While satellite radio has blazed a trail in the United States, it is still amidst its early days in Europe, although there have been one or two significant recent developments. Ondas Media, a new player in the market, led by former SES Astra executive Celso Azevedo, aims to launch satellite radio and multimedia services in 2009. It was revealed at the end of January that Ondas had been registered as an operator by the Spanish national regulatory authority, the Comision del Mercado de las Telecomunicaciones (CMT), and thus is authorized to provide satellite radio broadcast services from Spain to the whole of the European Union.

Azevedo said "this is the first full-fledged operating license granted in Europe for [satellite digital radio service (SDARS)]. We are extremely pleased to have the full support of the Spanish government and several other European countries. The most significant challenge in executing our business plan is to organize and manage the fund-raising activities so that you protect the value of the enterprise throughout its life cycle. We need to raise the financing required before we launch the full service and that is always a challenge."

In a 2006 interview, Azevedo was targeting profitability for Ondas within three years. A year through, he is more conservative in his forecast, saying "the goal is approximately 48 months, and we manage our operation each day to achieve that objective. The two milestones basically coincide. Our break-even for cash flow is closer to 4 million subscribers."

One question concerns what level of competition might appear in the European satellite radio market. It could be a major market, with players such as SES Astra and Eutelsat involved. In figuring how the nascent market may develop, Azevedo saw "a dichotomy: A monopoly as you suggest may hurt the consumer; on the other hand, to listen to football, baseball, golf, and tennis, you have to buy subscriptions to two different services. Maybe a combination of sorts could actually help the consumer."

As to lessons being learned from the American satellite radio market, Azevedo said "we watch the U.S. every day, because it will affect our OEM customers, investors, content partners, and consumers. We have learned that you have to be extremely careful in your early business deals with the distribution chain [so] that you don’t handcuff the entire value proposition by overly aggressive terms. We are careful to align the interests of Ondas with the OEMs and the radio manufacturers and, ultimately, the consumer. We always expect, anticipate, and plan for strong competition."

Among key challenges facing the operator through 2009 is in deciding content. Azevedo explained "we have a large budget for content because it is what is most important to our consumers. We know that, because we have just completed perhaps the most comprehensive market research on programming variety, diversity of language, [and] content-type expectations in this industry. This research has helped us determine the right mix of programming, and where it should come from. Our recent content deals have partnered us with leading companies in this industry. You will learn more about the details of that plan in the coming weeks and months."

Multimedia Car Radio

As Ondas Media received approval from the Spanish regulatory authorities, the European Space Agency (ESA) was demonstrating "the multimedia car radio of the future" at a recent space expo in the Netherlands. The car would have a specially designed mobile antenna, flattened so as to be nearly invisible in the bodywork, receiving signals in Ku-band as used by communications satellites. According to ESA, "the system uses only existing communication satellites. Additionally, the mobile multimedia system employs a cache memory – a hard disk or its solid-state equivalent. Received signals can be stored – in a similar way to personal video recorders – and played back after a short time shift or much later."

Rolv Midthassel, an ESA communications engineer who worked on the project, summed it up: "Firstly, in terms of costs," he said "this demonstration has proved a very new novel approach for satellite radio and multimedia services to cars in Europe. Since 2003, we have demonstrated that the technology is capable of doing this. We have spent 2.5 million euros ($3.26 million) on this particular development. We also have some antenna developments going in parallel, and here there has been a budget of two million euros ($2.61 million)."

Measuring the success of the project is perhaps more difficult, but Midthassel believes the project has done what it set out to do. He said "I would say the project has been a success. When we started a few years ago, it was not obvious that the project would work. These satellites in comparison to XM Radio and Sirius are fairly weak. They are using quite small antenna, which is picking up noise from neighboring satellites. As you can imagine, Ku-band satellites are very busy and every three degrees potentially you have an interfering satellite. Having a small antenna is certainly challenging. With the signal being weak, every obstacle, every tree, every building blocks the signal. So, you have a lot of interruptions. So, to provide an attractive service without using new infrastructure is quite a challenge. To have proved that it has been possible has been a great success."

According to Midthassel, the innovation can lower costs as well as offering a new type of multimedia/radio service for operators. He said "our development shows you can get away with just using standard television satellites. The key is adopting this new concept, moving away from live streaming and moving towards a file-based, push-and-store concept and then having a cache in the car, and from that building the service. In the media market, people are not listening to streamed broadcasts as much, but more podcasts, and listening to content they are interested in, at a time it suits them. These are the new trends we are seeing in the media landscape. Our system falls into that category."

Azevedo also gave his view on the ESA experiment. He said "we have been briefed repeatedly from our partners on the status of this experiment, and in fact will make use of several of the technologies that are being demonstrated. The ‘cache memory’ idea you mention is standard in our system, although it’s a bit more complicated than that. In any event, each of these types of announcements validate our core proposition for the past three years: People want more and better content than they can get today."

Analyst’s View

Andrea Maleter, a technical director at Futron, said "in the long run, it should be possible for satellite radio to be as successful in Europe as it has been in the US, potentially in a shorter time-frame, since there has already been so much of the groundwork done in the U.S., such as development of different types of receivers that can be moved from vehicle to home as well as different alliances both with vehicle manufacturers, and with other distribution systems."

In terms of how competition will take shape in Europe, Maleter added, "Eutelsat and SES Global are certainly well positioned to be significant players, although at least for the moment they have chosen to be a single player. One of their key strengths is broad-based distribution relationships with media companies and platforms throughout Europe. As to the ESA technology demonstration, it appears to have some real potential to help the industry take off by overcoming some of the technical constraints of service."

Maleter questions what impact an operator like Ondas will have in the market. "If the ESA efforts are combined with the Eutelsat/SES collaboration, there would seem to be an emerging concept of a European consortium approach to this market, which may prove more effective than the individual efforts by Ondas and WorldSpace from both a service and economic perspective."

While it has been argued that satellite radio may be better suited to the U.S. due to landscape and language, etc., Maleter rejects that argument, saying "the language ‘issue’ is something I have never understood, since this is exactly one of the reasons why satellite radio should be more attractive in Europe.," she said. Additional languages, like additional music formats, create expanded audience demand. With the increased mobility around the continent, consumers are likely to want to have access to their local programming wherever they go. And with the highly portable receiver options that have been developed for the U.S. market, you no longer need to be a truck driver who wants to listen to his own language broadcasts wherever his route takes him, although this is probably a good market."

–Mark Holmes

Melanie Betts, Grapevine PR (for Ondas Media), e-mail, [email protected]

Andrea Maleter, Futron Corp, e-mail, [email protected]

Franco Bonacina, European Space Agency (ESA), e-mail, [email protected]