OTTAWA – Research released Monday by the Yankee Group paints a pretty rosy picture for Canada’s two satellite radio companies, Sirius Canada and XM Canada.
Right now, says the report’s author Jeff Leiper, there are about 60,000 satellite radio grey market subscribers in Canada, which means they subscribe to the U.S. service(s) with a dummy U.S. address.
“We believe that the value proposition of satellite radio quickly will become clear to Canadian consumers. In fact, (survey) findings indicate that as many as 60,000 Canadian households are already subscribed; by definition, these are gray market subscriptions. The potential for a gray market in Canada for the US-based service was a key plank in both XM’s and Sirius’ application for licenses to operate a satellite radio service in this country. Our findings bear out at least a nascent demand that has not, until now, been met,” says the report.
Looking at the overall uptake in Internet, wireless phones, satellite television, and satellite radio in the states, initial demand should be slow, but will grow. “(S)atellite radio is different from internet access – it is not an entirely greenfield product. Canadians age 12 and older in 2004 listened to approximately 19.5 hours per week of free, over-the-air radio, according to Statistics Canada figures. XM and Sirius will compete with these free over-the-air broadcasts,” reads the report.
“Although there are similarities between DTH television and satellite radio, DTH has grown at the expense of existing paid services and differs little from existing cable offerings. On the other hand, satellite radio provides compelling advantages (and disadvantages) to existing radio offerings, at a premium price. The most analogous new technology may be cellular phones, which are also a premium enhancement to an existing service. In wireless telephony, from the time an affordable PCS service was launched by both Clearnet and Microcell, growth was also close to exponential for 2 or 3 years before leveling off to a more linear rate in recent years.
‘If we plot the growth of satellite radio along the lines of that for DTH television and assume year-end sales this year will stand at 80,000, we see the potential for 3.5 million subscribers to digital radio services at the end of 9 years,” reads the report.
As for the traditional broadcasters, they are in for a fight for listeners, says Leiper. Anecdotal evidence is that Canadians, like their American counterparts, are frustrated about the lack of choice on the traditional AM/FM dial,” he writes.
“Broadcasters should follow CBC’s example and explore similar partnerships to extend content onto other platforms, including satellite,” adds the report, referring to CBC’s part-ownership of Sirius Canada, along with Standard Broadcasting and Sirius U.S.
One real winner in this already? Telesat. It has long-term contracts to run XM’s satellites and is building XM Canada’s terrestrial repeaters. And, “(b)ecause of differences in the satellite architecture (XM uses an equatorial geosynchronous satellite that results in reception challenges at any significant distance from the Canada/US border), if XM wishes to challenge Sirius for subscribers outside the urban areas closest to the 49th parallel, it will likely spend millions more to build further repeaters. This is an expenditure not faced by Sirius because it uses a low Earth orbit constellation,” says the report.
