|
|
 |
|
 |
 |
| EXTENDED
INTERVIEW: HUGH PANERO |
|
 February 9, 2005  |
|
|
Hugh Panero, president and chief
executive officer of XM Satellite Radio Holdings Inc., discusses his
company's efforts to attract more subscribers and the benefits of satellite
radio not being subject to federal regulations in the first part of
this extended interview. The NewsHour Media Unit is funded by grants from the Pew Charitable Trusts and the John S. and James L. Knight Foundation.
|
|
TERENCE SMITH: For somebody who doesn't have, and maybe
hasn't even seen or heard XM Satellite Radio, describe it. What is it? HUGH PANERO: Well, XM Satellite Radio is sort of the ultimate radio service. What we do is we deliver over 130 channels of commercial-free music, we have about 68 channels of that, we have news, talk and sports and entertainment. We have sports like Major League Baseball. We have Bob Edwards. And what we do is we deliver it up to a satellite and it's received
by a tiny little antenna on your car and many of the devices that we
have will receive the signal, will display what channel you're on, what
the artist is that you're listening to, with the name of the song, as
if that's what's happening and then you can actually take this device
in many cases from your car to your home, and with a device we just
released, you can actually wear it on your belt. And it costs $10 a month and it really is -- you know, there was AM, there was FM, and now there's, you know, XM, which is the next generation of radio. |
||||||||||||||||||||||||||||
| Luring people to XM Satellite Radio | |||||||||||||||||||||||||||||
|
TERENCE SMITH: What's been the response of the people that have (it)
so far? And, how many subscribers? HUGH PANERO: Well, 3.2 million people are XM subscribers as of the
end of 2004. TERENCE SMITH: And when you project this in your mind as a business,
what do you expect by the end of 2005? And where do you get to the point
of viability? HUGH PANERO: Well, we believe we reach cashflow -- break even -- in
2006. We think that we will have in excess of 20 million subscribers
by 2010. We think this is an absolutely enormous market, even bigger
than what the analysts have projected. There's over 230 million licensed vehicles on the road, there's 140 million or so households. You basically have people that, you know, want access to the kinds of things that we offer, that they can't get because local radio really doesn't deliver it. They don't deliver digital quality. It can't be heard nationally across,
going from New York to California, and we basically are delivering the
passion of music that's sort of been lost in radio. TERENCE SMITH: I mean, that of course would be the first question I
think in any consumer's mind is -- why should I pay for something that
has traditionally been free? HUGH PANERO: Well, it's funny that you mention that, because when we
were a PowerPoint presentation before we became the product of the year
-- that was the basic question, the first one that people asked is,
Why would people pay for radio? And I grew up in the cable television industry where, in the early days of my nascent career, the big question was why would people ever pay for TV, and which it clearly, you know, 70, 80, 90 million people do. And it really is about just delivering quality content. And clearly, having 22 minutes of commercials on a local radio station -- mostly talk, very little music and not the music you want to hear in many cases because it can't be supported by the economic model of a radio station -- has basically drawn people to other alternative forms of getting content they want, whether it be satellite radio, whether it be, you know, iPod, whether it be the Internet, and we're just part of the revolution that's going on to satisfy the needs of people who want content when they want it in a very convenient way. |
|||||||||||||||||||||||||||||
| How the car industry brings in more subscribers | |||||||||||||||||||||||||||||
|
TERENCE SMITH: How many subscribers do you need to make money? HUGH PANERO: We really don't really talk about that because there are
many levers that you push in terms of how many subscribers you get from
different distribution sources, whether they come from people walking
into a store and buying the radio or from the car market. But right now we believe that we'll have 20 million subscribers by 2010. The makeup of those subscribers right now are about 50 percent of people who see our advertising and walk in and buy a device at a Circuit City, a Best Buy or a Wal-Mart. And another 50 percent of the people who actually are buying a new
car that has XM factory-installed, where we preview the service for
several months, and at the end of this trial period six out of ten people
subscribe to the service through, you know, companies like General Motors
and Honda. And we recently signed a deal with Toyota, who will be in
factories, installing XM radio in their cars in 2006. TERENCE SMITH: So how many cars will come off the assembly lines this
