The marriage of satellite radio companies XM and Sirius was reported an almost-done deal this afternoon once the Federal Communication Commission fined both firms a total of $20 million for using radio receivers and terrestrial repeaters that violated technical rules. That such a final decision would hinge on a tedious technicality, after 16 months of waiting — with further threats of legal challenges from merger opponents — seems an especially Canadian way of making an American bureaucratic decision.
Three years ago, the Canadian Radio-television and Telecommunications approval of subscription radio services was stalled through summer 2005, on grounds that too few CanCon concessions were requested of the companies licensing mostly American channels. Then, the federal cabinet determined it wasn’t worth their time to fight the inexorable march of technology.
Earlier this month, XM Canada crowed about their first-ever positive cash-flow quarter, banking $300,000 more at the end than at the beginning, even if about one-third of the 439,000 credited subscribers weren’t actually paying the monthly subscription fee. Nonetheless, the company claims to be on track to reach its stated goal of 1 million Canadian subscribers by 2010.
But as a public company, entirely independent of the Washington, DC-based XM Satellite Radio, the talk of how licensee Canadian Satellite Radio Holdings Inc. might be affected by a merger was that they weren’t going to talk about it. Based on the activities of founder and majority shareholder John Bitove, however, the exit strategy seems simple: just abandon one medium for another.
Bitove’s pursuit of a license for an HDTV network was quashed by the CRTC in April, on grounds of insufficient local programming, combined with the fact that there are already enough struggling channels out there. Now, the acquisition of $243.2 million worth of wireless spectrum should prove a better investment for the fast-food mogul — whose family name still provokes local resentment for instituting $6 ballpark franks almost 20 years ago. This venture, backed in part by Microsoft co-founder Paul Allen, has the ambition of offering cheaper cellphone plans.
The impression left behind is that XM Canada is a lame duck operation, waiting to have its assets handed off to Sirius Canada, in tandem with the American merger plans.
Promises made to support Canadian talent in exchange for selling satellite radios still can’t be broken, though. This week, XM Canada’s first-ever Verge Music Awards were quietly announced in tandem with the channel required to focus on emerging CanCon artists, promising $50,000 “in prizing” in the same week as the similarly motivated — and extensively publicized — $20,000 Polaris Music Prize, whose ceremony will be hosted by Grant Lawrence of CBC Radio 3, which maintains a programming feed on Sirius. While the Polaris Prize is decided by an expert judging panel, though, the Verge winners will be partly determined from online votes based on a multiple-choice list of every act on the playlist.
Were the two companies still competing for public attention, this distinction might have been newsworthy, rather than a passing afterthought.
The third-quarter financial results from XM Canada at least provide some residual insight into how they were expecting to keep procuring customers without a merger situation. Deals with automotive manufacturers became the overwhelming priority, rather than trying to sell people on a receiver they had to install themselves, let alone set up indoors. The fact that the biggest such deal was a distribution agreement with General Motors, at a time when their business is driving into a ditch, was acknowledged — although import vehicle partnerships were expected to pick up the slack. Converting free introductory trials to paid subscriptions was an entirely different challenge, although raising the monthly fee from $12.99 to $14.99 — at least $2 more than the equivalent US price — was cited as a revenue sweetner.
Conditions of license have required XM Canada to flow cash in the direction of domestic events, though. This weekend’s iteration of the Just For Laughs festival in Toronto is linked with the Laugh Attack channel ostensibly designed to promote Canadian stand-up comedy across the continent, even though an attempt at a daily live Mike Bullard radio show imploded after just four months.
Looking especially forlorn were the XM Studios that occupied a bank building owned by Bitove at Avenue and Davenport (pictured). Claims that the space would draw crowds to peek at visiting performers through the storefront window were never exactly substantiated. A recent makeover of the exterior has made it look like more of a gaudy billboard, although the space will likely be vacated soon.
“There will be no change in the service we deliver to our Canadian subscribers,” reads an emphatically reassuring note on the XM Canada website. Given how they lease almost all the programming from the US, any future renewal wouldn’t be in their control, even if surrendering their license will give satellite radio the 1 million customers in Canada that Bitove hoped for.
And while several Canadian channels were established to meet the CRTC’s controversial quota of one homegrown channel for every nine imported from XM stateside, those now include traffic channels for Toronto and Montreal, while little other original programming is maintained on a full-time basis. The rare exception to this trend, NHL Home Ice, would most likely be merged with the Hockey Night in Canada radio programming that CBC started producing last fall for broadcast via Sirius.
Sirius Canada boasted of 750,000 paying subscribers last month — the exact definition undisclosed due to private ownership, 40 per cent of which belongs to the Canadian Broadcasting Corporation. While constant Sirius station identification plugs on CBC Radio have likely helped to build its momentum, more fortuitous was its launch concurrent with the debut of Howard Stern, and the rewards of related publicity.
Selling the XM Canada subscriber base to Sirius Canada will presumably serve the satellite investors well. The satellite repeaters XM invested in to assure reception in urban centres across the country should serve the forthcoming cellphone operation just the same, assuming Bitove actually sticks with it.
For now, all either of the services can promise their Canadian subscribers is that their receivers will not become obsolete. Whether satellite radio — or the federal broadcasting regulators it remains beholden to — can survive this era is a different unknown altogether.
scroll@eyeweekly.com