Saturday, November 2, 2013

Satellite Radio

You can tell a lot about a company by how easy it is to contact them.

A friend of mine recently signed up for Sirius Satellite Radio.  Why is this?  Well, his favorite radio station switched from "oldies" to "country" and that means that the only radio stations we can get now are (1) Jesus - the hateful kind, (2) Country - the new bad kind, (3) Hispanic, and (4) two NPR stations that barely come in (blasted off the air by the hateful Jesus stations, which over-modulate).

If I was the kind of person who believed in Conspiracy Theories (but I don't) I would think that Sirius had bought up all the radio stations in the country and intentionally switched them to odious formats so you would have to pay extra for satellite radio service.

Anyway, my friend, fed up with this, decided to go satellite, and he claims he called the XM people and they signed him up for $4.89 a month for six months.   If this is true, then he got a steep discount off their advertised price of $17 a month or so.

But never confuse "savings" with "savings".   Reducing the price of an unnecessary expenditure is not creating wealth, just dissipating it more slowly.

And yea, $17 a month is a lot of money.   $17 a month, invested at 7% over a 45 year working life, comes to $62,373.36 at retirement time.   A little here, and a little there, and pretty soon you are bleeding to death from 1,000 cuts.   And that is the nature of subscription services and subscription fatigue.   You sign up for more and more of these types of services, and pretty soon - very soon - you are spending hundreds and hundreds of dollars a month, on "services" which are not essential to your daily life.

It pays to limit the number of recurring charges in your life to the bare minimum.   Small fees like $17.95 (which is seventeen dollars and not eighteen, right?  And certainly not close to twenty!) add up, cumulatively and over time.   People look for large chunks of "waste" to cut in budgets - whether personal, business, or even governmental.  The real solution to cutting waste from a budget is to cut a little here and a little there - because the big things can't be cut, only whittled down.

I met a young man the other day who confessed he spend the whopping sum of $200 a month on his smart phone.  He was 25 and fresh back from Afghanistan.  I tried to explain to him that $200 a month, invested over a working life could be a quarter-million dollars in retirement funds, and he gave me a blank stare.   I didn't have the heart to tell him about the money he was squandering trying to "hop up" a 2005 Dodge Charger.   Kids that age, just want to spend it all.   And it all seems so important back then.

But I digress.

Anyway, I was intrigued that Sirius would cut their rates so much.   I went on the website to check this out, but all I found were sign-ups online, and no discounts offered.   In fact, most of the gags were 'negative option' offers, where you get "30 days free" service (and we all know that FREE isn't, right?) so long as you provide a credit card number - so they can bill you perpetually.

Tellingly, there was no telephone contact number listed, other than on a help page.   I tried calling that number, but got only a DTMF telephone tree.   

When a company makes it hard to contact them, you know where this is going to go.

I did find a page where you can submit a request for them to contact you.   Obviously, their time is more important than yours!   You see how they are power-shifting here.

The entire website was so chock full of flashy animation and distracting graphics, as well as large come-on prices and fine print details that it was impossible to really figure out what the real "deal" or bargain was.   What are you paying and what are you getting?   You have to sign up to find out.   And that means giving them your credit card number.

Negative option sign-up techniques are never a good idea.   You sign up for a "Free 30 day trial" and if you don't cancel in time, your credit card is charged.   If you call to cancel, they claim never to have received your call.   And so on and so on.

AOL tried this technique in the past (google it).   People complain about Angie's List for the same reason.   Companies claim to have not gotten the message that you wanted to cancel, so they keep charging your account.   And many Americans never bother to check their credit card statements or accounts, so they don't notice - until months have past!   So after three months, they realize their subscription wasn't cancelled, and they call, yet again, to start the process over.  Guess what happens then?

As I noted in another article (citing a New Yorker article), AOL is kept afloat in large part because a number of people still pay the dial-up subscription fee, month after month, even though they use a cable modem or DSL or whatever.   People think that they still "need" AOL to get online.

As you can see, the "subscription model" is very lucrative for businesses!

(By the way, it strikes me that the phrase "Like us on Facebook!" which seems so prevalent today, will someday seem as quaint as "AOL Keyword:" was in 1995.    What seems ubiquitous and permanent in the online world, evaporates like ether in a matter of months).

