SAT RADIO ALMOST A MONOPOLY THANKS TO FCC

(This 2009 Corvette ZR1, in addition to over 600 horsepower, comes pre-wired for XM satellite radio).

Here at SteveParker.com, we get more questions and comments about satellite radio than any other single topic, with most all of them complaints. And the reasons for that are many of the same reasons sat radio has not grown nor prospered as much as many expected since XM started broadcasting (spacecasting?) on September 25, 2001; Sirius went on-the-air (on-the-space?) on July 1, 2002.

But a Federal Communications Commission decision, due any second now, and perhaps already announced in DC, is going to create a monopoly for sat radio in North America.

Now, it's one thing when a government agency deregulates or otherwise loosens restrictions in an industry (say, like in the banking and mortgage businesses, and that worked out great, didn't it?); it's another when that industry is made-up of just two companies.

This "merger" is going to make people even more confused about the sound system in their vehicle; HD Radio is an all-new product which offers some of the same benefits, sound quality wise, as sat radio. In some ways, it might even be superior. (A benefit to consumers is that sat radio receivers, after the XM and Sirius "merger," will be available from any company that wants to build them; HD Radio already welcomes all radio-makers).

The NY Times on Wednesday night (7-23-08) said the Federal Communications Commission was on the verge of approving a merger between XM and Sirius Satellite Radio, a move that would essentially create a North American monopoly in satellite radio.

The combination of Sirius and XM will create one satellite radio company with about 17 million subscribers and programming running the gamut from NASCAR to Indycar, Howard Stern to Oprah Winfrey, Major League Baseball to Martha Stewart.

Among the conditions that both companies had already accepted were planning for à la carte programming  that would give consumers flexibility in which channels they pay for, permission for any electronics company to develop devices that would receive the new, single-company service, a price freeze for three years and several more.

XM beating Sirius as the first spacecaster is something which has worked to that company's great favor. In the car business, perhaps more than any other, being first out of the gate doesn't guarantee success, but it can sure help. From September, 2001, to July, 2002, there was only one satellite radio company you could actually hear and which was getting all the publicity in car magazines and websites, TV and even traditional radio and newspapers ... you name it, if someone was seriously searching for news about sat radio, they eventually found themselves on XM's website for almost 8 months.

Even more important than XM's earlier launch was one of its owners. In 1988, a consortium of eight companies grouped together to buy one of the sat radio licenses, which were going to be made available by the FCC. Hughes electronics, then-owned by General Motors, was one of those eight.

Hughes made the satellites for XM's system, and GM was the first car-maker to announce sat radio would be available across their entire product line. GM bundled their OnStar service with XM, the two systems using the same exterior antennae for both. GM cars and trucks with OnStar are already pre-wired for XM and in most cases, the radio in that car or truck is ready and able to receive XM. All someone has to do is activate the service. Ask someone at the dealership to do that. It's not difficult, but based on my mail, it's a little too tough for a lot of people.

Click below to find out why car dealers are one of sat radio's biggest problems.

Ford, Chrysler and all their divisions, from Mazda to Dodge, Lincoln to Volvo have dealt exclusively with Sirius.

Being first in sat radio was similar to what happened when Toyota launched their Lexus luxury channel and Nissan followed with their Infiniti line. Lexus beat Infiniti into the market, and though people who were involved with launching Infiniti have told me that Nissan could have pushed-up the introduction date so Infiniti could go head-to-head with Lexus, they decided to wait. Instead of car magazine covers screaming "Lexus vs. Infiniti Shootout!" (I used to write headlines like that, and get paid for it), they said, "Lexus".

And that remains a big reason, all these years later, that when most people think "Japanese luxury car" the first word which comes to mind is "Lexus." I believe XM is still first in customers' minds when the subject of sat radio comes up, except for someone who already has Sirius, or the car they bought can be outfitted only with Sirius. (Honda's Acura luxury channel is another story; their lack of a V8 engine has hurt them greatly in the battle between the Honda, Toyota and Nissan luxury lines).

Why hasn't sat radio caught-on in a bigger way? It comes down to car dealerships.

I think that everything about sat radio, from the sound quality to the choices of music, news and talk offered is first rate. The biggest problem with sat radio (apart from it about to become a monopoly) is at the dealership level. What I've found through the messages at my website, dealers have little if any enthusiasm for selling sat radio, be it XM or Sirius.

In these times, when dealerships can make more money on their used car sales than on new cars or  trucks, sat radio is just another item which might scare away potential customers. If the price of, say, a GM-built truck is nearly the same as what the Ford dealer down the street is charging for a similarly-equipped pickup, adding XM to the bottom line isn't going to help the GM salesperson make that sale. (A Ford Focus World Rally race car would, if you could buy one, offer Sirius only, pre-merger).

