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Old 08-11-2003, 09:50 AM   #1
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Default Another step for Satellite Radio in Canada

Bitove Jr. bids to ride a new wave in radio
Deal will launch satellite broadasts here Canadian content could be an issue


MONTREAL—Former Toronto Raptors owner and Olympic bid leader John Bitove Jr. is getting into the satellite radio business with plans to launch a Canadian joint venture with U.S.-based XM Satellite Radio Holdings Inc., @Biz has learned.

XM will announce this week that it is teaming with a group led by Bitove to bring a version of its U.S.-based satellite radio service to Canadian consumers, according to Stewart Lyons, one of the partners working with Bitove.

The new company, called Canadian Satellite Radio Inc. (CSR) is completing its application for a broadcast license to the Canadian Radio-Telecommunications Commission, which it plans to file this fall.

Existing Canadian broadcasters have for some time been adding digital beams that offer clearer signals for their local programming. However, as yet few consumers have the receiving equipment needed to make those signals work.

Satellite radio, broadcast from space on a subscription basis to another kind of digital receiver, would have the effect of creating a new parallel line of radio stations that can be received beyond the range of traditional broadcasters.

As already operating in the United States, satellite radio content consists of a mix of new and familiar media. Some content is rebroadcast from sources such as ABC News, National Public Radio and BBC World Service. But other programming is original, targeting fans of jazz or rock music or other specialized categories.

"It is a very significant development that satellite radio is coming to Canada," said CRTC spokesperson Denis Carmel. "Consumers will be getting a greater choice of what they want to listen to, which will have an impact on the entire broadcasting market."

Bitove is one of Canada's largest restaurateurs, with operations that include Kentucky Fried Chicken, Pizza Hut, and Taco Bell. He was instrumental in bringing the National Basketball Association to Canada and led Toronto's latest bid to host the summer Olympics.

Satellite radio's appeal is that it can be beamed across the country with CD-like quality, along with data like song titles and artists' names. Traditional radio spectrum can only stretch so far and can't carry additional information.

In the United States, satellite radio has struggled, but is starting to catch on as XM and its only competitor, Sirius Satellite Radio Inc., sign up car makers, stereo manufacturers and other equipment producers to produce and install the technology consumers need to receive the radio signals.

XM and its Canadian partner expect a regulatory hearing from the CRTC early next year, and plan to begin offering services to Canadian subscribers shortly after. Additional details are expected to be made public this week when XM files its usual quarterly financial update, called a 10-Q, to the U.S. Securities and Exchange Commission.

Under the Broadcasting Act, a non-Canadian company interested in offering radio broadcast services in Canada must either establish a Canadian-based subsidiary or partner with a Canadian-owned and controlled company — 80 per cent owned at the operating level and more than two-thirds at the holding level.

XM chose the latter, forging an alliance with Bitove's CSR, which will have controlling interest.

"Since we already have a satellite footprint that extends deep into Canada, this provides a great opportunity to expand our business," said XM spokesperson Chance Patterson.

"As we move though the process with the CRTC they'll give us guidance as to the conditions of the license and other details."

Other rules under the Broadcasting Act as well as regulations imposed by Heritage Canada dictate that a broadcaster must satisfy Canadian content rules that require a certain percentage of programming to be "made in Canada."

However in CSM's case how such rules will apply is less clear, since the CRTC does not yet have official guidelines for content broadcast via satellite. "It doesn't really fit their guidelines for this particular kind of service," CSR's Lyons said.

"When it comes to content, there are guidelines in place for a lot of other existing formats, but we are really breaking new ground here."

XM offers some 100 channels ranging from hip-hop to opera to bluegrass — channels that will likely also be available to Canadians.

At the same time, CSR is working on forging relationships with existing Canadian broadcasters, which means the satellite system may end up, as in the United States, carrying already-familiar programming. The company has been in talks with CBC Radio and its French-language sister SRC.

Despite being awash in red ink, analysts note that XM has a lot going for it in terms building its subscriber base and forging relationships with the likes of General Motors, Hughes Electronics, Honda and radio station owner ClearChannel Communications.

Adding Canada to the listening mix will only help boost sales, they say.

"XM has already proven that people will pay for radio," said Steve Mather, an analyst with brokerage Sanders Morris Harris in Los Angeles. "It's not unheard of to pay for stuff that you used to get for free, particularly if you're getting something better."

XM has about $346 million in cash in its coffers, much of which will be needed to maintain its two satellites, launch a third next year and pay other costs.

While financial terms of XM's joint venture with Bitove weren't disclosed, XM's Patterson said the costs would be relatively low since XM already has satellites in orbit that beam signals well beyond the U.S. border.

It also already has a studio in Washington D.C. that can program and send content to Canadian subscribers, and its third satellite will be able to handle additional Canadian channels that could be available to subscribers in the United States too.

Sirius has stated that it is also interested in offering its service in Canada, though hasn't yet moved forward with any plans, according to company spokesman Thomas Meyer.

One concern with XM's foray into Canada is local programming, which some fear will fall by the wayside if local stations can't compete with coast-to-coast satellite radio in hundreds of formats.

"People have been interested in this for a number of years, and many people have approached us and spoken to us about establishing a presence in Canada," said Fernand Leger, director of spectrum policy with Industry Canada. "I don't think it is something they would have pursued if they did not think there was an opportunity there."

But it is still a question whether Canadians will fork out the dough for satellite radio when they can get radio entertainment and information, including high-quality commercial-free CBC , through conventional AM, FM and digital receivers when finally widespread.

Mather didn't think that satellite radio will make ordinary radio stations and their localized programming irrelevant.

"People will still listen to Bob and Cathy in the morning in their local market; that is not going away," he said. "There will be AM, there will be FM and there will be satellite as a third subscriber-based option, just like pay-per-view is available on cable channels now."
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Old 08-11-2003, 11:05 AM   #2
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Originally Posted by Taken From Article
Sirius has stated that it is also interested in offering its service in Canada, though hasn't yet moved forward with any plans, according to company spokesman Thomas Meyer.
I thought Sirius was pursuing this. Sirius has better coverage in Canada so why wouldn't they be an obvious choice to work with?

I found it interesting that XM was suggesting their 3rd satellite being lauched could provide some Canadian specific streams. I thought the 3rd bird was needed to replace the failing ones so I would think they would need 100% of the capacity for existing streams.
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Old 08-11-2003, 11:20 AM   #3
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AFAIK, Sirius is intending to offer service there eventually, but they havn't made any moves yet.

As far as XM's satellites.
XM-1 on the East coast will be drifted along side of XM-2, and each satellite will operate one transponder each. So, they will work in 50% capacity each to give 100% signal for the remainder of their effective life.
XM-3 will take the place of XM-1 and will be all by itself on the East coast, but it will operate at 100% capacity as it's solar panels are fine.
So, I think that he didn't know what he was talking about, because the new satellite is only to replace what the old one was failing to do.
XM could still change their content offerings around to where there was more Canadian news and artists, and give the CRTC more incentive to give them broadcasting rights in the country.
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