The Advantages of Sirius XM Satellite
Writing about satellite radio can be an exercise in futility. Sirius XM has very passionate fans, and they have those passionate fans for a reason. Getting commercial free music and unique content anywhere in the nation is outstanding, and satellite radio created a revolution in how we listen to and obtain audio entertainment. The merits of satellite radio stand alone. In covering this sector, I am perhaps sometimes remiss in pointing that out. Being around it so long, you can sometimes fall into a trap of thinking that everybody already knows this.
In covering satellite radio, I inevitably follow pretty much anything that has to do with satellite, media, and the Internet. I have seen start-ups come and go. I have seen terrestrial radio shift their business model. I have seen Internet come and go. Some “competitors” have weathered the storm, and the shifting dynamics of technology always keep me on my toes as to what services are viable.
Yes, I write about Pandora, Slacker, Apple, Google Music, and several others. I find these services have some compelling things that attract the attention of consumers. This is not to say that they are better than Sirius XM, it is only sating that they have facets of what they do that are compelling. In some areas these services outshine satellite radio, while in other areas they fall short. My focus has always been that Sirius XM should try to appeal to any market segment possible. My philosophy is that as good as satellite radio is, it is not perfect. I know that saying this is not the popular thing, but I try to deal in reality.
If I were to gauge my own audio listening in the car I would say that I spend 70% to 75% of my time listening to satellite radio, 20% of my time listening to my iTunes, 5% of my time listening to Slacker, and about 5% listening to terrestrial radio. Clearly I have a preference. Clearly there is something unique about satellite radio that compels me to listen to it more than all of the other competitors combined. I would say that it is a combination of unique content, ease of use, and the ability to simply turn it on and go. My habits are probably not unlike the habits of the average person in my demographic that has satellite radio.
In my house, things differ. I listen to probably 50% satellite radio and 25% Itunes, and 25% Slacker. What is the difference? Simply stated it is the quality of the internet connection, and my selected device. In my house I use a Logitech Squeezebox. All of the services are easy to navigate and use on the remote. Perhaps it is this reason that I find myself not underestimating the impact a higher quality Internet connection or integrated ease of use in a car would have. Most people probably do not use a Squeezebox, so their listening habits may differ in their own home.
Satellite Radio’s distinct advantage at this point is in the car. They have contracts with OEMs that ensure the availability of satellite on a large scale. Satellite radio in the car is easy. No plugging in, syncing, or remembering to refresh your Slacker channels is required. That advantage that satellite radio has will last for a few more years at least. My point in bringing up other services such as Google Music is that the road these services have to play through a car stereo are not as difficult as the road satellite radio had to travel. I am thinking longer term, and my only point is that satellite radio needs to have a strategy in place. Anyone who disagrees with that assertion is being short sighted. Cell signals and Internet coverage will improve over time. I do not think anyone would argue that.
With that being said, Sirius XM has some compelling advantages over other services. Some were brought up in the comments to my latest article about Google Music. The reliability of satellite delivered audio content can not be debated. It does indeed have better coverage than content over cellular networks. Opinions on this will vary though. I live in Massachusetts and use Verizon. I get a terrific signal in the areas I spend 75% of my time in. However, if I drive thirty minutes away, I would be very frustrated if I was trying to listen to streaming content over my phone. In fairness, I do have a couple of dead spots right out of my driveway with satellite radio. I can drive a mile in either direction and am lucky to keep my XM satellite signal for 100 feet. After that though, all is fine. At this stage the signal availability on a national basis goes to satellite radio by a wide margin. It is a distinct advantage that satellite delivered audio content has over anything else. Whether you are in the middle of Death Valley, driving down the PCH, or somewhere on Interstate 95, satellite radio has you covered. Ever see those maps Verizon and At&T pull out on their commercials? Don’t believe the hype. There definition of coverage means you can hear every other word on your conversation! That does not translate well to music.
I think that consumers look for some key elements when considering their listening habits:
CONTENT
The saying that content is king has been bandied about quite a bit. It is certainly true that content is what brings people to the plate. The advantage satellite radio has is that they offer a wide range of content in not only music, but talk and sports as well. I feel that it is the talk, and sports that offer the biggest advantage here. Sirius XM simply has content that is not available anywhere else. From Martha Stewart to Howard Stern, to the CNBC, the service simply delivers more unique content than anyone else. This will be the case for quite some time, but as we all know, there will be a day where that could change. The advantage Sirius XM has is that they already have relationships with the cream of the crop. It is now their job to keep those relationships going. With music, the gap is narrower, but Sirius XM is still easier than the others to use, thus will carry an advantage for some time to come.
