As the S-DARS satellites rise into their orbital positions, it's a good time to start thinking realistically about how things might change when satellite radio hits the air. How will listeners react, and how will the new services alter audiences' use of local radio? The answers to these questions will help terrestrial broadcasters prepare their counter moves.
An apt model for future audience behavior in this case is the arrival of cable TV and its effect on local television stations. Just as with S-DARS, cable TV subscribers suddenly gained access to dozens of new channels, yet the majority of their viewing time remained tuned to their local broadcast stations via the cable service. The same now can be said for satellite TV viewers in the top 30 or so markets where "local into local" channels now are being carried in DBS TV services.
Certainly, these new channels have reduced the audience shares of local TV stations from what they were previously, but this drop is far from proportional to the number of new channels that have emerged. In other words, all the new channels are competing at the margins, and they are not splitting the whole audience in anything close to an equitable fashion with local stations. The mainstream services carried by local TV broadcasters have retained large majority shares, and this trend is likely to continue.
Interestingly, this has resulted in a beneficial arrangement for all players. Even with slightly reduced shares, the local stations are reeling in record revenues. Meanwhile, despite their marginal shares, most cable channels also are going strong, given their national audience aggregation. Will the same apply to radio after the arrival of S-DARS?
Similarities and differences
This well-understood and pertinent model offers a good context for evaluating the radio environment of next year and beyond. First consider some finer-grained similarities. Just as with cable TV, the S-DARS user will be asked to pay for a service that previously has been available for free, and which will still include commercials. In addition, new channels will be national in scope, while the continuing legacy services will remain locally originated.
Importantly, even though S-DARS service will not include local radio channels like cable or DBS TV does, all proposed S-DARS receivers will include AM and FM bands. This is tantamount to the must-carry situation in cable or local-into-local DBS, such that the user will receive local terrestrial and imported satellite signals on a single device. Yes, the radio user will have to switch bands to alternate between these services, but in return for this minor inconvenience, local radio stations will continue to control their own delivery destiny to the receiver. So while there are significant technical and regulatory differences between DBS radio and TV here, the end result is roughly equivalent to the user (i.e., one new box receives both local and imported services).
Now consider the key differences between cable/DBS and S-DARS. First, current plans do not include tiering of services in S-DARS, meaning that both commercially supported and commercial-free premium music services will come in a single bundle for a flat subscription fee. This could make S-DARS service more appealing than cable/DBS. Also unlike cable, however, the subscription fee will not include the potentially improved reception of local channels in S-DARS, perhaps making it less attractive than cable/DBS TV in this respect.
Perhaps most significant, however, are the content distinctions between TV and radio services. Most cable TV channels serve niche audiences with fairly narrow and uniform national programming, while local TV stations present a more assorted bag of mainstream offerings, much of it exclusive (due to network affiliations and other protections), and some of it containing material of local interest. On the other hand, current plans call for S-DARS service to compete head-to-head with local radio formats. The S-DARS channel lineup looks very similar to the format list found across the dial in most US radio markets today, from public radio to heavy metal. Making matters worse, local radio's lack of much exclusivity and its current propensity toward de-localizing content (particularly in mid-sized and smaller markets) will make the distinction between S-DARS and local radio channels even smaller. By that analysis, one could conclude that local radio is likely to suffer audience erosion far greater than what local TV experienced with the introduction of cable.
None of these individual factors will operate in isolation, of course. The real outcome will depend on a complex interaction of multiple variables. Next month, this column will explore these projections of the future U.S. radio environment in greater depth and present some strategies for coping with the new competition.