Joseph Dorton, VP-advertising sales at XM, said the satellite radio network is the early stages of hiring an agency for the service that starts up in 2001. The move to convert consumers, via what he estimates will be a $100 million account, comes after XM convinced several major advertisers and agencies to hedge its bets on the new medium.
Grey Advertising, Ogilvy & Mather, TBS Media and J. Walter Thompson USA have signed on for ad packages to be divided among clients; XM also inked agreements with advertisers including Allstate Corp., AT&T Corp., Discovery Networks and Looksmart.com.
"We wanted to get in at this point," said Matt Feinberg, VP-manager radio at Saatchi & Saatchi's Zenith Media, New York. "We saw it as a no-lose situation. We didn't make a huge commitment to them, but we believe in the concept." Even if the subscription radio service is not successful, Mr. Feinberg said it's important to have new ad mediums available to clients. "I'd rather say, `Hey, I tried and missed.' "
Part-owned by American Mobile Satellite Corp. and backed by investors such as General Motors Corp., Clear Channel Communications and DirecTV, XM is the only licensed satellite radio company that plans to include advertisements along with radio content.
Competitor Sirius Satellite Radio will include commercials on just 50 of its channels. XM, however, will include approximately 5 to 6 minutes of advertising an hour on the majority of its 100 channels.
Mr. Dorton hopes the lack of advertising clutter on the satellite channels, and the company's agreement with Premiere Radio Networks to handle ad sales, will help satellite radio be a viable option for national advertising.
XM channels will contain targeted content and a variety of music and news including channels sponsored or produced by: BET, Bloomberg, CNN, the Hispanic Broadcast Corp., Nascar, the "News Hour With Jim Lehrer" and the Weather Channel.
"Each channel will be like a national radio station with unique content," Mr. Dorton said. "Advertisers will truly be able to buy us like they would buy a magazine. This gives radio an opportunity to become more of a primary medium" for advertisers.
XM's new agency will handle a consumer marketing campaign to attract subscribers willing to pony up $10 a month for the service, as well as purchase a XM-equipped radio system costing $200 to $450.
Though it is too early to start talking about satellite radio ads with clients, Ed Weiner, senior partner at Media First International, New York, said it's important to keep clients aware of their options.
"I really thought that [signing a charter ad agreement] was a no-brainer," Mr. Weiner said. "It's a brand-new technology and the opportunity to get in on the ground floor. Plus there's a cancellation provision to protect clients."