Innovation

The skeptics said streaming music would kill satellite radio. They were wrong

SiriusXM recently posted its best results in eight years. It’s survived the iPod, the smartphone and now streaming services like Spotify. Here’s how

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Howard Stern

SiriusXM Radio signed shock jock Howard Stern to another five years in December. (Corey Sipkin/New York Daily News/Getty)

With subscription music streaming services such as Spotify and Apple Music gaining popularity, wireless data limits inching upwards and cars increasingly getting their own cellular connections, you’d think the future might look iffy for satellite radio.

And yet, things probably couldn’t be better for SiriusXM. The New York-based company in February announced its best user growth in eight years, adding 2.2 million net new U.S. subscribers for 2015—a 30% improvement over 2014—for a total of 29.5 million.

The company’s Canadian arm has been posting similar results, on Wednesday reporting 27,000 new self-pay subscribers for the first half of its fiscal 2016 for a total of almost 2.7 million, along with continued growth in profitability and margins.

What’s behind satellite radio’s performance in the face of escalating competition? Mark Redmond, president of SiriusXM Canada Holdings, has some thoughts.

How is satellite radio changing in the face of these wireless and streaming trends?

You almost have to go back to our inception when we launched the business back in 2005. Nobody gave us much of a chance in competing with free [music], but over 10 years later we have 2.7 million subscribers and the U.S. is closer to 30 million.

When we launched, our primary competitor was terrestrial radio. It’s still how most people in North America consume audio content, as bad as it is. We try to show people the value of really good content and I think we’ve done a good job of doing that.

Shortly after we launched, it was, “The iPod is going to kill you,” because people were just going to consume music on those devices. Then you had Bluetooth in the vehicle so that was going to make it really easy to consume content through mobile device without any plugs or wires.

We’ve competed very effectively against those technologies. In the technology space, if you stand still you’re going to get run over.

We’ve been continuing to upgrade and invest in not only our satellite infrastructure, but our IP [internet-based] offering. That includes everything from launching and replacing our media player to apps that are much more user-friendly and give subscribers the ability to access our content on multiple devices.

Going forward, we have to continue to have a very dominant position in the car, but [also deliver] as people get accustomed to our content and want to be able to access it in other places, whether that’s an iPad, a computer or so on.

We think the combination of satellite and IP is better than any single solution, whether it’s Spotify or Pandora and so on. We know for a fixed price anywhere in North America and 70% of any new vehicles being manufactured that we have a very easy-to-use solution.

We don’t look at it so much as a threat, but rather as a significant opportunity to be able to enhance our offering and our feature set in and out of the vehicle.

Is streaming a more credible threat than terrestrial radio or iPods were, given that streaming services also offer curated-style playlists and “stations,” like you do?

I don’t know if I view it as more credible. It’s another competitor. We’ve addressed some of that through our IP offering. We have people who spent multiple years in the genre of the music that they’re programming that are curating those channels.

If you really like our eighties channel, but you’re more of a British rock listener, you also now have the ability in our IP streaming to program that channel with your personalized requirements. You set the toggles to say, “I want more British rock and eighties,” and we’ll start pushing that content to you.

So you’re listening to what you thought was a really good channel, but you’re now really listening to it the way you would like to program it.

We have all of that functionality today and it will continue to get better as we launch SXM17 [the company’s next-generation car-integration platform].

Most of these streaming services are music only at around $10 and quite frankly I see that as a benefit. For $15.99, we’ll give you all the music you want plus all the exclusive news, talk, sports and entertainment.

We know a lot of our subscribers stream our content and other content, but at the end of the day we’re not losing them to any of these services. The majority of our subscribers when we lose them, they unfortunately go back to shitty terrestrial radio because they don’t want to pay.

What about a standalone IP version of SiriusXM, without the satellite component?

We do offer it now at $15.99, but what I’m not going to do is discount it just because someone wants to stream it versus listen to it in their car because that’s not advantageous to us. If someone just wants to stream it on just their phone or iPad, I’m happy to do it.

The Recording Industry Association of America says SiriusXM is paying too little for music royalties in the United States. What’s the situation here in Canada?

It’s very different. We deal with three [royalty] collectives here, SOCAN, Re:Sound and CSI, and we’ve broadcast close to 1.4 million hours of Canadian content in the last decade. About 75% of that content is on our music channels, which is 75% new and emerging [artists].

There’s no other platform in Canada that gives new and emerging artists [such] an ability to be heard. A number of them would credit getting airplay and some success on terrestrial radio because of SiriusXM.

We’ve paid over $100 million in royalty payments since we launched in 2005 to the Canadian collectives, so we’re a huge contributor to not only providing a platform for artists but remunerating artists for their content.

At the same time we’ve spent over $80 million supporting Canadian music, education, concerts and festivals through our Canadian content development commitment that we have through our CRTC license. I’d be hard pressed to say there’s anyone who’s contributing more into the system than we are.

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