Ease of Use
This is just now becoming an issue in audio entertainment. In particular this is the case in the car. Sirius XM is as easy to use as an AM/FM radio. For the average person, That is a HUGE advantage over iTunes, Slacker, Pandora, etc. People do not want to take the time to plug something in, load an app, and figure out which playlist they want to hear. There are people who’s idea of a cell phone is for phone calls. Going beyond that simply is not an option for these people…they have not even attempted texting yet. This is more a generational issue though. The younger crowd is far more willing to go through some steps to get what they want. Personally I do not even bother to create playlists on my iPod. All of my music is there in one big playlist. However, I do know people that have dozens of playlists, and love it. The average person though, probably wants simple, and Sirius XM has that in spades over any other service.
PRICE
This is another aspect that was non-existent until satellite radio came along. Satellite Radio proved that people are willing to pay for a superior service. While the number of subscribers is not as high as we would like, the audience is large enough to be viable and good quarterly reports from Sirius XM will bear that out. Satellite radio fans see a great value for what they get. Some would even be willing to pay more. However, we need to consider the average person. The price point of Sirius XM being in the sweet-spot is a question that has yet to be confirmed. There are still plenty of people happy with free terrestrial, about 12 million happy with a modest fee on Slacker, and 60 million who take advantage of Pandora. Price will be a key component over the next few years. Sirius XM is still adding subscribers at current pricing levels, so they can compete at these prices. The real key will be if and when the ease of use and content offerings of other services improve.
The main advantage that Sirius XM has is that they are established. They are a known brand, and have deals in place with OEM’s that deliver more and more satellite radios to the consumer. These advantages will last for quite some time. These advantages can also stay in place if Sirius XM maintains the pressure that they have applied over the last few years. My opinion is that there are aspects of other services that Sirius XM should consider matching. I think that Sirius XM needs to improve their Internet service, and be ready to implement a viable competitive plan against the other Internet services. By doing this Sirius XM could further exploit the current advantages they already have, appeal to a wider demographic, and secure the future of the best radio on radio.
Sirius XM is by far my preference, and will be for a long time. I love the service. I simply don’t want to settle for what we have now. I want the best to stay the best. There is ALWAYS a way to improve and grow.
Position – Long Sirius XM Radio
Face it Spencer – There is no money in internet radio other than as an add-on service.
And Sirius is not going to be going to open up a music store like iTunes or Google. Sirius isn’t in the retail business.
You can post about internet radio all you want. That won’t make it a good business.
“I think that Sirius XM needs to improve their Internet service, and be ready to implement a viable competitive plan against the other Internet services.”
Exactly what is weak about Sirius internet service other than not having Howard on the apps? You keep talking about an overhaul.
A viable competive plan – they are available on the iPhone, Blackberry and Droid. They have their own internet radio in the TTR1. Their content on the net puts Pandora to shame.
Whats exactly else do you want?
Some people simply want thing to stay the same. Sorry it does work that way. If you don’t comprehend some of the advantages slacker and Pandora have over sirius xm’s service you simply do not understand modern radio and all of its facets
You want them to become like Pandora and do an automated personalized radio format? Have you talked about that with them? Can they make money that way? What are Pandora’s EBITDA growth numbers?
I did not say that I wanted them to be like pandora. I have stated MANY times things they could do to improve their internet model.
1. Don’t make me sign in every half hour.
2. Give me some album art
3. Give me some lyrics and band info
4. Let me skip songs i don’t want to hear, or even ban them.
5. let me create channels of content I like. With Slacker i type in “Rush”, and I have a channel that plays a lot of Rush, and other bands that are similar. It is simple and easy
6. Take the internet service deeper. Bring in a modern Jazz channel, a deeper blues channel, etc.. Give Indie bands a channel on the Internet service and make it a proving ground for the satellite service.
Sirius XM’s internet offering is half of what it should be or could be. If their is no money in it, then abandon it altogether, call it a day and make a go of it with satellites only.
Only blundering idiots think that Internet Radio is going to disappear. It may be some time before it gets to a car, but I would bet it wont be as long as most think.
