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Satellite radio’s two upstart providers have been leapfrogging each other in recent weeks with a flurry of announcements. XM Satellite Radio’s unveiling last week of a portable walkman-like radio followed closely on its big win of an 11-year contract with Major League Baseball and the debut of shows by former National Public Radio host Bob Edwards and the infamous talk-radio duo of Opie and Anthony.

Not to be outdone, XM’s archrival Sirius Satellite Radio has trumpeted its own expansions, such as shows hosted by hip-hop artist Eminem and cyclist and six-time Tour de France winner Lance Armstrong. In early October, Sirius pulled off the biggest marketing coup to date when it landed controversial radio host Howard Stern, who will move his show–and, it is hoped, many of his 12 million listeners–to Sirius beginning in 2006.

It’s all part of a single-minded marketing strategy: Make pay-for-play radio worth the monthly fee. With a fresh spin on the notion of what’s “local” radio and savvy marketing, XM and Sirius have turned up millions of listeners happy to pay for a service that has been transmitted through the terrestrial airwaves, at no charge to the listener, since the inception of broadcasting in 1920.

The duopoly reign as the FCC’s sole licensees for digital audio radio service. XM was first up with its satellites–it refers to them as “Rock” and “Roll”–in 2001, and the Washington, D.C-based network retains the first-mover advantage with 2.5 million subscribers tuning in to 130 channels. Sirius began broadcasting in 2002, has 700,000 subscribers, and produces the programming for its 120 channels from studios in New York City’s Rockefeller Center. The two companies are alike both for the huge financial losses they’ve incurred and also for their ferocious marketing efforts to attract subscribers.

The companies’ bullhorns have pushed satellite radio ever closer to mainstream consumers: Wal-Mart now stocks its shelves with Sirius radios under the Sanyo name, and customers in 4,000 Starbucks cafes will be sipping their lattes to the strains of XM’s Hear Music channel beginning next year. It’s small wonder, then, that satellite radio’s rate of adoption has grown faster than any new technology except for DVDs, according to John Carey of Greystone Communications, a media research and planning firm in New York specializing in the adoption of new media. One huge draw, of course, is that the programming is commercial-free. You pay a monthly fee of $9.99 (for XM) or $12.95 (for Sirius) and in return get pure music, news, or sports.

Freedom from ads alone probably would not have driven so many people to satellite radio, if ordinary terrestrial radio had been offering compelling content. But the industry has stagnated, serving up repetitious playlists, right-wing talk shows, and a limited range of musical genres. “Traditional AM/FM radio has been so non-innovative over the last 20 years that they’ve almost abandoned their reason for existence,” says Carey, who also teaches at Columbia University. Further, the broadcasters’ emphasis on the local aspects of radio and its integral role within the community fabric rings hollow at a time when conglomerates Infinity Broadcasting and Clear Channel have converted broadcast radio into a national business where many stations are programmed in other cities.

Forbidden by the Federal Communications Commission from carrying the local programming that government regulators left as the turf of terrestrial broadcasters, satellite radio put a contemporary spin on the twin notions of community and identity–proving, in effect, that community transcends geography. “XM can’t talk to listeners at the local level but they can do it on a national level,” says Carey, whose consulting firm has done research for XM. Listeners to channels that play music from a particular decade tend to choose the decade when they were teenagers, Carey says. “People call in from all over. They talk about events that happened. They talk about commercials that aired. That’s how [satellite radio] is dealing with the radio-is-local part. They’re creating community at the national level.”

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Tagged: Web, FCC, satellite radio, digital audio, XM

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