The Marketplace Report: XM's Deal with Oprah

Alex Chadwick speaks with Bob Moon of Marketplace about news that talk show giant Oprah Winfrey has signed a three-year deal with satellite radio company XM. The price? A reported $55 million.

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ALEX CHADWICK, host:

Back now with DAY TO DAY.

Hey, move over Howard Stern and DAY TO DAY for that matter, here comes Oprah. She's planning a show on satellite radio to be called Oprah and Friends; it's going to launch in the fall. Bob Moon joins us from the Marketplace News Bureau in New York.

Bob, which satellite service is going to carry this; will it be XM or Sirius, and is Oprah going to have her own channel 24/7?

Mr. BOB MOON (New York Bureau Chief, Marketplace): Well, XM Satellite Radio has signed up for Oprah for this three-year run. It's gonna be costing them $55 million. XM says it will be a weekly show hosted by Oprah, and then there will be programs for the rest of the time that will feature some of the other personalities from her TV talk show including Bob Greene and Nate Berkus, as well as topics from O, Oprah's magazine. The programming is gonna focus on fitness, health, and self-improvement topics. Some analysts are saying today that this is a smart move for XM because it should help the service attract a key female audience. Apparently Wall Street likes this idea; XM's share value jumped as much as ten percent just after this news was announced.

CHADWICK: But it's $55 million for a weekly show; are they gonna make their money back on that?

Mr. MOON: Yeah, it is a lot of money. Although $55 million over three years isn't anywhere near the $600 million contract over eleven years that XM's rival Sirius Satellite Radio has with Howard Stern. One analyst who follows this emerging business actually thinks this is economical in a way for XM. Tom Eagan of Oppenheimer figures it this way, he says, if this deal helps XM add just 145,000 subscribers over three years, they can break even on this deal. And beyond that, both XM and its rival are trying to get investors stirred up after some real worries in recent months, because they've been looking at car sales; they've been slumping, and they figure that means fewer cars means fewer satellite radios.

CHADWICK: Right. People won't be buying these new satellite radios to put in their new cars. Well, how effective are big name celebrities in actually attracting new subscribers to these satellite services; will they get that number in that amount of time?

Mr. MOON: Good question. Foster Research has done some looking into that very question. I spoke to one analyst who says that these big name personalities do help somewhat, but really it turns out that if you ask people the number one concern they have is price. You lower the price, he says, they'll get satellite radio.

Today in the Marketplace newsroom we're looking into the market for attention deficit drugs among college students.

CHADWICK: All right. Thank you Bob Moon of Public Radio's daily business show Marketplace produced by American Public Media.

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