Understanding Satellite Radio and Howard Stern — So You Can Start To Make Them Work For You TODAY

(Reader Note: While the ownership and listenership has changed since original publication, the buying principles and strategies remain the same)

You have read about two things in the media, business and entertainment news these past few months: the explosion of Satellite Radio, and Howard Stern is leaving public radio to join the Satellite bandwagon. You’ve probably read all the headlines, but didn’t realize how much it can – and ultimately will — affect your DR radio campaigns and how you use radio to market your offers. However, once you understand the impact of what is happening – both now and future – you can capitalize and stay ahead of the competition. Here’s a look at these current hot-button items affecting DR Radio:

Part One – Understanding SATELLITE RADIO:  It may have seemed far-fetched only 3 years ago, but now there are Two companies who are vying for domination of this exploding industry – and they are revolutionizing the medium in the process. The current industry leader, XM Satellite Radio, boasts about 3 million subscribers (at $9.95 per month), and recently made headlines for an 11-year deal to air Major League Baseball games. Up-and-comer Sirius Satellite Radio estimates a shade under 1 million subscribers (at $12.95 per month), and stunned the radio industry by locking up Howard Stern to a Half-Billion Dollar contract (beginning next year). That’s nearly 4 million listeners who are PAYING to listen to radio. And judging by the steady increase in their stock prices the past two years – both companies are here to stay. Especially since more car manufacturers are making Satellite Radio factory-optional, and more rental companies are offering the service.

XM, which is partially owned by FTC-conscious Clear Channel, has locked up many of the mainstream, general-interest programming around which to base its broadcasts. SIRIUS has built itself predominantly on male-targeted programs, including a lot of sports talk and play-by-play events. This said, each continues to try to outdo the other in terms of niche programming. The unprecedented audience segmenting that Satellite Radio offers is STAGGERING. They literally breaking traditional music formats into multiple subcategories by decade, content, taste, performers, etc for more total radio channels than most DirecTV subscribers will ever see on their TV screens.

How to make it work for you:Test this medium ahead of its growth curve – NOT behind it. Advertiser demand has been surprisingly strong, so don’t expect a cheap test. However, the number of DR companies who have renewed tests after only two or three weeks is much higher than those I’ve seen in traditional radio (even as a nine-year veteran of DR radio campaigns).

Currently, commercial spot time is only available on XM’s 20+ Talk Channels. Traditionally, these channels have been strong DR formats anyway (such as feeds of CNN, Discovery and MSNBC). Moreover, XM offers a two-line scroll across your radio screen as your spot plays – creating radio’s first ever “Visual Impression” (you can run your Website or Phone Number).

XM has exclusive pay programs such as NY Shock Jocks Opie & Anthony and NPR’s Bob Edwards – which offer specialty advertising deals for specialty audiences. Satellite Radio will only grow more segmented, and easily advertiser-targeted. Accordingly, if you feel these specialty audiences are right for you – you can co-brand your offer with these programs (often, with exclusivity).

Finally, consider that Satellite Radio subscribers may be the most ideal direct-response customers EVER. We know they have discretionary income, and they spent it on personal toys and benefits. We know they’ve bought a new car recently. We know they have a credit card (to which their subscriptions are billed). And we know if they are paying for a channel, they are paying VERY close attention to EVERYTHING that broadcasts on it.

Part Two – HOWARD STERN LEAVING VIACOM RADIO FOR SIRIUS SATELLITE:

2004 was a year that started with everybody BUT Janet Jackson getting penalized for – oh, you know what. 2004 ended with the “King of all Media” running for cover from the FCC and long-time employer VIACOM. Howard cited the unprecendented freedom and opportunity of satellite radio (which as a subscriber-paid media outlet, is unregulated by the government). I suspect that $500,000,000 helped ease his pain, too. Regardless, the impact of this single business move WILL have ripple effects that affect radio advertisers once Howard makes his move in 2006. Do you disagree? Consider that Sirius’ Stock price rose nearly 60% with the first month of Stern’s announcement. Do you still doubt his impact on American media?

Most obviously, FM Talk radio stations will have a tough act to follow after losing their most valuable commercial asset. Conversely, Satellite Radio will receive a boost in subscribers, listenership and credibility. Will radio struggle to find an heir apparent to Sterns throne? Or, with a Conservative President and government body, does this signal a return to more family-friendly radio programming? Either way, you can be prepared to take advantage of these shifts.

How to make it work for you: Currently, and for at least the next year, FM Talk is arguably THE best value in DR radio today – and has been ever since the aftermath of last year’s Super Bowl. FCC pressure has scared many advertisers away from the format, causing a drop in price and increase in open avails. FM stations are “wheeling and dealing” like never before. Moreover, Hot Talk is the most DR-friendly format on the FM dial – loyal audiences, active listenership, and attentive content (plus the aforementioned lower prices). The next year will be an ideal time for you to test FM Talk radio (assuming your demographics match up). You should enjoy the benefits of Howard’s loyal audience, and plan ahead for 4th quarter – the closer Howard gets to leaving free radio, the more audiences will tune in. Moreover, FM Talk stations will no doubt be promoting their midday and afternoon personalities more heavily. Remember, after Howard’s gone, THEY will be the lone proven commodities left on these stations. Test them accordingly to see if they’ll still be worth the investment in 2006.

When Howard officially joins Sirius, expect the possibility of commercial time available in his show (again, to reap back the hefty investment in him), a first for Sirius. Expect the overall subscriber base of BOTH companies to increase, due to Howard’s credibility-boost. And expect XM to increase their rates in anticipation of the subscriber boost (try to lock down these rates in 2005, before they increase). You can take advantage of this soon-to-be shift in radio listenership, if you know to anticipate it now.

A FINAL PREDICTION – MORE DR ADVERTISING OPPORTUNITIES STILL TO COME IN SATELLITE RADIO:

Just a personal prediction – XM’s non-commercial music channels and/or SIRIUS will likely begin to run limited commercials over time, too. Why? Three reasons –

With all of these properties in which XM and Sirius are investing, if they DON’T meet subscriber goals, they will be forced to find the revenue some other way. Advertising is the most natural means.

Former CBS Radio honcho, Mel Karmazin – until recently, the most powerful man in radio – recently joined Sirius as CEO. Mel is still an old-school radio salesperson at heart – and his past models for success lend themselves to finding a way to integrate advertising into his programming.

The early days of cable didn’t have much advertising either (and Direct Response represented a lot of what was there). Over an estimated 700,000 new subscribers join either company each quarter. As Satellite Radio becomes more of the standard – commercials will no longer seem intrusive over time.

Satellite Radio, FM Talk and the possibility of more family-friendly radio. You now know the future – plan ahead.

About the Author: Joe Rashbaum is the President of THE RADIO SOLUTION COMPANY., a full-service, radio direct-response agencies. Joe has consulted many first-time radio advertisers, and has guided many DRTV and print marketers to successful radio marketing. Joe may be reached at (856) 797-5715 or inquire below.

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