The point is, every time you sign up for a subscription, you put a little hole in your rowboat.   Not a big hole, but one nevertheless.   And if you can't plug this hole - or keep track of it - then your rowboat is going to require more and more bailing, over time.

My friends are very excited about XM radio, and how cheaply they were able to get it.   They claim that they paid for a six-month subscription, and when it ends, they can negotiate another six months, at the same price of less than $5 a month.

I will wait and see how this works out for them.   But frankly, I am skeptical.   I suspect what will happen is that after the six month period (or even before) they will find a nasty little charge of $17.95 on their credit card, and they will spend hours and hours on the phone trying to straighten it all out.

And if you can get satellite radio for $5 a month, why don't they advertise it for everyone at that price?

I tend to go with my gut instincts.  And the Sirius website has all the charm of a carnival barker.   Simply put, I don't trust them - and why should I?   After all, by now, we are all aware of how these marketing gags work.   The splashy ads and fine print say it all - pay no attention to the man behind the curtain!

So, no Sirius satellite radio for me.  Why?
1.  I am punching an unnecessary hole in my rowboat - for a trivial reason.

2.  I will have to dick around with these negative-option cancellation deals.   Not worth the stress!

3.  The carnival barker atmosphere of their website is like police tape roping off a bad deal.

4.  I tried this service once in a rental van, and frankly, I thought it sucked.   100 sports channels, 100 talk channels, and then 50 music stations playing things you probably don't want to hear, anyway.  In other words, I didn't think the service was worth much.  Even when FREE, we listened more to our iPod or CDs or over-the-air radio.  That is telling.
With the advent of Music over the Internet (Pandora, etc.) which you can stream through your smart phone or whatever, the XM model may become obsolete in a few short years.   Their huge cost structure (satellites, programing, etc.) is an inherent disadvantage (Pandora does not have to pay for cell phone towers).
"In the fourth quarter of 2009, Sirius XM posted a profit for the first time, with a net income of $14.2 million. This came after net losses of $245.8 million in the year following the merger. The company’s resurgence was owed in part to the loan from Liberty Media. Increased automobile sales in the US was also a factor. Sirius XM ended 2009 with 18.8 million subscribers.
By the end of 2012, Sirius XM’s subscriber base had grown to 23.9 million, mostly due to an increase in partnerships with automakers and car dealers; a strong push in the used-car market; and continued improved car sales in the US in general. The renewal of radio show host Howard Stern’s contract through 2015 ($400 million for five years, $100 million less than Stern’s previous five-year deal) was also a factor in the company’s steady growth; Stern’s show attracts over 12 million listeners per week"

In other words, Sirius hemorrhaged cash for many years (particularly since it competed with XM radio, until the two merged).  They are now starting to make money, only because a large installed base of radios is out there.   Problem is, of course, if you have two cars with Sirius radios, you need two subscriptions.  And if you want to use Sirius in the house, you need another radio there, another subscription, and an outdoor antenna with a sky view.  It is not like listening to "radio" off the air.  And not like Internet Radio (or streaming) which will play on any device you own, with one user account.

This CNBC report shows that revenues are up, but overall profits have dropped, slightly.   I think in the short term, as more and more Sirius/XM equipped cars enter our national fleet, they have the potential to increase their subscriber base.   But the real threat to their business is the smart phone, which with bluetooth, (or even a hardwire connection) can stream content to a car radio, house radio, or just ear buds - at a cost far below that of Sirius.

So, not only will I not be getting the service, I won't be buying the stock, either.  Long-term, their business model looks to be flawed, unless they can get the price down and greatly boost the number of subscribers.  As Mark put it, even at $5 a month, it wasn't worth it, if all we could do is listen in one car.  (I sarcastically offered to leave the car door open in the garage so he could hear it in the house.   But of course, that wouldn't work without a clear sky view).

And as Americans drive less and less (fewer of us will commute in the future) fewer people will think paying nearly $20 a month to listen to the radio is a worthwhile bargain.  It will be interesting to see how this plays out, over time.   Remember Iridium?