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Firing DJs Will Eventually Doom SiriusXM

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SiriusXM (NASDAQ: SIRI  ) , which has been steadily shedding DJs in favor of music-only channels since the two satellite radio companies merged, has dropped personalities on its '50s and '90s channels. The moves might make economic sense and they might even be what some listeners want, but ultimately, offering personality-free radio may doom the company's long-term prospects.

New York Daily News Columnist David Hinckley, who covers the radio and satellite radio business, wrote about the moves in his column Feb. 5, explaining that the service was becoming "music intensive -- a trend that has permeated all of music radio over the last 10 years."

The loss of DJs, however, makes the SirisuXM stations less distinctive and removes a differentiating factor between satellite radio and music services like Pandora (NYSE: P  ) , Apple's (NASDAQ: AAPL  ) iTunes Radio, and Spotify.

End of the arms war

When Sirius and XM were competitors, the two companies spent tens of millions of dollars locking up personalities and brand-name content in an attempt to lure customers. With the companies no longer competing, SiriusXM has retained a few signature personalities (Howard Stern, Opie and Anthony, and Christopher "Mad Dog" Russo, to name a few), but with no direct satellite competitor, the company has let deals with Martha Stewart and Cosmopolitan magazine expire while also letting the other well-know personalities on Stern's channels -- Bubba the Love Sponge and Scott Ferrall -- leave.

Will people leave?

Despite the loss of hosts, Hinckley said in an email interview with the Fool that he does not believe subscribers will leave the service in any significant numbers.

"It's a nuisance to drop a subscription. You have to call and go through the whole ordeal of getting to a live person," he said. "More significantly, my guess is that relatively few people buy a SiriusXM subscription for just one channel, with the possible exception of some Howard Stern fans."

Hinckley explained that most people were buying because they like the package -- perhaps the sports channels, the news channels, or something else combined with the music offering. "Even if it's your favorite channel, my guess is that most people feel disappointed, but decide they'll give what's left a shot," he said. "This is a conditioned response, too, from 'regular' radio, whose MO has always been change -- change in hosts, change in playlist, change in formats. Radio listeners, on some conscious or subconscious level, are used to it."

Is it worth it financially?

Though some of the major deals like Martha Stewart's bring a considerable cost saving to SiriusXM, getting rid of individual DJs does not. According to Hinckley, most hosts are voicetracked and do a whole shift, or a whole week, in one session, for which they get paid scale.

"Back before the merger, when Sirius signed that first big contract with Stern, it cut a whole flotilla of its DJs loose. That, obviously, was a way of making up some of the cost of Stern's deal," he said. "Then more DJs were eliminated in the merger.  So most of the DJs on channels where jocks were considered superfluous or marginal had already been taken off. What Sirius XM is doing now, even with the occasional live jock like Norm N. Nite, feels more for strategic than financial purposes.

Can a competitor swoop in?

If eliminating DJs is not for financial reasons, you can assume the company is doing it because it believes people want only music on its music channels. That might be true. But with it becoming easier for people to stream Internet music services in their cars, not having DJs makes SiriusXM -- as a music service -- a less-effective version of Pandora. SiriusXM offers a lot of music for a radio station, but it does not take your input and let you customize the way Pandora does. It also does not let you simply pick what you want to hear the way Spotify and other streaming services do.

"I think it does become easier for a Pandora or streaming music services to poach consumers if SiriusXM doesn't offer something different. But I suspect SiriusXM looks at it from the other perspective -- that it also becomes possible for satellite to poach music service customers," Hinckley said. "I've heard satellite radio in a number of supermarkets, which clearly prefer an all-music feed to something with DJs."

SiriusXM, as a package, does still have differentiators in its news, sports, and talk programming. But as its music offering fades to generic, the company is dropping something that made it special -- something that made it radio, not just music.

And while SiriusXM offers a lot of value for the price, the company, if it stops being special, faces the same vulnerability the cable business does. At some tipping point, SiriusXM customers will realize they can bundle most of what they get out of SiriusXM for free or less money with not much more hassle.

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Read/Post Comments (15) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2014, at 2:42 PM, ccZaphod wrote:

    I've been a Sirius Subscriber since 2004 and will likely switch to Pandora if they dump the DJ's from the channels I listen to. Not that I'm a huge fan of any particular DJ, but I do enjoy the 30 seconds of background or color the DJ adds to the broadcast.

    I am a Pandora subscriber already, but currently only listen to it while in the home -- wouldn't take much more for me to listen to Pandora in the car as well.

  • Report this Comment On February 10, 2014, at 2:46 PM, BPserf wrote:

    SIRI has satellite music why can't they come up with a satellite internet?

  • Report this Comment On February 10, 2014, at 2:54 PM, Honestguy wrote:

    When SIRIUS dropped Jonathan Schwartz from Siriusly Sinatra, than letting him go from 40's on 4 I was very disappointed. So much so that I dumped my subscription and gave the money to the Jonathan channel on internet radio WNYC FM. Pandora will do just fine for the rest of my music needs.

  • Report this Comment On February 10, 2014, at 2:59 PM, 67vair wrote:

    Cool down Daniel. Sirius will be fine and will always have DJS. A true radio co., not a jukebox, like the other money losing companies.

  • Report this Comment On February 10, 2014, at 3:01 PM, Guggerpaul wrote:

    Are you still talking? I'm trying to listen to music here!

  • Report this Comment On February 10, 2014, at 3:12 PM, goodguy36 wrote:

    I think you're all wet. Cool it! Quit knocking Sirius. I've been with 'em for 8 years. Not gonna miss some of the DJ's at all. I pay for music, etc. Not talk.