Satellite is king of the hill right now. It is their kingdom to keep or lose. My philosophy is to keep up with things so that you don’t crumble. I think that it is prudent to change with the times and the technology. Yes, there are still some who use a typewriter and love it, but that does not get them very far.
You want to know Pandora’s EBITDA growth numbers? We all would. Why ask a question that no one has the answer to. What we know is that the business over there is growing. We do not know how profitable it is because they are not public. Do you think Google wants to go into music to lose money?
I realize that you do not like the Internet Radio business model, but I have not seen you give any reason as to why you feel it is not viable. Why is Sirius XM’s version viable in your mind and everyone else’s not? Come on now…..take off the rose colored glasses and be a bit objective.
“Only blundering idiots think that Internet Radio is going to disappear.”
Exactly who said it is going to disappear. Internet radio has been around since 1994 with no viable business plan. There are hundreds of thousands of internet radio companies on the the net. It’s not going anywhere.
There are 2 problems that still need to be addressed –
1. A growing revenue and EBITDA model.
2. The barrier to entry doesn’t exist. A 5 year old can create an internet radio station.
I just don’t see these issues being overcome for internet radio. The business plan that works has not been created yet and with the RIAA fees it looks like it never will make any serious money. Big issues.
Pandora made a big splash early on in smartphones. But apps on smartphones will be as commonplace as websites on the net very soon. There will be millions of them. Fragmentation is a key issue as well.
“Why is Sirius XM’s version viable in your mind and everyone else’s not?”
Sirius has an add-on service for ARPU and retention reasons. As a stand alone service I don’t think any model works right now.
I believe Google is going to compete with iTunes as a music store. That is a good retail business. It’s not the radio business though. It’s a very different business. I don’t believe Sirius will ever go into retail.
Google’s plans go beyond a music store
“Google’s plans go beyond a music store”
Well that will be interesting to see. Google is a great company. I don’t believe the plan is radio. I think they are going hard after iTunes with a souped up version including search and ads.
I don’t remember the exact numbers, but over 80% of “radio” listening has been and still is in the vehicle. That is why XM and then Sirius long ago went to the car manufacturers.
If you don’t recognize that “internet” radio has to compete in a vehicle environment to compete with Sirius XM, then you miss the most significant point.
And you have to recognize the cost of providing that mobile bandwidth and willingness of consumers to pay for it, just to get “music” in their vehicles.
The same arguments that were used against Satellite radio (and still are) have to apply to internet radio as well. Will they pay for it? What will be the service quality? Will they accept commmercials, or pay for a service, plus the cost of bandwidth?
Honestly, I would like to see a conversation about what Sirius should do on the internet differently and the business viability of such a plan.
For one I would say Sirius ever putting a free plan like Pandora’s would absolutely cannabilize it’s own sub service. So I think if you are looking at a Pandora like service on the net it can’t be free. To do an add-on automated service you have to ask would it be more viable than Sirius’ current internet offering or would you do it as an addition to the current one. Would it have an acceptable cash flow margin? Do any internet radio services have any voiable revenue plan? There are tons of questions.
Pandora is now profitable. Read this wall street journal piece and you will see how much more Sirius XM can do. Pandora adds 100,000 users a day! There is money there.
http://blogs.wsj.com/digits/20.....hnology%29
There is opportunity for Sirius XM
Making $2 per user per listener per year in revenue vs. Sirius $70 per listener per year makes me seriously wonder about the EBITDA growth, especially with the prohibitive RIAA fees.
Right now it’s a tough business to be in and I just don’t see it getting better. If there is an internet model out there that would be accretive to Sirius’ EBITDA I think Mel would grab it. I don’t believe there is an internet company out there yet who has that type of business model.
Pandora does better than $2 per year. They are likely well beyond that at this point.
Mel Karmazin May 4, 2010 –
I also want to highlight once again for you the uniqueness of our business model which is the subscription service. If you take the audience, the cum audience of terrestrial radio and you take the total revenues that terrestrial radio generates you see they monetize their audience somewhere between $10-20 per year. If you do the same thing to the internet users and take a look at the number of people they have using their service and take a look at where their revenue is you will see they are only monetizing it to the tune of about $2 per year per user.
