AM & FM still biggest competition for satellite radio


Much has been said about broadband Internet access in automobiles threatening radio – both satellite and traditional AM and FM stations – but SiriusXM CEO Mel Karmazin told investors and analysts on his quarterly conference call that the real battle of the dashboard is still the same. It’s the satellite radio company he now heads competing for listeners with the business he came out of: AM and FM radio.

“Although we are the only satellite radio company, we do face numerous competitors. And this competition is increasing in the IP world, as there is no real barrier to entry,” Karmazin said of the competitive landscape. “In 2011 SiriusXM was factory installed in about two-thirds of all cars sold in America, while AM and FM radio was ubiquitous. Today, we are not seeing IP as a game-changer. IP easy to use connectivity in cars is still very modest, but will become more commonplace over the coming years. Terrestrial radio is still our biggest competitor by far. And we know very well how to compete with it.”

And while AM and FM radio continues to command far more listening than satellite radio, Karmazin offered some interesting numbers to illustrate why he likes the SiriusXM business model. He said SiriusXM generated $139 in revenues per subscriber in 2011. The largest terrestrial radio company (he didn’t mention Clear Channel by name) received only 10% of that, or about $13 of revenue for each of its listeners. The largest IP competitor (that would be Pandora) got less than $6 per regular user. “This demonstrates the difficulty of generating advertising revenue from mobile users on their smartphones,” Karmazin added.

The SiriusXM CEO also threw out some figures for revenue per employee. “At SiriusXM we generate approximately $2 million per employee per year, as compared to IP radio, which is less than half that. Interestingly, terrestrial radio generates about $300,000 per employee compared to our $2 million,” Karmazin said.

RBR-TVBR observation: Interesting figures. So, we wonder, is SiriusXM understaffed or is the traditional radio industry overstaffed?