A death foretold: the strange case of satellite radio

Many years ago, in the mid 90s, I was peripherally involved with the analysis of the two startup satellite radio companies, XM and Sirius. It was apparent to me then that the advent of mobile Internet access would kill these companies. The superior versatility, unlimited programming choices, and precision advertising capability of the mobile Internet platform would do to satellite radio what talkies did to silent films.

The only question in 1994 what when (not if) Internet audio programming could be streamed to cars and hand-held devices. It might be argued that this competitive uncertainty was so great as to provide ample justification for the lavish investments required to orbit radio broadcasting satellites and the corresponding programming and marketing infrastructure, but was this really so?

Unlike earlier eras of technological progress, the microelectronic revolution has been a forecaster’s dream. Because of Moore’s law, which describes the exponential increase of microcircuit density, it has been possible to predict the price/performance and the feature/performance characteristics of future consumer electronic devices with considerable precision. Moore’s Law was well understood at the time that the radio satellites were launched.

In retrospect, it is difficult to avoid concluding that the backers of satellite radio, their contractors, and their consultants fully understood the high probability that mobile Internet technology would wipe out their business model. Why did they proceed? I believe that the ventures were funded because of what C. Wright Mills calls “organized irresponsibility.” The people behind the schemes had front-loaded rewards, in the form of commissions, contracts, bonuses, and IPO proceeds that provided ample inducements to launch a doomed venture. Many of these players privately reasoned that they would make a lot of money – no matter what happened to satellite radio.

Does this pattern sound familiar? It is the same thing that happened in the financial sector and resulted in the near-meltdown of the world economy. People deliberately made deals that they knew were tainted or ill-fated because their short-term gains would outweigh any long-term losses – especially if the losses would be borne by others.

The bad news is that almost any industry in America over the last 20 years shows evidence of organized irresponsibility misdirecting investments with ruinous results: automobiles, aerospace, telecommunications, banking – you name it. Our business culture has contracted a disease of predatory bad-faith dealing, and until it is cured we will continue on the road to national ruin.

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    • Viet71 on June 19, 2009 at 10:17 pm

    Thanks.

  1. Satellite radio was rolled out not only to milk short term profits, but to also enable an attached stealth surveillance technology. At least one of those companies was using declassified military (cold war era) satellites which had been repurposed for commercial use, but here’s the kicker – homes, and ESPECIALLY vehicles which had satellite radio would be very easy for the government to track. The NSA was into satellite radio up to the eyeballs when it first came out, and that was why.

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