SIRIUS satellite radio has 19 million subscribers. We have over 35 million listeners. You take our revenue and divide it by those 35 million listeners and you see we are generating $70 per listener per year. Again, as compared to $10-20 for terrestrial and $2 for internet users. So I think you see the strength longer term of our business model.
http://seekingalpha.com/articl.....transcript
So you can obviously see see Spencer as an add-on ARPU enhancer and a loyalty and retention driver, internet radio works for Sirius. As a standalone business, internet radio pretty much sucks as a revenue producer and with those RIAA fees increasing EBITDA is really difficult.
I wish there was a good internet radio business model out there. I am sure Mel pounce at it if there was anything accretive to cash flow.
My belief is Google is going the route of iTunes and will probably raise the bar. I think that really was inevitable with Apple and Google going head to head on smartphones. A very good move by Google.
Yes I know my stuff, but I have much more important things going on in real life right now, so I am going to have to take a break from talking about the sad state of internet radio’s business model Spencer.
Have a good weekend dude. It’s been fun arguing.
Sad state? I wouldn’t call their growth rate and increasing revenue a “sad state.” From a business standpoint, they are looking pretty solid.
Muscle….
We do not know if Mel is referring to pandora or internet radio as a whole. Pandora is supposed to bring in $100 million in revenue this year. They are not as far along as Sirius in terms of time to roll out. Their model will work fine, and the potential of Pandora increases daily.
I really got get going Spencer. There are serious health issues in my family.
From what I read recently Pandora passed 60 million registered users. At your 100 million in revenue that is coming in less than $2 per user now.
Yes, internet radio sucks as a business. It’s RIAA fees are horrendously high and it has a helluva time monetizing users.
But what Google is going to do is not radio. According to all reports this is a direct targeted attack on iTunes.
Can you define “sucks as a business?”
It’s RIAA fees are MUCH LOWER now than ever. I wouldn’t call them horrendously high at all.
What is hard about monetizing their users? Can you explain what you know about it and what is so hard about it?
I feel that what is needed is an automatic lifetme sub with every new car receiver sold. Package the price into the system. Let’s say that the manufacturer negotiated cost would be $350 then having this worked into the price of the vehicle would cost the initial buyer about $7 a month over a 48 month financing period assuming the car was 100% financed. A trivial amount to say the least, but Sirius would be in that car until it was crushed or the radio got stolen. Subcriptions would go thru the roof and so would Sirius’ income.
I see where some manufacturers charge $495 for a satellite receiver while others state that it’s included in car OEM. Either way the customer ends up paying for it. What I’m sying is that if their getting the first half of what they need to listen to satrad, why not provide the second half as well OEM? It’s as simple as that.
I have been trying for over 2 years to get a straight answer from Sirius management re: why vehicles are not packaged with lifetime subs. They will not answer that question. I’ll repeat this again, Mel is a wheeler and dealer and is not as smart as everyone believes him to be….he is surrounded by idiots. And that is no joke.
How much would you like to see the price of the vehicle go up to pay for a lifetime sub? $500? What percent of that goes to the auto company and the dealer? How many new car buyers want to pay for a “lifetime” sub for a vehicle they may only own for 3 or 4 years?
Before you start calling others idiots you should look in the mirror. You obviously know nothing about the auto industry and consumer and dealer sensitivity to pricing.
Just because you have an “idea” don’t assume its good.
Ok Hooper. We know who you are.
Sirius/XM doesn’t need more cheerleaders, so I appreciate your articles, they seem fair to me. I have had the service for 2 years and owned the stock for 5+ years. I recently had to drive in a car without Sirius/XM it was like torture. I hope the stock starts to move safely above a dollar, but I feel like it will languish between $1.02 and $.92 for the next several months. I hope I am wrong, I would love to see it back at $1.25.
I appreciate the kind words. I do not understand why there are so many people following this equity that want to ignore the marketplace. Satellite radio needs to grow and keep people connected. They can do it, they just need to take thye steps.
Sirius radio is much better then all the others they have something for everyone, they just have to do a better job marketing their product especially the used car market.
GREAT article, it has noted/answered many of my concerns. They could use a little more of the ‘Google/killer’ instinct. Show that map on national TV and show their coverage (everywhere except maybe NORAD’s underground bunker?). There is a lot they can and hopefully, will do. If we could just get Malone out of the way. I can’t figure what his impact is going to be. Can we buy him out? Can he dictate terms?
