Shock treatment boosts interest in satellite radio
By Kevin Zimmerman
Special to the Tribune
Published November 13, 2004
Consumer awareness of satellite radio hit the stratosphere after shock jock Howard Stern said he was moving his show to the emerging format.
More important, Stern's announcement, coupled with new deals for the National Football League and Major League Baseball, has jump-started a nascent industry that needs millions more customers before it can turn a profit.
But here's the rub: If you are a fan of Howard Stern and want to listen to out-of-town baseball games to monitor your fantasy team, you will need two radios. One for the Sirius Satellite Radio Inc. network, which will broadcast Stern's show, and one for XM Satellite Radio Holdings Inc., which has the MLB contract.
In their war for content and customers, XM and Sirius also are bumping up against consumer willingness to shell out more money for what they once got for free.
"There are limits on people in America subscribing to so many things already," said Josh Bernoff, a vice president at Forrester Research.
"Most of the marketing so far has focused on the number of choices, but to really set themselves apart from one another--and from terrestrial radio--they need to talk about what they can offer exclusively," Bernoff said.
"Something like [XM's] Playboy Radio or Stern [on Sirius] can be more explicit than is possible on regular radio, and that could have a potentially significant impact," he added.
Consumers already spend a bundle each month for television programming that once cost nothing and for wireless phone service that didn't exist about a decade ago. Still, the growth of satellite TV the last few years, due in part to unique content, like the ability to watch any NFL game, is encouraging.
"There are currently over 25 million satellite TV subscribers in this country, and we feel that the dynamics are very much the same--variety, selection and choice, with a digital-quality signal and a lack of commercial clutter," said Sirius Chief Executive Joseph P. Clayton.
At the end of its third quarter in October, Sirius said it passed the 700,000-subscriber mark. Clayton said that number should rise to 1 million by the end of the year, with a "big acceleration in growth" once Stern joins in 2006.
For its part, XM totaled slightly over 2.5 million subscribers as of Nov. 4, with a spokesman saying the company was on track to reach 3.1 million by year's end.
Nevertheless, both providers are far from profitable.
"Sirius and XM are both on pace to lose about $300 million each in net income this year," said Dominic Ainscough, an analyst at the Yankee Group.
The reason is exceptionally hefty start-up costs, which means consumers probably won't have to worry about a third choice.
"The capital costs of entry are so high, it's hard to imagine anyone else getting into this space," Ainscough said.
Or as Clayton puts it, "If you can get the FCC to give you the spectrum, and if you have about $2 billion, launch two or three satellites, and have three or four years to get yourself set up, then you, too, can be a satellite radio provider."
Another cost: unique content. Sirius is paying Stern $500 million over five years, starting in January 2006. And XM is paying Major League Baseball $650 million over 11 years.
Although unique content is drawing customers, XM has more subscribers mostly because it was first and has deeper ties with automakers, a key to generating new listeners.
Roughly half of XM's subscribers come from new-car buyers. For the 2005 model year, XM is available in more than 100 vehicles, primarily General Motors and Honda. GM expects that XM will be installed in 2 million of its cars by the end of this year.
Sirius also gets about half of its listeners through automakers. It has partnered with Daimler Chrysler, Ford and BMW in about 80 models. In October, shortly after the Stern signing, Ford announced it would offer Sirius as a dealer-installed option in 13 models by year's end. The automaker hopes to have the service available as a factory-installed option in up to 20 vehicle lines by the 2007 model year.
"Automobiles are the strong selling point, but there's still a question of how people use music or other radio content in their cars," said Michael Gartenberg, a senior analyst at Jupiter Research.
"The two companies are slugging it out right now, in terms of competing in the marketplace," he added. "It really comes down to the distribution channels, in cars as well as at home, in addition to how well they market themselves to consumers. Raising consumer awareness is important, as is getting them to accept the concept of paying for radio.
"How it all shakes out is still very much up in the air."
After-market installation also is picking up.
"Sales of satellite radios have been good so far, and they're steadily growing," said Neil Riffer, mobile electronics manager at ABT Electronics in Glenview. "Whenever an announcement about programming is made, whether it's the NFL, Howard Stern or baseball, we see a bump in interest."
Easy installation
"In a car, we can add satellite radio capability to any stock radio, or change the factory-installed radio to an Alpine, Sony, Kenwood or Pioneer [for XM] or a Kenwood or Alpine for Sirius," Riffer said.
Both subscription services offer reduced rates for customers willing to make longer commitments than month-to-month plans. And each charges about $6.99 a month for additional units, much like cable TV companies charge a fee for additional set-top boxes.
Although a listener would need two radios to hear the competing services, a new crop of detachable satellite radios--such as the SKYFi from Delphi--allow consumers to bring their unit with them into the home or office.
Some units can store shows
Another convenience: Delphi introduced the Delphi MyFi in October, an iPod-like device that receives live satellite radio broadcasts on a portable unit.
Users can store up to five hours of content for later listening via its memory mode.
