Wednesday, February 21, 2007

Sports programming and Satellite Radio – now it’s going to get “Sirius”



The announcement Monday that Sirius Satellite Radio and XM Satellite Radio intend to merge their two services didn’t come as a surprise to those who have followed the evolution of satellite radio. The two companies faced their inevitable destiny, a merger of their assets in hopes of dramatically cutting back on their losses. And those losses, according to The Wall Street Journal have been staggering.

In 2005, the companies had combined losses of $1.5 billion, after losing a combined $1.4 billion the year before. Their 2006 results haven't been released, but Goldman Sachs analyst Mark Wienkes estimates that Sirius lost $1.1 billion on revenue of $628.8 million last year, while XM lost $658.2 million on revenue of $914 million.

Central to both satellite radio providers – their insatiable appetite in buying sports programming – paying rights fees to acquire the right to broadcast sports events

"What's a lot of money? To me, the NFL is exorbitantly expensive on all media," April Horace, a Denver-based emerging technologies analyst for Janco Partners Inc. told The Seattle Post Intelligencer. "But people in America seem to have an insatiable drive; they don't seem to get sick of sports, and they seem to continuously be willing to pay for sports."

A cornerstone of Sirius’ business strategy has been to pursue exclusive sports content. Currently, Sirius has exclusive satellite radio broadcasting rights to all NFL, CFL and NBA games. Sirius also announced in December 2005 a multi-year deal with the NBA, which makes the satellite radio company the broadcaster of more live NBA games than any other radio outlet. Sirius airs Full Court Press, weekdays from 12 pm - 3 pm ET; FCP is the only all-NBA show on Sirius. The agreement also creates a 24-hour NBA Radio Channel, located on channel 127. NHL games will be shared with XM for the 2005–2006 season, after which XM will have exclusive broadcast rights. Starting in 2007, Sirius will have full NASCAR coverage, including, among other programs, a two hour weekly show hosted by NASCAR driver Tony Stewart.

Sirius also has rights to a number of major college sports teams, including teams in the Big East, Big Ten and the Southeastern Conference as well as schools like Notre Dame. Beginning in 2005 Sirius also has exclusive radio rights to cover the NCAA Men's Division I Basketball Tournament. In August 2004, Sirius launched NFL Radio, a 24-hour radio stream dedicated exclusively to covering the NFL. Sirius has also been aggressive in creating its own in-house produced studio sports radio content.

Sirius also broadcasts select English Premier League matches, in addition to airing World Soccer Daily, a Monday-Friday two hour talk show dedicated to soccer, and has inked an exclusive deal with two-time defending EPL champion Chelsea. Continuing their major expansion of soccer coverage, Sirius announced a deal to add UEFA Champions League soccer to their lineup on September 27, 2006.

XM’s service includes: 73 different music channels, 39 news, sports, talk and entertainment channels, 21 regional traffic and weather channels and 23 play-by-play sports channels.

While many believe Howard Stern’s move to Sirius was a key to what took place Monday (Stern was lured from terrestrial radio to Sirius for $500 million), sports rights fees have played an even bigger financial role.

On December 16, 2003 Sirius Satellite Radio signed a $220 million deal with the National Football League to broadcast professional football games beginning in 2004. Over the course of the seven-year deal, the NFL will receive $188 million in cash and $32 million in Sirius stock, with the ability to earn warrants to buy an additional 50 million shares.

Sirius secured national broadcast rights to all regular season NFL games, as well as select preseason and playoff contests. It also became the official satellite radio provider of the NFL.

"I would call this a transformative event," said Sirius CEO Joseph Clayton. "There's no question we're the leader in sports compared to terrestrial radio or our (satellite) competitor."

The deal was not exclusive, but contained a provision that would make it "very expensive" for Sirius competitor XM Satellite Radio to gain the same kind of rights to NFL games. As part of the agreement, Sirius created an additional sports channel, "The NFL Radio Network," an around-the-clock stream of NFL games, features and analysis. (Call it the NFL Network on radio).

The next salvo was fired by XM on October 20, 2004. XM announced an 11-year, $650 million deal with Major League Baseball to broadcast games live nationwide and become the Official Satellite Radio provider of Major League Baseball.

The agreement granted XM the rights to use the MLB silhouetted batter logo and the collective marks of all major league clubs. As part of the deal, XM created a 24/7 MLB channel called "Home Plate". The deal started with the 2005 season and runs through the 2012, with a 3-year option that MLB can pick up.

"This is the crown jewel -- the deal that we've been waiting for," declared Hugh Panero, XM's president and CEO, announcing the $650 million agreement with MLB to broadcast every game that began with the 2005 season.

