The Cunning Linguist :Þ
2005-07-29 13:02:04 UTC
XM, Still One Step Ahead of Sirius
Rivals Vie for Audience's Divided Attention
By Annys Shin
Washington Post Staff Writer
Friday, July 29, 2005; D01
Until recently, XM Satellite Radio Holdings Inc. and its rival Sirius
Satellite Radio Inc. were engaged in a tit-for-tat, deal-for-deal face-off.
Sirius landed the NFL; XM responded with baseball. XM signed an exclusive
deal with General Motors Corp.; Sirius partnered with DaimlerChrysler AG. XM
scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock
jock Howard Stern from terrestrial radio giant Infinity Broadcasting.
But for all the billions the two companies have committed to differentiating
themselves from each other, they are increasingly following similar business
strategies, analysts say. And that might not be a bad thing for the
satellite radio business, which while growing rapidly, has so far attracted
only a tiny portion of the 193 million people market research firm NDP Group
estimates listen to traditional radio. Satellite radio subscribers pay a
monthly fee to receive more than 100 channels, including music, news, talk
and sports.
Analysts expect XM and Sirius to generate enough revenue to cover the cost
of their operations in the next two years. But as the two companies move
into the home, laptop and personal music player, they are vying for
consumers' attention with podcasts, online radio and downloaded music. Which
prompts the question: Will satellite radio's audience be eroded by whiz-bang
gadgets before the industry escapes the red?
A recent NPD Group survey found that more people still listen to downloaded
music than satellite radio. But the satellite radio audience is likely to
grow as deals the two companies have made with automakers start to generate
a critical mass. April Horace, an analyst for Hoefer & Arnett Inc.,
estimates the total number of satellite radio subscribers will reach 20
million in five years.
So far, so good. D.C.-based XM, for example, reported yesterday that its
second-quarter loss narrowed and revenue more than doubled. It added 647,226
subscribers during the quarter and expects to hit 6 million by year's end.
Sirius, based in New York, will report earnings Aug. 2.
XM remains dominant, thanks to an edge in technology that dates back to
2002, when XM launched its service -- a year earlier than Sirius. That lead
has helped XM attract 4.4 million subscribers, compared with 1.5 million for
Sirius. The differences between the two companies may not remain stark for
long. The same outfit now manufactures microchips for both companies. The
two companies now charge subscribers the same monthly fee -- $12.95. And to
the average consumer strolling down the aisle at Best Buy, "the products
being offered are not a ton different from either company," said Jason
Helfstein, an analyst with CIBC World Markets.
"The biggest differences today are in technology and content. Both
advantages will start to disappear over time," Helfstein said. "They're both
going in the same direction."
XM and Sirius are still betting that most of their customers will tune in
when they're behind the wheel. The technology of satellite radio "is
designed for vehicles," said Jim Collins, a Sirius spokesman who cites the
same figures as analysts: There are 220 million cars on the road today and
16 million to 17 million new cars sold each year.
By now, most of the major automakers are committed to offering one service
or both, but it will be at least five years before automobile sales will be
the primary source of new subscriptions, Helfstein said. XM now draws half
its subscribers from the auto market and half from the retail market, said
spokesman David Butler. Sirius draws more of its subscribers from the retail
side, Collins said.
While they wait for subscriptions to pick up among drivers, the two
companies want to expose more people to satellite radio when they're at
home, shopping or online. Lately, this strategy has led to big-name
partnerships such as Sirius's announcement in June that it would provide
content to Sprint cell phones. Last week, XM and Samsung Electronics Co.
said they plan to introduce a digital music player with satellite radio in
time for the holiday shopping season. The device will work in conjunction
with an online music store exclusively for XM subscribers hosted by Napster.
Sirius is hoping to offer a digital music player with satellite radio by
then, too, Kit Spring, an analyst at Stifel, Nicolaus and Co., said in a
July 26 research note.
The next frontier is likely video, said Sean P. Butson, a Legg Mason
analyst. For months, Sirius officials have said they plan to offer video
service, most likely for kids in the back seat, starting next year. Analysts
expect XM to make use of broadcast spectrum it agreed to acquire earlier
this month for video and more data services. Butson said the two companies
could spend 2006 vying for the favors of SpongeBob SquarePants.
XM reported second-quarter revenue of $125.5 million, compared with $53
million for the comparable period a year earlier. The company had a loss of
$146.6 million (70 cents per share), compared with $166 million (84 cents )
for the second quarter of 2004.
