Originally created 12/12/04

Satellite radio, Muzak battle for businesses



Listen.

It's at the gym, the grocery store, in a diner, a gasoline station, at a fast-food restaurant - it's music - and it's meant to make you spend.

Although we don't always pay attention to it, businesses do, and they're willing to shell out big money to pay the companies that provide the soundtrack to our lives as shoppers.

But Muzak, long the king of background tunes, is starting to face competition from the traditionally consumer-driven satellite music providers such as XM and Sirius.

Muzak targets strictly business clients - usually places people work or shop, but XM and Sirius set no such limitations on their business by catering to both consumers in their homes or cars, and businesses.

"I think that's a key target market for them right now," said Ross Rubin, the director of industry analysis for the NPD Group, a Port Washington, N.Y.-based market research firm.

In some ways all three companies are similar.

Each provides music through satellites beaming the signals down to Earth, and although Muzak was traditionally known for bland "elevator music," today its nearly 80 stations are hipper, and closer to Sirius and XM's offerings, than ever.

But that's where the likenesses end.

Muzak offers commercial customers more options than XM and Sirius, including on-hold music for telephone systems. Muzak also installs its sound systems, which it sells or leases to clients.

Although neither XM nor Sirius would release a breakdown of consumer clients vs. business ones, officials from both companies confirmed that they have entire departments set up to capture commercial clients that might otherwise go to Muzak.

"It's particularly appealing to small and independent businesses that typically can't afford traditional music services like Muzak because of the cost of equipment and other fees," said David Butler, a spokesman for XM.

At University Health Care System's downtown gym, Health Central, customers were complaining that the local radio stations played too many commercials and music wasn't motivating enough, said Cindy Stephens, the marketing/group fitness manager at the gym.

"It was one of our hugest complaints," she said.

When it came time to find an alternative, Ms. Stephens weighed Muzak against Sirius and XM.

A few weeks ago she chose Sirius because of the cost.

WBBQ-FM (104.3) was one of the traditional radio stations formerly piped through Health Central's sound system.

Despite being bumped, Barry Kaye, the vice president and general manager of Clear Channel Radio CSRA, which owns WBBQ, said satellite radio has not yet had a financial impact on traditional, or "terrestrial" radio.

Because terrestrial radio is free, and offers a local flavor, it won't go away anytime soon, said Mr. Kaye, whose company owns five FM stations and one AM station in the market.

"It's going to just come down to more choices for more people," he said.

Television is an example of a media with programming that has some formats broken up by commercials, while other offerings are on a pay basis and are commercial free, Mr. Kaye said.

Even though it was free to have traditional radio playing at the gym, making the customers happy had to take priority, Ms. Stephens said.

Gym employees were able to install Sirius themselves, and it costs $500 for the equipment and a one-year commercial subscription package.

"Even at that price, to make the customers happy, it's very affordable," Ms. Stephens said.

Research she did showed that Sirius was about a third as costly as Muzak, she said.

"The outlay for the equipment is much cheaper and there are no long-term commitments when you do lease it," said Ron Rodrigues, a spokesman for Sirius.

It's hard to compare costs because of the number of options available with Muzak, said Bill Lavery, the owner of Carolina-Georgia Sound Inc., an Augusta-based Muzak franchise that services 5,000 customers in seven states.

He said Muzak is often more expensive because it offers a wider range of services, including satellite television systems, that are not offered by XM or Sirius.

"Businesses want to be able to do more with their sound systems than just music," Mr. Lavery said.

Other features include advertisement blurbs such as the kind heard in grocery stores.

Such an array of features has kept major retail chains securely in Muzak's pocket, Mr. Lavery said.

"It's the complete package," he said.

Nationally, Muzak exposes over a third of the population - roughly 100 million people - every day to the music it provides to its 350,000 client companies.

Mr. Lavery said he doesn't consider XM and Sirius a threat yet, in fact, he has Sirius radio in his truck, where he listens to sports radio, taking advantage of one of many nonmusic offerings that XM and Sirius provide, but Muzak doesn't.

"It's more for the consumer," he said.

But XM and Sirius might compete in limited ways, in businesses where owners want to install their own systems, Mr. Lavery said.

"Our biggest competition is silence and the radio," said Mr. Lavery, who this year has seen business improve by 20 percent to 25 percent.

The inoffensive nature of Muzak's programming also is a key to the company's success, he said.

"If it appeals to a narrow group, then you don't want to play that in a business because a business wants to attract everyone," Mr. Lavery said.

That might be true in some cases, but in other situations playing a certain type of music is the right thing to do.

"We can adapt the music for the mood we're trying to accomplish," said Michael Yonesaki, a co-owner of the Metro A Coffee House.

Mr. Yonesaki might select classical music in the morning, jazz in the afternoon, and alternative rock in the evenings, he said.

In many cases, individual managers with Muzak don't have direct control over what type of music is playing because that ability is reserved for corporate owners, who want to keep strict control of the music in their business' locations.

Despite the array of differences among XM, Sirius, and Muzak, in addition to the more comprehensive services offered to business clients by Muzak, officials say they'll continue to target businesses.

"We are signing up bars, restaurants, offices, gyms, cruise ships, and hotels," Mr. Rodrigues said.

Sirius expects to have 1 million subscribers by the year's end, and XM is expecting 3.1 million.

As more consumers sign up, more businesses will sign up, and the word of mouth between users will drive growth in both segments of the market, XM's Mr. Butler said.

Reach Adrian Burns at (706) 823-3352 or adrian.burns@augustachronicle.com.