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Death Ray From Outer Space 

Satellite radio brings 100 stations and digital sound to San Francisco's car stereos. Can local broadcasting survive?

Wednesday, Oct 7 1998
In mid-September, a small group of engineers carted a rack full of electronic gadgets out to Sutro Tower, hoisted it up, and affixed it to the gangly landmark, which beams radio and television signals down into the nooks and crannies of San Francisco.

It was a modest undertaking, but with it comes hope that the wizards of technology may -- finally -- be on the verge of bringing something new to your radio.

Technological advances have been rolling forward for years on virtually every other part of the communications landscape. Television expanded into cable and satellite services -- for better or worse -- and High Definition Television is on the way.

Meanwhile, compact discs replaced records, and the world became awash in pagers and cell phones and fax machines and laptops. The Internet made it possible for every American with the stomach for it to plumb the depths of Bill Clinton's sex life.

And while all that happened, radio remained a quaint throwback, a sort of Luddite enclave in the Information Revolution. You got your AM. You got your FM. Just like your parents did.

But not for much longer.
The electronics installed atop Twin Peaks belong to CD Radio, a New York-based company trying to win the race to bring the next generation of radio to the masses. San Francisco is the first city in the country to be rigged in preparation for the new service, and 40 other cities across the country will follow suit.

Four satellites are under construction in Palo Alto. Over the next year-and-a-half, CD Radio will launch three of them (assuming they don't blow up on the pad) to carry the first coast-to-coast satellite radio service. (The fourth satellite is a spare.)

The satellites will beam 100 radio stations to most of the country, excluding Alaska and Hawaii. Listeners in Oakland, Lubbock, Fargo, and everywhere in between will be able to tune into exactly the same commercial-free music stations, news shows, and sports reports, all programmed out of a massive complex of studios now being outfitted at CD Radio's headquarters on the Avenue of the Americas in New York.

In urban areas, ground-based repeaters like the ones recently affixed to Sutro Tower will help funnel the satellite feeds into downtown corridors and canyons, which don't have a clean line of sight to outer space. San Francisco will probably need four or five repeaters, says Andrew Greenbaum, CD Radio's vice president and chief financial officer, and nationwide the company will spend about $15 million setting up its ground equipment. All the stations will be digital, meaning listeners will get CD-quality sound.

Assuming, of course, that listeners are willing to pay for it. Like satellite television, satellite radio will be a subscription affair, costing about $200 for the equipment needed to upgrade a radio and another $10 or so in monthly fees.

CD Radio is aiming for the most captive listening market of all -- drivers. Commuters weary of morning blather, long-haul truckers tired of searching for something to listen to on their cross-country drives, and customers with specific musical tastes that aren't sated by the limited playlists of Top 40 stations -- CD Radio is gambling that at least a million of those people, nationwide, will be willing to pay for its seamless, high-quality broadcasts. Most of the company's 100 stations will be tailored to very specific tastes, attempting to provide programming depth within narrow formats.

"There's a very significant portion of the listening public that just doesn't get served in terms of local broadcasting," says David Margolese, CD Radio's chairman and chief executive officer. "Broadcasters serve advertisers. They don't serve listeners."

CD Radio's investors -- including Bank of America, which owns about 10 percent of the company through its Robertson Stephens & Co. investment banking arm -- are also betting at least $600 million that listeners will buy the new toy.

In San Francisco, the odds look good. God and Caltrans know traffic is only going to get worse, forcing ever more people to spend ever more time trapped in their cars. And Bay Area listeners are notably diverse, theoretically eager to dip into deep wells of unconventional or obscure musical offerings.

If CD Radio delivers on its promises, analysts and industry experts say, it could shake up the lower rungs of Bay Area broadcasting by overpowering some of the smaller, niche radio stations. And even the bigger stations are watching the advent of the new technology closely.

"I think the general feeling is that if people will pay for cable while there's broadcast television, then they'll pay for something similar on radio," says Paul Marszalek, operations manager for KFOG (104.5 FM).

San Francisco is a quirky radio market, unlike most other cities of its size. An eclectic population and accidents of geography have created an unusually fractured audience. Rather than the handful of monolithic stations that dominate some large cities, the immediate San Francisco area has more than 50 stations competing for listeners, and even the biggest have only a relatively small audience share. Many of the smaller stations scrape by with a few thousand listeners.

Anything that threatens to dilute the market even more could dramatically affect the local radio scene. And most everyone seems to think that satellite radio will lure away at least some listeners.

"I do think satellite will do to radio what cable did to the networks," says Tom Barnes, an Atlanta-based media consultant who has closely followed the birth of the new technology. "I think San Francisco is going to be a real key market for this because it is hard to get radio stations there."

Between the hills and the skyscrapers, it is often hard to get radio stations here. Try holding the same radio station signal while driving up the Peninsula on Highway 280, or passing through some of the East Bay canyons.

The problem is worst for FM stations, whose signals require the equivalent of a clear line of sight to reach your radio. AM broadcasters fare better, because AM signals can bounce. AM stations are the only ones that can now come close to blanketing the area with their signals. But even so, the reach of a typical station is only about 30 miles, and many local commuters travel farther than that to and from work.

About The Author

David Pasztor


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