Bankruptcy of WorldSpace

Published by MBA Skool Team, Published on July 11, 2011

On December 31st 2009 one of the pioneers of Satellite radio network in India shut shop. This was a rude shock to all the subscribers as the company had filed Chapter 11 bankruptcy in USA and the subscribers in India would neither get the service nor would be refunded for the services which they were due. So what exactly went wrong and whether there was any chance to salvage their operations.

worldspace radio-bankruptcy

Worldspace is a satellite Radio network providing services to around 2 lakh subscribers. The company is headquartered in Silverspring Maryland with studios In Washington, Mumbai, New Delhi and Nairobi. Before filing for bankruptcy the company had employed two satellites and was broadcasting around 62 channels out of which 38 of them were provided by international, national, regional third parties and 24 of them were owned by the company itself. However unlike the other radio networks most of the channels were available through subscription plan.

So how exactly did the system work and how was it different from the other radio networks ? Unlike other commonly found radios Worldspace System comprised of three major components.
1. Space segment: This refers to the company owned satellites which broadcasted the radio signals to all the subscribers around the globe.
2. Ground segment: this refers on the ground operating and broadcasting centres.
3. User segment: this refers to the user owned devices found at the subscriber’s home which received the radio signals.
The USP of this service was crystal clear international, regional music without any advertisements.

How was their journey in India brought to an abrupt halt ? A brief about the company in India is that it was launched in 2000 to tap into the country's craze for music especially among the youth. They launched premium subscription services charging a monthly fee of around Rs.150 for a basic package whereas for the premium package they charged around Rs.450. The receivers were primarily manufactured by BPL and they were priced at around Rs.2500 to Rs.3500. By 2007 they had a subscriber base of around 1.7 lakh subscribers. However with the opening of radio frequencies to private operators resulted in the mushrooming of radio channels across the country. However their model was subscription driven whereas the new radio channels were advertisement driven.

So how come they pulled the plug first in India ? The answer lies in the policy making delay by the government. The newer radio channels could air their content everywhere including in cars via the normal music players which is normally found in cars. However Worldspace was different as it needed a separate device. So they were banking on something called hybrid digital radio services which would allow them to broadcast to vehicles. This service was called mobile services. The success depended on car manufacturers integrating Worldspace receivers in their cars. But for that first they needed the government to allocate spectrum which ultimately never came through because of the FDI norms prevalent in the country. With this delay they reduced their marketing and sales activities and in the end did not even honour the commitments to the users.

The subscription driven model did not find many takers and for them to be profitable it was very essential with no advertisements on any of their channels. The newer radio channels had made a dent in their subscriber base and they were steadily losing their subscribers. With losses mounting worldwide they needed massive financial support to sail through which was not forthcoming. So in the end they decided Indian Market is not their future and they finally decided to close down operations and went silently into oblivion on the last day of the year 2009

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