Scott Greenstein of Sirius Discusses the Growing Appeal of Satellite Radio

TERENCE SMITH:

If you were trying to describe to somebody what Sirius is and what it offers that they can't get for free on FM or AM, what would you say?

SCOTT GREENSTEIN:

First and foremost, commercial-free music. We have 65 channels of commercial-free music that range in every genre and every sub-genre that you could imagine, from classical, to jazz, to Broadway, to many different kinds of classic rock 'n roll, to dance music, to background music, to opera, to everything in between.

TERENCE SMITH:

When did you first hear about satellite radio and begin to get yourself acquainted to the notion?

SCOTT GREENSTEIN:

About a year and a half ago or so, when I left the film business and started to first consult here, and then ultimately about 10 months ago became president of entertainment and sport.

Along the way I was familiar with it, I was watching the trend, and I was also watching my own actions in having less and less satisfaction out of the radio and thinking there was an opening, and then seeing gaps that existed between television and radio for genres and markets that might be underserved that the radio was a natural for.

TERENCE SMITH:

Did the model make sense to you right away?

SCOTT GREENSTEIN:

Sure. I always believed that, like the cable television model, that people would pay for something they otherwise didn't have, or for more content, and certainly for the ability to have music as a more personalized entertainment mechanism that they could have in their car, because we all enjoy listening to music in the car. What we don't enjoy is commercials.

TERENCE SMITH:

So the key word there is content.

SCOTT GREENSTEIN:

Right. And one thing that Sirius, I think, is clearly the leader in not only satellite radio, we're trying to be the leader in all of radio in content. We have, as you know, a series of very unique assets, from everything from the NFL (National Football League), to NPR (National Public Radio), to a Maxim channel, to a channel with Eminem and 50 Cent and Interscope Records for that crowd. We have every version. We have the official version of the Elvis Presley estate to have a 24-hour Elvis channel.

We have Faction, which we created for our younger listeners that has all kind of action sports athletes, such as Tony Hawk, Bodie Miller, Kelly Slater, Lance Armstrong and the music they listen to.

So we have brands and sub-brands and genres all over. Our eighties channel has the original MTV VJ's which are clearly associated with that era. So we try not only to have the best programming, we also try to have the best and most unique assets that go with that programming, whether it's a brand of a magazine or personalities.

TERENCE SMITH:

Is the content now where you want it to be?

SCOTT GREENSTEIN:

No, I'm never happy with the content, but I am pleased with the development over the last six months of the content that we do have. As you know, we recently announced NASCAR, which we won't have for two years, but we're pleased with that.

We're very pleased, obviously, to have Howard Stern starting in January of 2006. We love the NFL – the only 24-hour NFL radio network.

We have very unique content that's unique to us, and it's growing — our subscribers are growing with it, and we're constantly creating programming now and for the future that we think will be compelling.

TERENCE SMITH:

You say you're never content or satisfied with it — what's missing, at least in category? What's missing? What would you like to have?

SCOTT GREENSTEIN:

Well, I'd like to see more women's programming, I'd like to see more children's programming, I'd like to see a lot of those grow. And we are growing a lot, and we are evolving in those areas.

First and foremost, because of the significant relationships we have with our automobile partners, we wanted to make sure that we had programming for the most likely demos that went into by cars and might, you know, enjoy additional programming.

TERENCE SMITH:

Which are —

SCOTT GREENSTEIN:

It's generated, you know, men and women together, but the male traditionally has looked at the car longer and the assets of the car longer than that. So we're excited that we feel we have a full spectrum from 18- to 50-year-old men certainly covered in programming from Faction, as I mentioned, to Shade 45, to Maxim Radio with the magazine, to the NFL, to the NBA (National Basketball Association), the NHL (National Hockey League). We have over 100 colleges, we have most of the top 25 colleges. This year Oklahoma and USC play for the national championship. Both have exclusive deals with Sirius, so we really love the way we've covered the male spectrum.

Now it's our turn to really look at women's programming and children's programming and hopefully do as equally as thorough a job.

TERENCE SMITH:

You mentioned Howard Stern. What do you think is going to be the Stern impact when he finally is on the air on Sirius?

SCOTT GREENSTEIN:

Well, we have already seen a great deal of people coming in for existing programming saying what made the difference was the fact that in a year or less they'll have Howard Stern on the air with Sirius. And you have to remember that's very different than any asset, I believe, that either we or XM has in the sense that he's unique and exclusive to satellite radio. So the only place you can hear Howard Stern will be on Sirius satellite radio. And so to us, we've seen the impact, it's already helped our subscribers, it does every day, and we think his audience will come as they have before, whether it's for DVDs or books or pay per view specials. His audience tends to be very loyal and very aggressively follow what he does. The very essence of what made them that way was the radio show. Now the radio show will be moving to satellite radio, we think it's likely a lot of them will come over.

