PRB 05-92E
Sam N. K. Banks
Carolina Mingarelli
Revised 9 December 2008
Parliamentary Information and Research Service
Library of Parliament
Satellite Radio
INTRODUCTION
One of the biggest broadcasting stories of 2005 was
the arrival of subscription satellite radio services in
Canada.(1) At the time, satellite radio was presented
by some as “arguably the most revolutionary
advancement in broadcasting history”(2) and the
biggest technological development in radio since the
introduction of FM radio almost 40 years ago.(3)
One commentator ventured that satellite radio would
“change the very nature of Canadian broadcasting
from the ground up, as well as the tuning habits of
Canadian radio listeners.”(4)
Like enhanced cable with high-definition digital
programming as compared to basic, non-cable
television, satellite radio offers more variety and
greater range at a higher price.
Digital audio programming is sent via satellite directly
to cars, homes and public locations for subscribers
who have special receivers. Terrestrial transmitters
fill in gaps in coverage.
Unlike conventional radio, which can be received for
free, satellite radio costs its subscribers approximately
$14 per month. In addition, the receivers needed to
listen to subscription radio programming cost from
$60 to $400. Much like satellite television, each
broadcasting service has its own type of receiver,
which can only receive that broadcaster’s programming.
SATELLITE SERVICE
PROVIDERS IN CANADA
Canadian Satellite Radio Inc. (operating under
XM Canada) and Sirius Canada Inc. (in which the
CBC is a partner) are two satellite radio services now
broadcasting in Canada. Each service carries over
120 channels. Both services claim that the music
channels are entirely commercial-free,(5) and the
news, talk, sports and comedy radio channels boast
exclusive content and have substantially fewer
commercials than conventional radio.
THE ADVANTAGES OF SATELLITE RADIO
The range or reach of satellite radio is significantly
greater than that of conventional radio, which is
generally local and emits signals that fade with
distance and can be disrupted by mountains or other
objects on the landscape. Satellite broadcasting
technology allows a radio broadcaster to send a signal
to a satellite located in orbit above the earth; the
satellite then returns the same signal to a large area of
the earth’s surface (the signal’s “footprint”). The
technology allows a signal to be sent directly to any
place that has a device for receiving it. It is thus
possible to listen to the same channel during a drive
from St. John’s, Newfoundland and Labrador, to
Ucluelet, British Columbia – a range of almost
8,000 km. The satellite signal will be lost, however,
when a structure such as a parking garage or a bridge
interrupts the signal. Weather conditions may also
disrupt the signals from time to time.
Satellite radio is further distinguished from conventional
radio by the variety and depth of programming
offered.
Music programming in particular is
categorized and subcategorized.
For example,
programming is offered by decade (1950s, 1960s,
1970s) and differing genres (urban, country,
bluegrass, Latin, hip-hop, Christian, jazz and blues,
classical, world, rock). Within each genre further
divisions are found: for example, one service offers
an all-Elvis channel, and “classic rock,” “progressive
rock” and “deep classic rock” niches are represented.
Each service also broadcasts exclusive concerts for
subscribers. Channels dedicated to talk radio include
politics, sports, advice, and lifestyle.
This ability to provide such niche programming means
that satellite radio can offer subscribers far greater
depth and variety than can conventional radio.
In contrast, AM and FM radio are constrained by a
comparatively limited number of channels. As well,
each station must pursue its target audience and thus
cannot risk offering programming that is radically
different. As a result, conventional radio is criticized
as an increasingly homogenized medium. Moreover,
the amount of commercial advertising on conventional
radio may irritate some listeners.
THE DISADVANTAGES
OF SATELLITE RADIO
What satellite radio does not offer, however, is local
news, traffic and weather; for that listeners must
continue to rely on their conventional local – and free –
AM or FM radio stations.
Satellite radio also does not offer exposure to
“world music” as broadly as Internet radio channels
available free of charge (assuming the availability of a
computer and Internet connection), and the
programming offered by satellite radio, while wideranging, is limited to broadcasts from North America.
However, the most significant drawback to satellite
radio is that it requires the consumer to purchase a
new type of receiver and, more importantly, the radio
content. Convincing radio listeners to buy what they
are accustomed to receiving free may be a challenge.
In addition, because each service has its own type of
receiver, consumers must select and stay with a
particular service or else incur significant costs to
switch.
CANADIAN AND FRENCH-LANGUAGE
CONTENT ON SATELLITE RADIO
The Canadian Radio-television and Telecommunications
Commission (CRTC) requires that all conventional
radio stations ensure that 35% of their popular musical
selections are Canadian each week. Before granting
licences to Canadian satellite radio services, the
CRTC had to decide how much Canadian content
each service would have to provide.
This issue was a matter of significant debate during
the process to approve the services in Canada.
Because the programming on satellite radio is mostly
American-produced, there were concerns that there
would be insufficient levels of Canadian and Frenchlanguage content, and that what Canadian and Frenchlanguage content was available would be overwhelmed
and marginalized.
Many people, however, supported the arrival of
satellite radio in Canada, praising the greater variety
and reach of the service over conventional radio.
