As I reported here some time ago, Opie and Anthony and XM Satellite Radio have been in talks with CBS’ radio division to bring the duo (and third crew member Jim Norton) back to terrestrial radio. Now, as of April 21, 2006, it looks like the rumors were true and the deal is basically final.
The new Opie and Anthony Show appears to be an unprecedented arrangement. The current show runs from 7 AM to 11 AM on XM channel 202. In the future, the show will be three hours on commercial radio, with an additional two hours that can only be heard on XM. For satellite subscribers, the new show will be five total uncensored hours. Opie and Anthony will reportedly be permitted to talk about XM on traditional radio over the span of their two year contract.
The deal hasn’t officially been announced yet, and already the detractors are coming out of the woodwork.
Rick Aristotle Munarriz says at The Motley Fool:
XM needs to focus on building a better moat, and that means more exclusive content. It had no choice but to share Oprah Winfrey with the larger television audience, but Opie & Anthony are a different case entirely. Sharing the risks devalues the product when something so much more than a free sample at a mall food court is being dispensed. Why lend a hand to a competitor slowly sinking in quicksand? If it isn’t a fair trade, don’t you dare sign on that dotted line, XM.
[ADBLOCKHERE]I am looking at this deal as something completely different. I think XM is tipping their hand as to what their greater business strategy is going to be. While satellite radio is a cool thing because of the technology, it might also be the company’s greatest weakness. Satellite radio is harder to use than regular radio. The signals and equipment have improved over time, but it isn’t yet where it needs to be. We all know this.
The satellite radio subscribers are still the early adopters at this point. People with satellite radio are people in remote parts of the country with little radio choice, or hardcore radio fans who want to pay for commercial free and uncensored entertainment. Your casual radio listeners and the iPod generation aren’t going to rush to sign up at this point. This really puts a cap on the number of potential subscribers in the early portions of this business cycle.
Also, with technology the way it is these days, who is to say that Satellite is going to be the dominant technology over time? There are tons of competitors that are just an innovation away from entering the market with at least the possibility of creating a much more effective broadcasting standard.
How about the next few iterations of WiFi Internet? How about the cell phone companies? Verizon already has VCast up and running delivering video to phones. Who is to say they couldn’t eventually enter with a more effective audio delivery technology than satellites can offer?
With threats like these looming, it appears that XM is at least open to those possibilities. With this deal, they might be letting the world know that while satellite radio is their business, they have the ability to create content, make deals and become a great partner to syndicate their talent.
Testing the waters of further diversification doesn’t really seem like a bad idea to me and it isn’t exactly out of character for XM as they have also made deals with AOL and DirecTV who broadcast XM music channels on their respective services.
Obviously, the remainder of this story is yet to be written. Opie and Anthony have to resurrect the radio business that David Lee Roth has presumably crashed over the last few months at CBS and seven affiliates in relatively major markets. They need to do so while staying out of trouble, of course. But more importantly, for XM, they have to continue to create an added value for all the XM subscribers who have fallen in love with their uncensored show. With the current arrangement of three terrestrial hours and then an additional two uncensored hours on XM afterwards, it appears that they are already prepared to deal with this duality.
Oh and another thing.
If you think Opie and Anthony and CBS radio make strange bedfellows, you are right. But at the same time, when it comes to revenues, profits and competition, these things continue to happen. This arrangement, while revolutionary, is not inimitable. I am not saying that I think Howard Stern’s show will be syndicated through Clear Channel anytime soon, but I would be surprised if there isn’t an answer to CBS’ move from one or more of their competitors depending on how the Opie and Anthony deal turns out.
Oh and another thing, part 2.
Famed sports talker Jim Rome is currently weighing his future options with radio and television. While he doesn’t have to worry about the uncensored bit, wouldn’t this deal work really well for him too? He could do a three hour show to all his terrestrial markets and carry another hour or so exclusively on a satellite provider.