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Don’t Count Satellite Radio Out

It's easy to say that it has been tapped out – the market for folks who want to buy satellite radio gadgets and subscriptions for commercial-free music of the same varieties that can be found online for free. 

And yes, that game is indeed over. 

But you would be mistaken to close the chapter of media history titled "satellite radio" simply because the satellites are no longer relevant. You would be misjudging what satellite radio actually has and how they can theoretically leverage it in the future, assuming they get their heads out of the warm and cozy sand. 

Consider what satellite has: 

1. They have the name and email address for all 20 million of their listeners 

They have, in other words, the permission to nurture a relationship with consumers who actually pay them for the privilege. Don't underestimate the power of a market who puts their money where their mouths are. 

If smarter heads prevail, I would expect Sirius XM to turn that access into knowledge and to turn subscribers into a community of members whose opinions shape the content directly. 

When you have every email address you have the ability to know a lot about each individual subscriber and to deliver a much deeper and richer definition of "value." 

2.  They know that you are underestimating them 

Within the next twelve months you will see Sirius XM Pandora-cize their content – creating the ability to customize familiar satellite radio channels to your own tastes on the equipment you already have – like the iPhone and the Blackberry – not simply equipment you need to buy. 

Note that I am not saying they MIGHT build customization into their product – I'm saying they WILL. 

This will go far in changing the excrutiatingly limited borders we place around "satellite radio." And unlike the Pandoras and Slackers of the world, Sirius XM will be doing this for a market that actually pays premium dollars for this service. 

3. They will have less to do with music, and more to do with everything else

Great, so why should you stick with Sirius XM when you can get their music choices and so much more for free from other sources? 

Two reasons: 

First, because 20 million people are already in the habit and alternatives are only attractive if there is a problem in need of solving. 

Second, because music alone is not why many subscribers subscribe. One of Sirius XM's long-time disadvantages is that there's a lot of good content there, but most of it is hidden or scrambled around a schedule so baffling that even the folks who work there don't know what's on when. 

We are rapidly moving to an on-demand world. And in that world the advantage goes to the "outlet" that has the content and is capable of organizing it in such a way as listeners can get what they want when they want it. 

4. What folks will pay for will be changing 

In the future it is far more likely that listeners will subscribe to a filter rather than a distribution channel.

That sentence is one of the most important I will write this year, so it's important that you understand it.

A "filter" is content from a particular point of view. It could be a personality, a theme, or some other coherent stream of meaning. It is not necessarily a "channel" as satellite currently uses the term and it's certainly not the distribution system that is "satellite radio." 

For example, Howard Stern is a filter. Listeners could theoretically subscribe to Howard Stern directly whether or not they subscribe to the rest of what Sirius offers, just as broadcasters can take one show from Premiere or Air America and leave the rest on the table. 

But that filter isn't simply the show, it's all-things-Howard across all distribution platforms. It's digital, it's audio, it's video, it's text, it's community, etc. 

My point is this: Sirius XM stands to gain a lot more profit by monetizing filters than by trying to hawk radios from a dark corner of Best Buy

Why pay for "Sirius XM" when I can pay for the content universe that most appeals to me, especially when that content is not limited to audio only? 

What's scarce in this world isn't 120 channels of commercial free music. What's scarce is talent. And the companies capable of and interested in creating a filtered universe of media content around that talent in order to monetize it in every way possible: Subscription, licensing, merchandise, advertising, you name it. 

This is the future of satellite radio that so far has yet to be realized. So you can't count them out. 

But it remains to be seen whether they will see their own future as clearly as I have. 

PS If you are reading implications from these points into what terrestrial radio should be doing, you're very clever. More on that in a later post.

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