Article from: Chicago Tribune
--------------------------------------------------------------------------------------
We have a few Tech Articles on this subject you might want to read:
How to Put Satellite Radio in Your Car or Home
Satellite Radio FAQ
By Kevin Zimmerman
Special to the Tribune
Published November 13, 2004
Consumer awareness of satellite radio hit the stratosphere after shock jock Howard Stern said he was moving his show to the emerging format.
More important, Stern's announcement, coupled with new deals for the National Football League and Major League Baseball, has jump-started a nascent industry that needs millions more customers before it can turn a profit.
But here's the rub: If you are a fan of Howard Stern and want to listen to out-of-town baseball games to monitor your fantasy team, you will need two radios. One for the Sirius Satellite Radio Inc. network, which will broadcast Stern's show, and one for XM Satellite Radio Holdings Inc., which has the MLB contract.
In their war for content and customers, XM and Sirius also are bumping up against consumer willingness to shell out more money for what they once got for free.
"There are limits on people in America subscribing to so many things already," said Josh Bernoff, a vice president at Forrester Research.
"Most of the marketing so far has focused on the number of choices, but to really set themselves apart from one another--and from terrestrial radio--they need to talk about what they can offer exclusively," Bernoff said.
"Something like [XM's] Playboy Radio or Stern [on Sirius] can be more explicit than is possible on regular radio, and that could have a potentially significant impact," he added.
Consumers already spend a bundle each month for television programming that once cost nothing and for wireless phone service that didn't exist about a decade ago. Still, the growth of satellite TV the last few years, due in part to unique content, like the ability to watch any NFL game, is encouraging.
"There are currently over 25 million satellite TV subscribers in this country, and we feel that the dynamics are very much the same--variety, selection and choice, with a digital-quality signal and a lack of commercial clutter," said Sirius Chief Executive Joseph P. Clayton.
At the end of its third quarter in October, Sirius said it passed the 700,000-subscriber mark. Clayton said that number should rise to 1 million by the end of the year, with a "big acceleration in growth" once Stern joins in 2006.
For its part, XM totaled slightly over 2.5 million subscribers as of Nov. 4, with a spokesman saying the company was on track to reach 3.1 million by year's end.
Nevertheless, both providers are far from profitable.
"Sirius and XM are both on pace to lose about $300 million each in net income this year," said Dominic Ainscough, an analyst at the Yankee Group.
The reason is exceptionally hefty start-up costs, which means consumers probably won't have to worry about a third choice.
"The capital costs of entry are so high, it's hard to imagine anyone else getting into this space," Ainscough said.
Or as Clayton puts it, "If you can get the FCC to give you the spectrum, and if you have about $2 billion, launch two or three satellites, and have three or four years to get yourself set up, then you, too, can be a satellite radio provider."
Another cost: unique content. Sirius is paying Stern $500 million over five years, starting in January 2006. And XM is paying Major League Baseball $650 million over 11 years.
Although unique content is drawing customers, XM has more subscribers mostly because it was first and has deeper ties with automakers, a key to generating new listeners.
Roughly half of XM's subscribers come from new-car buyers. For the 2005 model year, XM is available in more than 100 vehicles, primarily General Motors and Honda. GM expects that XM will be installed in 2 million of its cars by the end of this year.
Sirius also gets about half of its listeners through automakers. It has partnered with Daimler Chrysler, Ford and BMW in about 80 models. In October, shortly after the Stern signing, Ford announced it would offer Sirius as a dealer-installed option in 13 models by year's end. The automaker hopes to have the service available as a factory-installed option in up to 20 vehicle lines by the 2007 model year.
"Automobiles are the strong selling point, but there's still a question of how people use music or other radio content in their cars," said Michael Gartenberg, a senior analyst at Jupiter Research.
"The two companies are slugging it out right now, in terms of competing in the marketplace," he added. "It really comes down to the distribution channels, in cars as well as at home, in addition to how well they market themselves to consumers. Raising consumer awareness is important, as is getting them to accept the concept of paying for radio.
"How it all shakes out is still very much up in the air."
After-market installation also is picking up.
"Sales of satellite radios have been good so far, and they're steadily growing," said Neil Riffer, mobile electronics manager at ABT Electronics in Glenview. "Whenever an announcement about programming is made, whether it's the NFL, Howard Stern or baseball, we see a bump in interest."
Easy installation
"In a car, we can add satellite radio capability to any stock radio, or change the factory-installed radio to an Alpine, Sony, Kenwood or Pioneer [for XM] or a Kenwood or Alpine for Sirius," Riffer said.
Both subscription services offer reduced rates for customers willing to make longer commitments than month-to-month plans. And each charges about $6.99 a month for additional units, much like cable TV companies charge a fee for additional set-top boxes.
Although a listener would need two radios to hear the competing services, a new crop of detachable satellite radios--such as the SKYFi from Delphi--allow consumers to bring their unit with them into the home or office.
Some units can store shows
Another convenience: Delphi introduced the Delphi MyFi in October, an iPod-like device that receives live satellite radio broadcasts on a portable unit.
Users can store up to five hours of content for later listening via its memory mode.
Article from: Chicago Tribune
--------------------------------------------------------------------------------------
We have a few Tech Articles on this subject you might want to read:
How to Put Satellite Radio in Your Car or Home
Satellite Radio FAQ