TERENCE SMITH:

How many, as a business proposition, how many would have to sign up to justify the money you're paying him?

SCOTT GREENSTEIN:

We really don't disclose what we feel would be an exact quid pro quo. On the other hand, you know, we've made it very clear at the time of the announcement that if we had a million subscribers come solely because of Howard Stern, we would feel the deal would be economically sound and profitable for us. So we still maintain that, and we'll continue to stick with that.

But we're very comfortable with the number of subscribers that have already come and given his listenership of roughly 10 million, give or take a little bit on either side – it could be higher, could be a little lower.

The idea that, you know, roughly 10 percent need to come over, for us, that's a bet we couldn't not take because, as I said, when you look at the track record of who goes to (the movie) Private Parts, or who buys the two books that rise to the best seller list, or that his audience has consistently shown an unusual loyalty and fanaticism about following and going. And as I said, that all stems from the radio show, and now the radio show is moving.

So, do we believe 10 percent of those listeners will move over? We do. On the other hand, you have the situation that he's on in less than 50 of the markets of the 300 in America, so there are many cities, towns, and areas that have never heard Howard, and yet the only access they've had are the books and the movies and other things they have certainly gone after. So we feel we also have a lot of new markets, even small ones, to go into by virtue of our national service to benefit from that. So we're quite optimistic about having Howard and what it means.

TERENCE SMITH:

Is he going to, in your view, grandstand Sirius? Will the two be equated in people's minds?

SCOTT GREENSTEIN:

No. I think it will be similar to anything you look at on the cable service. There will be channels like HBO and others that stand out for having the Sopranos and Sex in the City, but you won't confuse that with ESPN. We feel we're going to have many, many programming assets that are unique to certain groups and demos, and they'll be passionate about them and excited to have them. Howard will be one of those assets.

TERENCE SMITH:

What impact do you expect satellite radio, both XM and Sirius, are going to have on commercial, terrestrial radio?

SCOTT GREENSTEIN:

I think there's room, clearly, for both to exist, no different than network television and cable television.

But I think it's clear that satellite radio fills a niche, and a growing niche in the market, and it could be a big sector by virtue of the growth we're all seeing as an industry combined to exist side by side, but nevertheless be a major factor going forward.

TERENCE SMITH:

Major factor – quantify that for me. It's about 4 percent now.

SCOTT GREENSTEIN:

I don't know what it will go to, but I certainly know when you look at the amount of places that satellite radio can go easily from boats, to planes, to office buildings, to residences, to the car obviously, and the consistent turnover of cars in America and all that, I don't see it stopping.

TERENCE SMITH:

I want to get a sense of where you think this is going five years, ten years. I know you can't – obviously you can't predict…but, if cable and satellite have gobbled up about 75-80 percent of the television market, can satellite radio do that someday?

SCOTT GREENSTEIN:

I wouldn't want to quantify where it could go, because if I could predict the future, we'd do a lot of things.

But so far, the exponential growth and the fact that it is growing faster than satellite television did, and it's very easily understandable for the American market place. In other words, it's radio in your car, it works everywhere, you don't lose the signal when you drive, you have commercial free music, you have a choice of 120 or 125 or more channels, you have much more selection on different things you might like for personalized choice of entertainment. It's almost – we at Sirius, at least on the music side, feel like it's an iPod without the work. In other words, it's right there for you to have as much selection of songs as you can go. So where it goes I can't predict. It's just clear that it's going and moving very aggressively.

TERENCE SMITH:

What do you think your audience is looking for when it comes to news and information programming?

SCOTT GREENSTEIN:

Well, there's two things. They're clearly looking for, you know, up to date national news, and then they're looking for more specific personalized news that might apply to them.

So, for instance, we carry all the major news services from CNN and Fox and others on our service, but we also have more niche programming where the news might be more skewed to a different use of the news. We have many things also in development that will be news channels, but will be more specific to a particular subject or need as opposed to just the average news that you would hear, you know, on more traditional news channels.

TERENCE SMITH:

Do you have any plan to generate your own news coverage?

SCOTT GREENSTEIN:

Generate our own news coverage – it's something…

TERENCE SMITH:

Right now you're picking up existing services. Is there any notion at Sirius to try to create your own news division?

SCOTT GREENSTEIN:

Right. The best way to answer that, in certain specific categories or genres we would consider it where they're under-served by traditional news services. You know, we're huge fans of what people do over at Fox, and CNBC, and CNN, and all that.

It would require something that would be unique to the marketplace that we'd feel a need, just the way we felt commercial free music and all those channels did, to want to do that.

