May 2007
John Bitove seems to thrive on entrepreneurial challenge. The Toronto businessman headed the group that successfully brought the National Basketball Association to Canada in 1993 with the formation of the Toronto Raptors. He was the volunteer president of the City of Toronto bid for the 2008 Olympic Games. And in 2005, his startup, Canadian Satellite Radio Holdings, was the first company to broadcast satellite radio in Canada.
But what's perhaps most impressive is that, working with partners that included Accenture, he effectively launched CSR—building broadcast studios, repeater networks, technology infrastructure and staff—even as he was raising capital through an IPO and a high-yield debt issue. And they did it all in 12 weeks. According to New York-based Accenture senior executive Warren Dodge, "[Bitove's] team unleashed the power of partners. Whether it was hardware vendors, musical talent or technical providers, they let us do our thing and create something for them.
All they said to us was, 'Meet the deadline. We trust you. Now go ahead and deliver.' " Before CSR could even begin to tackle the challenge of building its business, the company, which is partly owned by US-based XM Satellite Radio (CSR's service is marketed under the brand name XM Canada), had to fight off a political challenge to its right to broadcast at all. It had filed its first application for a broadcast license in Canada in 2003. "We were expecting the decision to happen between February and June 2005," recalls Chief Financial Officer Michael Washinushi, "so we were in the depths of business planning, putting feelers in the market for a potential IPO and capital-raising through the high-yield markets."
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After long and painstaking deliberations, the Canadian Radio-television and Telecommunications Commission issued the license on June 16, 2005. That's when the real drama began. Almost immediately, Canada's terrestrial broadcasters and some cultural groups appealed to have CSR's license set aside. To ensure that Canadian artists are heard by the Canadian public, the CRTC requires the country's terrestrial broadcasters to devote at least 35 percent of their airplay to Canadian music. However, for satellite radio companies, the proposed figure was just 10 percent, which didn't sit well with the terrestrial broadcasters.
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Canada's Globe and Mail reported that "the sleeper issue became a cause célèbre. . . . Nationalist-leaning MPs took turns during various caucus meetings to bash the Canadian Radio-television and Telecommunications Commission decision." Opponents of the license approval supported an all-Canadian subscription radio offering—with no ties to US-based satellite radio—called CHUM Subscription Radio Canada, which would broadcast through land-based transmitters and only to big cities. And CSR had little public support; one poll indicated that 64 percent of Canadians wanted the license approval to be reversed.
But even before the appeal went to Canada's federal cabinet, prominent Canadian artists had been coming out in force to speak on behalf of satellite radio. As it turned out, even with the Canadian content requirements, many Canadian artists were finding it impossible to reach an audience through conventional radio.
"I believe that satellite radio will finally help to give aboriginal artists a voice that they so richly deserve," Inuit chanteuse Susan Aglukark said. "Our native artists will finally reach people in all areas of our country, including those listeners that have had far too little choice for too long." Canadian guitarist Jeff Healey of the Jeff Healey Band, and Canadian music producer Daniel Lanois, who has worked with Irish supergroup U2 and rock icon Bob Dylan, also spoke on behalf of satellite radio.
On September 9, 2005, the cabinet upheld the license approvals for CSR and competing satellite radio operator SIRIUS Canada, ushering the new medium into Canada.
Ramping Up
When the CRTC gave the company its initial blessing, says Washinushi, "it was full steam ahead, but cautiously. We started ramping up resources and key personnel to support the business, but were careful about how much we invested, knowing an appeal could turn around the decision."
However, toward the end of August, with the political controversy escalating and public opinion running against it, CSR told its partners to put all work on hold. As a result, when the cabinet decided that the license could stand, CSR had built none of the technological or physical infrastructure to support its business.