  • Report this Comment On February 10, 2014, at 3:37 PM, TJR wrote:

    Another bullcrap article from a pandooker lover.

  • Report this Comment On February 10, 2014, at 4:35 PM, itsthatbriguy wrote:

    One of the most anticipated and well-received additions to the Sirius service has been the MySXM feature on it's apps and web player. Sure, it tweaks the music mix on a given station a bit, but more key to its success is the blessed lack of yapping idiots interrupting the flow of music with insane and utterly irrelevant chatter. If I wanted chattering nonsense, I would go back to the dying terrestrial wasteland.

  • Report this Comment On February 10, 2014, at 5:35 PM, sirifair6 wrote:

    I would not make such radical statement like doomed if they drop DJ's but guys like Bernie Taupin are still worth a million. I love his Saturday night talk about musicians from the past, their stories, etc. Bernie is a jewel and a walking encyclopedia of music and its history.

  • Report this Comment On February 11, 2014, at 5:33 AM, zukerman wrote:

    To me the difference between a good DJ and a bad one is when they talk into the intro of one of my favorite songs, this is when it becomes about him/her and not what I intended to listen for. My wife was thrilled to hear Cousin Brucie because he was someone she grew up with, but at the same time he knows when to shut the pie hole.

    We live in a society where it's become altogether to quick and easy to comment on what we think is good or bad, never even considering the fact that we aren't necessarily the best cross section of listeners. Someone that will sit endlessly hour after hour listening to talk radio might not mind the long winded DJ at all, yet it will irritate someone else.

    We've become the whiner generation giving our own commentary on everything and everyone without pause. Imagine a world of robotic parrots that all listened to the same thing, that would be very boring to me. BTW, you'll need to make money consistently in order to be able to pay DJs. This is the third year running that Pandora has planned to double down on ad sales and the second where they plan to draw the local audience, nobody has done it 4 quarters in a row yet, nobody.

  • Report this Comment On February 11, 2014, at 11:14 AM, BillFromNY wrote:

    "Doom" is a little over the top, I think. Sometimes I like having an announcer and sometimes I don't. Depends a lot on the announcer.

    But there are no announcers so important that I would drop my subscription.

    I, too, was very sorry to see Jonathan Schwartz go. (Although to be honest I had listened to him so much on Sirius that I was beginning to get a little tired of him.) I imagine that he was bumped off the popular and powerful Sinatra channel because the Sinatra family that runs that channel still carried a grudge from some criticism of a Sinatra album many years ago. This despite the fact that Schwartz had done more than anyone to keep Sinatra's music alive.

    Schwartz said when he left Sirius entirely that he was retiring at the age of 75 from the daily grind and that Sirius had treated him very well.

    However, since he has started up an Internet station where he still hosts a live 3 hour show every day, perhaps there was a little more to his "retirement" than he said.

  • Report this Comment On February 11, 2014, at 1:20 PM, WallStr3tNvrSlpz wrote:

    I think this article is a miss and realistic fiction at best. One thing is missing is SiriusXm may release DJs strategically but they also add new personalities and bring back canceled channels strategically. Trends move quickly and DJs and more importantly paying listeners change; some DJs become outdated from a numbers perspective quicker than a public perspective but as always SiriusXM re-ups with new talent to increase the value of it's content. SiriusXm is known for it's content they are The Content King, so we have to give them some respect in that regard. Past history says maybe they know what they are doing with the Djs and overall content offering, could even be called expertise.

  • Report this Comment On February 12, 2014, at 10:39 AM, dannysboy wrote:

    I have been a business traveler for decades and within my preference of music, I have always had DJs I preferred over others.

    With SiriusXM, I'll use as an example the POPS ch. ,75.

    If I know Vincent Caruso or Preston Trombly are on, I'll tune them in. They add color to a medium that can be pretty stuffy.

    If management doesn't think personalities are important, then what is Howard Stern doing here getting richer. He obviously draws an audience, of which I'm not a member.

  • Report this Comment On February 12, 2014, at 10:55 AM, Pancakes22 wrote:

    I got rid of them when they dropped nikki six

  • Report this Comment On February 12, 2014, at 6:33 PM, BillFromNY wrote:

    The author doesn't really seem that familiar with all the music stations offered by Sirius. Granted, a lot of people never make it past pop stations 3-10, which play the pop hits of that decade (4 - music of 40s, 10 - music of 2000-2009, etc.). With these stations the announcer question can be important.

    But there are so many other music stations: light rock, mellow rock, folk, love songs, long rock album cuts from 60s and 70s, 70s and 80s, classic and contemporary country, classic and contemporary jazz, bluegrass, gospel, Broadway, light classics, heavy classics, Metropolitan Opera which broadcasts live operas from the Met. And stations dedicated to Elvis, the Grateful Dead, Jimmy Buffett, Pearl Jam, BB King, Springsteen.

    I could go on, but probably people wish I hadn't gone this far. The dedicated stations often have members of the group as guests or guest hosts. One year Bob Dylan hosted a weekly show in which he played and discussed his favorite songs on a particular topic.

    Announcer or not, you can't find anything like the variety of stations anywhere else. Where else can the elderly go to listen to the music of the 30s and 40s that they grew up on? They are not important enough to be targeted by any other stations. This is why I think that a three month trial isn't enough to explore everything on Sirius while at the same time trying to learn to operate his or her new car.

    Except for their basic pop stations, Sirius music channels aren't anything like what is available on Pandora or Spotify or Apple. Which is why I say that Pandora and Sirius are hardly competitors. Pandora plays the pop hits in jukebox fashion presented in a very appealing way to listeners. If that's all they're interested in then it would be foolish to subscribe to Sirius. People who get attached to just one or two Sirius music channels will not give them up.

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Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

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