XM to Put Ads on Some Music Channels

Thanks to a newly negotiated settlement, XM Satellite Radio will no longer be able to claim its music channels are completely commercial free. Four of its channels, programmed by media giant Clear Channel Communications, will now include advertising as part of the deal.

Commercials are not completely foreign to XM -- it does run ads during breaks on its talk radio stations, as does Sirius. However, the addition of commercials to music stations is an anathema to a policy instituted by the company two years ago.

XM and Clear Channel first butted heads over the commercial-free requirement in the beginning of 2004, when the satellite radio service decided to remove all ads from its music programming. Clear Channel disagreed, forcing the two sides to enter arbitration on allowing the media conglomerate to add its own commercials.

Arbitrators ruled in favor of Clear Channel, opening the door for advertising. The commercials would appear on a current hits channel, a past hits pop channel, an easy listening and a country music station.

XM did not comment directly on the development, only saying it was pleased with the agreement and Clear Channel's programming.

Commercial-free music has become a stalwart feature of satellite radio, so XM's loss at the bargaining table could be a blow to the company. However, the advertising does not start immediately, meaning the network has time to add new channels to offset those run by Clear Channel.

XM plans to launch four new channels in the near future, keeping its position as the commercial free music leader. XM would have 69 stations without advertising, compared to 68 from competitor Sirius.

XM currently has some six million subscribers, and has seen rapid growth over the past year. Many financial analysts say this growing base could prove lucrative if the company would relax its advertising policies in the future.