The reasons? There are two primarily. One is the growing availability of in-vehicle internet capability, which allows Pandora into a venue once battled over mainly by Sirius XM and AM-FM radio. The other is the possibility of the Internet Radio Fairness Act becoming law.
Sirius, which does not make much money at all via the sale of advertising, benefits from its own growing presence inside vehicles. According to analysts at the National Traders Association, it has deals in place that have it factory installed in about 70% of new models – giving it an excellent opportunity to convert automobile buyers into subscribers.
But more and more models are also providing internet connectivity, allowing entrée to rapidly-growing Pandora.
According to NTA, Sirius has 24M paid subscribers, compared to only 1M for the more advertising-reliant Pandora service. But Pandora has come 60M total subscribers, giving it a leg up when it comes to the sheer mass of its user group.
The Internet Radio Fairness Act, which figures to be debated in Congress this year after getting an initial hearing in one of the final committee sessions of the 112th Congress, would level the royalty playing field between the two services, giving another huge boost to Pandora.
“Internet-enabled radio in the car has already begun,” Pandora Chief Executive Officer Joe Kennedy said. “It will grow as a snowball, initially small but growing exponentially.”
NTA added, “While Sirius XM receivers have satellites that deliver strong signals and high audio quality, they are still susceptible to disruptions. Satellite radio is also likely to fade due to the widespread availability of faster and better Internet connection in cars. If Sirius XM (and other satellite radio companies for this matter) does not want to be left behind, it needs to reinvent and give in to the online hype.”
RBR-TVBR observation: Sirius’ headache is also going to be a headache for broadcasters. Clearly, in-vehicle success enjoyed by Pandora will come out of terrestrial radio’s hide as well as satellite radio’s.
AM-FM radio has one advantage over both Sirius and XM – localism. That’s it, ladies and gentlemen.
There is every possibility that Sirius XM will be able to offer a music mix among its many channels that is closer to any one individual’s taste than a mass-appeal AM or FM station can. But it can’t say word one about what’s happening in the town that individual lives in.
Pandora can provide a dead-on match for a particular individual’s musical taste, but it’s delivery is dry and it too is mute on the local community.
AM-FM can provide music in an entertaining way with special local sauce – and it had better do so in a compelling manner to make sure satellite and internet services cannot wrestle in-vehicle listening away.