Satellite Radio Killer Application

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Satellite RadioKiller Application?

• Group 8 Section 11
• Eric Mollo
• Mike Ferranti
• Kristen Blough
• Rushi Sukharamwala

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Presentation Overview

• How it works
• Companies
• What they have to offer
• Industry Analysis
• Drawbacks
• Is it a Killer App?

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Satellite Radio

• How does it work?
• Communication Satellites
• XM - Geosynchronous orbit
• Sirius - Geosynchronous elliptical 24 hour orbit
• Terrestrial Repeaters
• Designed to rebroadcast at higher power levels
• Antennas/Tuners
• Cars, Buildings, Homes

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XM Satellite Coverage
Sirius Satellite Coverage
Sirius Satellite 24 Hour Satellite Rotation
Sirius Satellite 24 Hour Satellite Rotation
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FCC Licensed Companies

• Sirius
• Founded 1990
• Bid for FCC License 89.9 Million
• Current Subscribers 5.1M
• 130 Channels
• 69 Commercial Free Music
• Previously known as CD Radio

• XM
• Founded 1992
• Bid for FCC License 83.3 Million
• Current Subscribers 6.9 Million
• 170 Channels
• 69 Commercial Free Music
• Previously known as American Mobil Satellite Corp.

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XM and SIRIUS Subscribers
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Service Offerings

• Sirius
• Purchase Receiver
• 59.95 - 119.95
• 10 or 15 Activation Fee
• Inclusive Package
• 12.95 Monthly
• 499.95 lifetime subscription
• Other Offerings
• Marine Weather
• Sirius for the Work Place
• Internet Radio

• XM
• Purchase Receiver
• 59.95 99.95
• Inclusive Package
• 12.95 Monthly
• Discounts to as low as 9.99 with 5 year plan
• Other Offerings
• Marine Weather
• XM for the Work Place
• Internet Radio

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Program Variety

• Sirius
• Sports NBA, NFL, NCAA, Soccer, Horse Racing,
  NASCAR
• Comedy Howard Stern, other stand up
• Martha Stewart

• Sirius XM
• Music
• Pop, Rock, Electronic, Hip Hop, Country,
  Christian, Jazz, Classic, International
• News
• Weather
• Traffic

• XM
• Sports MLB, NHL, NASCAR, PGA, NCAA
• Comedy Opie and Anthony, other stand up
• Bob Dylan, Oprah, Al Franken

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Threat of New Entrants

• Low because of high barriers to entry
• Need FCC approval to access digital spectrum
• Cost XM and SIRIUS 200M to use
• Record industry lobbies Congress
• PERFROM Act of 2006
• XM Inno

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Bargaining Power of Suppliers

• High
• Record industry controls content
• Want to increase licensing fees
• Ex Cant have Elvis satellite radio station
  without approval from Elvis record label
• Forces satellite radio companies to pay prices
  demanded by record industry

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Bargaining Power of Buyers

• Low because of switching costs
• Specialized content
• SIRIUS offers Howard Stern
• XM offers Weather Channel
• Real-time traffic info and GPS navigation

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Threat of Substitute Products

• High
• HD radio offers enhanced sound quality and
  clear reception
• Google AdWords dMarc Broadcasting
• Offers services that dynamically generate and
  change commercial content
• By the 4th quarter of 2006, Google expects
  AdWords clients will be able to place advertising
  in both terrestrial and satellite radio spots

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Industry Competitors

• High because it is expensive to leave the
  industry and low differentiation between products
• XM Porsche vs. SIRIUS VW/Audi
• Exclusive deals to be respective providers of
  satellite radio to these car companies
• Porsche has 25.1 stake in VW
• XM Hyundai vs. SIRIUS Kia
• Hyundai is parent company of Kia

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User Perception

• When it comes to technology, there are two kinds
  of people in society
• People who prefer control over comfort
• People who prefer comfort over control
• Younger people are usually more controlling
• People 12-17 use MP3 players the most
• Dislike commercials and commentary between songs

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User Perception

• Older people usually prefer comfort over control
• Have the general idea of, Dont fix what isnt
  broken
• Listen to the radio for personal connection with
  DJ
• Have become accustomed to AM/FM radio

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Initial Drawbacks

• Forced to pay almost 200 million for use of
  airwaves
• Digital Performance Right in Sound Recordings Act
  of 1995 forced payment of royalties to performers
• Costing XM about 20 million in two years
• National Association of Broadcasting (NAB) didnt
  like satellite radio from the start

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Current Drawbacks

• High hardware/service costs
• About 12 of control seeking users would turn
  down free satellite radio
• About 30 of comfort seeking users would turn
  down free satellite radio
• Lack of local broadcasting
• FCC doesnt allow them to broadcast locally
• Broadcast a limited amount of local channels
  across the nation through a loophole
• Local coverage still doesnt compare to AM/FM
  radio

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Current Drawbacks

• Service charge causing users to prefer portable
  receivers
• Butproblems with portable devices
• Limited battery life (5 hours)
• Lack of adaptability with iTunes
• Dead spots
• Need to power off devices during scheduled
  recording sessions

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Potential Drawbacks

• Limited censorship
• Satellite radio not licensed by the FCC
• Receive strict First Amendment protection
• The NAB has been leaning on the FCC to provide
  oversight and regulation

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Killer Application

• A killer application is a good, service, or way
  of doing business that dramatically changes the
  accepted order or the old way of doing things.
• Satellite Radio is on its way to being a killer
  app to terrestrial radio for a number of reasons
• Portability
• Universal Signal
• Big Name Entertainers (Howard Stern)

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Portability

• Initially portability was a problem with
  satellite radio.
• Now there are gadgets that make portability no
  longer a problem.
• The Inno is the newest and latest player made
  from Pioneer.

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Universal Signal

• One of the main problems that people experienced
  with terrestrial radio is that a signal is not
  always available.
• Rural or lesser populated areas
• In tall building and in tunnels
• 3 Universal satellites assure premium quality
  programming.

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Big Name Entertainers

• In early 2006 XM signed Oprah to a 3 year 55
  million deal.
• XM also signs shows such as Friends and other
  sitcoms.

Most notable signing was that of Howard Stern in
2004. He signed a multi-million dollar agreement
with Sirius that would be fulfilled over a 5 year
span.
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Are You Sirius ???

• Howard Stern was paid 500 million for a 5 year
  exclusive contract with Sirius.
• On Sirius he is able to have his show censor
  free.
• So why the high price tag ?
• Both he and Sirius target the 18-49 year old male
  segment.
• Main reason was to compete with XM increase
  market share

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Satellite vs. AM/FM

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Satellite Radio is

• Still in the development stage of its life cycle
• Satellite radio and its features are far superior
  to that of terrestrial radio already
• It may not be a killer app right now but
• Contracts with big name entertainers
• Contracts with all major sporting leagues
• Constantly improving sound quality
• Commercial Free radio!
• What more could you want?!?
• Only we can make it happen, so go out and try
  it!