Satellite Radio

Future Viability: Mature

A profitable niche service with growing competition from online platforms.

Multi-channel, ad-free premium audio subscription service
Primary target audience: listeners in vehicles
Low penetration in the Canadian market, but subscribers report high levels of listening
More popular in the English-language market than in the French-language market, but penetration in both markets is stable
Canadian operation depends greatly on the health of the U.S. service; both publicly report stable, high profits

Success for satellite radio will depend on maintaining its strong relationship with auto manufacturers to retain a key position in vehicle dashboards. Another factor is how well this model will compete with online subscription audio services as mobile broadband speeds and coverage increase and mobile data costs decline. Overall, satellite radio should remain viable in the future.

Read time: approx. 5 min

The Fundamentals

Ad-free for a fee, plus premium content. SiriusXM subscribers have access to 120+ channels broadcasting across North America, including commercial-free music as well as news, talk, sports and children’s programming. Premium content includes agreements with professional sports (e.g. NHL, NFL, NBA) and celebrities (e.g. Howard Stern). SiriusXM also provides Canadian-produced channels and includes a broadcasting agreement with the CBC.

Innovation meets a traditional format. As with AM/FM radio, satellite radio makes significant royalty payments and Canadian content development (CCD) contributions. SiriusXM must also make financial arrangements with sports leagues and organizations to offer play-by-play and sports talk radio content. The service depends on high infrastructure expenses, from the leasing of satellite capacity to the operation of terrestrial repeaters in urban markets. To build its market, SiriusXM has focused on one key platform: vehicles. By negotiating with auto manufacturers to incorporate satellite receivers into new vehicles, SiriusXM is able to expand its potential audience by ensuring it is prominently positioned on dashboards. SiriusXM is also pursuing a digital strategy by offering online subscriptions to its service.

Canadian Contribution

A large financial contributor. Satellite radio makes a significant financial contribution to Canadian content through CCD contributions and royalties. In 2016, its CCD contribution was estimated to be $13 million. In the same year, SOCAN distributed $5.6 million in royalties from SiriusXM to Canadian songwriters, composers and publishers.

Content for and by Canadians. As with AM/FM radio, satellite radio in Canada must meet some Canadian content requirements. These requirements apply to channels, programming, and subscription packages. In terms of channels, 10% must be Canadian-produced, and there must be at least one Indigenous channel. In terms of overall programming, at least 85% of all musical selections and 85% of all spoken word broadcast in a week on all Canadian-produced channels must be Canadian.1

Subscription packages must contain at least three English-language and three French-language Canadian music channels. How do music rights work?

Consumer Profile

A low-growth, niche audience. In 2017, 17% of Canadians (19% of Anglophones and 9% of Francophones) said they had a satellite radio subscriber in the household. This penetration level has been relatively stable in recent years. While the penetration level may be modest, those who have satellite radio listen to it a lot—nearly 10 hours/week (9.4 hours for Anglophones and 6.3 hours for Francophones).

Audience trends for satellite radio

Source: MTM

Financial

Stable single-source revenues. Satellite radio revenues come from subscriptions and although revenues have been increasing, the growth seems to be slowing down. Increased accessibility through integrated devices (in cars, for example) has helped the service increase subscriptions; however, satellite radio remains a relatively niche service, with a market share of 13%. Although revenues increased from 2015 to 2016, satellite radio’s market share did not.

Financial trends for satellite radio

Source: CRTC estimates (CRTC data collection; Sirius XM publicly available financial statements; Ovum; MTM consumer data)

Notes:

Revenues, profits and market share for satellite radio were obtained from publicly available annual reports.
Canadian content development (CCD) amounts were estimated using publicly available annual reports.
Splits by language markets are estimated based on MTM data.
EBITDA and EBITDA margin are the measures used for the profits of satellite radio.