By Gino Lattarulo
As a musician and producer who lives and breathes for new technology in audio entertainment, I am convinced of two things concerning the future of radio:
1. Terrestrial radio is a dead man walking.
2. Satellite and Internet radio are the going to be the new and permanent sheriffs in town.
Now I think we all know why The National Association of Broadcasters is so against the Sirius/XM Merger. Their business model is so outdated it has rust flaking off the chassis. Don't think so? Let's speculate for a minute.
We know that the satellite radio race is in turmoil thanks to our fun loving politicians at the Justice Department and the FCC. Sirius (NASDAQ:SIRI) and XM (XMSR) are dangerously close to collapsing without a merger. Well, MAYBE. We can all say that without a merger one will fail and one will not but the truth is that neither stock will fail regardless of the outcome. Here is why.
As a merged company or as separate companies, they will probably be bought out. But unfortunately, Satellite radio itself is limited. 300 channels won't make the cut as soon as auto manufacturers install Internet-ready receivers. This will not only give listeners thousands of channels but will turn your car into its own hot spot so you can use your laptop in your car as well. That is until your car comes with it's own PC or MAC system built in but that's a discussion for another time for the next battle between Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL).
This many options are just too good for the consumer to pass up. So Sirius and XM will more than likely be bought out. Not because they can't make it on their own but because there are hungry companies out there with deep enough pockets to make the shareholders an offer they can't refuse. Standard satellite radio will still remain because of content like the NFL and MLB.
Sirius and XM will probably need both satellite and Internet streaming radio to compete but that will only give them more options to make money by expanding their business model to either free radio with advertisers to pay the bill or paid radio without advertising with subscribers to pay the bill. I predict that Internet radio will probably become the top gun in autos within five years. At my house I go to a web site that lets you create your own Internet radio station based on your musical tastes and I can pipe it throughout every room. And as soon as cars roll off the line with Internet receivers built in to them you can wave goodbye to terrestrial radio.
Clear Channel (CCU-OLD) has only one chance to stay on the right side of the soil. Stop trying to fight technology and start stroking checks because once this satellite radio merger debacle has cleared the trees, the likes of Microsoft, Google (NASDAQ:GOOG) and Apple will be salivating so hard they will need bibs.