Sirius XM’s Request To FCC Is Not About Raising Prices…It’s About Cutting The Ties That Bind Them
When Sirius XM merged, one of the stipulations was a three year price freeze. It seemed like a small concession to give in order to gain merger approval. Up until that point Sirius XM’s Mel Karmazin had spoken many times about the fact that the company had never raised the price of the base subscription and that he felt there was elasticity in the price. Analysts began taking an inevitable price hike into account with their projections. Then the price concession happened and a price increase to drive revenue was taken off of the table.
Last year I wrote several times that the FCC giving up their control over Sirius XM’s price structure was not a slam dunk. Once the government gets their claws into something it is often difficult to pry them free. In this case, I think all of the latest swings in technology will actually be helpful to Sirius XM. The company argued that the competitive landscape is more robust now, and this is quite true. With BlueTooth A2DP technology and car audio systems integrating more and more with devices outside the dashboard, consumers have more options than ever before.
Many media outlets have painted a picture that Sirius XM is seeking permission to increase prices. This is not the case at all. Instead, the company is seeking the FREEDOM to adjust their prices as they see fit. There is a distinct difference. This is more about gaining their freedom than anything else. While this freedom may ultimately lead to some price increases, higher satellite radio prices is not a foregone conclusion.
There are several factors that the FCC may consider in making their decision, and the company could have to offer up additional concessions to gain their “freedom”. One such concession could be for subscribers to both the Sirius service as well as the XM service. If you fit into this category you have the pleasure of paying full price for both services. Thus if you drive a Ford and your spouse drives a GM, you are paying for two full price subscriptions. If you have multiple subscriptions on the same service you get “family plan” pricing for the additional subscriptions. This very issue was brought up by consumers multiple times during the comment period for the merger.
What I foresee is that instead of a price increase the company will “rearrange” some of their pricing structure. Offering better discounts in some areas while perhaps increasing prices in others. Sirius XM needs to tread carefully here. The service, while superior in distribution capability and content offerings, has to compete with the likes of Pandora which at $36 per year is far less expensive than the current $150 plus you need to pay for Sirius XM. The easiest way for the company to put through an increase without consumer pain would be to build it into the price of a car from the start. This however would require some negotiations with OEM’s as they try hard to keep their prices competitive.
These changes in pricing structure will likely not be incorporated until the company rolls out Satellite Radio 2.0. Luckily for the company they have the latitude to price Satellite Radio 2.0 however they want. The price freeze applies to the base service only, thus, if Satellite Radio 2.0 is marketed as a premium add-on, the company can put a price tag to it. I am sure the company would rather couple pricing changes with the new capabilities and services offered by Satellite Radio 2.0 giving the consumers added value which would justify a price increase.
What Sirius XM is really seeking here is flexibility to price their service how they see fit. In my opinion their best chance in gaining that freedom is by sweetening the pot slightly. Personally I think the multi-subscription pricing across the two platforms would be enough to get the deal done.
Position – Long Sirius XM Satellite Radio
I think they should also be looking at additional packages. Perhaps even charging a buck more for each premium channel (Howard, NFL, etc.)
If they do decide to raise the base rate, I would increase it by $2 and get it done and out of the way for a couple of years. I believe that the people who drop the service would drop anyway, even with a .50 increase.
Also, I’d like to see some crafty adverts. Get Howard and Oprah in a shouting match, with Laura as the reg. They need to generate some buzz. Most people think of sirius xm as music only.
Mel’s a rip off artist. He promises he won’t raise subscription rates, yet somehow we are all paying more than before the merger.
They have already raised the prices for the multiple radio “discount” and done away with the free Internet listening. My favorite tactic is that now the companies are merged, I still have to pay full price for my Sirius and XM subscriptions because they don’t offer the multiple radio discount across the Sirius and XM brand names. I am failing to see where the merger helped the consumer. Besides turning off the service, how else could they discourage consumers from subscribing?
Satellite Radio 2.0 will probably be a flimsy piece of plastic that balances precariously from the cigarette lighter that you can mount your iPad to in order to listen to Rosie O’Donnell.