year with, with satellite radio, yours or the competition? HUGH PANERO: Well, speaking for XM, GM, in December of '04, hit a milestone of 1 million XM customers who are GM car owners. And GM and Honda combined, for the 2005 calendar year, are going to produce 1.5 million cars that are factory-installed with XM Satellite Radio. And we, by far, have been the leader in both the retail market and the OEM [Original Equipment Manufacturing] market -- or the new car market, you know, without the acronym -- and we continue to maintain that lead and grow it as we have taken this business from its very early stages of it being a PowerPoint presentation to where we are today, which has been very exciting. TERENCE SMITH: Is there room for two of these services in the marketplace? HUGH PANERO: I think there is. It's a big market. Clearly, we are competing
not only against our duopoly competitor but, clearly, there are other
forms of entertainment and distraction that people have in the car. But I think that both companies can be successful. I think it's all about execution and I think that how we've been evaluated on Wall Street, and our management team has been at -- with very high marks in terms of executing and actually having been, in the beginning, the underdog and then kind of zipped past the competitor because of our technology lead and our ability to execute getting XM into the big car companies. |
|||||||||||||||||||||||||||||
| XM's selling points: technology and content | |||||||||||||||||||||||||||||
| TERENCE SMITH: Beyond
the technology, what are you selling here? Are you selling a different
lifestyle, a different approach? Metaphorically, what are you offering
people? HUGH PANERO: Well, I think what we're offering people is this ultimate audio form of entertainment. I mean, there's many people who would -- will love to spend hours at night searching for music and downloading it, and buying it at iTunes, and all of that, and that's fine -- there's young people that do that every day. But in my lifetime, I don't have two hours to spend. I'm reading a
book to my son or my daughter, and I think, like cable television or
satellite television, there's a large group of people who basically
want somebody to be the concierge service, to provide them with information
and what we do is we provide news feeds from the BBC and Fox News and
CNN and the Bob Edwards show. And on the music side, we can help people navigate through the new
music because they trust us. They believe that we love the music, we
love the blues, we love classical music. If you're a sports fan, we're
going to have Major League Baseball starting in two -- starting in the
spring with pitchers and catchers. And so I think that for those people whose lifestyles change, we fill
a void that has been created because local radio abandoned them, and
for those people whose lifestyles will get busy, we are able to provide
something -- HUGH PANERO: Well, I think that what XM provides is an alternative
to the way people have received audio entertainment in the past, and
as a lifestyle issue, you have those people who are very focused on
owning, downloading, you know, buying, purchasing, and spending hours
searching on the Internet. There's another group of people who simply want to pay their ten bucks a month, trust a company like XM, who believes in the blues and classical music, and provides Major League Baseball and Bob Edwards, and news feeds, 130 channels, along with traffic information, and I can trust those people like a concierge, to direct me to places where I can learn about music, explore it, and maybe go buy an album on the Web, and we become an enormous muse for consumers who are driving in their car, walking on the street, you know, listening to it at home. TERENCE SMITH: In the competition between XM and Sirius radio, is,
is content the king? Is content going to decide it? Technology? Some
combination? HUGH PANERO: Some combination. On the content side, you know, Billboard magazine named us radio service of the year. So on the content side, we're -- 'I think winning.' I think that that's a constantly-shifting creature. You got to get better, you've got to get better if you're in public
broadcasting or in commercial television or in the movie business. We have to improve. We basically have a series called Artist Confidential,
very much like behind the Actors Studio, where people like Bob Weir
or Bonny Raitt or Neal Sedaka, or great artists, Phil Collins, come
in. We have interview shows where we talk to them intimately and then
they play music. Very unique to radio. Radio used to be -- local radio used to be a live medium. Everything's
taped, done from another part of the country, really not much localism
to local radio. And we deliver these kinds of things, and then each of our DJs don't
program the stations based on some script that they've been given about
what Billboard saw and happens to be the highest rotation or maybe some
influence that they have from a record company. They do it based on their own knowledge and passion for the music,
which is very unique, and I think people migrate to that kind of creativity. TERENCE SMITH: Now your competition has responded to the challenge,
and maybe the lead that you established early on, and spent a very large
bundle of money to hire Howard Stern. HUGH PANERO: Yes, they did. TERENCE SMITH: A serious challenge. HUGH PANERO: Yes. Well, a serious challenge in one particular genre.
