Sure, XM (XMSR
) and Sirius (SIRI
) would wring out plenty of cost savings as one company. But the two have yet to earn a penny of profit. Their combined losses for 2006 are expected to hit $1.7 billion. And competition is everywhere. Car salesmen are pushing new iPod jacks. More than 57 million Americans now listen to some form of Web radio each week, says radio-audience tracker Bridge Ratings, compared with 14 million subscribers for XM and Sirius combined. Broadcasters are beginning to offer high definition, or HD, radio. While consumers need to buy a special receiver to get HD, which squeezes more programming into the same frequency, the service is free.
Meanwhile, 240 million folks listen to regular radio at least once a week. And who knows what's around the corner? Maybe a form of WiMAX will be capable of streaming Web radio to a speeding car.
Here's a radical notion: Perhaps XM and Sirius should just take the satellite out of satellite radio. "Satellites are a really expensive and soon-to-be obsolete method of delivery," says Paul Maloney, editor of RAIN: Radio and Internet Newsletter. XM and Sirius each have already spent $1 billion-plus to build and launch their birds, and these things last only 10 to 15 years.
XM and Sirius may never have cool hardware. But they do have decent programming, an eclectic mix that appeals to all kinds of interests, from Major League Baseball games to unsigned alternative bands. O.K., Sirius might have overpaid ($500 million over five years) to get shock jock Howard Stern, but he draws millions of listeners each day.
Where better to sell that programming than on cell phones or Web sites? XM and Sirius are already doing it--at least to a limited extent. Their subscribers can listen to all the channels by visiting the companies' Web sites. XM provides some of its offerings to aol Radio (TWX
), and two dozen or so channels to Cingular and Alltel (AT
Distributing more programming through third parties would require moving beyond the current $12.95-per-month subscription model. That could include sharing ad revenues or subscription fees with wireless carriers or Web sites. XM's deal with Cingular may provide a model: Subscribers pay an extra $9 a month to get the XM channels, a fee that is divvied up between both companies.
XM and Sirius have built surprisingly robust brands in six years, thanks in part to pushes in such retail outlets as Best Buy Co. (BBY
). For media outfits trying to reach ears and eyeballs in multiple ways--including, if it survives, via satellite--a strong brand and content may well be the killer apps. By Tom Lowry and Paula Lehman