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The Federal Communications Commission gave commercial radio stations the go-ahead to broadcast digital signals -- a move that could prematurely snuff satellite radio's short-burning flame.
Satellite radio was hyped as the answer to tired commercial stations that play the same, limited music. It promised crystal clear, commercial-free music and talk shows tailored to individual tastes and delivered with digital signals. From reggae to sports talk, listeners could tune in to their favorite stations from coast to coast.
Both Sirius Satellite Radio and XM Satellite Radio launched aggressive campaigns starting in the late '90s, spending hundreds of millions of dollars in an attempt to capture listeners.
That didn't happen. The monthly fee and steep installation costs for digital radios kept many folks from signing up. Now, wallowing in debt, the companies face a new challenge: Commercial stations are back in the ballgame after the FCC cleared the way for them to begin digital broadcasts as early as this year.
"The only advantage of satellite radio was that they could say they were digital, and now that argument goes by the wayside," said Dennis Wharton, the National Association of Broadcasters senior vice president of communications. "And we are free and local. If you can get what you want and it's free, there really is no argument for satellite radio."
On Thursday, the federal government backed a technology called in-band on-channel (IBOC) developed by iBiquity Digital Corporation that allows broadcasters to send both analog and digital signals.
Adopting both analog and digital delivery means consumers' car stereos won't turn into worthless junk as stations switch from analog to digital. Congress has discussed similar forced upgrades for digital television, causing consumer advocates to worry that the government is trying to push new technologies too quickly.
Even without the government's help, high-definition radio -- HD radio -- has already started moving forward.
Six major markets -- New York, Los Angeles, San Francisco, Seattle, Miami and Chicago -- will get an early push from iBiquity. The company is outfitting the biggest stations with its transmitters, hoping to reach half of the listeners, according to iBiquity CEO Bob Struble.
The big blowout comes in January at the Consumer Electronics Association convention, when manufacturers start pumping out home and car audio equipment.
"Consumers have rapidly adopted digital technologies because of the choice they provide and this shows no sign of slowing," said Struble.
The coming digital bonanza spells trouble for XM and Sirius. Each has been hit with the a double whammy: tiny revenue streams and gushing losses.
XM Satellite Radio left the gate first, and consumers showed early interest. The company has 200,000 people paying $10 a month for unlimited access to its 101 channels of music, talk, sports and entertainment. Yet, even with numbers projected to reach 350,000 by year's end, XM has racked up $240 million in losses.
Sirius has fared worse. The company attracted 6,510 subscribers with a limited rollout, which ended this year. Those paltry numbers led to a staggering net loss of $192 million on revenues of $54,000, although the company expects those numbers to improve as a result of its nationwide service expansion in July.
Despite these obstacles, satellite radio could survive by falling back on its vast selection of music that isn't offered on commercial stations. IBiquity's IBOC technology makes the music sound better, but it doesn't address most stations' limited playlists.
"IBiquity isn't offering anything that deals with the programming that you get on AM and FM today, or the commercials that you get," said Chance Patterson, XM's vice president of corporate affairs. "With XM Satellite Radio, you get unique programming and you get it on a nationwide, coast-to-coast basis. Those are unique to us, and have been part of our success so far."
Still, both companies need to raise tens of millions of dollars to stay in business, according to their latest SEC filings. And while Patterson said XM's business plan remains on schedule, that debt could ultimately be satellite radio's undoing, now that it is competing with similar services that come with no subscription fee.
"It's got to be a concern to the satellite radio companies that have invested enormous amounts of capital in an overhyped product," said Wharton.
Satellite radio was hyped as the answer to tired commercial stations that play the same, limited music. It promised crystal clear, commercial-free music and talk shows tailored to individual tastes and delivered with digital signals. From reggae to sports talk, listeners could tune in to their favorite stations from coast to coast.
Both Sirius Satellite Radio and XM Satellite Radio launched aggressive campaigns starting in the late '90s, spending hundreds of millions of dollars in an attempt to capture listeners.
That didn't happen. The monthly fee and steep installation costs for digital radios kept many folks from signing up. Now, wallowing in debt, the companies face a new challenge: Commercial stations are back in the ballgame after the FCC cleared the way for them to begin digital broadcasts as early as this year.
"The only advantage of satellite radio was that they could say they were digital, and now that argument goes by the wayside," said Dennis Wharton, the National Association of Broadcasters senior vice president of communications. "And we are free and local. If you can get what you want and it's free, there really is no argument for satellite radio."
On Thursday, the federal government backed a technology called in-band on-channel (IBOC) developed by iBiquity Digital Corporation that allows broadcasters to send both analog and digital signals.
Adopting both analog and digital delivery means consumers' car stereos won't turn into worthless junk as stations switch from analog to digital. Congress has discussed similar forced upgrades for digital television, causing consumer advocates to worry that the government is trying to push new technologies too quickly.
Even without the government's help, high-definition radio -- HD radio -- has already started moving forward.
Six major markets -- New York, Los Angeles, San Francisco, Seattle, Miami and Chicago -- will get an early push from iBiquity. The company is outfitting the biggest stations with its transmitters, hoping to reach half of the listeners, according to iBiquity CEO Bob Struble.
The big blowout comes in January at the Consumer Electronics Association convention, when manufacturers start pumping out home and car audio equipment.
"Consumers have rapidly adopted digital technologies because of the choice they provide and this shows no sign of slowing," said Struble.
The coming digital bonanza spells trouble for XM and Sirius. Each has been hit with the a double whammy: tiny revenue streams and gushing losses.
XM Satellite Radio left the gate first, and consumers showed early interest. The company has 200,000 people paying $10 a month for unlimited access to its 101 channels of music, talk, sports and entertainment. Yet, even with numbers projected to reach 350,000 by year's end, XM has racked up $240 million in losses.
Sirius has fared worse. The company attracted 6,510 subscribers with a limited rollout, which ended this year. Those paltry numbers led to a staggering net loss of $192 million on revenues of $54,000, although the company expects those numbers to improve as a result of its nationwide service expansion in July.
Despite these obstacles, satellite radio could survive by falling back on its vast selection of music that isn't offered on commercial stations. IBiquity's IBOC technology makes the music sound better, but it doesn't address most stations' limited playlists.
"IBiquity isn't offering anything that deals with the programming that you get on AM and FM today, or the commercials that you get," said Chance Patterson, XM's vice president of corporate affairs. "With XM Satellite Radio, you get unique programming and you get it on a nationwide, coast-to-coast basis. Those are unique to us, and have been part of our success so far."
Still, both companies need to raise tens of millions of dollars to stay in business, according to their latest SEC filings. And while Patterson said XM's business plan remains on schedule, that debt could ultimately be satellite radio's undoing, now that it is competing with similar services that come with no subscription fee.
"It's got to be a concern to the satellite radio companies that have invested enormous amounts of capital in an overhyped product," said Wharton.
