Lost in space? XM Satellite Radio has bad day, investors point to lack of new car renewals
Maybe that $55 million deal last week with Oprah Winfrey was a bit over the top... One of XM Satellite Radio's directors quit Thursday, saying the company would be in deep
trouble if it didn't quit spending like a drunken sailor (we're paraphrasing here, but you get the idea). Meanwhile, XM
reported an increased quarterly loss on higher expenses.
XM has almost twice the subscribers of rival Sirius
(that has shock jock Howard Stern as its star celeb), but both companies are spending heavily to attract new
subscribers, in a race to capture share in an expanding market. Therein lies the rub... in the last quarter it cost XM
$89 to sign up each new subscriber, vs. $64 a year ago.
XM says this is all a short term aberration, and
it's on track to reach profitability by 2010. Investors were less sanguine - its shares were down 5 percent at the
close on Thursday, with some pointing worriedly to XM's failure to turn new car buyers into regular subscribers. Many
vehicles now come with a free trial period of the satellite service, and 'uptake' rates after the complementary period
expires haven't been as robust as the company has been hoping for.
[Source: CNN/Money]
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Reader Comments (Page 1 of 2)
wood 2:44PM (2/17/2006)
Gee, could it have anything at all to do with the amount of viable programming one can obtain for free on regular radio. Yes, Satellite offers superior signal and coverage, but unless you are a frequent long distance traveler or audiophile there's little or no motivation to pay for radio. The cost of connecting (insert your mp3 player of choice) is lower (unless you're replacing your Head Unit) so even if my favorite radio station disappears, there's still no significant incentive to purchase satellite radio service.
Cool idea, just don't see it as viable over the long term. Once UWB or some competing standard for wireless high speed internet access becomes widely available, there will be no reason at all to continue patronizing these services--assuming they last that long.
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rrudorf 3:06PM (2/17/2006)
I could not disagree more with the first comment. I have 3 XM accounts and really don't ever want to consider life without it. I simply cannot hear things on "free" radio that i hear on XM. right now I have on Deep Tracks and they are playing "Golden Earring, Mad Love's Comin'"
Find that anywhere else...
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Julio 3:18PM (2/17/2006)
No, Wood, it does not "have anything at all to do with the amount of viable programming one can obtain for free on regular radio". The flaw in your reasoning is in assuming that there exists viable terrestrial programming. For millions of people (and growing), this is not the case. Traditional radio has become a homogenized commodity long on commercials and pushing stale, cookie cutter playlists of medicore music. I first signed up for satellite as a local area commuter who was unable to take the horrible radio offerings in my market. Several of my coworkers did the same.
Satellite radio grew out of this programming morass, which terrestrial radio has belatedly recognized and attempted to counter with their lame attempt at "Jack" programming. The problems with satellite radio is the economics of building a base of subscribers. XM and Sirius rely on the tricky model of having people pay for costly equipment as well as monthly programming. This blunts the growth of their user base, while they counter through rebates, which adds to the cost per subscriber to build market share. Tivo had the same problem. Unlike Tivo, howevr, the satellite providers have the advantae that new cars can be outfitted with satellite ready radios that can be financed along with the cars. As more time passes, more and more people who ordinarliy wouldn't add new hardware have the opportunity to subscribe. In the mean time, they need to follow the traditional startegy started by Gillette -- "give away the razor and sell them the blades"; in other words, subsidize some of the the aftermarket equipment.
Where I feel they are making a mistake is in most car manufacturers picking sides -- XM only availbale in GM, for example. As one who is brand loyal to Sirius, this would be a deal killer for me. They need to be like Nissan, who offers pre-wiring for both formats.
Ipod integration in vehicles is a bit of a challenge, but the jury is still out as to what effect this will be to satellite radio. (I for one have both). Wifi and other distributed internet is a concern, but not for some time.
In the mean time, enjoy your crappy radio programming, Wood.
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Punchy 3:31PM (2/17/2006)
Bottom line is that advertising is coming to your beloved satellite service, sooner than later. This bad news just gives them the ammunition they need to break it to you sooner than later.
