XM vs. Sirius

1
XM vs. Sirius

• Robert Weesner
• Emil Keshishian
• Jeff Wedemeyer

2
History/Development of Satellite Radio

• Satellite radio was developed by NASA engineer
  Robert Briskman when he invented the core
  technology of satellite radio in the late
  80s/early 90s
• Briskman formed company called Satellite Radio CD
  to commercialize the technology but was without
  funding
• Briskman met venture capitalist and Canadian cell
  phone magnate David Margolese who invested the
  needed capital

3
History/Development of Satellite Radio

• FCC was reluctant to grant licensing for
  satellite radio but eventually did so in 1997
• FCC auctioned off the satellite spectrum which
  went to 2 bidders- XM and CD Radio
• XM Radio had been in development since 1992
• CD Radio changed its name to Sirius in 1999
• once FCC granted licenses to both satellite
  providers they had to deliver on their promise to
  deliver nationwide satellite radio service or
  their licenses would not be renewed in 2007 and
  the licenses would expire all together in 2010

4
Satellite vs. Terrestrial radio

• What is the value in satellite radio?
• unlike terrestrial radio, satellite radio
  provides nationwide coverage-no loss of signal
  when your listening to your favorite song
• sound quality of satellite radio is said to be
  close to CD quality

• satellite radio offers so much more programming
  variety than terrestrial radio which usually has
  about 5 formats to choose from in any major
  metropolitan area-satellite radio offers 100
  channels or more of different formats
• subscribers to satellite radio must pay a monthly
  fee and buy special radios which can cost up to
  400-terrestrial radio doesnt cost anything and
  is standard in any automobile
• satellite radio does not provide local
  programming that listeners want and get from
  local stations

5
Barriers to widespread adoption of satellite radio

• very expensive to put satellites into space
  (Hundreds of millions of dollars)
• receiving signal from space requires special
  equipment
• how could potential customers be persuaded to buy
  the satellite radios when they already have
  radios in their cars and homes?
• difficult to get advertisers to support a service
  that initially had no listeners, with out
  advertisers, how could the service generate
  revenues?

6
First-mover advantages

• first to capture market share (XM)
• first to build public awareness
• build alliances with major auto manufacturers who
  helped market the service even further as part of
  a feature in new vehicles

• first to be sold in major consumer electronics
  retailers (Best Buy and Circuit City)
• built customer base faster
• first to become profitable!!

7
Business plan for Satellite Radio

• Why was satellite radio created?
• Why is satellite radio better than standard A/M
  F/M radio.
• 48 of all radio stations use only one of three
  general programming formats.
• 71 of all commercial radio stations use one of
  only five general formats.

8
Satellite Service Programming

• Both XM and Sirius planned to have 100 channels.
• XM offers 101 Channels 70 music 30 talk/ sports/
  news.
• Sirius offers 100 channels 60 music 40 talk/
  sports/ news.
• XM offers no commercials on 35 music channels all
  other channels limit commercials to just 2 min an
  hour.
• Sirius offers commercial free music on all 60
  music stations.

9
Formats

• XM
• Classic music 3 Ch.
• Pop music 10 Ch.
• Jazz/Blues music 7Ch.
• Country music 6 Ch.
• Rock music 12 Ch.
• Latin music 5 Ch.
• 10.00 a month

• Sirius
• Classic music 3 Ch.
• Pop music 9 Ch.
• Jazz/Blues music 5Ch.
• Hip Hop music 5 Ch.
• Country music 5 Ch.
• Dance music 6 Ch.
• RB music 4 Ch.
• Rock music 13 Ch.
• 12.00 a month

10
Infrastructure

• Satellites orbiting around the earth servicing
  the United States.
• Network of terrestrial repeaters
• Satellite compatible radios
• Recording studios used to broadcast

11
Distribution

• Both companies believed that installation in cars
  trucks was likely to drive early growth.
• XM made exclusive deals with GM and Honda
• Sirius made exclusive deals with Ford and Daimler
  Chrysler

12
Financial

• At the end of 2003 XM radio reported that it had
  spent
• 470 million to put satellites into orbit
• 267 million to set up a system of repeaters
• 130 million on satellite control facilities and
  studios.

13
Why is XM ahead of Sirius?

• Larger customer based
• -XM had about 930,000,000 sales in 2006
• -Sirius had about 630,000,000
• -XM had almost 33 more sales
• -XM has 860 employees to serve the customers
  where Sirius has 772.

14
Why is XM ahead of Sirius?

• -XM launched Satellite before Sirius.
• -XM launched end of 2001
• -Sirius launched mid 2002
• -Sirius lost about 347,000 subscribers
• -XM has 2 strong satellites Sirius has 3 regular

15
Why is XM ahead of Sirius?

• -XM joined with auto manufactures about one year
  earlier then Sirius
• -Gave free subscription trials to new automobile
  buyers
• -Research shows 50 of customers subscribed the
  fallowing year

16
What must XM do to stay ahead?

• -Always be the price leader (XM about 10 Sirius
  13)
• -Offer promotions deals (Hook Customers)
• -Pay Off Matrix (Be ahead or equal never behind)

17
What must XM do to stay ahead?

• -They must promote their product to other
  companies
• -Create contracts with department stores
• -Create new unique stations (ex- hits for
  department stores)

18
Who are the indirect competitors? And treats?

• -FM/AM Radio
• -Internet Radio
• -Cable Television
• -CDs
• -Tapes
• -Portable Media Devices (Most Treat)