October 2000
Satellite and digital radio

Satellite and digital radio - on what basis can they succeed?

Indisputable advantages for broadcasting!

Last month ( Sept comment), we commented on the potential threat to traditional broadcasting from the Internet and concluded that, at its current state of development and probably whatever its development, it was more of a new medium in its own right than a major threat to traditional broadcasting in technological terms, We did put in, however, a caveat about it possible taking away a significant fraction of radio advertising.
Satellite and digital radio, however, like their television counterparts, offer some indiputable real advantages to broadcasting. Like traditional broadcasting a single signal can be received by as many people as care to tune in without any additional transmission costs unlike Internet streaming. Unlike terrestrial broadcasts, though, satellite radio does not have the problems of range that FM does nor of interference as AM does. If you're in the satellite footprint and have a suitable receiver, you should get a good signal. And digital potentially offers the options to both put out more channels and get better quality providing the right balance is struck.

Digital opportunities.

The real question to us, therefore, is the models which would make them a success. In essence we see digital as likely, initially at least, to offer more of the same with some advantages of quality and some extras such as being able to tie in data streams (pretty good for traffic and weather news for example). However noting the impact of dozens of extra channels on television, even more of the same offers opportunities to also slip in some of the new. For example it would be possible to have pay-as-you-listen or subscription channels which can target niche audiences who are currently left out because there's just not enough room for the channels in AM and FM spectrum. An example of this potential is the BBC plan in the UK to offer new national channels including three digital ones (RNW Sept 29).
The current downside is of course the cost of the receivers, which will have to come down dramatically for mass take-up unless the commercial lobbyists succeed in getting AM and FM closed down!

Satellite radio.

Satellite radio essentially covers wide geographical areas and looking at current plans we find it both interesting and encouraging that both the major US satellite radio operators propose subscription channels free of advertising although XM is hedging its bets a little by plans for some advertising on some channels.
Thinking about it one way, of course, traditional state broadcasters who depend upon a licence fee are in effect providing a subscription channel although satellite radio will not have the backstop of the sanctions on those who do not have a licence in some countries (Very heavy fines apply in the UK if you do not have a TV licence -the separate radio licence was dropped years ago. In Japan, on the other hand, there is no legal sanction against those who do buy a licence although most people still seem to pay up and as a result get an advertising-free state broadcaster, NHK).
To us there are real benefits in the range and variety of programmes that result when broadcasters don't have to look over their shoulders in case the advertising departments try and block or tone down material that a big advertiser might find displeasing. There's also a major advantage for some types of programming in the very fact that it doesn't have to be interrupted with advertisements, a reason in the UK to value BBC Radio 3 which can regularly carry less popular works or a whole symphony uninterrupted whilst commercial competitor Classic FM is inevitably pushed towards a menu of gobbets of "popular" classics

Will enough people pay? And what will they get?

We rather hope that satellite radio does take off and subscription and pay-TV, delivered by cable and satellite, has certainly shown that there is a demand for some services. In the case of TV this has been for entertainment with sport and movies the "must-haves" although there are successful players in more niche markets.
Satellite radio could go the same way but since the production costs are much lower it could also have a much wider range of programming. A radio documentary, after all, can come in at a hundredth of the cost of a TV counterpart and still maintain technical quality whilst the complexity of TV means that cost cutting usually shows. Satellite radio thus potentially offers a couple of hundred channels of good quality audio with a wide range of programming for a comparatively small subscription.
Like the Internet, we see it as more of a global or wide-area medium, with terrestrial services still dominating for local radio services. If it can get the audience then there should be some welcome additions available to people although, in some circumstances, rights problems could be a significant factor (see RNW Sept 23 regarding BBC having to shut down an analogue satellite service mainly because it had only UK sports rights).

Our overall findings!

Overall we see think satellite radio, like Internet audio, will be yet another different and complementary service to that provided by current terrestrial broadcasters. Similarly we see digital radio as expanding not curbing their opportunities.
Certainly the combination may continue to dent the share price of "Big radio" and maybe some players who've overpaid for their expansion may have to retrench or even, in some cases, go under.
However we don't see significant threats to the smart players and the real bottom line for the audience should be an enhanced diversity of programmes available to them. We think there is room for all and look forward to a mix of very local community radio (we do support LPFM in the US), commercial local radio, commercial networks and syndicated shows, licence-funded broadcasters able to operate independent of advertising pressures and new services from satellite and the Internet.
We also hope there will be room for subscription or pay-as-you-listen models as well as those being funded by advertising.
And as a final word, for most people it's going to be a while yet before the fancy new technologies match the cost and convenience of the "tranny". Radio from a $10 transistor is affordable and convenient. Do you really expect portable reception of quality at $10 upfront and no extras via the Internet?

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