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Old 12-10-2003, 05:21 PM   #1
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Default Check out XM & Canada's satellite radio agreement

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 12-10-2003, 07:55 PM   #2
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What's the source and when did this information become available? I'm not sure if this is the same thing that was announced a couple months ago or not.
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Old 12-10-2003, 08:50 PM   #3
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i got this from a post off of xmfan and it is the same info posted 3 months ago august...just thought it would be a nice revisit..
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Old 12-10-2003, 09:24 PM   #4
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I have seen absolutely no new news of this other than the casual mention in an article or two. I wonder what the status is?
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Old 12-10-2003, 09:29 PM   #5
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Sirius's news does seem to be more significant than this by announcing the rebroadcast of two Canadian stations. This probably puts them on the fast track to getting approval.
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Old 12-10-2003, 09:44 PM   #6
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What two stations are they gonna can for the Canadian content?
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Old 12-10-2003, 09:47 PM   #7
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Who knows? We will probably find out if/when the next lineup change occurs.
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Old 12-10-2003, 10:12 PM   #8
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Maybe they will surprise us and expand the number of channels.
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Old 12-10-2003, 11:04 PM   #9
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I bet thats what they have in mind Manco, as it would also solve the problems of what to pre-empt for sports. I guess I dont mind new stations being added if they can find a way to add them such that there is no sound quality loss in the music channels.
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Old 12-11-2003, 12:22 AM   #10
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Joseph Clayton said in the Annual Shareholders meeting that they figure out how to add 3 more channels a year through codec improvements so this to me was an indication that they are always looking to free some bandwidth for more content. They should have space for at least 3 more channels by now I would think
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Old 12-11-2003, 12:50 AM   #11
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This is all so interesting to me. I am so excited about the coming New Year with SIRIUS. I just feel like we are going to see some things happen in a major way on the OEM side and marketing. Probably some new equipment and of course some stream changes. It will be neat to see them add some new content via more streams. I'd just be so tickled to see SIRIUS get approved to do business in Canada first. We already know they have the best reception up there. I think the flood of subscribers would be a tremendous boost to SIRIUS.
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Old 12-11-2003, 01:01 AM   #12
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I agree DAB and share your optimism. I think Sirius has decided to spend big money to get things rolling on the OEM side. While this will hurt their profitablity, I don't think they have a choice since the OEM's have shown they need some incentive to get rolling. I can hardly blame them since they probably look at what GM got from XM and want similar treatment. Hopefully Sirius won't have to sell out as much as they did in that agreement, but I'm in favor of spending some real cash to get the problem fixed.

I can hardly wait until CES. I suspect it will be a deluge of announcements from both companies, and we will all try to analyze who comes out ahead. In the end I suppose all of us listeners will come out ahead
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Old 12-11-2003, 01:48 AM   #13
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I agree, Manco. I am also glad they decided to spend some cash to get OEM sales going. That will be a major subscriber boost! And I also can't wait to hear the announcements at CES.
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Old 12-11-2003, 07:53 AM   #14
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Dab,
As I live here in Montreal,I agree this announcement is GREAT news for us Canadians.My reception here is excellent apart from occasional drop-outs,Ie.Tunnels,etc.I already have quite a few friends who want to get Sirius,after seeing my set up with the selection & amazing sound quality.
It's nice to see Sirius stepping up & beating XM to the punch.
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Old 12-11-2003, 12:07 PM   #15
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manco what direct evidence have you seen that Sirius is cashing up with the OEM's?
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