© 2005 The Washington Post Company
Rivals Vie for Audience's Divided Attention
By Annys Shin
Washington Post Staff Writer
Friday, July 29, 2005; D01
Until recently, XM Satellite Radio Holdings Inc. and its rival Sirius
Satellite Radio Inc. were engaged in a tit-for-tat, deal-for-deal face-off.
Sirius landed the NFL; XM responded with baseball. XM signed an exclusive
deal with General Motors Corp.; Sirius partnered with DaimlerChrysler AG. XM
scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock
jock Howard Stern from terrestrial radio giant Infinity Broadcasting.
But for all the billions the two companies have committed to differentiating
themselves from each other, they are increasingly following similar business
strategies, analysts say. And that might not be a bad thing for the
satellite radio business, which while growing rapidly, has so far attracted
only a tiny portion of the 193 million people market research firm NDP Group
estimates listen to traditional radio. Satellite radio subscribers pay a
monthly fee to receive more than 100 channels, including music, news, talk
and sports.
Analysts expect XM and Sirius to generate enough revenue to cover the cost
of their operations in the next two years. But as the two companies move
into the home, laptop and personal music player, they are vying for
consumers' attention with podcasts, online radio and downloaded music. Which
prompts the question: Will satellite radio's audience be eroded by whiz-bang
gadgets before the industry escapes the red?
A recent NPD Group survey found that more people still listen to downloaded
music than satellite radio. But the satellite radio audience is likely to
grow as deals the two companies have made with automakers start to generate
a critical mass. April Horace, an analyst for Hoefer & Arnett Inc.,
estimates the total number of satellite radio subscribers will reach 20
million in five years.
So far, so good. D.C.-based XM, for example, reported yesterday that its
second-quarter loss narrowed and revenue more than doubled. It added 647,226
subscribers during the quarter and expects to hit 6 million by year's end.
Sirius, based in New York, will report earnings Aug. 2.
XM remains dominant, thanks to an edge in technology that dates back to
2002, when XM launched its service -- a year earlier than Sirius. That lead
has helped XM attract 4.4 million subscribers, compared with 1.5 million for
Sirius. The differences between the two companies may not remain stark for
long. The same outfit now manufactures microchips for both companies. The
two companies now charge subscribers the same monthly fee -- $12.95. And to
the average consumer strolling down the aisle at Best Buy, "the products
being offered are not a ton different from either company," said Jason
Helfstein, an analyst with CIBC World Markets.
"The biggest differences today are in technology and content. Both
advantages will start to disappear over time," Helfstein said. "They're both
going in the same direction."
XM and Sirius are still betting that most of their customers will tune in
when they're behind the wheel. The technology of satellite radio "is
designed for vehicles," said Jim Collins, a Sirius spokesman who cites the
same figures as analysts: There are 220 million cars on the road today and
16 million to 17 million new cars sold each year.
By now, most of the major automakers are committed to offering one service
or both, but it will be at least five years before automobile sales will be
the primary source of new subscriptions, Helfstein said. XM now draws half
its subscribers from the auto market and half from the retail market, said
spokesman David Butler. Sirius draws more of its subscribers from the retail
side, Collins said.
While they wait for subscriptions to pick up among drivers, the two
companies want to expose more people to satellite radio when they're at
home, shopping or online. Lately, this strategy has led to big-name
partnerships such as Sirius's announcement in June that it would provide
content to Sprint cell phones. Last week, XM and Samsung Electronics Co.
said they plan to introduce a digital music player with satellite radio in
time for the holiday shopping season. The device will work in conjunction
with an online music store exclusively for XM subscribers hosted by Napster.
Sirius is hoping to offer a digital music player with satellite radio by
then, too, Kit Spring, an analyst at Stifel, Nicolaus and Co., said in a
July 26 research note.
The next frontier is likely video, said Sean P. Butson, a Legg Mason
analyst. For months, Sirius officials have said they plan to offer video
service, most likely for kids in the back seat, starting next year. Analysts
expect XM to make use of broadcast spectrum it agreed to acquire earlier
this month for video and more data services. Butson said the two companies
could spend 2006 vying for the favors of SpongeBob SquarePants.
XM reported second-quarter revenue of $125.5 million, compared with $53
million for the comparable period a year earlier. The company had a loss of
$146.6 million (70 cents per share), compared with $166 million (84 cents )
for the second quarter of 2004.
© 2005 The Washington Post Company