Did Rush Limbaugh just ink the last blockbuster megadeal in the radio broadcasting industry?
The conservative talk show icon is extending his deal with Clear Channel's
According to Clear Channel, Limbaugh's show draws an audience of nearly 20 million listeners through 600 radio stations. The deal also includes syndicated snippets, running the RushLimbaugh.com website, and a premium site and newsletter.
A Rush of blood to the brain
Limbaugh's deal is dwarfed by the five-year $500 million contract that Howard Stern signed with Sirius Satellite Radio
Well, terrestrial radio's appeal is waning. Hardcore commuters have switched to the mostly ad-free satellite radio, while the portability of digital music, podcasts, and Internet radio have created pocket-sized alternatives to firing up the AM and FM bands.
Even more importantly for terrestrial radio's fortunes, the merger between XM Satellite Radio
XM and Sirius have opened up their billfolds in the past to ink pricey deals. Whether they were wooing Stern, Oprah Winfrey, or Martha Stewart Living Omnimedia's
That will change. Stern is unlikely to command the same $100 million-a-year payday he's averaging today, even though Sirius' ability to close the subscriber gap with XM since Stern's arrival certainly suggests he deserved the money. The key is that Sirius-XM won't bid against itself. Limbaugh's deal is a record for terrestrial radio, but it still averages out to just $50 million a year, and that's if performance incentives are hit.
Turning dollars into pocket change
Scaling back programming costs is probably long overdue. Other old-school media companies like newspaper and magazine publishers have resorted to layoffs to counter plummeting circulation rates and ad revenue. XM and Sirius now combine to beam digital radio to nearly 18 million paying subscribers, yet neither company has ever come close to turning a profit.
Terrestrial heavies like Clear Channel and Cox Radio
The industry will evolve. Terrestrial and satellite radio providers have generally done lousy jobs in monetizing their websites. This may come as a surprise, since terrestrial radio should be milking the heck out of local search advertising. XM and Sirius have done little to implement interactive marketing on their sites. Even XM's deal to sell songs through Napster
Hopefully, that will change in the future. When you couple new revenue streams with the lower cost structure afforded by programming costs, the future of radio -- both satellite and terrestrial -- may be brighter than you think.
Here are some other recent stories on XM's long courtship with Sirius: