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Coming to Your Car Radio: Cable Nets

Satellite-radio providers are attempting to do for the audio medium what cable operators did for television — and appropriately enough, they've turned to cable programmers for help.

Subscription-based services that will provide approximately 100 channels of music, news, weather, sports and entertainment to listeners anywhere in the continental United States, the first satellite-radio offerings are expected to launch late this year.

To fill all those channels with compelling content, satellite-radio operators are recruiting cable programmers. And the networks are willing to oblige, noting the similarity of the two mediums, the opportunity to extend their TV brands, access to new advertising revenues and the low cost of repurposing their existing programming for audio transmission.

Satellite radio — like cable TV or direct-broadcast satellite —promises more programming selection, fewer commercials and better sound quality than broadcast stations.

"We consider it cable for your car," said Carrie Trimmer, director of licensing at A&E Television Networks.

Networks view satellite radio as a promising opportunity to reach viewers when they are away from the TV. Most cable programmers plan to re-edit the existing audio portion of their television programming for delivery via radio.

AETN, for example, will provide programming in partnership with Sirius Satellite Radio Inc. It will offer audio feeds of such shows as A&E Network's Biography
with few alterations.

Trimmer said satellite radio will promote the A&E brand and its cable TV shows, while also providing a new source of advertising revenue.

One of most intriguing aspects of satellite radio is that it creates an easy-to-track and simple-to-buy national radio-advertising option, Trimmer said.

While cable-TV programmers are appreciative of the potential benefits of satellite radio, recent experience with another new distribution channel — the Internet — has made them cautious about spending too much on the new medium too soon.

Trimmer said AETN expects to keep its costs low. As part of the deal, Sirius will perform most re-editing and content preparation in its New York studio.

Sirius and rival XM Satellite Radio Inc. plan to launch by the end of the year and have already started to air test programs.

Both services promise 100 channels, with an even mix of genre-specific music stations and news, sports and entertainment options.

Cable operators make up a large portion of XM's programming, though sources such as ABC, National Public Radio, and the British Broadcasting Corp. will also contribute.

XM Radio so far has programming deals with CNBC, CNNfn, C-SPAN, Discovery Channel and others. Sirius has agreements in place for its part, with such programmers as Fox News Channel, ESPN, The Weather Channel, A&E Networks, the Sci Fi Channel and USA Network.

NO EXCLUSIVE DEALS

Neither XM Radio nor Sirius insists on exclusive licensing agreements with cable programmers. In many cases, programmers are cutting deals with both outfits. In general, each cable network will have its own channel.

Both XM Radio and Sirius use satellites to deliver their signals to radios across the United States. The companies beam signals to satellites in orbit above the U.S. In turn, the birds bounce the signals back down to Earth, where specially equipped radios can receive and process them.

Transmitters on the ground will boost the signal in dense urban areas.

Major car-audio manufacturers such as Sony Corp., Alpine Electronics Inc., Clarion Co. and Jensen will build the consumer gear, most of which will pick up local broadcast signals as well as satellite programming.

The radios will cost between $200 and $1,000 each. Automakers Ford Motor Co., BMW AG, Volvo Cars of North America Inc., American Honda Motor Co., and General Motors Corp. have agreed to install the devices in certain models.

The satellite-radio companies are encouraging auto sellers to provide free programming subscriptions as part of a car purchase. They hope such a strategy will quickly generate subscribers.

Lehman Brothers managing director Bob Berzins said satellite radio has a good chance to succeed. He projects that satellite-radio subscriptions will rise from 2.8 million in 2002 to 38.7 million in 2007, but will only still account for 5.8 percent of total radio listening hours.

Berzins said music programming would dominate the listener experience. But cable-networks could provide a prime source for low-cost, narrowly focused programming material for start-ups that lack the resources to create non-music content to round out their line-ups.

Most carriage contracts between cable networks and the satellite radio companies run three years and involve an advertising-revenue split, typically a 50-50 arrangement, Berzins said.

The providers also draw subscription revenue: Sirius plans to charge $12.95 a month, while XM Radio will go for $9.95.

Berzins likes the satellite providers' promise to add programming choices, reduce commercials and provide better reception, especially in rural areas.

"It will take off for all the same reasons cable TV succeeded," Berzins said.

Elana Sofko, director of non-music formats at Sirius, said the cable networks have offered widely varying approaches to creating audio content for the radio provider.

News outlets — such as FNC and Bloomberg Television — plan simulcasts, while Discovery, A&E and other entertainment networks are exploring more elaborate re-edits of content mixed with some original material.

Some Nets Wary

Some networks, such as Comedy Central and Sci Fi Channel, are looking at ways to create entirely new shows and programming for the satellite-radio service, provided the costs aren't too high.

Comedy Central vice president of enterprises and corporate strategy Holly Lim said her company would prefer to create original programming especially suited for radio that represents the Comedy brand. Most stand-up comedy performances would provide good audio content without much re-editing, she said.

But Comedy realizes satellite radio will take at least a few years to attract enough subscribers to generate significant advertising revenues.

"We're not going to be spending money without a business model," Lim said.

She said her company is now in discussions with both satellite radio services and wants agreements that include more than just advertising-revenue sharing.

David Karp, a senior vice president of media development at Discovery Networks US, said the Internet bubble taught programmers not to sink too much money into a still-developing medium.

"Though chances of success appear good, you have to wait for the service to grow and provide the revenue to support investment," Karp said. "We've certainly learned that lesson over the last four years."

To that end, Discovery will mostly use existing audio from TV shows to keep costs low. It will provide programming to both Sirius and XM.