Here Comes Satellite Radio

Tired of endlessly fiddling with the car radio dial to avoid commercials, improve reception or find a good song?

The remedy could be radio's response to cable TV: a subscription satellite service that beams 100 channels of music, news and other programming to cars - and eventually homes - with coast-to-coast coverage.

Two companies are launching pay satellite radio in the new year, hoping to give listeners more variety, better sound quality and fewer commercials. Reggae lovers will have their own channel. Country and rock fans will have multiple choices.

Analysts say it will take a few years for the service to make inroads in the radio marketplace. Traditional broadcasters argue that consumers won't pay for what they can get for free.

But the new industry players disagree.

Today, listeners have "one channel for all things," said Dave Logan of XM Satellite Radio, one of the two new companies. "I have all channels for all things."

XM's Washington facility contains more than 80 digital studios to create content for those channels. The spacious rooms, filled with state-of-the-art equipment, will soon house on-air personalities and programmers assembling 24 hours of music and entertainment. Inside a special performance stage, live music concerts can be recorded and carried on the channels.

Listeners, on the road nationwide, will even be able to call in on an 800-line and make requests. XM plans to offers satellite radio by mid-2001.

Both pay radio services cost $9.95 a month. In the short term, consumers will have to shell out several hundreds dollars for adapters or special car radios that can receive satellite broadcasts along with their AM and FM stations.

But in the next year or so, car markers are looking to build satellite radio receivers as a standard feature in their new high-end models and offer it as an option on less pricey cars. Eventually, retailers will sell home and portable units with satellite receivers too.

"Radio hasn't changed in 30 years. It exists to deliver listeners to advertisers," said Joe Capobianco, senior vice president of content for New York-based Sirius Satellite Radio, which starts offering service this month. "We flip that on its head because we are focused on the subscriber."

Both companies have partnered with news and content providers to help fill their channels and have recruited famous names to anchor some of their shows.

Some local stations already use a form of satellite radio themselves: Programming for the stations comes from a syndicator in another location, which uses satellite communications to deliver not only the programming, but also the signals to the local equipment to insert local material, such as commercials and announcements.

Some of that local material may have been recorded by the syndicator, and then fed to the staton via satellite for later use.

XM and Sirius are the only two companies that have licenses from the Federal Communications Commission to offer satellite radio.

But they will need to snag about 15 percent of the radio listening market to be considered viable - a benchmark they should be able to meet in a few years, said Mark O'Brien, executive vice president of The BIA Financial Network.

The services work like this: A ground antenna sends the radio signal to the companies' commercial satellites, which in turn transmit the signal to cars or other audio systems.

Satellites need a direct line of sight to beam their signals, meaning that tall buildings or other obstructions could interfere with the broadcasts, especially as cars weave in and out of different areas. So the companies also are using low-wattage radio transmitters on the ground - operating on the same frequencies as the satellites - to fill in the gaps.

"When you're moving in a car with a portable radio, it introduces a whole host of new technical challenges," O'Brien said.

Despite the new variety made possible by the channels, the broadcasting lobby doesn't think this is a threat to free, over-the-air radio.

Dennis Wharton of the National Association of Broadcasters said most people turn on the radio to find out about local information such as traffic jams, something that a national service can't provide.

Even some of the most distinct features of local radio could get a run for their money, asserts Logan of XM. By installing Global Positioning System technology in the satellite radio receivers, the company could deliver traffic and weather reports tailored to a listener's location.

Analysts predict that traditional radio won't be displaced - drawing the analogy of cable TV and the broadcast networks. But the new service could force AM and FM radio stations to reduce commercials and improve their programming to stay competitive.

"Ultimately, the listeners will win," said O'Brien. "They will have more choices."

©2001 CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report