before the merger both companies were trying as hard as they could to bring top of the line, high tech radios to the market to compete for customers. But now there hasn't been any innovation at all as far as I can tell. The radios available now are no better than the ones from 5 years ago. Before the merger the radios were getting smaller and smaller, adding capacity to store content, and adding many other features. But now they have stopped trying to innovate because they no longer need to compete with another satellite radio company for customers. They think that if you want satellite radio that you will get it, and since they get money no matter what service customers go with they get paid in the end. But they are thinking the wrong way. They may not have to compete for customers with another satellite radio company, but they are in fact competing. They are competing with devices like iPods and other Mp3 players, smart phones and tablets, and heck even regular radios. Someone might be considering getting a satellite radio but with all the other options available they might reconsider. One thing that is good for them is that smartphones and other devices that can access the internet can stream satellite radio online. So if you have an iPhone or other smartphone, you can pay for satellite radio service and listen to it via your phone. However there is so much content available for free or for a very low price that paying $15 a month or more is not very appealing. Sure you don't have to pay for extra hardware but most people don't want to pay for something when they can get a comparable service for free or close to free. Satellite radio has good content that is not available anywhere else, but most consumers these days are not interested. You can stream music online from tons of internet radio stations. You can even listen to news, comedy, and other talk stations online for free. So the only thing they have going for them is their unique name brand content that people want, such as sports and famous talk personalities like Oprah and Howard Stern.

So while Sirius and XM were spending all of their time and effort to compete with each other and eventually merge with one another, they dropped the ball on competing with all other content services and devices. If they were focused on providing great content at a great price, along with offering competitive devices, they might have been able to increase their market share. But no, they thought inside the box and lost their edge. Howard Stern has been at Sirius since 2006, and arguably this is what caused them to overtake XM in market share and customer base, eventually causing them to merge. He fulfilled one 5 year contract and is now in the middle of another. But in 5 years who knows where he will go. If another company can pay more for his show and he wants to take it then Sirius XM is out of luck. And whether you like him or not, he is a very large piece of the Sirius XM puzzle. His 2 channels are the most listened to stations on both Sirius and XM services. If he leaves for another broadcast company, possibly an internet based streaming service, then all his listeners will follow and leave Sirius XM in the dust. If this happens I believe that it is a very real possibility that they go out of business. Sirius XM needs to continue to innovate by coming out with better radios and more channels and great unique content that is not available anywhere else.

One thing that I believe they should try is to get some of the more popular podcasters to join their service. Currently they play a few different podcasts on some of their channels, but they are not unique: you can download them on your computer or portable device for free. If they had most of the top podcasts unique to their service they might be able to gain some more customers. If Joe Rogan, Mark Maron, Adam Carolla, Chris Hardwick and others were only on Sirius XM then they might just be able to gain more customers. But that is just an idea, I like podcasts and I like satellite radio, but the fact is I used to pay for Sirius but now I cannot justify the expense. Instead of listening to Howard Stern all the time, I listen and watch clips of his show that I can find online and listen to some of my favorite podcasts. If these podcasts weren't available for free then maybe I would pay for the service.

A few years ago, Sirius launched a service that allowed video channels to be streamed into cars alongside the existing audio channels. There was only 3 channels at the time and they were all geared for kids. This was for parents who wanted an additional source of entertainment for their kids in the back seat. But this service was only available on a few select Dodge and Chrysler vehicles that were new at the time. I think the service only lasted one year - they promoted it for a few months and since there was no demand they dropped it. They stopped allowing people to sign up for it and allowed the current customers to have the content for the rest of their contract and then they stopped broadcasting it for good. Although there were only 3 kids channels and it was only available in a few cars and minivans, I think it was a pretty cool and innovative idea. Plus it didn't help that it was a little pricey for the service. But if they would have kept it going for a while, enticing more auto makers to offer it in their vehicles and acquiring more channels and content I think it could have actually amounted to something. Even if they only added one channel, I think they could have made it a very neat and desirable service. They could have 2 cartoon channels for the kids, one for Disney and the other for Nickelodeon, as well as one news and weather station and maybe another channel with various TV shows and movies. This would allow kids to watch cartoons while mom drives them to and from school and other activities. Families could get live video entertainment in their cars so they could watch in the back seat on a road trip. Businessmen could watch the news while they are being driven to work. Moms could watch Oprah in the front seat while they are parked waiting for their kids to get done with soccer practice. Video content obviously takes more bandwidth than just audio, but with compression and lower quality audio, I imagine that a video channel could take about 1.5 times the amount of space of a music channel. Taking a few channels away so that they could add some video channels seems like a good compromise to me. Especially if they could make it so the audio could be picked up by all radios but the video could only be seen with a video receiver. That would allow them to have a station such as a news and weather station that you could listen to on a radio and watch the accompanying video on a monitor with a video receiver. I believe there is a lot of potential with this service and I am very disappointed that it never amounted to anything. I think if it was offered on all SUVs and minivans for a reasonable price, a lot of people would buy it. They only had it on less than 5 vehicles so of course not that many people purchased it. It wasn't even advertised so most people never even knew about it. It is stuff like this that is causing them to go out of business. They spent all the time and effort and especially money in research and development and creating the compatible devices and marketing the products for whatever short period that they did, and then just threw it all out since they stopped offering it. Why even go through with it if you are just going to discontinue it a year or two later?

Since Sirius XM want to keep the two service separate, they should brand them differently and market them accordingly. Instead of having two identical services that just confuses the customer, they could provide different kinds of services that tailor to different markets. For example, Sirius could keep the video streaming service and offer more kid and family friendly content as well as content marketed towards women and parents, along with more relaxed and calmer music like jazz and country western. On the other hand, XM could be branded more towards adults, offering more sports stations and explicit comedy and entertainment channels as well as adult talk shows like Howard Stern and Bubba The Love Sponge, along with music like hard rock and rap. At least this way people would have reasons to choose one over the other. Right now the main choice is which sports you like better and if you want Howard Stern or not. This would make it easier to choose which service you wanted as well as make each service stand out more as having unique content. This could remove a lot of the redundant channels and make way for unique ones. Most people who listen to Martha Stewart won't listen to Eminem's Shade 45 rap channel, and most people who listen to Howard Stern won't tune to the slow jazz station. They should realize this and tailor their service to the different demographics.

And then there is the case of the 'ala carte' channels. This was promised by both companies before they merged. It was one of the main reasons that the merger was approved. They said it would be cheaper in the end for most customers and not lead to a monopoly. But they haven't implemented the ala carte option. You have the choice to get the standard channels or to pay extra to get a few additional channels. There is no option to pay less if you don't want certain channels. If I don't want Nascar then I should be able to pay less to not receive it. If someone has Sirius and they hate Howard Stern, they still have to pay for his channels. But they haven't come through with any of the promises that they made before the merger. There is a monopoly. There is no innovation. And only time will tell how long they will last without making these changes. If someone wants to pay for only a handful of channels they should be able to do so. This might cause some customers to pay less, but what about the current customers who might pay for more? What about all the new customers that they could acquire if prices were lower? Sirius XM was greedy and they didn't follow through with any of their promises, and they are going to pay for it in the end. I don't think that they can sustain themselves with their current operating procedures. Howard Stern can't talk forever, he will retire sooner or later and Sirius XM will be toast after this if they don't do something to keep them in the market. I like Sirius XM and I like radio in general, so I hope they don't go the way of the dinosaurs. But I don't know if they can stop it from happening.