If you've ever take a road trip through the American heartland, you might have found few options on the radio dial, interspersed with lots of static.
Here’s the good news.
By the end of the year you could be cruising with your favorite tunes thanks to a new technology that promises to give you what you want and when you want it anywhere in the United States -- without the static, fading and constant commercial interruptions of conventional radio.
From space to your car
New York City-based Sirius Satellite Radio is building a digital satellite radio system that will broadcast 50 channels of commercial-free music -- from reggae to New Age, as well as 50 channels of national news, sports and entertainment programming for a monthly subscription fee of $9.95.
The company promises programming from the likes of CNN, USA Today and C-SPAN, as well as international stations from programmers such as the Hispanic Broadcasting Network.
"Conventional radio is not geared toward the needs of the listener."
There has not been such a revolution since the FM band brought stereo reception to static-plagued listeners in the 1970s, analysts say.
Satellite radio’s target audience will be commuters who are confined to their cars, where radio listening (69 percent) still tops other formats, such as compact discs (9 percent) and cassette tapes (15 percent).
There will be no advertising on the music channels, but there will be some on the talk channels, though significantly less than there now is on conventional radio.
"Conventional radio is not geared toward the needs of the listener," said Mindy Kramer, spokeswoman for Sirius. "It’s geared toward the needs of the advertisers."
She said that the company’s income would mostly come from customers’ subscriptions.
Analyst William Kidd of C.E. Unterberg Towbin in New York said that that subscription number has the potential to grow to about 100 million U.S. households. "They are clearly tapping a market opportunity," he said.
Along with the monthly service cost of $9.95, customers will pay about $200 for a basic satellite radio, which can be rolled into the financing of the car. The cost rises if a subscriber chooses a more sophisticated satellite radio, such as one that stores names of songs and artists from earlier broadcasts to be replayed later.
"Cable TV has proven that people are willing to pay for better quality programming," said analyst J. Armand Musey at Banc of America Securities in New York.
"Unlike a lot of new technology, this comes in as affordable from day one," Kidd said. He rated the company a strong buy last week with a 6-month target price of $100.00 a share.
Sirius has partnerships with Ford Motor, DaimlerChrysler, BMW, Jaguar, Mazda and Volvo giving the company access to about 17 brands of cars. "The fact that satellite radio will eventually be staring every car owner in the face makes us believe that mass market acceptance of the satellite radio is a given," Kidd said in his most recent report on the company.
"The car companies have been very committed," Kramer said. "It gives their customers another reason to buy their cars."
And it appears that analysts and automobile companies aren’t the only ones serious about Sirius.
A Lehman Bros. Unit agreed to provide Sirius with $150 million in financing recently. And Wall Street powerhouse Blackstone Capital Partners III said it will purchase $200 million of Sirius’ preferred stock.
"Sirius Radio will provide a superior product offering American consumers," said Blackstone’s senior managing director Mark T. Gallogly.
Advertising heavyweight Goodby, Silverstein & Partners in San Francisco signed on to a $100 million contract to promote the company nationwide. The advertising company later dropped out of the ad review for DirectTV’s $150 million account, citing a conflict with its Sirius account.
Launching soon
Sirius is scheduled for launch of its first of three satellites via a Russian rocket in Kazakhstan between June 28 and July 3. The company plans to begin broadcasting by year's end.
The radios will work much like your TV cable box. If you fail to pay your satellite-radio bill, you'll lose your programming. And if you get a hankering for local programming, you just press a button and go back to FM or AM.
But analysts believe that most listeners will stay tuned to satellite radio.
Sirius plans to broadcast Tony Robbins's motivational speeches and live concerts with such artists as Sting, Grandmaster Flash and MC Lyte, who will also have regular programs.
The Federal Communications Commission in 1997 gave a license to Sirius to develop digital radio broadcasting. Another company, Washington, D.C.-based XM Satellite Radio, also received a license and is expected to be up and running by year-end.
Analysts say that there is room for both in the marketplace. While Sirius will target mostly the "drive audience," XM will target both the portable market and the home market.
"Both companies are expected to be profitable," Kidd said.
But with the recent U.S. satellite launch failures, is the fledgling satellite radio industry in peril?
"Sirius has an 89-percent chance of successfully deploying its constellation," Kidd said. "Keep in mind, the Proton has an 85-percent success rate over its last 20 launches."
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