The Bird’s The Word

Michael Hedges February 10, 2005

Radio broadcasters visiting the Le Radio conference in Paris this week were all atwitter when TDF radio director Alain Delorme suggested a pan-European satellite radio service might soon be launched.

SES-Global and Alcatel, according to Delorme, approached Télédiffusion de France (TDF) with the idea to support local French distribution of a pan-European subscription radio service. SES-Global initiated talks with Alcatel about the possibilities for satellite radio in January with SES-Global chief executive Romain Bausch calling the idea “a big priority for 2005.”

The venture under discussion would have Alcatel providing the programs and SES-Global providing satellites, the birds. They have 12 right now and provide some 1300 television, radio and interactive channels through their Astra system to 94 million European homes, mostly in the UK, Germany and France. Murdoch-owned BSkyB is a major client.

Delorme, for his part, expressed measured skepticism, saying he had questions about the business model.

For Europe’s commercial radio broadcasters, the thought of having a new, and potentially large, competitor leering down from the sky brings yet another chill. Private sector radio – outside of the UK – has yet to digest the various digital radio technologies and feels threatened by every new piece of consumer electronics. Audience studies in several European countries show increases in radio listening through non-traditional devices like TV set-top boxes, PCs and mobile phones. 

Satellite radio in the United States has gathered buzz as the two rival providers – Sirius and XM – cut deals with automakers for dashboard space and sign-up high-profile radio personalities, even high-profile executives. Both companies have massive debt and rumors abound of an eventual merger. Both companies have projected quantum subscriber increases for 2005; XM to 5.5 million from 3.2 at the end of 2004 and Sirius doubling its reach to 2.2 million by years end. Subscribers pay about US$10 per month for the service but subscriptions purchased through auto dealers are heavily discounted.

Nor is satellite radio new – in concept – in Europe. WorldSpace originally planned to compete for European listeners. That failing, they turned to Africa and Asia.

For SES-Global and Alcatel launching satellite radio in Europe is a matter of maximizing existing capacities. Increased marginal cost for a few – even a few dozen – radio channels is next to nothing. One euro per month from one percent of their current household coverage more than pays the cost of providing 35 or 40 automated music channels.

When New York investment bank JP Morgan surveyed their customers about satellite radio they found the absence of advertising driving listeners off FM more than unique content.  Sirius CEO Mel Karmazin is said to be “investigating” the possibility of selling commercial time on certain channels.

Any program contents planned by Alcatel are unknown. Their spokespersons are resolutely quiet. Any pan-European content would necessarily consider language and other differences, a content model far different from the homogenous US market. And, too, EC and national regulators would want to have their say.

However, the subscription business model cannot be counted out. Telecoms have found that mobile customers will make micro-payments for everything from ring-tones to weather forecasts. The revenue potential for music downloads – and other content – is limited only by the imagination. For the satellite providers, though, the business models are nothing new and perilously out of date with customers more attached to iPods and Gen3 mobile phones than table model radio sets.