My car was in the shop for a few days. The dealer took three stabs at it over the past month before realizing that a defective gas tank needed to be replaced. The end result is that I spent five days with a loaner.
Did I mention that the rental car didn't have satellite radio?
I'll admit that I'm spoiled. I've had a Sirius portable unit since 2004 and have had XM in my GM car since 2006. It's been awhile since I actively sought out AM/FM radio, and even then it's usually for the sake of local sports radio, since that's about the only thing I can't truly duplicate through Sirius or XM.
In short, I had forgotten how forgettable terrestrial radio has become. Between the sheer volume of ads -- which I realize pay the bills -- and the razor-thin music rotations, I was never happier than when I picked up the phone to hear "your car is ready" at the other end of the line.
Trying to take the pulse of old-school radio is a challenge. Clear Channel went private. The remaining publicly traded operators -- Citadel, Cumulus, Beasley, and the like -- are either penny stocks or command minuscule market caps.
Many of the stocks have hitched a ride on the market rally, but the gains don't feel particularly earned. Entercom (NYSE: ETM ) has seen its shares grow nearly tenfold from its 52-week low, even though its latest quarterly report shows a 14% dip in revenue, with adjusted profitability falling twice as quickly.
Some may argue that the industry's wounds are self-inflicted, but I suspect foul play. I think several other factors have contributed to the demise of the traditional radio industry. I have a few suspects in mind.
Let's see how they line up.
Blame it on Sirius XM
With 18.5 million subscribers, satellite radio is a terrestrial party crasher. This is more than just a big number on Sirius XM Radio's (Nasdaq: SIRI ) rolls. We're probably talking about 18.5 million of the more fanatical radio listeners, with enough disposable income to bankroll their subscriptions. This dilutes the quality of the terrestrial listener, at least in the eyes of potential sponsors.
Terrestrial radio was so threatened by satellite radio that it lobbied extensively -- through its National Association of Broadcasters arm -- to nix the merger between Sirius and XM. It ultimately failed, but it threw enough wrenches in the system to delay the pairing for a year and a half.
One can argue that satellite radio has its fingerprints all over the cadaver, but it's not a slam-dunk case. Only 47% of the buyers of new cars that come with factory-installed satellite receivers continue to pay for Sirius or XM after their trial subscriptions run out.
However, no one said satellite radio's appeal has to be universal to deal a blow to old-school broadcasters. In the end, we're talking about 18.5 million people who are unlikely to bother with terrestrial radio for as long as they're active satellite subscribers.
Taking a bite out of Apple's crime
Portable media players were a novelty until Apple (Nasdaq: AAPL ) introduced its iPod. Several generations later, the iPod is the undisputed champ. But let's take Apple in for some questioning before we pin the crime on Mel Karmazin.
Apple moved 10.2 million iPods in its latest quarter. It also cleared nearly 7.4 million iPhones, which come complete with iPod functionality. In other words, Apple moved nearly as many iPod-capable devices in three months -- 17.6 million -- as the entire population of satellite radio subscribers. If we tack on the portable-media players that rivals Microsoft (Nasdaq: MSFT ) and SanDisk (Nasdaq: SNDK ) sell, we're probably looking at numbers that well exceed the satellite-radio crowd.
It's no surprise to find more and more cars with audio input jacks. There may not be a financial incentive to add the jacks -- as there is for automakers that deliver paying subscribers -- but consumers are demanding it.
With a choice of digital music purchases, ripped CDs, podcasts, and audiobook services, an iPod owner never has to run out of fresh content.
Blame it on the smartphone, wise guy
Unlike the iPod, Apple's iPhone streams the Web without a Wi-Fi connection. Internet-savvy phones by Apple, Research In Motion (Nasdaq: RIMM ) , and Palm (Nasdaq: PALM ) are making content access truly portable.
It's no surprise to find that the top music application on Apple's App Store is for Pandora Radio. Pandora's ability to serve up music streams tailored to the individual user make it unique in a way that terrestrial -- and even satellite, to some extent -- can't duplicate.
I say the Internet killed the radio star
Satellite radio, portable media players, and smartphones have helped poison terrestrial radio slowly, but I believe the World Wide Web will ultimately make terrestrial-radio towers obsolete.
As dirt-cheap -- or even free -- connectivity becomes ubiquitous and coverage gaps shrink, it will be hard for a handful of local radio stations to compete against the countless number of Web-based stations running on hobbyist shoestring budgets.
Obviously, some terrestrial stations will stick around as global streamers. The more popular content creators will simply go it alone and connect directly with fans. However, terrestrial radio as we know it is fading with every passing day.
The last lunge of the dagger will come from cyberspace.
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