Sirius’s Elena Sofko and Streamingmedia.com’s Rich Seidner join AIR on-line
by Sue Schardt

“You can observe a lot by just looking around.” – Yogi Berra

From a launch pad in Kazakhstan, Sirius Satellite Radio launched its third and final satellite on the last day of November, and within several hours announced they’d “successfully established a communications link and deployed the satellite’s solar panels.” As Sirius marches down its final days to the January 2001 soft-launch of 100 channels of direct-to-consumer audio, it’s timely to review the exchange during the keynote session at AIR’s on-line Annual Meeting 2000, held on October 21, 2000.

Sirius’ Director of Talk/Sales Partners Elena Sofko, one of the keynote guests, is the point person for content providers on Sirius’ 50 talk channels. She also oversees all the marketing and advertising for that half of the business. Public radio is investing heavily in Sirius, with PRI developing one 24×7 channel, — “News and Views” — and NPR preparing to fill two 24×7 channels, “NPR Now” and “NPR Talk.” While NPR will launch a new, satellite-exclusive morning news magazine ? “The Way In” — most of the start-up content on Sirius’ public radio channels will be programming originally produced for local or national radio station distribution. Both PRI and NPR have made clear their intention to develop original content streams for the Sirius channels. While details are not yet public, a number of independent producers are negotiating terms with PRI and NPR to contribute programming to Sirius, or to participate in the creation of new content.

For a subscription fee of $9.95, people will have access to all of the Sirius channels — 50 music, 50 news/information — via their Sirius-enabled car radio receiver. The promise is that a listener will be able to listen to their favorite program, “crystal clear,” coast to coast. The music channels will be commercial-free with live DJ’s providing continuity. The talk channels are expected to generate revenue through advertising.

AIR’s other keynote, Rich Seidner, is VP of Data & Analysis at streamingmedia.com, which positions itself as “the home of the streaming media industry.” Their website offers a variety of Internet business resources, including live industry-related “talk shows,” tutorials, tech news, a job directory, financial reports, and examination of current trends. Rich leads their data acquisition and analysis initiatives. He wrote a book last year — Playing for Profit — which proposes that streaming and the Internet are radically changing the dynamics of the entertainment business model.

Most of the on-line chat focused on Sirius: the basics, how satellite radio will complement or detract from traditional broadcasting and the Internet, and ? of greatest interest to AIR members judging by the number of queries ? what the revenue model is and where independent producers fit in. I’ll review some of the highlights from the day’s keynote speeches, and subsequent live-chat session.

Q: What is the footprint on the [Sirius] channel, and do you have plans to go beyond satellite distribution?

ES: The Sirius footprint is the continental US. We’ve successfully raised 1.5 billion dollars to create the satellite based proprietary infrastructure, and for the time being, we’re focusing just on that. It’s our core business, and all of the secondary channels of distribution won’t exist for us unless we get the core business up and running. Once it is, you likely will see us penetrate at-home and at-work as well as portables markets.

Playground for Creatives

Seidner and Sofko both emphasized repeatedly that the time is ripe with opportunities for independent producers in radio. The goals of traditional radio have been so highly focused by consolidation — “to deliver the biggest possible audience to an advertiser resulting in 75% of all the stations in the US delivering one of 5 formats” ÷. that the “future of radio producers holds enticing opportunities” on the new platforms of satellite radio and Internet. Like the early days of radio, television, or the recording industry, innovation and experimentation rule in these newest incarnations of electronic media. “÷ the stations and program producer that were good at what they did and played to their strengths survived the challenge. Those that were poor went away,” states Sofko. “The key is adaptation. Don’t let the new entrance intimidate you–they’re all providing you with new platforms — playgrounds–.for you to have some means of creative expression, and to proliferate your message. Take advantage÷take some risks.”

Seidner reminds us that the Internet is a largely unregulated environment, which “allows for stable industry structures to be entirely re-shaped or re-intermediated.” The Internet is also witnessing explosive market growth — “more than 100 million client-downloads [of streaming software] worldwide. — I’m looking for wildly new forms of interactivity. Can you just imagine 100 million people singing the Hallelujah Chorus, live and mixed, or 200 people doing an online jigsaw puzzle of thousands of pieces together?”

