Back in July of 2016, I wrote an article wondering what might happen if AM/FM radio broadcasters woke up one day to the headline “SiriusXM is Now Free.” What made me think about this happening, was I had just read how Angie’s List had announced they were pulling down their paywall and making their service free and available to everyone.
Pay to Play
Call it a subscription, a membership fee or a paywall, what happens when they are eliminated? In Angie’s List’s case, less than one percent of Americans were members at the $40/month fee that had been in place. Paying that fee let people see the reviews of members that they experienced when doing business with certain businesses or services. But now, everyone could have free access to those same rather substantial reviews, while enjoying the website’s strong, trusted and valuable content.
Why did Angie’s List Tear Down Their Paywall?
Angie’s List is a publicly traded company. Their stock had been down seventy-five percent from the previous three years and management was under pressure to get the stock going back up. By tearing down their paywall, they would increase page views. When page views go up, revenue goes up.
SiriusXM Under New Leadership in 2021
On January 1, 2021, Jennifer Witz takes over from James Meyer as CEO of SiriusXM. Meyer has been leading the satcaster since May of 2004. During his tenure, SiriusXM has grown to having its service playing in 132 million cars, but with only 34.4 million paid subscribers.
Its stock price all-time high was back in February of 2000, over twenty years ago, when it hit $66.50 a share. This past year the stock has traded between $4.11 and $7.40, for an average price of $6.05 a share.
Do you see an Angie’s List type of problem?
Walking a Tightwire
Incoming CEO Witz knows she will be walking a tightwire by making part of SiriusXM free to all radios capable of receiving the satcaster’s signal. The challenge will be to monetize those non-members through ad-supported free channels without cannibalizing paid memberships. SiriusXM grew revenues 7% in 2019 to a record $6.2 billion.
AM/FM radio revenues are projected to fall 17% in 2020, largely due to the COVID-19 Pandemic, but quickly rebounding in 2021 and growing in the years beyond.
Audio Advertising Works
With the dynamic growth of smart speakers, fueled in the United States by Amazon which controls 70% of the home smart speaker market, new interest of advertising goods and services via audio only has increased dramatically.
This should be a boon to AM/FM radio advertising, except for one caveat, the way people consume audio today is vastly different than even ten years ago with eMarketer saying there are 204 million digital audio listeners in the United States today. In fact, listening to digital audio makes up two-thirds of all digital media consumption, second to only digital video viewing based on time spent on this activity.
Moreover, digital audio advertising has been growing at a double digit rate.
Competition for Your Ear
The competition to be in your ear has never been greater. Spotify, Pandora, Amazon Music, Apple Music, YouTube, podcasts, and audio books are all looking to get a piece of your time and attention.
With this increased focus on digital audio by consumers, advertisers are following in lockstep.
SiriusXM
Which brings us back to where this article started, SiriusXM. The satcaster has long seen AM/FM radio as its main competition and that two-thirds of AM/FM radio’s revenue stream is due to dominance on car radios. It’s simply too tempting not to want to utilize the chip it’s paid to have installed in your vehicle’s dashboard and monetize it in a new way. Doing so would mean an increase in revenues for its shareholders and at the same time the ability to elevate the company’s stock price.
If Apple has taught the world anything, it is that you can’t be afraid to cannibalize yourself if you want to grow your company. Also, you don’t always have to be first to the party, to come away a big winner. You simply need to provide a superior product.
SiriusXM also enjoys the advantage of knowing who’s listening to what. Here’s how the satcaster puts it:
Jul 6, 2020 — “TRACKING” YOUR ACTIVITIES ACROSS DEVICES AND APPS We receive Listener Usage Data automatically from Internet-enabled devices. If you have a Sirius XM account, we may match the Listener Usage Data we receive to the device or devices associated with your account and thereby with you or your household.”
It’s an obvious advantage over audience estimates provided by a third party ratings company when a digital audio service can tell an advertiser how many people actually were exposed to their advertisement.
For radio sellers in 2021, it’s like bringing a knife to a gun fight.
The other day, we took two of our grandchildren to a wildlife safari park here in Virginia. It was a simply magical day. But that’s not the part of the story I want to share. It is that both kids were wearing their Boston Red Sox baseball caps.
Jerry Lee recently sold his only radio station, WBEB in Philadelphia, Pennsylvania. It was 55-years ago this past May that Jerry and his partner David Kurtz put the station on the air. It signed on as WDVR. In the 1980s the call letters were changed to WEAZ and the station was branded as “EZ 101.” The station brand was not only well known, but fixed tuned FM radios were given out by the radio station to area businesses to play the station in their stores and offices.
Most recently, Jerry rebranded his station as “101.1 MoreFM.” This change, like all the others, was promoted in every imaginable way and became familiar to listeners virtually overnight.
Once upon a time, all radio listening was recorded using a diary, kept by a listener for seven days. Years of diary reviews at the Arbitron headquarters in Maryland proved to me that the radio stations most familiar to their listeners got the most “votes” from their fans.
People in the survey said traditional AM/FM radio was the thing most replaced by audio listening via their smart speaker.
“Brands now have a chance to behave like human beings, talking, understanding, guiding, empathizing…voice is the single biggest vector of emotion, emotion is the biggest driver of preference. This is a true 1:1 marketing opportunity and a chance to build relationships like never before.” -Mark Paul Taylor, Chief Experience Officer, Global DCX Practice, Capgemini
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