And not only salespeople on the showroom floor as well as the F&I (finance and insurance) person, whose goal is weighting you down with as many options as possible, don't push XM or Sirius because their spiff, or commission, isn't enough for them to force the issue. The sat radio ball is dropped at the dealership level.

Some makes and models have run promotions offering free sat radio installation (even though in GM vehicles, it's already a part of the car) and activation free, but the buyer still has to shell-out cash every year to keep the service on. One way or another, if someone wants sat radio, it's going to cost them.

Whether it's worth it or not is up to that customer. Odds are, they'll continue their subscription; once they get used to it, sat radio's a lot of fun, but will never replace the Big Three of local radio: news, sports and weather.

We'll cover HD Radio in a future posting; you may be surprised to learn of its many benefits, and may help you make a decision on whether or not to add sat radio to your car or truck.

Now, after several years of competition between XM and Sirius, it looks like by the time you read this there will be one sat radio company in this country, a monopoly created by the federal government. And you don't need me to tell you how strange that is.

So what do you think? Do you have sat radio in your car or have one of the portable receivers? Did you get your sat radio from the dealership or buy it as an aftermarket item at a Best Buy or some place like it? What was your experience with the dealership when you wanted to activate the sat radio in your new car? If you don't have it, does the creation of one sat radio company make you think now is the time to buy?

And finally, which service do you like better, XM or Sirius? And that's  probably the last time anyone will ask you that question, because soon, there will be just one.

Comments

[High Desert Car Dealer]

Any car picture that you ever post on here I instantly want but can never have. It's a cruel world.

[Steve Parker]

Thanks for the note on living in the mountains and enjoying Sirius sat radio. I plead guilty to being late in posting messages and responding to the authors ... It'll be up on the site tonight!

Have you, as a customer, received any info at all about what's going to happen now that the merger has been approved? Any special offers? Any word on new radios which will pick up both stations in the interim between now and when the merger is technically finished?

Thanks again for your comment.

Steve Parker

[Steve Parker]

Thanks for dropping us a note because of something you read on our site, www.SteveParker.com. Sorry for being somewhat late in posting it and answering you, but your message will be on the site this evening.

That's a funny story about getting your dad's radio and then finding yourself not wanting to live unless you kept the XM service ... I understand completely.

The GM cars in the company's Los Angeles fleet, which they loan to journalists (like me) all have XM. And it's always a sad day when I have to turn-in a GM car and then get another test car from another car-maker... And whether they offer XM or Sirius, the service hasn't been activated.

We have a number of new outlets, listed below --- please check them out!

Thanks again for taking the time to write.

Steve

[Steve Parker]

My thoughts on this have always been: The "problems" with both XM and Sirius had a lot to do with the lack of training and the small spiffs (commissions) paid to dealership salespeople, the last people (including the F&I person) to have the car before the customer.

The prices are pretty high for activation and subsequent re-ups. And I've found that, depending on the channel, there are as many ads as on conventional radio. And when XM dropped their World Music channel which focused on Euro-African, instead putting on more Hispanic music, I was bummed. These companies were supposed to carry music which listeners couldn't get on conventional radio. Oh, well.

I still think that had the dealerships been 1/2 as excited as they are about someone buying some questionable "undercoating" from the F&I salesperson, which that person and the salesperson get a lot of money for (probably 85% of the cost paid by the buyer) then both companies might have been able to survive as separate entities.

But now ... We'll never know. Which stinks.

I think the "truth" on the merger is somewhere between your opinions and mine.

[DensityDuck]

Calling it a "government-created monopoly" is a bit disingenuous. It's not as though the government awarded a sole-source contract--indeed, the two companies wanted to merge _years_ ago, but the FCC has taken this long to approve the whole idea!

The market just won't support two different companies. This isn't a case where competition creates superior product--this is a case where we can either have no competition because there's only one company, or no competition because everyone went out of business.

****

I have XM. Quality isn't an issue; no commercials (and no freakin' _talk_) is what I come for.

[RPD]

I've had XM since late 2001. My father had leased a Cadillac, and to his surprise they shipped him an XM Skyfi with a free year subscription on it. He didn't want it, so I took it.

I've been pleased not to have to put up with morning drive DJ chatter, and I can carry the receiver into work with me to continue listening all day.

Having the service free for a year got me past the difficulty of the idea of paying for radio. A reason I hear frequently when I recommend sat radio to friends. When my free trial ran out, I was loathe to give it up, and have remained a customer ever since.

Local sports hasn't been much of an issue for me. ESPN and FSN cover my sports talk needs, and I can always switch to AM if I need to. It helps that I'm not a fan of local market teams.

I've never really seen much difference between the services, other than may Sirius having the NFL and Howard Stern, vs XM having MLB and NASCAR.

[Chuck]

I live in the mountains (Vail, CO), and have Sirius. Without it, I have a choice of NPR (can only take so much All Things Considered), a local rock station that is intermittent, and one AM station that is religious. For me sat radio is worth the price for the choices it offers.