I mean, they basically paid half a billion dollars to hire Howard Stern.
It's like $100 million a year. And, clearly, it was a terrific deal for Howard Stern. Whether it makes
good economic sense is to be seen, and, clearly, Howard Stern has a
certain audience that he's very attracted to. His actually ratings have
been going down of late, based on the local radio ratings that come
out, and he has as many negatives that go with his positives. So the question always is, from a business standpoint, you know, is
there a return on that investment and do you really think that there's
going to be Howard Sterns' picture at the Ford Motor dealership in the
Midwest where they're trying to sell satellite radio? I'm really not
quite sure. But we all make our bets. I mean, we basically believe that an investment,
which we made a significant investment in Major League Baseball. We
think it's the crown jewel of sports content. There's 2,400 games. It's
available at different times of the day. You basically have a sport
-- you know, people like, you know, that were sort of made for radio,
for those people who understand the evolution of different mediums,
and we're very excited about that, and it's something that the whole
country can enjoy and I think that's the kind of investment that we
made. TERENCE SMITH: Was baseball your response to Howard Stern? HUGH PANERO: Baseball was something that we had always wanted to do.
The problem was that some of the rights were really tied up, you know,
at the time with ESPN for a number of years, and when they became available,
we basically went and got the deal because we -- in speaking to consumers
and car companies and retailers -- baseball made the most sense, compared
to something like football which is, you know, 18 weeks out of a year. If you really want to watch or experience a football game, you really watch it on television, and it's on Sunday, so it's not exactly a high-driving time. But with something like baseball, every day there's a baseball game and actually at different times of the day. So we can basically go after the "dislocated fan." It's the Dodger fan that lives in New York, or the Yankee fan that lives in the Midwest and these people are fanatical about their teams, as evident by what happened during the Yankee/Red Sox series, where an entire country was energized by what was going on. |
|||||||||||||||||||||||||||||
| More freedom of speech without federal oversight? | |||||||||||||||||||||||||||||
|
TERENCE SMITH: Sirius has Howard Stern. You have Opie and Anthony.
And you're not under FCC regulation. Is satellite radio sort of going
"down market" and going to edgy programming? HUGH PANERO: I think we have edgy programming, because I think there's
a place for coarse comedy in an environment where people are electing
to, you know, pay maybe a $100 for radio and then $10 a month, and then
we have the ability to block out the channels. But in terms of our channel lineup and our economic commitment, there's
a different between having a service like Sirius that has committed
half a billion dollars to Howard Stern, who's actually going to program
three channels, and to our commitment to have a show for Opie and Anthony
that has an hour or two to exploit what is his, you know, humor, and
in the marketplace. So I think that there are abilities for us to have more speech freedom because of this. But it also comes with more technology that allows people not to get
it if you don't want it, to block it out, but very different than local
radio where you can't prevent anybody from hearing coarse language,
and also the radio stations, as you know, were given these frequencies
and paid nothing for them, and therefore they are held to a higher standard
of regulation with regards to protecting people from what might be controversial
speech because you can't protect it. Clearly with a subscription service it's a different model. TERENCE SMITH: Is there a line that you don't want to cross? HUGH PANERO: I think that there's a certain line that exists, you know, and I think that we have a sensitivity to what that line is. I sort of -- you sort of know it when you see it, I guess is the expression. But clearly, we -- I think what's happening is that even some people
like Opie and Anthony, who've been controversial on local radio, are
sort of maturing through the process and learning that, you know, they
want to evolve as either comedians or entertainers and that the humor
that may have worked in an open-air environment, let's say on local
radio, they have to be a little more sophisticated maybe in our medium
but still be cutting edge and be controversial. I think that that's what a magazine rack of speech is all about. And
so you have -- we range from Bob Edwards, actually, who launched on
