Satellite Radio's Collapse in Spirit, If Not in Letter

Needless to say, I didn't generate much goodwill with my opinion that satellite radio is on the road to failure. But it seems readers confused my dissatisfaction over the current state of affairs with a hope that it would fail.

You see, I want satellite radio to succeed. As my fellow Foolish commentator Rick Munarriz pointed out in his insightful counterpoint to my article, the choice between satellite radio with all its warts and commercial-driven terrestrial radio is really no choice at all. "Satellite radio can't die," he wrote. "Common sense won't let it happen."

Alas, a dearth of common sense
My biggest complaint about satellite radio is that it has abandoned its entrepreneurial roots. As I opined, it's opted for safety and sameness and is becoming more and more like terrestrial radio. The suspension of radio personalities Opie and Anthony by XM Satellite Radio (Nasdaq: XMSR  ) the other day, whatever you think of their brand of comedy, underscores my position that the metamorphosis is drawing nigh.

Self-censorship is the camel's nose under the tent. The FCC has been wanting to extend its regulation to satellite. By pre-empting the regulators -- assuming they even had wanted to do anything about the skit in the first place -- XM executives have made it far easier to rationalize giving the regulatory agency the authority to do so.

I always thought the premise of satellite radio was that you didn't have to think too carefully about what you said because of someone looking over your shoulder. On-air personalities were no longer going to have to live by the seven-second delay. Just before making the leap to satellite radio, Howard Stern's broadcasts were practically unlistenable because of breaks in the programming caused by the station censor hitting the button.

The suspension of Opie and Anthony has all the appearance of appeasing regulators and all the subtlety of taking a sledgehammer to innovative free thinking. I'm sure the other satellite-radio on-air personalities know they'd better break out their red pens and start editing their skits to make them less edgy.

Filing down the edges
This, of course, is what I was critical about before. The move of radio executives to satellite radio would end up infusing that space with the same culture that has denuded terrestrial radio.

This could end up being worse than the hoped-for merger with Sirius (Nasdaq: SIRI  ) not going through. While Rick noted that people are taking advantage of XM's desperation move of offering extended free subscriptions to keep subscribers subscribing, the fact is there is a huge movement afoot for Opie and Anthony fans to cancel altogether.

According to some blogs following the firestorm of protest over the ham-handed approach XM took to dealing with what was admittedly a rude, crude, and coarse bit of black comedy, phone lines are jammed with waits of as long as one to two hours to cancel service. If the anecdotal evidence is any indication, XM has a huge mass exodus on its hands.

Yet while the outpouring of sympathy and solidarity for the two shock jocks is completely understandable -- this is a typical terrestrial-radio way of handling a discomfiting situation -- it will probably have limited effect on XM's overall situation. Obviously, management is taking it seriously (XM is offering free service extensions, after all), but fans of The Opie & Anthony Show really don't have many options. Sure, they can still listen to Opie and Anthony's CBS (NYSE: CBS  ) terrestrial-radio show -- since the brouhaha occurred on satellite radio, there won't be a similar knuckle rap for their regular radio program -- but the content simply won't be the same.

Dollars matter, too
Since it was only a 30-day suspension, though, listeners who canceled their XM service would have undoubtedly trickled back to satellite without the inducement of free service. The smart move from an executive standpoint -- aside from not having suspended the radio duo in the first place -- was to actually ignore the protests. Sure, they would have reported extremely high churn rates next time around, but for all my criticism of satellite radio, there is a difference between the two formats, and I think fans would have returned. Eventually. When Opie and Anthony returned.

What XM has done now is burden itself with fewer revenues for whatever amount of time they've decided to extend subscriptions. Despite my fomenting the downfall of satellite radio, XM has really done the yeoman's job of proving my point for me -- that there's less than a dime's worth of difference between it and terrestrial radio -- and its demise may just be closer than I had imagined.

Fool contributor Rich Duprey subscribes to Sirius and is in the process of having an XM receiver installed. He does not have a financial position in 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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