After years of mounting losses and with competitors emerging from every side, Sirius XM Canada wants to renegotiate the terms of its licence to save millions of dollars a year and put it on a more even footing with the traditional radio industry.
The Toronto-based satellite radio company's licence is up for renewal for the first time since it was issued in 2005, and its executives will ask the Canadian Radio-television and Telecommunications Commission to cut its mandatory contributions to artistic development funds by about 90 per cent.
While radio stations are enjoying one of their best years ever, Sirius XM Canada faces the same problem plaguing newspaper publishers and television broadcasters – consumers are finding content for free, and turning away from subscription based services that require them to pay.
"Sirius XM Canada has been losing money at a disturbing rate," the company says in a filing to the CRTC.
While unprofitable, the company has paid $52-million to the CRTC in the last seven years. That's almost $20-million more than Canada's 400-plus commercial radio stations paid, in total, over the same time period. The CRTC takes money from radio broadcasters, and redirects it toward programming that helps recording artists produce content.
The company's executives have painted a bleak picture of the future for the 120-channel service as it heads into licensing hearings in Ottawa on Thursday: Subscribers are difficult to find and even harder to keep, content is expensive and Internet-based music services are expanding rapidly thanks to the proliferation of mobile devices.
With off-the-dial, Internet-based competition intensifying and traditional radio holding its ground, how the CRTC classifies the company and its services could determine whether the service survives in this country.
When it was awarded its licence in 2005, the company was treated more like a cable company than a radio station. That meant that it had to redirect 5 per cent of its revenue to the development of Canadian talent, compared to 0.5 per cent for the country's terrestrial radio stations.
And although the service's biggest draw remains American programming such as The Howard Stern Show and Martha Stewart Living, Sirius XM Canada agreed to stiff Canadian content regulations that see it dedicate more time to Canadian emerging artists and talk radio hosts than traditional radio operators.
Sirius XM Canada – which was formed in 2011 as a result of a merger between Sirius Canada and XM Canada and owned by a publicly traded company called Canadian Satellite Radio Holdings Inc. – was expected to post about a $100-million loss over the term of the contract when it was awarded its initial seven-year licence.
But it was also assumed it would be posting a $65-million annual profit by the end of the licence, and the company says "the actual figures are much worse."
In its most recent quarter, Sirius XM Canada posted a $2.6-million loss.
Meanwhile, figures released earlier this month by the CRTC show revenues for the country's AM and FM stations were $1.6-billion. Profits rose to $311-million, topping pre-recession levels.
"It will be many, many years before you start to see radio share decline because it's just so easy," says media analyst Barry Kiefl, who estimates there are more than 100 million radio sets in Canada. "The infrastructure is already built – it is omnipresent. There are all sorts of great things out there on smartphones and the like, but for most people that's just not a realistic alternative."
Other domestic services have also emerged to compete for listeners – the CBC launched a free music player at CBCMusic.ca, Stingray Digital has a similar paid version. Meanwhile, a handful of large international players have moved into Canada, and they are not required to pay into the Canadian content fund.
"These competitors, using new technologies, pose an even greater challenge for Sirius XM Canada – which is national and subscription-based, not local and free – than for commercial radio," the company said. "Internet radio and radio that is available on wireless devices are complementary services to commercial radio, but are substitutes for satellite radio."