Why Satellite Radio Will Fail

Say goodbye to satellite radio. As a driving force in entertainment, it's already past its heyday. Just as quickly as it exploded on the scene, satellite radio is becoming yesterday's news.

It's not because XM Satellite Radio  (Nasdaq: XMSR  ) was able to add only half as many net new subscribers in the first quarter as it did last year. Nor is it because Sirius Satellite Radio  (Nasdaq: SIRI  ) added only half a million new subscribers based on the strength of some sketchy new-car production sales schedule (auto manufacturers account for the bulk of new subscribers). Forget that the number of people who buy their satellite radio receivers in-store fell by more than 50% this year and that the churn rates -- the number of customers the radio stations lose each month -- continue to climb.

No, it's something less statistical than all that, more ephemeral. Satellite radio will fail because it sucks.

I'm not an early adopter of most technology, and I got my first Sirius satellite receiver only when Howard Stern announced that he was leaving terrestrial radio. Being a fan of his comedy, I was willing to test out what a no-holds-barred Stern could be. For the most part, I find his show to be the one bright spot in what has otherwise become a wasteland reminiscent of ground-based stations. Yet one entertainer cannot keep an empire from crumbling.

Teenage wasteland
The biggest problem for satellite radio is that it is morphing into terrestrial radio, albeit without the commercials. Let me list some of the reasons I see satellite radio failing.

  • Limited playlists.
  • Annoying DJs.
  • Lousy reception.

You would think most of those would apply to any terrestrial radio station run by Clear Channel Communications (NYSE: CCU  ) , but they're symptoms of the problem with satellite radio.

Play it again, Sam. And again and again.
I definitely don't miss the insipid commercials I used to find on regular radio, but with 24 hours of airtime to fill up, you'd think the satellite companies could maybe mix up the playlists once in a while. How many times can Sirius' rock station Octane play Hinder's "Lips of an Angel"? And I think there's some Carpenters song played every 12 minutes on its Moving Easy band.

I listen to just a handful of stations on Sirius, and believe me: You can just about set your watch to when a particular song is going to come on. Can't they play some of the lesser-known songs by the artists, just for variety? While I have a Sirius radio, the same failings apply to XM. Repetitive songs seem to be an industry-wide issue that I thought satellite radio would resolve.

Hey, Mr. DJ!
Perhaps I'm showing my age, but there's a lot of '70s music I like, so I tune into Totally '70s. I'm left to wonder, though, whether DJ Barry Williams (a.k.a. Greg Brady from The Brady Bunch) is required to introduce every song with some pun pulled from a song's lyrics. What terrestrial radio has never learned -- and satellite is following closely in its footsteps -- is that DJs rarely matter.

Anyone can spin a record. Certain personalities -- Howard Stern or Opie & Anthony -- are able to differentiate themselves, but then again, they're not playing music. Most DJs are forgettable, even Octane's Kayla, once the music starts.

CBS Radio (NYSE: CBS  ) actually has come to this conclusion. Its nine Jack FM stations -- in the New York metro area where I live, it's 101.1 -- have done away with DJs and simply have a generic, smart-aleck voiceover making commentaries between songs. And the music's not too bad, either, though there are still commercials. Satellite ought to take a cue from CBS.

Home on the range
I drive the entire length of the New Jersey Turnpike a lot. It is exceptionally rare for me to be able to listen to an entire song without the signal cutting out. Sure, you're warned about tall buildings blocking signals sometimes, but there are a lot of flat areas on the turnpike without buildings, trees, or even animals where the receiver suddenly reads "No Signal."

In that respect, I think XM has Sirius beat. You can be deep inside a garage and still get a signal with XM. I've found myself stuck in plenty of dead zones with my Sirius, or I'll be sitting at a traffic light inching forward to find just the right spot to get the signal to come back on. Blue skies and green grass might make for great song lyrics, but they're no guarantee of getting a radio signal.

Satellite radio once held a lot of potential: commercial-free, unfettered by the FCC, and able to play whatever the stations wanted. Instead, it's opted for safety. As big-name radio executives like Mel Karmazin moved to satellite, it became more like terrestrial radio. And when there is little difference between what your local Zoo station is playing -- woo-hoo! wheee! yuk! yuk! -- and what you can find on satellite, not even a merger of XM and Sirius can save it.

Got an opinion on radio? Bring it to CAPS! More than 28,000 fellow ranked investors are waiting to tune in to your thoughts.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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  • Report this Comment On December 09, 2009, at 11:13 AM, Gemini220 wrote:

    I agree totally with this article except you forgot to mention the radios suck, especially the portable ones. I am on my fourth. As soon as Howard Stern is gone so will be millions of customers. I for one. At this time I listen on the Internet player.

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