Emerging and independent Canadian artists in
particular were supportive, suggesting that satellite
radio, with its niche markets, would provide greater
exposure than does conventional radio’s mass market.
Whether it has resulted in greater exposure of
Canadian artists in North America remains to be
determined.
Ultimately, the CRTC decided that 10% of the
satellite radio channels available in Canada must be
Canadian-produced, and one quarter of that 10% must
be French-language stations. A minimum of 85% of
the musical selections broadcast on the Canadianproduced channels as a whole must be Canadian.
A similar proportion was imposed on spoken-word
programming, whereby 85% of it must be produced in
Canada and feature a Canadian primary performer or
speaker. Moreover, each satellite radio service must
devote at least 25% of the Canadian musical
selections it broadcasts to songs by emerging
Canadian artists.
Further, each service must
contribute minimum sums for Canadian talent
development; this money is to be divided equally
between French- and English-language talent.
In late 2005, both Sirius Canada and XM Canada
launched their programming. Ten of the 100 channels
Sirius Canada offered were Canadian, with equal
numbers
of
Frenchand
English-language
programming. Of the 88 channels on XM Canada,
8 were Canadian, 4 each in French and English.
In 2008, Sirius Canada offered 12 Canadian channels,
5 of which were in French, and XM Canada had
19 Canadian-produced channels, with 5 providing
French-language programming.
SATELLITE RADIO AND
THE “GREY MARKET”
Prior to late 2005, no Canadian radio service was
authorized to provide satellite radio programming in
Canada. Some Canadians wishing to receive the
service obtained it from one of the two US providers
via the “grey market.” Canadians would buy US
receivers and then subscribe to a US service, using a
false US billing address. As many as 80,000 Canadians
may have used this grey market avenue to obtain
satellite radio service.(6) It was suggested that many
of these grey market users signed up mainly to receive
a particular channel featuring a US-based radio
personality.(7) (That channel and radio personality are
included among those now heard on a Canadiandistributed satellite radio network.)
It was also suggested that the number of grey market
users indicated a strong interest in receiving satellite
radio and that if the service was not available in
Canada, then Canadians would resort to the grey
market. This could cause the grey market to grow
even larger.
Tied to these concerns about the size and growth of
the grey market were fears of concomitant losses of
revenues and opportunities for the Canadian music
and broadcasting industries.
Moreover, foreign
broadcasters are not obliged under their terms of
licence, as are Canadian broadcasters, to devote a
certain proportion of their programming to Canadian
content. Therefore, the grey market could represent
both economic and cultural losses to Canadian
listeners.
Now that satellite radio is being distributed in Canada,
it will be interesting to see whether the grey market
listeners will be repatriated to Canadian satellite radio
services and what effect, if any, that may have on
Canadian broadcasting and cultural industries.
OTHER ECONOMIC CONSIDERATIONS
Satellite radio’s expanding market puts it in direct
competition with free Internet radio as well as with
pay audio programming services in cable, direct-tohome and mobile formats. Though satellite radio once
focussed on the car market, it has more recently set its
sights on distribution via cell phones. Also, in 2006
and 2007, cable and direct-to-home satellite television
services obtained a modification to their broadcast
licences, allowing them to distribute satellite radio
digitally.(8) These changes may help broaden satellite
radio’s listenership.
Today, it appears that satellite radio in Canada has
found an audience. A fall 2006 survey indicated that
after almost one year on the air, satellite radio’s
audience was larger than that of Internet and pay and
specialty radio programming services combined.(9)
In 2007, Canadians who owned satellite radio receivers
spent 11 hours a week listening to satellite radio.(10)
As of 12 June 2008, Sirius Canada reported that it had
over 750,000 subscribers(11) and by 21 May 2008
XM Canada’s subscriber base had reached
439,900.(12)
Though satellite radio’s audience seems to be
growing, competition is as well. Satellite radio is now
offered on many new cars, either as an option or
already installed. But adapters allowing consumers to
plug their MP3 players or iPods into their car stereos
have hit the market, and many car manufacturers now
also provide the option of integrating these devices
directly into new models.(13) XM Canada is responding
to competition from MP3 players with the launch of
the XMp3, a portable satellite radio and MP3 player.
Another potential competitor for the industry is digital
radio broadcasting (DRB). Like satellite radio, DRB
requires a special receiver, but its broadcasts are free.
Moreover, the technology allows a broadcaster to emit
several signals on one frequency, thus allowing for the
creation of bilingual radio stations or the transmission
of ancillary information along with the programming
(such as traffic and weather information and even
graphics). Though DRB remains a fringe media in
Canada, it is gaining in popularity in the United States
(Ford equips certain of its models with stereos capable
of receiving DRB) and could have an impact on the
audience for satellite radio in coming years.(14)
With the growth and increasing acceptance of satellite
radio as a viable alternative to commercial radio, there
had been concerns that the value of advertising time
on conventional radio would decline. This seemed
especially likely, given that one of satellite radio’s
main selling points is that it is virtually commercialfree. This decline in the value of advertising time on
conventional radio could, in turn, lead to losses of
revenue for radio stations and their shareholders. So
far, the introduction of satellite radio in Canada does
not seem to have had a detrimental effect on terrestrial
private commercial radio revenues. In fact, between
2006 and 2007, total revenues for private commercial
radio stations increased by 6.2%, mainly because
advertisers are paying more for airspace. Moreover,
2007 saw the launch of 23 new radio stations
in Canada.(15 )
The recent merger of Sirius and XM in the United
States has put satellite radio back in the news.