Both Seidner and Sofko downplayed concerns that some producers and more often radio station programmers and managers hold that new media channels will compete with or render obsolete traditional programming channels. Pointing to history ? the development of television, the advent of FM, the proliferation of radio formats over the years, and finally, to cable television as an example, Sofko commented, “The demise of radio has been predicted over and over through the years by TV and other competing media ? not only has radio survived, but it has flourished.” Further, the proliferation of media gives listeners more choices, and advertisers more ways to reach their target audience÷.it is a good thing, she claims.

Revenue

Sirius is banking on the belief that listeners will readily pay for access to a wider and more diverse range of musical genres, which provide more depth and background within each channel, are commercial free, offer 2-3 time the number of cuts you hear in a typical hour on the radio, and in general, seek to “bring the artist closer to the audience÷not to deliver an audience to an advertiser.” Like the Internet, the aim is to build “community,” where listeners will have a “unique and personal experience in the Sirius environment.” Their success in building large coalitions of listeners via the 50 music channels, and getting them to pay up each month, are the corner stone of the revenue model.

“If we deploy our bandwidth with programming that gives the consumer something “more than,” “better than,” or “other than” what they can already choose on the radio, then you have the justification for the expense, especially for a nominal $9.95 a month subscription fee, ” says Sofko.

Q: If you are trying to emulate the cable TV business model of HBO for example, does that mean you pay independent producers for content on the news channels or would advertising/underwriting have to pay for the independent programming to be included?

ES: We do not pay for programming, but will barter for it. We are looking for either revenue or ad inventory share. We are not trying to emulate the cable model, as those economics have a license fee per subscriber. In a barter deal [with a producer], Sirius is looking for a share in the revenue opportunity that stems from the commercial inventory. Either we share the commercials themselves (producer sells their share, Sirius sells its share), or the revenue from sold commercials (producer can sell all and remit to Sirius, or Sirius can sell all and remit to producer).

The other 50 talk-based channels will include an average of 6 minutes of commercials per hour, as compared to as many as 20 spots/hour on commercial radio these days. Plans call for reviving old formats, like radio drama, and experimenting with new ones ? a SciFi Channel, the Scandal Channel, MotorSports.

Sirius will manage and control all the channels. According to Sofko, while most of the formatting is set and much of the content has been determined, this is a work in progress, and they are still searching for good content, and will continue to do so for the foreseeable future. Sirius has tried to create an environment that is “hospitable to independent producers,” says Sofko.

As for the Internet, in spite of all of the innovation and excitement of recent year, the jury is still out so far as who will make it or break it, says Seidner. Emerging business models are untested. Whether you’re an independent producer or a large cooperation, “we still don’t have answers to a lot of questions such as ‘will narrow-casting and niche-casting will ever be profitable,’ or ‘what will be broadcaster’s killer revenue stream,'” and many issues related to e-commerce, advertising, and marketing.”

In spite of the uncertain revenue opportunities, Seidner has strong words of encouragement for independent producers, “The Internet is the best possible opportunity — ever — for the independent creative community. …freedom from all of the creative limits on content and distribution…to look beyond what all radio has done in the past, and to not limit itself to what the commercial stations are doing. …There’s gold in them thar hills, and the Internet is the future.”

Q: Do you think a pay-per-bit business model will work [on the Internet]?

RS: All of the standard ways of making money from content will apply — subscription, sales, advertising, and licensing. I rather doubt that “per bit” is the appropriate measure of content. It’s all about selling something, and that means that enough people have to be involved to make it pay — either buying stuff, or watching/hearing ads. Independents are totally freed from limits on their creativity and output. Only the core economic restraints still apply.

Which is to say, it’s still a challenge to build and sustain an audience, especially in and era where the zillions of choices far outnumber what anyone can keep up with. Business models are always going to be about gathering and sustaining a repeat audience.