Counters Sirius: "There is no more exciting sporting event in college sports than NCAA March Madness, and this deal will allow college hoops fans everywhere to follow their team, from the opening tip to the Final Four," said Scott Greenstein, president of entertainment and sports, announcing the multiyear deal to carry live play-by-play broadcasts of every NCAA Tournament game.

"Baseball is a radio game, because it's during that great time of year when everybody is out and about, traveling on vacation, they're on the highways, or maybe they are on the East Coast in drive-time traffic, so there is always a captive audience,” Seattle Mariners broadcaster Dave Niehaus said in a Seattle Post Intelligencer report in 2005 "We come into your house every day, nearly 200 times a year counting the games we do in spring training."

Two years ago (February 2005) Sirius pirated NASCAR from XM by offering $107 million over five years for the auto-racing broadcasting rights beginning in 2007. That agreement began Sunday with Sirius broadcast of the Daytona 500.

On September 13, 2005 XM announced a 10-year $100 million deal to carry National Hockey League broadcasts beginning with the 2005-06 season, initially sharing the coverage with SIRIUS but gaining satellite-radio exclusivity from 2007 (September) onward.

When Sirius announced their earth shattering five-year $500 million agreement with Howard Stern in October 2004 (Stern actually made his Sirius debut in January 2006) Sirius officials made it clear the demographic of Stern’s audience and sports fans was exactly what they where looking for.

"The demographic of the sports fan matches up really well with the demographic of our customer base right now," said Ron Rodrigues, Sirius media relations spokesman. "They tend to be men in their 20s through 40s who have average or slightly above-average income and education levels."

"You tend to go where the audience is, and you serve it, so sports came definitely as a priority for us," Rodrigues told The Seattle Times.

Both XM and Sirius offer ESPN Radio and Fox Sports Radio.

XM also offers Home Ice (hockey centric service broadcasting from Toronto), MLB Home Plate (a baseball channel that accompanies XM’s cornerstone MLB agreement), the PGA Tour Network (PGA related programming), XM Sports Nation which features everyone from Cal Ripken, Troy Aikman, Duke Head Basketball Coach Mike Krzyzewski, Dale Earnhardt, Jr. and NASCAR’s Jimmie Johnson. XM also hosts XM Deportivo a Spanish driven sports channel.

Sirius offers channels that accompany their National Football League, National Basketball Association and NASCAR programming. Sirius also offers something called Sports Action which is similar in nature to XM’s Sports Nation. Among the shows and hosts on Sirius’ Jerry "The Shark" Tarkanian, programming linked to the popular high school sports site rivals.com, NHL Live and The Mike & Murray Show.

Ironically not listed on Sirius primary content page is Hardcore Sports. Launched on January 15, 2007 and based in Toronto, the engine behind Hardcore Sports is a show called “Sports Rage” hosted by Gabriel Morency. While Morency remains a largely unknown talent, Morency is to sports radio what Howard Stern is to talk radio. Whatever they’re paying Morency isn’t enough, but at the end of the day Gabriel Morency is what will bring people to satellite radio. (Disclaimer – Howard Bloom appears as a regular guest on Sports Rage, but is not paid to be a guest on the show).

Many media business watchers believe Howard Stern’s $500 million deal (which has now ballooned by an additional $325 million in performance bonuses) was the biggest single mistake in the history of the media. Nothing could be further from the truth. Howard Stern maybe the only personality who is capable of generating enough interest to convince people to purchase the right to listen to him. Howard Stern is one of a kind programming. Others have tried but Howard Stern can’t be duplicated.

Its great to offer an NFL, MLB, NBA, NASCAR and NHL channels, but if you turn on your car radio, access ESPN, FSR or Sporting News Radio on your computer you’ll be able to listen to all the NFL, MLB, NBA, NASCAR and NHL talk you’ll ever care to listen to and it won’t cost you a dime. It remains to be seen when XM and Sirius merge in the coming months if they’ll keep the league centric channels as part of their programming. The costs associated with talk radio programming are much higher than most can imagine. It’s likely those buying satellite radio can tune into ESPN and Fox Sports Radio (both offered by XM and Sirius) and get their fill of NFL, MLB, NBA, NASCAR and NHL content, but if satellite radio is ever going to work it will only work with unique programming that can’t be heard anywhere else.

The key to long-term subscriber growth is with unique programming you can’t hear anywhere else. One of the key’s to long-term financial growth for the merged XM and Sirius will be initially to cut costs, get rid of programming that people can listen to on terrestrial radio. Howard Stern and Gabriel Morency they can only be heard and will only work through satellite radio. Their long-term futures have to be good; the same can’t be said for the costly and redundant NFL, MLB, NBA, NASCAR and NHL channels currently be offered by XM and Sirius.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Seattle Post Intelligencer

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