the same day as Opie and Anthony, and Bob Edwards, a voice that was
about to be cut off on local radio and we preserved that voice. So it is a balance that occurs in our channel lineup and our programming
decisions. TERENCE SMITH: I guess I'm wondering if you have in your head some
definition of something that you would find too offensive to put on
the air. HUGH PANERO: I think we do and we have broadcast standards, and I think
there is obviously laws and legislation that's out there in terms of
certain restrictions that even exist, that supersede issues of what
the FCC is, and I think that we're conscious of what those things are
and what we think is tasteful or just being aggressive. But we obviously weigh it on the side of speech and the fact that there's
130 channels and if you don't want to listen to that channel, just go
to 129 other channels and don't subscribe, or block it out or get a
radio. TERENCE SMITH: Would it be damaging, in your view, to satellite radio
as a medium to be seen as smut radio? HUGH PANERO: I think that's a situation that really can't exist. I
think maybe in the case of Sirius because they made such an enormous
investment in Howard Stern, but our channel lineup is much more balanced,
and we have 68 commercial-free music channels, we have 21 traffic and
weather channels, we have five or six news channels like Fox and CNN. We have talk channels that feature Sean Hannity and a number of talk
personalities. So if you just look on a percentage basis, it's a small amount of our
channels that have what is controversial speech from what we call these
kinds of jocks compared to the wealth of programming that we offer,
you know, to clearly outweigh it and balance it out. TERENCE SMITH: Uh-huh. What about political slant? I see you're adding Dr. Laura and G. Gordon Liddy. Do I sense a little drift to the right here? HUGH PANERO: No, we have various channels, America Left and America
Right. We were one of the first radio outlets to actually find a home
for Al Franken and Air America, and what we're really just looking at
is who are proven radio talk personalities that like this platform and
-- three years ago wouldn't talk to us, but now say this is a great
way to reach, you know, their message. So, we have this America Left platform that has Al Franken and Air
America and Randi Rhodes, which I'm sure you've done stories on or you
understand who they are. And then we have a series of the 'Sean Hannitys' of the world and 'Dr.
Lauras,' and so on, who maybe talk to a different audience, but each
one of them has a large following and it's really up to the listener
to decide what is the niche of programming that they want to listen
to. TERENCE SMITH: Is it important to you not to get labeled one way or
the other? HUGH PANERO: I don't really think about it much. I don't think we have an issue of being labeled each way. I think what we're really focused on is that we just have 130 niches that we want to exploit and some of them are far left, far right -- traffic, weather, classical, blues, and as long as we're satisfying a lot of niches I'm pretty happy. TERENCE SMITH: Is there -- you're not now under the control of the
FCC. But there is great resentment on the part of terrestrial radio
about that, and various legislative moves. Do you seriously anticipate any change in that? HUGH PANERO: Well, I think there'll be a lot of debate and I think
that the work of Congress is to create debate and discuss issues. I think that much of the local radio banter on this issue is -- doesn't
have much credibility. I mean, this is a local radio that has not fulfilled
some of its commitments to go digital. They basically say they're local
but they bring in signals from outside the market. They've just added
more commercials. They are an organization that really isn't that focused on improving
their own product but basically participating in what might be considered
anticompetitive tactics to hurt the new guy on the block, which is what
they've been doing for a number of years. I mean, for example, there was a fight among the broadcasters which
was sort of rejected by the FCC to say we don't want satellite radio
providing any a these local traffic and weather channels. TERENCE SMITH: Uh-huh. How significant would it be to you if you came
under greater federal regulation than you presently have? HUGH PANERO: Well, I don't really, you know, deal in hypotheticals.
I think that what we are is a subscription service and the regulations
and and case law is pretty clear about certain speech issues. |
|||||||||||||||||||||||||||||
The NewsHour Media Unit, including this site, is funded by grants from:   |
| |||||
 | |||||
| |||||
|
|
| |||
| |||||
| |||||
| Support the kind of journalism done by the NewsHour...Become a member of your local PBS station. | |||||
