Satellite Radio and Howard Stern

Satellite Radio: Will Howard Stern's move make us change the way we think

about radio?

Howard Stern's plan to move to satellite radio in January 2006 marks a

major turning point for the radio industry. Not only has Stern brought the 

possibility of subscribing to satellite radio into the minds of the

millions in his audience, he has also gotten more people to start thinking

and talking about what really distinguishes satellite radio from

traditional radio.

Satellite radio was first authorized by the Federal Communication

Commission (FCC) in 1997, seven years after initial applications. The

delay in approval was in part the result of protests by the National

Association of Broadcasters which charged that the service threatened

"traditional American values of community cohesion and local identity."

Ironically, as these charges were being made, traditional radio was

becoming nationalized through use of more national programming and industry 

consolidation under Clear Channel Communications and Infinity Broadcasting. 

The FCC dealt with these issues by restricting satellite radio to only

national programming. Essentially this rule minimizes competition with

traditional radio stations that only reach local markets and get the

majority of their revenue from local advertisers. Despite there currently

being very few small, independent, local broadcasters to protect, this

remains the most significant regulation on satellite radio.[1]

Today there are two main players in the satellite radio business: Sirius

and XM. Though Sirius signed Stern, XM is currently the leader in terms of 

subscribers. Both companies have neared bankruptcy at various points in

their short history, and both have yet to make a profit. By signing Stern

for $500 million over five years, Sirius must gain at least one million

subscribers to pay this commitment.[2] Clearly satellite radio has a long

way to go, but with steady growth and high-profile contracts (not only with 

radio personalities, but with car companies who now install satellite radio 

equipment in all new cars), the future remains wide open.

Satellite radio is subscription-based, commercial-free, and largely

unregulated. This last point appears to be the main draw for Stern. Since 

the infamous Super Bowl incident this year, there have been calls for

significantly expanding FCC indecency regulations on public broadcasts.

Currently there is talk in Congress about increasing penalties for

indecency from $27,500 to $500,000 per violation and holding performers

personally liable.[3] Stern is notorious for receiving indecency

violations. By switching to satellite radio, Stern declared the ability to 

"bring my fans my show my way."[4]

Traditional radio retains several advantages that are unavailable to

satellite radio. Traditional radio was granted free use of the airwaves in 

1927 by the federal government and has the right to play music without

paying royalties to performers. In exchange, the FCC has the right to

restrict the content of the radio broadcasts. Despite these content

regulations that seem to be a flagrant violation of the First Amendment

right to free speech, these restrictions are permitted and have steadily

expanded throughout the twentieth century. Alternatively, satellite radio

companies paid almost $200 million for their airwaves and pay more

royalties for music, but there are no content limitations.[5]

Two significant questions are introduced by Stern's move to satellite

radio. Will the FCC attempt to regulate satellite radio as its audience

grows? And if not, will the single advantage of free content be enough to

move satellite radio to the forefront of the radio industry?

Under its current regulatory status, satellite radio will remain free of

content restrictions due to its subscriber-only structure. This regulatory 

status can be compared to that of HBO, or even the Playboy Channel, on

cable television. With such a comparison, it seems that satellite radio

has a completely unlimited ability to dictate content and include material

that would be deemed indecent or obscene on traditional radio. As such,

Stern is not the only one making the switch. The popular radio show "Opie

and