Radio for the world, if they'll listen
It’s one of the stranger consequences of globalisation: in India, salesmen are going door to door selling satellite radios that receive, among other things, National Public Radio’s All Things Considered.
The company behind this unusual combination of 1930s-style marketing and space-age technology is WorldSpace, a Washington, DC-based outfit that is trying to make satellite radio, already a success in the United States, a global phenomenon.
That is proving to be quite a challenge.
United States consumers have the disposable income, spend a lot of their time in their cars and mostly speak the same language. That combination of factors, which has made XM Satellite Radio Holdings and Sirius Satellite Radio successes, doesn’t really apply in other comparably sized land masses.
“This is more challenging, but if we can pull it off, it’s really more interesting,” said Noah Samara, WorldSpace’s chief executive.
“I wanted to provide a service for the poorest nations of the world, and I wanted it to be a consumer product.”
The company now has two satellites in orbit that broadcast to Asia, western Europe and Africa, covering more than 75% of the world’s population—a huge potential market.
But those billions of people have been slow to tune in.
WorldSpace has been broadcasting since 2000—a year before XM Satellite—but had just 64 000 subscribers this June, the latest figures available.
Part of the reason is that after spending $1,2-billion, largely from two Saudi investors, to launch its satellites, WorldSpace couldn’t afford to promote itself.
Also, it chose to launch its first satellite over Africa, with the stated goal “to spread knowledge for the good of mankind”.
Samara, an Ethiopian who emigrated to the United States in 1974, felt that Africans were dying because of a lack of information about HIV/Aids and because of propaganda-filled local media that stoked wars.
But the radios, which cost $60, are simply too expensive for Africa. After five years, it has 26 500 subscribers on the continent.
Now, its coffers filled with new investment and the proceeds of a $250-million public offering in August, WorldSpace has shifted its focus to India.
“Given the size of India’s population and the share of youth in that population, the country is a major target for any lifestyle product,” said Parijat Chakraborty, an analyst with research firm International Data in New Delhi.
“Though the service has been available here for four to five years now, I wouldn’t say the launch was very successful in the first phase,” Chakraborty added.
“For the past one year, they have been relaunching the concept and I think this time it shows very good potential for rapid adoption.”
Marketing a high-tech product in a developing country isn’t like selling one in the United States. For one thing, India doesn’t have a national retail chain like RadioShack.
“We do it the old-fashioned way, because the infrastructure isn’t there,” Samara said.
In addition to its 450 door-to-door salesmen in India, the company works through local electronics distributors and has set up lounges where people can listen through headphones to the 40 channels it broadcasts, including Fox News, BBC and original programming in seven Indian languages. Subscriptions cost $3.50 a
Analyst Thomas Watts at SG Cowen, which helped underwrite WorldSpace’s offering, noted that it’s very difficult to estimate how many Indians feel they can afford that.
“I’ve talked to some people in India who say they’ve seen lots of ads, but it’s too expensive,” he said.
“Others say the cost is nothing to people who drive a car and have a good job.”
However, taking the success of XM Satellite and Sirius into account, Watts believes WorldSpace can break even with 4,5-million subscribers in 2009 if everything goes well. Samara put the break-even figure at 2,5-million to 3-million Indian subscribers.
Lucas Binder, an analyst at UBS (which also underwrote the offering), notes that something like 200-million Indians listen to the radio every day.
“I think it’s going to be attractive, because the radio choices in India are much more limited than in the US,” Binder said.
He noted that Indian cities typically have just three to five FM stations, financed with heavy doses of ads.
While observers are generally positive about the company’s prospects, the stock market appears skeptical. After initial excitement over a company that could capitalise on the growing Indian middle class, the stock has headed steadily south. It is trading around $13 on the Nasdaq stock market after selling for $21 in its IPO.
“The fact that… you’re not going to be able to recognise whether the business is a success for six to nine months made some people nervous,” Binder said.
Investors will get some indication of how the new strategy is working when WorldSpace reports third-quarter results in November.
The market is also waiting to see if WorldSpace will get permission from the Indian government to build out a network of repeater antennas on the ground.
Without such repeaters, listeners need to place their antennas with a line of sight to the satellite in the southern sky, and can’t get reliable reception in their cars. XM Satellite and Sirius have such repeaters in the United States.
WorldSpace is working on getting permissions for repeaters in France and Italy, which are covered by its AfriStar satellite but have a negligible number of subscribers.
More importantly, it’s looking at expanding into China, which is already covered by the WorldSpace satellite signal. But the company doesn’t have permission to sell receivers in the country, which restricts and censors foreign media. WorldSpace would like to add Chinese-language channels and make radios that exclude foreign news channels.
“We’re not interested in whether China is setting its media rules this way or that, we’re interested in what those rules are and how to follow them,” Samara said.
Like India, China has a large number of internal immigrants from areas with mutually unintelligible languages and dialects. For instance, with its Tamil-language channel, Samara wants to reach workers from southern India who have moved north to New Delhi.
“We want to create a home away from home,” he said. - Sapa-AP