Satellite radio slow to show profit

  • 05-Nov-2008 12:32 EST
Mel Karmazin answers questions posed by moderator Larry Fobes after a keynote address at the recent Convergence 2008 event.

Start-up companies typically are slow to turn a profit, and satellite radio is certainly not an exception to that undesirable financial malady.

“We’ve incurred great start-up costs in our business model,” Mel Karmazin, CEO of Sirius XM Radio, said during the question-and-answer session following his keynote address at the recent Convergence 2008 event.

Putting up a single satellite costs approximately $250 million, according to Karmazin. (Sirius launched three satellites, and XM launched four satellites prior to the merger of Sirius XM Radio.) Add in infrastructure costs, channel host salaries, and other expenditures, and the investments are substantial.

“We need to make money, and that’s what I’m focused on,” said Karmazin, the former President and COO of Viacom Inc., an entertainment and media company. Sirius XM Radio has 19 million subscribers today, and key to keeping and adding to the customer base are the commercial-free music channels as well as the talk, sports, news, traffic, and weather stations.

“It’s all about content. Our success is going to be because we’ll continue to have the best content in all of radio,” said Karmazin, adding, “Educational content is something we would consider. We’ll continue to invest in our programming.”

Karmazin said the company’s engineers have plenty of ideas for future applications, but “we’re at the mercy of OEMs to say whether or not they want it.” When asked if terrestrial radio has a future, Karmazin said those radio stations are “definitely not a business that is going to grow.” Radio stations focused on covering items of interest in the local communities are best positioned for a long life, according to Karmazin.

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