You sound very bitter and biased, we won’t pay much heed to your opinions.
Tristan, if you locked in before they did away with it, you still have free internet radio. I got a lifetime sub 3 years ago or so and I still listen free all the time.
Mel has kept his promises of not raising rates on the base subscription. The royalty pass through was approved by the FCC.
I agree with Sirius and XM subs being considered family plans. There is no reason why this could not be done and it SHOULD be done ASAP.
I have a lifetime sub also. But just because I am not getting screwed as much as another subscriber doesn’t mean I am happy about it. I was curious to see when I paid for the lifetime sub so I attempted to log in to my Sirius account. However, since I changed my credit card number and I am letting another sub expire as a protest, they won’t let me access my account without paying them $209.18 first. Screw them. Sirius should take a lesson from Netflix and learn how to treat their customers right.
I just found out that those POS’s won’t even let me listen to Sirius over the Internet because I am letting one of my subscriptions expire even though I have a lifetime subscription. What a bunch of B.S.! Sirius can rot in hell.
That’s funny.
Total nonsense or wishful thinking — this can only be about raising rates.
{if Satellite Radio 2.0 is marketed as a premium add-on, the company can put a price tag to it.}
I think this would be a big mistake, considering it would further alienate subscribers from the younger demographic and exponentially fragment their service offerings even more. This is like buying a computer, but having you buy the keyboard and mouse separately. Doesn’t make sense at all!!!!!
Spencer I agree that it’ll get tougher for Sirius as they have to compete with Pandora’s $36 even though Sirius has all this content.
Another question, what will Pandora do with funds it receives from it’s IPO???????? What is the offering anyways? $100million?
Pandora is showing up in phones, players, etc…. Next logical approach here is to hire some programmers, roll out some app enhancements and functionality, then SLLllloowwwlyyy get the content! What is Mel Karmazin & company smoking????
Spencer, when listening tonight on the radio show, it seemed like you all want Sirius/xm to do more with the internet. I totally agree,whether it be mobile or home entertainment devices. It seems like the main focus for Mel is balance sheet repair. Maybe the money’s not there yet to be first to market on all new,hot trends. It might not be such a bad thing to let others spend and fight it out while sirius can watch from overhead and swoop in on the best of the new trends. Also, if satellites will eventually be obselete would the satellites have any value to anyone else? It’s got to be tough to have all this money in satellites, knowing you need to be focusing on the internet,marketing,content and fixing the balance sheet. I know satellites are still good pipes but pandora,slacker etc. don’t have to worry about that expenditure. Oh well 2.0 could shed a whole new light on the situation.
Here we go! All I can say is that I have 3 subscriptions ( 2 home 1 is a life time sub and 1 car). I know that after the merger I lost the free internet listening ability. If the price goes up I most likely will drop one of my home subscriptions. It looks to me my life time sub was a good idea.
Sirius has not increased it’s basic sub. price since it sold it’s first sub. in 2003.
How much was your cable tv bill in ’03?
All companies, who do not have the government medding in their affairs, increase their prices based on standard of living increases. Sirius has not been allowed to do that.
However, the biger issue here, bigger than siri, is the FCC’s presumed right to tell a retailer of a purely discretionary product or service how much they can charge the customer.
There have already been stories in the news that many members of the new Congress intend to bring the FCC into the dock and have a chat about abuse of their authority. Good!!!
Had a 2 yr sub for Sirius in a leased car with a ~1 yr balance, no premium service needed, rcvd Howard Stern, all channels, no problems… New car has xm, and I can’t transfer the sirius service over??? New “demo” xm service is basic and it’ll cost $2-3 more/mo to get the “Premium XM service” to receive Howard?? Been a subscriber for 5+ yrs, Howard listener for well over 20 yrs going back to Wash DC. Seems SIRI don’t give a crap if I stay or go, nothing they can or will do as long as they can increase my avg monthly rate. Now that’s what I call “Premium” customer service…!