Music Labels (not so) New Threat: Satellite Radio

Fascinating article on the front page of today’s WSJ:  Music Labels See New Threat  From Satellite Radio.

What makes this such a standout is that instead of merely blaming piracy, the Journal observes:

"The challenge from satellite radio is the latest example of how
technology and changing consumer behavior are undermining the
longstanding business models for record companies, Hollywood studios
and other creators of entertainment content. The new radio receivers
tap into deeply held anxieties at record labels, which are trying to
embrace new technology at the same time they fight off widespread
online piracy of their product. The music industry already has seen
sales of recorded music fall steeply in the past six years, in part
because of the industry’s inability to harness new technologies."

Recall we addressed this failure to embrace new technologies by the recording industry as well as terrestial radio. Its part of a larger, strategic problem within the industry.

I get Sirius as part of my DISH echostar TV package. On the one hand,
I do want the right to time shift entire programs onto my iPod to listen
to when I want; On the other hand, I understand the industry concern
if a device can effectively scour the entire satellite cast and turn it
into a free iTunes Music store. (Then again, I have yet to determine how
artists get paid with Rhapsody’s 25 free songs a month web set up; It must be nice to be able to give away someone else’s product top promote your own).

The bottom line: All these problems are the results of the industry’s
long and inglorious history of technophobia, lack of startegic
planning, and incompetant management. The recording industry has fought
digital distribution for a long time, and now its mistakes and foibles
have come home to roost.

Ironically, most of the recording industry’s own woes are of their own making. They fought Digital Distribution to placate their big retailers — so Digital Distribution developed without them; Tower Records filed for banckruptcy, and Apple’s iTunes now sells more music than Tower Records, Sam Goodys, or Borders Books, Music, and Cafe.

Here’s an excerpt from the WSJ:

The beleaguered music industry faces a new, unexpected threat in its battle to protect copyrights and royalties: the arrival in stores of new satellite-radio receivers that mimic iPods in their ability to store and organize hundreds of songs.

Fast-growing subscription radio services, offered by XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., provide hundreds of channels of music and talk radio to people who buy special radios and pay a $13 monthly subscription fee. Some satellite-radio receivers already allow listeners to record a few hours of programming.

But with new receivers from XM and Sirius, subscribers can record far more music from satellite-radio broadcasts and manage songs as if they had bought them individually, for instance by setting up playlists and deleting songs they don’t like. Because both services offer niche channels, it becomes easy for users to quickly find artists or songs they want and store them. Sirius, for instance, offers channels such as Rolling Stones Radio and Elvis Radio.

That’s alarming to the music industry, which gets much lower fees for songs that are played on satellite radio than it does for songs that are purchased through download services or on CDs, or in the case of labels, for songs that play on subscription services like Napster. The music industry argues that the new devices are essentially recorders that allow consumers to keep songs permanently without paying the appropriate fees — though users must keep subscribing to the satellite services to be able to access their recorded songs.

Music Labels See New Threat  From Satellite Radio
Receivers That Can Record, Manage Songs Stir Concerns Over Copyrights, Royalties
THE WALL STREET JOURNAL, December 8, 2005; Page A1

What's been said:

Discussions found on the web:
  1. Dan Greenhaus commented on Dec 8

    Ignoring the technological aspects of their failures, the fact remains that the music industry still believes it can churn out subpar albums for $20 a pop, and the public, with an ever increasing set of alternatives, will continue to buy them. Good albums still sell. Bad ones do not. The music industry should take note.

  2. Ken J. in Michigan commented on Dec 8

    For this fan of niche music, the bloom is already off the satellite radio rose. My carpooler, who had been an enthusiastic XM customer, was offended to discover that his favorite channel, techno music on #82, was now carrying Christmas songs by Perry Como and the like.

    At least that one’s temporary. My favorite channel, the World Music channel on #100, looks to be permanently gone. My understanding is that XM had to add some French language programming as a condition to do business in Canada. So, World Music channels #100 and #102 are now carrying French-language programming; the XM website is trying to say this still counts as world music programming, but it’s not what fans of this market segment are expecting.

    Another friend, a fan of folk music, is complaining that Sirius has whacked folk music, which was the only reason she subscribed to the service.

    From here it looks like the niche music which the satellite services used to draw in the initial base of customers is going to take a hit any time the operators think they can put on something more popular.

    Back to my minidiscs of streamed radio stations from Britain…

  3. Rigel commented on Dec 8

    Did they just flunk economics? Is their business model built soly on undercharging other large corporations and overcharging the end consumer?

  4. B commented on Dec 8

    Take that Sony!,1282,69763,00.html

    Is Sony a buy in 2006? Years of mismanagement, bloated cost structure and insular management.

    Will the British American unlock Sony’s brand, patent portfolio and intellectual capital? And can he unlock Sony Music and find a way to create value with satellite radio? This is a once great and potentiall great company again. Comments?

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