Aside from the programming, this is after all the big draw...no ads. But, some on get real, the opportunity for any subscription based service provider is not in the service, it lies in the ability of the provider to guarantee an audience to the advertisers and benefit from that. Whether it's your cell phone, this website or Satellite radio, if they can make money by leveraging their user base via advertising they are going to do it.
Once, that shoe drops you are left with hearing "Golden Earring, Mad Love's Comin'" as the value proposition, is that really worth $12.00 a month plus the intial costs of the hardware requirements and installation (that you will change over and over again as they introduce new models with larger clolour touch sensitive screens etc...). I think not, good luck XM and Sirius, but until you pay me to listen to your advertisers and provide the hardware I need as standard on my next car purchase, I won't be signing on anytime sooner or later.
Punchy
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Joel A 3:36PM (2/17/2006)
XM came with our Accord hybrid. We tried activating it but it didn't work. XM never called us back.
Not putting XM down. Probably more persistence and we'll be up. But Sirius has more of the programming that we like (no, not Stern) so we'll be getting them shortly.
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Mal Fuller 3:39PM (2/17/2006)
"right now I have on Deep Tracks and they are playing "Golden Earring, Mad Love's Comin'"
Gosh, I can hardly imagine life without Golden Earring, Mad love's Comin'! Part of the reason for that fact is that I've not a clue as to what the F... Golden Earring, Mad Love's Comin' is!
I guess satellite radio's way too hip for my room!
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scooter 3:50PM (2/17/2006)
I have had XM for about 5 months now and I love it. I don't feel like collecting & organizing tons of music files, remembering to carry an MP3 player with me, etc. The news, traffic, and entertainment is especially welcome on long trips.
I feel it is a great value now and I would pay even more for XM to stay commercial free. There are so many choices as well as exposure to new music that I would never get otherwise.
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PeterJ 4:04PM (2/17/2006)
Anyone who refutes the concept behind satellite radio by stating "why would I pay for what I can get for free" just loses me right there. If you're okee-dokee with the state of your FM dial almost anywhere in the U.S, you're either extremely fortunate or completely irrelevant to the success of XM and Sirius. Out of 250 million people in the country, they probably only need to come up with about 20-30 million subscribers between the two of them to be perfectly viable.
As to the MP3/Ipod argument...I'd suspect a lot of Sat radio owners like myself own both. How would I find out about new music to purchase and download if I didn't have a means to hear it? And for the cost of a single LP (and a cheap one at that) I can hear 60+ stations of music for an entire month. As a Sirius owner, it's an even better value since I paid upfront to be subscribed for the long-haul...a big savings on the monthly rate.
I think clearly both providers are paying too much money to the likes of Stern and Winfrey and it's biting them in the a$$ now. But those bad decisions don't invalidate the concept.
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Steve S 4:07PM (2/17/2006)
Between Cell phone, landline, sat TV, TIVO, internet, Netflix, WoW subscription, yada, yada, just no money to pay for radio. Other than in my car I dont listen to radio anyway. Most of the time its CDs or MP3s..
Im waiting on ubiquitous internet everywhere (in my car, on my phone, my PSP, laptop, e-ink reader) for my monthly $$$.
For some it will work if you listen to a lot of talk radio or music and dont download music. Should be interesting if it stays a viable business.
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BCM 4:40PM (2/17/2006)
Unfortunately, satellite radio is still radio. I load my CD changer and listen to what I want. Paying money to subscribe to radio isn't even on the radar--I don't think I've listened to a radio station at home or in the car in more than a decade. If I bought a new car which had satellite radio standard I wouldn't sign up if it were free.
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TheAwesome 4:42PM (2/17/2006)
My concern is when we become dependant on XM and then they hit us with the same commercials and lousy content we were getting for free. Just like cable television did in the 90's.
I hope that XM fails for this reason. But considering how devout satelite radio's fans are I feel I'm on the losing end.
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Mick 5:47PM (2/17/2006)
I once drove half way across the country and couldn't find a single station worth listening to. Why would I pay to have that same junk beamed to me from Outer Space?
