Satellite radio. Here to stay?

Good short write up. I'm glad you posted the link here.

From a technical standpoint, satelite radios is a really neat concept. Better than FM sound quality, station and track data, hundreds of channels, genere specific and ultra-specific chanels, interesting talk radio content and variety you don't get in a semi-rural city with limited talk radio options. Plus program notes, program scheduels etc.

But the business model is only going to be successful if they lower the cost of acquiring customers and increase the revenue per suscriber; the two go hand in hand. Part of the problem is the fact that they have chosen a price point which is not justifyable to many potential customers, but their marketing advisors are saying that the price point must be maintained and that you can overcome that by using advertising to "expand mind share and interest".

Let's take a look at mind share. How many people do you know that are totally oblivious of satelite radio. I can't name one that I know except for a friend's 90 year old grandmother who isn't necessarily a potential customer for satelite radio anyway. But folks who are buying new cars, people with long commutes, people who like broadcast radio but hate the limited sound quality, they are all aware. I bet the average soccer mom is aware.

The problem satelite radio is having is that it is a 2-pronged cost structure and for cost consious consumers, which most are, paying $50-300 for a receiver and then another $12/month for something they don't use as much as a TV or computer just doesn't make a whole lot of sense to them. How do you overcome this. Less expensive and more portable and easily integrated (into cars and home stereos) units. And the monthly fee is going to have to go down. The secret to any high capital operation, as satelite radio is, is to get as many people signed up and operate on volume. If the price of the hardware and service is inexpensive people will sign up in droves and stay. However at this price point and hardware cost, that isn't going to happen for some time.

 

The monthly payment I don't mind. I pay monthly fees for items like cable or internet connection. It was the cost of the units that was keeping me away for a long time.

 

Don't look at me... I said who would pay for TV when it's free!

 

When the Crime Channel isn't on free TV.

 

I have no problem paying the monthly fee. Given all the driving that I do, I spend waaaay more time listening to the radio than watching TV (I could do without cable, actually). Having the comedy stations and commercial free music in SoCal traffic has really improved what used to be an el-sucko commute.

The first XM system I had put into a car cost me $500. The cost was higher because I didn't want an extra unit hanging off my dash, so I had a whole new radio put in (which at the time also required me to buy a new received and stick it in my trunk.

I think my husband paid around $100 for his last system - which has a pause feature, and can be moved from car to car to house using additional docking stations (he doesn't rub that in *too much*).

If you are considering getting satellite - go for it. It was totally worth it for me.

- Catfromtex

 

I purchased the "lifetime" plan for Sirius. Not cheap, but time has a way of passing quickly and the service "breaks even" in 48 months. I try to think and act long-term.

There are major changes happening in technology - surround sound home theater systems, HD large format digital televisions, satellite radio, DVDs transitioning to EVDs with more and much longer content, MP3 players that do audio and video and more . . .

 

XM isn't the only one

Sirius posts bigger loss as costs surge

Sirius, based in New York, posted a fourth-quarter net loss of $311.4 million, or 23 cents a share

Revenue tripled to $80.0 million from $25.2 million, beating the $76.1 million forecast by Reuters Estimates. Total costs rose to $377 million from $284 million.

Revenue $80 Million
Expenses $377 Million
Howard Stern $500 Million

Projected loss from operations of about $540 million in 2006, on revenue of $600 million

Someone tell me how this works?

Oh, they think their Revenue will be $1Billion by 2010

Well, good luck with that.

 

So Howard Stern isn't packing them in like they expected?

 

Stern brought in over a million subscribers. Can't blame Sirius' woes on him.

 

Whenever I talk to most people about this, they are generally confused about which one to choose, and that pretty much stops them from thinking about it too much further. This is probably one of those instances where one of the technologies/competitors must fail in the short term for the whole industry to survive.

 

Better than FM sound quality? You've got to be kidding me.

The sound quality is awful. I guess the differance with satalite and FM is that it is free froim static and artifacts. while "sound quality" is realitivly undefined, I guess most people over 40 (or whenever hearing starts to decline) cannot hear the differance and sound quality to them is only measured in static. But I guess, to be fair, I can spot a mp3, even at 128K+ compression -- I like my upper harmonics intact.

 

FM radio was going nowhere untill the government mandated that all radios manufactured for sale in the US support the FM band.

UHF Television was going nowhere until the government mandated that all television sold in the US support UHF.

Why were the above two steps necessary? Because manufacturers were at a competitive disadvantage (price) if they tried to do it on their own. Also, the programming on FM and UHF sucked because there were no listeners. (Chcken vs. Egg question.)

Sat Radio is suffering from the same illness. I'm quite happy with my AM/FM receiver in the car. If it included XM or Sirus capabilities at no or very low price uplift (no brainer decision) then that overcomes one issue. The government can fix this but don't hold your breath under tha way the Bush administration operates.

The other one is the monthly subscription fee. This needs to be eliminated. Maybe a tier subscription is in order. Example: A very minor signup fee of $2.00 via operator or self signup via website that is FREE. You hear advertising at this tier and it could be local advertising (the technology exists to do this now). No credit card informatioin required for this tier but telephone number and/or email might be appropriate. Also, you have to renew this tier once a year. The 2nd tier would be a subscription service that would be similar to their existing services. Depending on how much you pay would determine how advertising free the programming would be. I suspect that everyone would signup for tier 1 initially and then many could be promoted to tier two with the use of special incentives like cable, e.g., service to 2nd receiver is free, provide a free sample week or two of tier 2 programs. Its the cable model and it works.

I just don't see any benefit to spending money for more hardware just to see if I like the programs that I will have to spend yet more money to hear.

Currently their marketing model is, IMO, wrong and that's why it is costing them so much to signup new subscribers.