TERENCE SMITH:

Like what? You mean news about the entertainment industry, or news about the music industry? Is that the sort of niche –

SCOTT GREENSTEIN:

Sure, and there's many other things that would fit that category where people want more news. They may want more updated news, they may want things that are logical for them, if they're in a large sector, to be in their car while they're driving to work, they may need some news that is different than the traditional news you hear about every day.

TERENCE SMITH:

Obviously, from the money that you and XM are paying, you must consider sports to be a pretty big battleground area between the two of you.

SCOTT GREENSTEIN:

We do, although I think it's fairly clear that we are the leader in sports, based on having the NFL, certainly in 2007 with NASCAR; you have now the NFL and NASCAR, the two most watched, I believe, on television and attended sports in person, plus we have the NBA, the NHL, over 100 colleges, most of the top 25 colleges, we have the English Premiere League for all the soccer fans here in America. And Faction for the extreme sports, as I mentioned, they're after a sports channel.

So we feel real confident that sports (a) is very important, I agree with you, and (b) that we are certainly the dominant leader in satellite radio and sports right now.

TERENCE SMITH:

Now, those big – the mainstream sports — football, baseball, basketball, etc. — they exist elsewhere on the dial for the listener.

SCOTT GREENSTEIN:

Right. But certainly our NFL network is different. In other words, you're from Washington. If you were living in New York, the only place you could hear the home feed of the Washington Redskins that you were used to would be on Sirius Satellite Radio. We carry both the home and away feeds on every game. So if you're on a business trip in Denver and you're a Redskins fan and you wanted to hear the Redskins against the Broncos, that would be great because you're in Denver. But if you wanted to hear the Redskins against the Cowboys and you're in Denver, only on Sirius Satellite Radio you could hear the Washington feed or the Cowboy feed while you're driving around Denver. So it covers every area, every team, both home and away games.

TERENCE SMITH:

When can Sirius turn a profit?

SCOTT GREENSTEIN:

That has been commented on in financial documents. That's not something that I comment on.

We have a plan that we presented to Wall Street, we feel comfortable with that plan. We think, you know, our numbers in the fourth quarter as well as early this first quarter are extraordinary, and we're excited about our chances to get the plan that we set forth.

TERENCE SMITH:

XM says that it will be in the black in 2006. Will Sirius?

SCOTT GREENSTEIN:

I really don't want to comment on that, and we'll wait and see how XM does, and we'll just stick to doing what we're doing here at Sirius, and we're quite happy at the level of awareness and where we are right now in the marketplace.

TERENCE SMITH:

What's been invested so far?

SCOTT GREENSTEIN:

I don't – I'm here to talk about programming and issues with that. We don't discuss –

TERENCE SMITH:

I mean, the Wall Street presentation surely wasn't a secret.

SCOTT GREENSTEIN:

No. No, but it's not my area.

TERENCE SMITH:

All right, we'll get it from elsewhere.

SCOTT GREENSTEIN:

And I'd appreciate that.

TERENCE SMITH:

Just finally, look ahead, say five years from now – what do you see from Sirius?

SCOTT GREENSTEIN:

Satellite radio in virtually every car in America, no different than cable television in virtually every home in America, and I look forward to its use being somewhere between the way cable television morphed out of network television, and they both existed, and the American public has even better programming.

I look forward to the same content spectrum happening where traditional radio will exist, but satellite radio will have a large spectrum of programs and choices for personalized information and choice that America seems to gravitate towards.

TERENCE SMITH:

Is there room for two?

SCOTT GREENSTEIN:

Sure. Sure. There's HBO and Showtime. There's many examples of that, and we feel confident with that, and again, while there has been two, and there's been heated competition for certain properties and other things.

We feel very confident that our business plan is sound, certainly our approach to talent is sound, and seemingly our content and programming we're providing is sound because our satisfaction numbers are so high…and we're quite pleased so far.

TERENCE SMITH:

Can you catch up?

SCOTT GREENSTEIN:

Sure. Sure. The gap's been closing, and we're excited at our chances. We started roughly 18 months or so afterwards.

At retail, certainly the gap is very close right now, if at all, and in the automobile industry, we've been fortunate that our partners are now very aggressive in the Ford group, in the Daimler Chrysler group, and BMW and others, and we're really excited about the potential of 2006 and 2007 when our auto partners are full bloom, our Howard Stern content is on the air, and he's actively promoting and marketing our service, in 2007 with NASCAR coming, we're really excited that we haven't even begun, and the gap is closing right now.

TERENCE SMITH:

That's excellent. Thank you.

SCOTT GREENSTEIN:

Thanks so much. I appreciate it.