Making Sense of Clear Channel's Satellite Radio Presence

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A label exists for people who become infatuated with radio in youth, obsessively call into stations, and eventually, in their teenage years, land an on-air gig at a commercial station. That label is radio geek. I am a radio geek. As a radio geek, the developments of the last several years represent nothing short of a dream come true.

As a child, I spent my nights doing two things - mimicking my favorite DJ (Kid Crockett on WKSE in Buffalo, who morphed in Kid Kelly on New York's Z-100) and tuning in faraway AM stations late at night. There was something special about those days, but there was also something equally annoying. When Kid left WKSE for Z-100, I could no longer listen to him. And the reception on the out-of-market AM stations I listened to was horrific. Fast forward about 20 years and that's all changed.

Thanks to Internet streaming, I can listen to pretty much any radio station. Its geographic location, in most cases, means nothing. Sound quality varies, depending upon the circumstances of the stream. And now, Clear Channel (CCMO.PK) makes five truly "iconic" stations available on satellite radio. In some ways, this is nothing new. While I tend toward not citing Wikipedia as a source, it does a good job explaining Clear Channel's history with satellite radio.

While Clear Channel has always had a presence on XM Radio, it has been quite a bit less direct than simulcasting five terrestrial radio stations via the service. It's one thing to have sales or programming control over a station or provide random national programming (Clear Channel has routinely done both with terrestrial competitors). But the simulcast breaks new ground and raises several questions. Frankly, I am not sure exactly what to make of it. I know this much - Sirius XM (NASDAQ:SIRI) CEO Mel Karmazin had to sign off on it. That much gives me confidence. From there, all I can do is consider what this means from several standpoints, including one where I portend that this might have something to do with Pandora (NYSE:P).

Could the Arrangement Get Bigger?

As of now, the five Clear Channel stations only appear on XM Radio. Because I only subscribe to the Sirius XM internet stream, I cannot get them. Whether or not we see an expansion depends upon exactly where the two sides want to go with this. Brandon Matthews speculates that Rush Limbaugh could have something to do with this. While there's always been speculation that Rush would make the jump to satellite in some form, he apparently has been teasing a major announcement on his network terrestrial show.

It's All About the Content

The five station move and the thoughts of Rush on satellite underscore a drum I have been beating of late: Only content matters. The platforms used to deliver content are inconsequential. Programmers should strive to give consumers access to their content via as many devices, interfaces and services as possible. It all goes back to the quote of the year as far as I am concerned:

I don't know what a TV is anymore. It's kind of an anachronistic term.

-Melinda Witmer, Wall Street Journal, 3/25/2011

And that ties in to what Clear Channel Radio President and CEO John Hogan said in the above-referenced press release:

Click to enlarge
Click to enlarge

Clear Channel's coming around. Who really cares if listeners access your programming on a terrestrial radio, on a computer, via a mobile app, or over satellite radio? All that matters, as Hogan says, is that you make your programming as easy to access as possible to the largest possible number of listeners.

How Does Sirius XM Win?

On the surface, this looks like a total and complete win-win situation for Clear Channel. It's certainly not a programming coup for XM. At day's end, radio geeks such as myself and a few other transplants will get a kick out of being able to listen to what are really heritage radio stations. It's hardly a mass appeal offering. In that regard, it does little for XM (and Sirius XM), but only serves Clear Channel's interests.

If, however, something bigger sits on the horizon - Limbaugh on satellite or even something big, but not quite as big - today's news could be something the "Amazin' Karmazin" gave up in return for the real prize of securing strong Clear Channel content that has mass appeal.

This deal could be a winner for Sirius XM on several other counts, although I am not sure how much weight I put into each of these at the moment.

Advertising Revenue

In a previous Seeking Alpha article, I discuss the uphill climb Sirius XM faces vis-a-vis generating meaningful advertising revenue. Because I have no idea what the previous or present Clear Channel deals look like, I cannot make a firm statement here. But, there's got to be something in this for XM (and, in turn, now or maybe eventually, Sirius XM as a whole) other than access to programming readily available elsewhere. That something could be a cut of the advertising revenue these Clear Channel stations produce. But, given the way Clear Channel sells ad time on these stations - through agencies and as part of multi-station, multi-market deals - I am not sure how the two parties would do the math.


The possibility always exists that this is simply Karmazin's way of telling the world that Clear Channel has given up. Unable to compete with Sirius XM, Clear Channel opts to hand over programming from key properties to satellite. Because I think Karmazin "gets" the aforementioned discussion on content, I don't believe this is the case. While it might appear that Clear Channel has given up on the surface, this move actually makes them look pretty good. Terrestrial radio must cut the cord with the "anachronistic" radio and embrace other, more relevant forms of content delivery. This move shows that they're ready to do just that. The flip side to the "perception" argument could be true.

In the face of the forthcoming Pandora IPO, maybe we are seeing the beginnings of terrestrial and satellite radio joining forces. It would make perfect sense. Why compete against one another when content - not the content delivery system - is king? Why not partner to take on the Pandora challenge together?

On your car audio receiver, you have always had a button for the AM band and the FM band. Terrestrial radio companies have never really cared much which one you pushed as long as you ended up listening to one of their stations. Now, increasingly, you have a button for AM, FM and satellite. Pandora is not quite so seamless yet. Packaging terrestrial and satellite radio programming together, to some extent, as content makes a tremendous amount of sense. Could it be the case that upcoming SatRad 2.0 makes such a marriage even easier for the radio consumer to navigate?

Of course, Karmazin will carefully craft any union, as to not dilute the value of a Sirius XM subscription. I don't know how this will turn out, but (A) there's more to this than what we heard this morning and (B) it's incredibly exciting.

If nothing else, this move simply proves that the world just keeps getting smaller. Think about it. When I was a kid and Kid Crockett/Kelly left my hometown for the Big Apple, the only way I could hear him was to call his New York City request line and ask to be put on hold. Today, I can listen to any terrestrial radio station online. I can listen to Z-100 out of New York on satellite. And I can listen to Kid Kelly himself on Sirius XM. Everybody probably has a similar personal story. Bottom line - talk about things changing while staying the same. The emergence of "new media" has truly just made the old world better and much more accessible.

Taken together, the developments we have seen and the ones we have yet to see make me even more bullish on Sirius XM's future. I think Karmazin makes 2011 the year satellite radio goes just a little more mainstream. That translates to more subscribers, which means big things for Sirius XM's stock.

Disclosure: I am long SIRI.