Sponsored stations is nothing new. In fact, it was how television advertising was done decades ago. Remember Wild Kingdom, brought to you by Mutual of Omaha? The concept is simple. Instead of getting several advertisers to buy ad time on a station, you get one company to sponsor the station. The advantage for the sponsor is the opportunity to get their name out in a crystal clear manner and without competition. The advantage for the station is that it can have fewer commercials, make consumers happy, and reap the financial and goodwill benefits.
Last week, Pandora announced a new partnership with Chase Sapphire. The deal involves a Chase-branded audio channel, Sapphire Summer Sounds, that will run from June 20 until September 4. The Chase-branded channel will join 14 other summer-themed channels offered for a limited time by the Internet radio provider.
"Strategic partnerships with companies like Chase Sapphire allow us to deliver the best personalized music experience to our listeners while giving brands the opportunity to connect with their passionate consumers in a fun, creative way through music," Heidi Browning, Pandora's senior vice president of Sales and Marketing, in a press release announcing the partnership.
This is not Pandora's first station sponsorship deal. Toyota and Lexus partnered with Pandora last year in a similar venture, marking the Internet radio provider's biggest ad deal to date.
But would Sirius consider such a move, and if so, why hasn't the? Technically, it might contradict the satellite radio provider's promise of "commercial-free" music, but I doubt consumers would find a branded station to be that offensive./ Instead of calling a channel "Classic Rewind", why not call it "Coca Cola Classic Rewind"? It could still be ad-free from an audio standpoint, but having such a sponsorship could become a viable revenue generator. Sirius could also leverage that branding on its substantial web pages and apps.
Clearly, Pandora and others in the space are onto something that Sirius has not. Spotify has a deal with Coke, and iTunes inked a major deal with Pepsi. Where is Sirius? Is the company missing the proverbial boat, or is it being smarter than everyone else?
Sirius' management tends to be very results-driven. If someone develops an idea, the questions are always, how will the concept impact the balance sheet, how many subscribers will it deliver, and in what timeframe? These are good, sound questions that may not have an immediate answer with sponsorship campaigns. Does Sirius not get into this business because there is no concrete, immediate benefit to the idea? Is that a smart move when big brands are partnering with your competition?
Station sponsorship is something that has become a much more global issue for Sirius. For years, I have said that the company should expand its mobile and Internet presence. In my opinion, these are necessary spaces for Sirius to be in because of the capabilities an Internet platform can offer. It also once believed that royalties paid for broadcasting on the Internet were more expensive, thus Sirius should avoid spending the additional dollars. In the end, however, it was evident that Sirius had a dire need to have a viable and competitive Internet offering. The company has been very late to the game and, thus, in many ways has allowed competitors such as Pandora and Spotify to gain a stronger foothold. Whether or not Pandora or Spotify make money is immaterial. They exist, and therefore, Sirius can't afford to ignore them.
As Sirius moves forward in 2012, there are many questions that investors want answered. Will Liberty Media (LMCA) -- the company's largest shareholder, which has been open about its intentions to eventually take over Sirius -- make a move that brings in new management? Will that management implement some philosophy changes? Will a new philosophy change the dynamics of Sirius as an investment? Is Sirius doing the right thing by staying out of the sponsorship game?
In my opinion, Sirius should strongly consider trying to partner with a major brand as a way to test the concept and see if it delivers. While it's important to ask questions about how such a deal might impact the balance sheet and how fast it may deliver subscribers, the company also needs to be asking other, deeper questions, such as: How do such deals impact competitors? Do these deals make them more viable? Will ad dollars shift toward those competitors? Does the competitor's brand gain more awareness through sponsorships?
Certainly there will be varied opinions on the subject. Now, the question is whether or not the opinion of current management aligns with that of Liberty Media, which could deliver some interesting synergies with companies like Live Nation and others down the road.