What Stern Really Means For Satellite Radio (And Terrestrial Broadcasters)

by Sean Ross, VP of Music & Programming

If your only exposure to satellite radio had been the consumer press over the last two years, you would be forgiven for thinking that terrestrial AM and FM radio were already obsolete. Satellite’s musical depth particularly resonated with music writers who had long bemoaned a lack of variety on mainstream radio. So it was a little telling that the first question many journalists had last Wednesday, in light of the news that Sirius Satellite Radio had signed Howard Stern was, “Is this the thing that finally helps satellite radio break through?”

To answer that question on its most obvious level first: Yes, if any one personality will sell subscriptions and help Sirius gain on rival XM, it’s indeed Howard Stern. (Opie & Anthony had the opportunity to do that on a smaller scale; with them gone to XM, only Stern or Rush Limbaugh could have upped the ante.) With a reported Stern cume of 12 million and plenty of interest in markets where he isn’t now on the radio, the million subscribers that Sirius says will make the deal work shouldn’t be hard to find.

But it’s also a coming of age for satellite in another way. As the tenor of the press coverage suggested, it’s also an acknowledgement that while infinite musical variety may have been a killer app for the three million current XM and Sirius subscribers, it wasn’t necessarily putting the services on pace for profitability. And while there’s been a lot written about the iPod’s potential effect on conventional radio, there are already at least three million of them out there as well, all with the ability to cut in to satellite’s musical variety franchise. And that leaves satellite looking more to mainstream radio for content, whether it’s Stern, O&A, or Bob Edwards.

There are 13,000 radio stations that already have to deal with not having Howard Stern as their morning host.

We had already seen, over the last year, some acknowledgement from radio’s new media competition that terrestrial radio’s offerings were not without merit. Microsoft is marketing Internet radio stations that “sound like” established outlets. The mainstream satellite formats may still offer music that doesn’t research well for most commercial outlets, but it’s less likely to be music you never heard of. And while Stern helped rewrite radio’s rules 23 years ago, he’s been Rock radio’s morning show template for at least the last 10-to-15 years. It took the FCC’s new scrutiny of several-year-old tapes to make him dangerous again. Even then, Stern has spent the last six months proving that he can still win, even with several key topics now proscribed.

When satellite radio isn’t being compared to cable TV, it’s being compared to the early days of FM. The parallel that resonates here is to FM somewhere in the early-to-mid ‘70s when the deliberate anarchy of the first progressive FMs first gave way to something more systematic, whether it was the first major Top 40 FMs or just the more codified Rock radio that many were already decrying by the late ‘70s. That’s the real coming of age that’s taking place here.

Then again, while it might have been satisfying for AM PDs in 1972 for their FM counterparts to admit that listeners liked the hits, it still wasn’t good news that their franchise was being co-opted. Rock radio, in particular, already has a less loyal young male audience that is more interested in satellite than other demos. Those listeners do like to hear about certain topics and the morning shows that remain at terrestrial radio are less free to discuss them than their new competitors. And both satellite services have a particular depth of Rock programming compared to other formats.

Rock radio, and Stern affiliates in particular, also became more dependent on the morning show as not just a springboard for the rest of the day but sometimes as a station’s only motor. Tom Joyner, like Stern, can certainly impact a station’s fortunes by coming or going, but there aren’t a lot of Joyner affiliates who have no viable music franchise after morning drive.

So how devastating is Stern’s loss? Some attendees at last week’s National Assn. Of Broadcasters’ radio show in San Diego tried to minimize it—a lot, they said, could happen in 15 months, particularly given satellite’s financial issues and terrestrial radio’s sudden attention to the potential for wireless broadband. Others derided any brave face as “whistling past the graveyard.”

That said, there are 13,000 radio stations that already have to deal with not having Howard Stern as their morning host. For those with that task suddenly thrust upon them, one answer is pretty obvious: create compelling content, serve the community and be an indispensable part of listeners’ lives. Problem is that the stations that decided to put Stern on years ago, rather than compete with him, have long relinquished that franchise.

And while personality and localism have been the most cited solutions for terrestrial radio over the last week, Stern’s departure should also be further impetus for broadcasters to take care of their other housekeeping issues, most notably spot load. Many may view Clear Channel’s “Less Is More” initiative cynically, but anything that reduces clutter and spreads the word is more important now, particularly when Stern will indeed be running commercials. While satellite radio has only promised commercial free music channels, and Stern listeners are already overlooking high spot loads already, satellite’s “commercial free” franchise is at least a little more vulnerable.

Broadcasters like to say they compete with themselves even when there’s no direct competitor. For that reason, they would be advised to compete with the nightmare scenarios of the last week, rather than minimize them. But if competing with Stern seems daunting, remember that there was a time when nobody in radio could imagine a bigger morning show than Rick Dees, or Don Imus before that, or Robert W. Morgan before that.

It’s also worth noting that R&B and Latin radio have already developed superstars of a similar magnitude, in Joyner and Renan, respectively. And that many Rock radio observers were already spoiling for a Stern vs. O&A match in morning drive. While the week’s events have already made it abundantly clear who the bigger national star is, O&A will have a 15 month head start and a larger existing cume to work with. Terrestrial radio now needs to ask itself what it will do with its own head start.

Sean Ross is Edison Media Research’s VP of Music & Programming and the former editor-in-chief of Airplay Monitor, Billboard Magazine’s radio programming publication. The opinions expressed here are his own and can be found on the edisonresearch.com Web site every week. Sean can be reached at 908.707.4707 or SRoss@edisonresearch.com.