Internet vs. Satellite vs. Traditional Broadcasting

Seidner pointed out that the wireless streaming consumer products are on the way and will likely have an impact on the current dynamics in new media. Sofko, for her part, takes the stance that “proliferation [of wireless] will take a long time and will have a difficult time competing with satellite radio.” Sofko also points out on several occasions that Sirius owns not only the content, but the pipes ? the distribution channels. They have total control, which give it advantage over wireless. Not only will the Internet wireless audio lack bandwidth in automobiles but, in Sofko’s view, it will likely need to rely on ad supported programming÷won’t be able to compete with Sirius 50 commercial free music channels.

Q: My question concerns how car-based satellite radio will be integrated with the radio I listen to in my kitchen. Isn’t there another RF band that the satellite signals go on? Will someone start making “in-house” radios that have these frequencies on the dial as well?

ES: For the time being, we are focusing our attention on the automotive market. At-home, at-work and portables are secondary markets that for us won’t exist unless we can successfully establish the core business in the car. Furthermore, introducing a new media platform to consumers faces a lot more competition from incumbent mediums found at home (TV, cable TV, internet, radio, books, magazines, your own CD collection, VCR etc). In the car you have a captive audience with a lot less choice, and I don’t have to tell you about how much more radio listening is done in car than elsewhere.

Our proprietary transmission system — from the signal origination here in NYC through our satellites and repeaters back to Sirius enabled car radios — was specifically designed to hit a very small moving target; a tiny satellite dish mounted on a moving vehicle.

Having said that, the secondary markets seem to be coming to us. Cable operators and others have approached us about carriage of our signal to the home…There are plenty of ways we can get into these secondary markets without requiring a consumer to put a satellite dish on the roof and buy a new stereo receiver.So even though we are very focused on getting the core service up and running, this isn’t a bad problem to be faced with. It’s now just a matter of choosing the right partners to help us get there.

Seidner, for his part, points to increasingly personalized interactivity as key to emerging business models on the Internet. He seems to be an advocate of Disney CEO Michael Eisner assertion that there is a “revolution coming” in the area of entertainment and the Internet…a completely new medium. ”

Q: Do you see the most-listened-to NPR programs migrating to (pay) satellite and OFF of local radio, and if so, doesn’t that have fairly severe consequences for the public’s ability to listen to “public” radio even if they can’t afford to support it? If I understand what a couple of others have suggested, National Public Radio could, over time, become National Pay Radio. Please tell me I’m missing something.

ES: I don’t see this happening. New distribution channels most usually supplement rather than replace previous distribution channels. CableTV didn’t displace the business models of the major TV networks. TV didn’t replace radio. Radio didn’t replace books and newspapers. In the end, staying in business with free content all depends on building and sustaining a big enough audience to fund the broadcasts (audience reach, frequency, duration, and demographics). Sure, the best programming will migrate to lots of new channels, but that’s to the benefit of the content owners.

I moderated the live chat with the keynotes, and for various logistical reasons spent an interesting two hours on the phone with Rich Seidner. He told me his favorite book is “Last Chance to See” by Douglas Adams, the guy who wrote “Hitchhiker’s Guide to the Galaxy.” It’s the fictional story about the world being ‘unexpectedly demolished by hideous creatures from another planet,’ and one man’s search for one of the rarest of the endangered animals.

In the view of these two industry leaders, the independent producer — far from being on any endangered list — has unparalleled opportunity. Neither were able to provide much reassurance or detail about how producers will pay their rent or eat by way of these new channels — something that frustrates and concerns many producers — but emphasized that this is the time for creatives who are willing to take some risks and get onto the playing field. And, they say, radio not only will endure, but it is likely to be enhanced by the proliferation of electronic media.

AIR board member Sue Schardt founded Boston-based SchardtMEDIA in 1998 to focus on creating and marketing solution-oriented programming for radio and new media. Her weekly music program In the Margin of the Other on WMBR is entering its 14th year of production.