At the time, CSR had only about half a dozen employees. It had no broadcast studios. It had no repeater networks to ensure that signals were strong and not blocked by buildings or other obstacles. It had no systems that would allow subscribers to purchase the service, activate their radios—satellite radio requires a special receiver—or even pay their bills. Moreover, the same federal cabinet decision that gave the green light to CSR also allowed competing SIRIUS to broadcast. But despite the challenges, CSR was determined to be first to market.
"What you do is you leverage relationships," says Joanne Kerr, director of IT for CSR, who joined the company shortly after the license approval was upheld. "You have to have very strong partners, and you do a whole lot of outsourcing of work. You have an extended army of people around you, and you get smart with your partnerships. Otherwise, you can't do it."
CSR partner XM Satellite Radio—the US-based satellite radio company, which owned 23 percent of CSR—was an Accenture client. Accenture had started working with CSR in May, to help the satellite broadcaster come up with a road map for its launch. Now, with the go-ahead from the federal government, an Accenture team began work on developing the subscriber management system.
"They trusted us to deliver everything needed to turn on radios, collect money from subscribers and manage the financials," says Kelly Askew, who led the Accenture team on the CSR project. Accenture supported the Canadian team with resources from the Philippines who specialized in configuring the Oracle Portal software. Accenture also adapted and integrated with systems used by XM Radio in the United States to meet CSR's distinctive needs.
"Accenture not only did the actual coding but also helped the internal business people to develop the business processes and functionality," says CSR IT chief Kerr. "From a business perspective, they made the system appear to be very simple. Most IT people know that the simpler the interface, the more complicated the back end. They made it so simple that, without training, anyone could activate their radio online. I'd never seen a user interface as simple as this created within 12 weeks."
During the same three months, CSR had to put its financial house in order. "We looked at a number of different capital structures. We saw tremendous growth potential in the business, and didn't want to dilute the ownership," says Washinushi. The IPO was successful, raising $55 million. In addition, CSR raised $100 million through a high-yield debt offering.
CSR began broadcasting on November 22, 2005, beating SIRIUS to the airwaves by nine days. The CSR broadcast studios were still under construction, so the company's all-hockey talk channel talent (including New York Rangers great and Alberta native Mark Messier) appropriated a boardroom at the main office, and their voices boomed through the walls, keeping not only subscribers but also the coders and business process engineers in the room next door up to date on the latest in the sport. (As this issue went to press, a proposed merger of XM Satellite Radio and SIRIUS was pending before US regulators.)
Business as Usual
As intense as it was to get a new business successfully off the ground in only 12 weeks, some at CSR look back at the undertaking with nostalgia. Recalls Kerr: "For 12 weeks, everyone focused on the birth of a baby, and now they have to change diapers."
There is a difference between an adrenaline-charged drive to create a new business and the daily duties of running one. "The challenge has been making sure to operationalize the business with the right metrics and measurements in place," notes Washinushi. "And that doesn't happen overnight but over a number of months."
Meanwhile, Accenture remains very much a part of the CSR story. In early 2006, the broadcaster signed a three-year outsourcing agreement giving Accenture responsibility for operating and maintaining the systems built for the launch. Later that year, the relationship was going so well that CSR opted to extend it for another three years.
Strategically, CSR continues to emphasize relationships. The Canadian telecommunications company TELUS now makes CSR-produced programming available to TELUS mobile phone subscribers, and Air Canada carries XM content exclusively on its flights and in its lounges. A number of carmakers, including General Motors Corp., Honda Motor Co., Nissan Motor Co., Toyota Motor Corp., and Hyundai Corp. are installing CSR's radios in new cars destined for the Canadian market. In fact, according to projections, the company will have an 80 percent share of factory-installed satellite radios in Canada in 2007. Customers can also buy the radios through electronics vendors.
In the first quarter of 2007, barely a year after its launch, XM Canada had 147,000 subscribers and CSR had announced its intention to have 1 million subscribers by 2010 and a $100 million operating profit by 2012. A stretch goal by some standards—but look at what CSR accomplished in 12 weeks.
Gregory J. Millman is a New Jersey-based business writer.
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