Satellite Radio's Structural Advantage Over Commercial (XMSR, SIRI, CCU, CXR)

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Includes: CCU-OLD, CXR, SIRI
by: The Stalwart

The Stalwart submits: As I drove through Houston, TX on my recent road trip across the south, I came across a great radio station, FM 97.1 Country Legends, which played ample amounts of Willie, Waylon, George, and Johnny, all stuff I can't get enough of. From time to time they broke in with a promo for their sister station which played, "The Best Country Hits of Today", which I probably wouldn't listen to if I weren't paid to do so. Still, it's a nice arrangement. I suspect, sadly, that the "Hits of Today" station gets better ratings, but because they owned multiple stations, they could afford to go after the niche market of classic country.

This is, I think, the simple structural advantage that XM (XMSR) and Sirius (SIRI) have over traditional radio. Because the network owns every station, they can avoid the problem of having every network sounding mainstream. On a standard radio dial, with lots of competitors, each station seems to sound like the others. Anyone in the long tail-crowd would probably agree, for the most part, with this analysis.

What I'm wondering is how much of an impact the longstanding ownership regulations had on creating this state of affairs. One argument among the regulators is that if companies like ClearChannel (CCU) and Cox (CXR) owned too many radio stations, then the media would lose its diversity, so artificial non-market restraints were put on these companies. It turned out that many independent radio stations, all vying for a slice of the mainstream market started sounding the same, and if more had been owned by the same companies (like the stations in XM and Sirius) it might not have turned out that way.

Editor's note: See recent Seeking Alpha coverage on XM and Sirius including: Responses to Sirius giving Howard Stern $200M in common stock; Motorola's iRadio challenging satellite radio; Is Sirius worth its price versus XM?

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