In July 2008, 17 months after the announcement of the
transaction, the US Federal Communications
Commission approved the merger, which had received
wide media coverage.
The merger has raised
questions as to the status of these companies’
Canadian counterparts. Though both Sirius Canada
and XM Canada have indicated that their services in
Canada will not change as a result of the merger in the
United States, André DiCesare, Vice-President of
XM Canada, has recently indicated that “the future of
satellite radio is with one distributor.”(16) The CRTC
has demanded that both explain any merger plans and
how these could affect their broadcasts.(17) The
CRTC has also indicated that it has the right to reject
any merger between the two companies in Canada,
and if such a transaction were to occur, to hold public
hearings. The US companies merged to cut costs in
order to better compete with new technologies and
free Internet radio.
This will result in the
consolidation of their broadcasts from one satellite
and the closing of any duplicate specialty radio
stations. All of this has sparked concern over
continued procurement of Canadian content, the
ability for a business to circumvent regulations by a
merger and greater foreign ownership of the
two Canadian satellite radio services in the future.(18)
(1)
Greg Quill, “The year of digital satellite,”
The Toronto Star, 28 December 2005, p. E8.
(2)
Joe Leary, “Stern a hot buy on ‘grey market,’”
The Province [Vancouver], 15 January 2006, p. C3.
(3)
SpaceRef
Interactive
Inc.,
News
release,
“XM Satellite Radio Launches First U.S. Digital
Satellite Radio Service,” 25 September 2001,
http://www.spaceref.ca/news/viewpr.html?pid=6105.
(4)
Quill (2005).
(5)
XM Satellite Radio Inc., the US version of
XM Canada, added advertising to four of its music
channels in 2006: Sarah McBride, “Four XM Music
Stations Will Start Running Ads,” The Wall Street
Journal, 8 March 2006, p. B3. At the time,
one commentator suggested that “[a]nalysts believe
the company, and its partners, could one day
generate significant revenue from advertising”
(Ibid.). To date, neither Sirius nor XM Canada has
incorporated advertising to its broadcasts.
(6)
Greg Quill, “Thousands of Canadian Stern fans sign
up for ‘grey market’ radio,” New Brunswick Telegraph
Journal, 5 January 2006, p. E6.
(7)
Ibid. See also Leary (2006).
(8)
Canadian Radio-television and Telecommunications
Commission [CRTC], Broadcasting Policy Monitoring
Report 2007, Gatineau, July 2007, p. 38,
http://www.crtc.gc.ca/eng/publications/reports/Policy
Monitoring/2007/bpmr2007.pdf.
(9)
Ibid., p. 11.
(10) CRTC, Communications Monitoring Report 2008,
Gatineau, July 2008, Table 4.5.6.
(11) Sirius Canada, “Sirius Canada Exceeds 750,000
Subscribers,” News release, 12 June 2008,
http://www.siriuscanada.ca/en/media/press_view.aspx
?ID=press_00083.aspx.
(12) XM Canada, “XM Canada reports third quarter
results and first ever positive cash flow quarter,”
News release, 10 July 2008, http://media.integratir.com/
t.xsr/PressReleases/XMQ308_PR.pdf.
(13) Associated Press, “Apple and 3 Automakers Plan
Alliances on iPod Use,” New York Times Online,
4 August 2006,
http://www.nytimes.com/2006/08/04/technology/04ipo
d.html?_r=2&adxnnl=1&fta=y&adxnnlx=1224874479U6/Gf1+xfLDIODTuOoGZhw&oref=slogin&
oref=slogin; N. Van Praet, “Finally, Radio You Can
Watch: Sirius Offers Video Data,” National Post,
15 November 2006, p. FP6.
(14) A. McKenna, “La Radio HD sur les traces de la radio
satellite,” La Presse, 21 January 2008, p. La Presse
Affaires 1.
(15) CRTC, Commercial Private Radio: Statistical and
Financial Summaries 2003–2007, Gatineau, July 2008,
http://www.crtc.gc.ca/eng/publications/reports/BrAn
alysis/radio2007/radio2007.pdf.
(16) P. Cloutier, “Une fusion est dans l’air,” Le Soleil
[Québec], 4 November 2008, p. 29 [translation].
(17) V. Pilieci, “Canadian Regulator Questions Satellite
Radio Merger Plans,” The Ottawa Citizen, 20 July
2008, p. A1.
(18) V. Pilieci, “Satellite Radio Merger Threatens Canadian
Content,” The Ottawa Citizen, 31 March 2008, p. A1.