Should XM and Sirius Lower Their Prices?

Posted by: Olga Kharif on February 17, 2006

In the past year, satellite radio company XM actually increased its prices. And this year, Wall Street analysts have been saying that both XM and its rival, Sirius, could increase prices again; the users, their thinking goes, will pay a bit more anyway.

But recently, I got to see a Forrester Research January study that seems to indicate that both companies should, in fact, cut prices — big time.

Forrester surveyed 4,752 U.S. households and discovered that only 3% of them plan to buy satellite radio service in the next 12 months.

What gives? Consumers are, apparently, waiting for lower prices. They are not willing to pay $12.95 a month for satellite radio service. Forrester found that 22% of consumers would sign up for the service if it were cheaper. And 19% of those surveyed might consider signing up if the radios themselves are more heavily subsidized.

I think this survey could be very telling in terms of what satellite radio companies might really do this year. As XM and Sirius chase growth, they might start dropping prices. The key for them will be to figure out how to do that profitably.

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Reader Comments

Wes

February 21, 2006 11:20 AM

I love XM Radio but I'm not a subscriber....WHY? The prices.

The last thing I want is another monthly expense coming out of my checking account especially since I have to spend $50 buying a satellite receiver. XM could do well by offering yearly service plans (which I would be interested in) for $99. I would consider a monthly service plan for $7.99. Above that it's just not worth it. CD's sound great and my car has an MP3 player built in.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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