I eventually stopped somewhere in Colorado and bought an Irish music tape which I listened to the rest of the way to California. Do they have all-Irish music channels on XM or Sirius?
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RamSport47 6:03PM (2/17/2006)
#12...On Sirius, you find a channel you like...there are over 120 to choose from...set it in New York, and play it ALL THE WAY to Los Angeles...that's why it's great...no channel changing needed...no hunting every hour to find the closest thing to come in (usually country). Set it on Sirius 36 The Beat, and listen as long as you like
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iQuack 6:07PM (2/17/2006)
I know I waste $$$$$ on XM because I drive very little, but signed up after the trial period. When I do drive, I really enjoy XM. Also can hear XM while using the computer because the subscription includes online listening.
Drove alone on one 8.5 hour (each way) trip shortly after buying my Accord EX-L that came with XM. Satellite radio is great for long trips because the same station stays with you and plays CD quality sound anywhere in the continental U.S. I stuck with one favorite channel for the entire drive and it made the 8.5 hours much more enjoyable--there were very few repeats, too.
Was able to cut the cost by purchasing 3 years at one time instead of letting XM charge a monthly fee--paid just over $8 per month doing it that way, but it'll be more if I renew when my 3 year term is up in March, '07.
Until you've tried XM, you don't know what
you're missing.
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Phydeaux 6:17PM (2/17/2006)
LOL! And those that comment on "having free radio why pay" or "I have CD" also do not have satellite / cable TV since you can pick up stations using the old rabbit ears.. or just watch DVD's at night. If you want to claim it's cost prohibitive then i'll hear ya... but those that refute obviously have never tried it. I travel by car extensively and I have yet to find a 24 hours comedy station on FM or AM in any market that i've driven in. I also like XM 27 cinemagic which plays movie clips and movie music... again something you won't find on terrestrial radio. BTW a 60 year old bud gave those discussion... one road trip with me listening to 50's station and XM Frank's place and he bought in.
BTW many new vehicles are installing input jacks for IPODS and other equipment to make easy hookups (look at 2006 Impala which has a very cool factory radio).
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Leader 6:46PM (2/17/2006)
If only the initial period given the new car buyer were indeed "complementary," then perhaps more would sign up and start paying for XM. However, it is merely "complimentary."
See? This is where "spell check" just doesn't cut it.
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Steve B. 7:18PM (2/17/2006)
I spent about a week driving my mother-in-law's XM loaded Cobalt. It was neat in a gee-whiz way, but I wouldn't get it unless it was free on a month to month basis. I can listen to what I want on CD's and CDR's... If I get really irritated with that, I can get an MP3 player and load it up with online-radio from WinAMP. No need to deal with this silliness.
So yes, I've tried XM, and didn't find it worth my money. Then again, we have a public radio station here that plays a wide variety of both mainstream rock and a good amount of indie, without normal commercials (just a bit of "this hour of programming brought to you by ____.") I'll listen to that, support the college students in the radio broadcasting school at the local college, and buy an extra 2 Chipotle burritos a month.
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Alpha 7:26PM (2/17/2006)
I installed a Via eden motherboard and a 8" xga touchscreen in my dash. Total cost $300usd. With that I have 80gb of mp3's and I can sync it to my bittorrented collection via wifi with my main pc. This setup if you have the knowlage or $$ will make it so I never have a need for anything else. Did i mention true 5.1 audio to boot with ac3 divx music videos?
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Dave 8:04PM (2/17/2006)
Oh, I don't know XM. Maybe its because the "XM Ready" system that came with my new car still requires another $700 before it functions. Not sure if it's your fault or Honda's, but seriously, that's not too enticing.
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Mick 9:13PM (2/17/2006)
From the overwhelming response to my question I take it there is no all-Irish music channel on XM or Sirius. How about an all-Pavarotti chan? Don't want no Placido, only Luciano. Have they got that?
And I wonder if XM prohibits its employees from using the company parking lot if they listen to Sirius! (Oo, I seem to be mixing my blog threads.)
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