Satellite Radio: Destined to Fail?

When I last bought a car, in 2003, satellite radio was all the rage. So much so, in fact, that the navigation system came pre-packaged with an XM Radio receiver. At that time, Sirius and XM were competitors in a fierce battle to get their receivers into the marketplace, primarily via factory-installation in new cars. Today they’re a single entity, Sirius XM Radio.

With more than 18.5 million subscribers, Sirius XM Radio is the only satellite radio service provider in the United States and Canada. You’d think, with such an enormous number of people subscribed to their service (and a de facto monopoly), they’d be turning a hefty profit, but the opposite is true. In 2007 alone, the combined losses of both Sirius and XM, prior to the merger, was over $1 billion.

This means that, although Sirius XM is taking in over $3 billion in subscriber fees per year, it’s spending over $4 billion to provide the service. I can’t even fathom how that’s possible.

Financials aside, there are other challenges that stand in the way of satellite radio being successful, first and foremost of which is the proliferation of portable media players.

Listening to the radio is a dying activity. In just 100 years, we’ve gone from a society that huddled around the soft glow of our tube radios, listening to the latest serial episode, to one that prefers to listen to a personally chosen playlist, of essentially anything, on our portable media player. Calling a radio station to request your favorite song is irrelevant: you simply click a button and can listen to it any time you want and, when you decide a new song is your favorite, you simply purchase it for less than a dollar.

There’s also the issue of sound quality. While I haven’t had much opportunity to listen to Sirius’ streams, I can say with authority that XM’s sucks. I’ve found FM radio to typically sound much, much better, with better reception. I know that seems counterintuitive given XM’s aggressive marketing of their sound quality and reception footprint, but it’s true.

I’ve found XM would cut in and out while driving down the freeway on a clear, blue day, yet work perfectly inside my concrete garage structure; go figure. One advantage that XM does have over terrestrial radio is that you can listen to the same station as you drive a long distance, instead of hunting for another station as the first one fades. That’s all irrelevant as more and more of us plug our iPod into our car stereo, though.

It seems to me that satellite radio, at least in the sense that Sirius XM is offering it, is a step backwards. The next step in the evolution of music appears to be receiving a broadcast based upon your own personal playlist, but containing music you don’t necessarily already have, like what Pandora Radio can do on the iPhone today.

Maybe the spectrum freed up by the implosion of Sirius XM will provide bandwidth to a whole new generation of streaming media that we’ve only begun to glimpse.