With my Skydock and iPhone I now have a computer in my car. Isn’t this the next step? Wireless and de-activated when driving, except for the passenger. Isn’t wireless going to cover 80-90% of the population soon? SIRIUS needs to tap the 60 mil tech teens.
Eaxactly….I use a skydock because I have the most options with it. I have written about the demographics issue as well
Sirius does allow you to put preferred music into some of it’s dockable players and when that song is played the channel is changed to that song for you. It also has rewind and pause features. Remember, this is live radio, not servers randomly picking songs, at least for the most part, so the content delivery at the source is quite different from Internet radio.
Sirius’s Internet radio is just fine. I use it 8 hours a day at work. I don’t know why you have to log in and out every half hour? I go an hour and a half before I get a message asking me if I’m still listening.
I listen to Sirius about 80% of the time. Either from my home dock or from the Internet at work. Pandora is good for about a week or two, then it’s just a repetitive mess. I had to go without Sirius for about a month one time and it absolutely sucked. I had to rely on Pandora and my iTunes. I wasn’t happy and when I got my Sirius back and a dock player for my home I was back in business and life was normal again.
Sirius is by far the best option for me. The music is great, channels are diverse, and where I live in Boston the service is top notch and almost as reliable as an FM radio. I’ll be a Sirius subscriber as long as Sirius will let me subscribe. It’s a huge part of my music lifestyle. More so then my iPod touch, my iTunes playlist on my computer, or any Internet radio service I’ve tried. Not having Sirius for a month, after 2 years of service, made me realize how important it really was to me.
I would like to see Sirius get a much better desktop home application that can integrate buying own songs and make a library. Maybe they could even share in the revenue if the song is purchased directly from the streaming station. There present internet radio looks like hell and has no features. XM’s is much better, but still lacks and they should have just one with the option to sign on to either service.
I don’t know about Pandora and Slacker, but whether they have a great service or not, I doubt they have a viable business model. Time will tell and I think the NAB terrestrial cronies are backing them with cash to try and hurt Sirius.
sxminvestor….
The NAB and terrestrial do not back these services up. They have their own versions.
I have 3 radios, 2 in cars, 1 in the house. Have a 45 minute commute in CT and my Stilletto 2 is awesome. I can save songs, create playlists, schedule recordings. These portables need to be marketed better. Unfortunately the Stilletto isn’t manufactured by Directed Electronics anymore, Sirius needs to get back on a hardware platform similar to the Stilletto. I just don’t think the built-in Sirius radios in cars doesn’t do the service any justice (can’t save songs).
I also want to mention that reception used to be spotty, with the new satellite in the air i lose signal less often, much less. Probably clips out once or twice on the ride home.
Spencer, thanks for the site. You do an incredible job.
“Cell signals and Internet coverage will improve over time. I do not think anyone would argue that.”
OK, I won’t argue with that, but it doesn’t come without a cost and its a point that can not be forgotten. There is limited bandwidth available for cell phones and video and music services eat it up. That’s why you see ATT and others increasing the price of unlimited data services — its costs them a ton to upgrade and expand their networks and they need a return on that investment.
Love Sirius – what is BOGUS about Sirius is this: if I am an “XM” subscriber with the best of Sirius package – there is NOTHING I can’t get of what they have to offer – if I am a “Sirius” subscriber (which I am) with the best of XM package (which I do) – there are several glaring programming pacakge i can NOT hear. MLB games and Fox Sports radio are the two most glaring. They (Sirius) needs to fix this ASAP. Re-sign Howard, and add those two items – and Sirius is the best. If they build around mad Dog Radio and get talent for sports talk – i.e. Dan Patrick, Colin Cowherd, etc. – an they would dominate.
Ease of use? Absolutely! I don’t have to turn on my sat. radio and download the latest software updates (which invariably screw up something else). I don’t worry about viruses (somebody almost got me with one this a.m.).
Playlists? I must have over a 1,000 hrs. of 33s, tapes, and cds. Once in awhile, I play one.
When I’m on the road for 4-5 hours, I want to hear recordings I have never heard before, or maybe something else from the kaliedoscope of broadcasting that sat. radio provides——-and internet radio doesn’t.
The further out in the sticks you are the better the reception is. Will that be the case for internet in the car? I wouldn’t bet on it.
By the way, something that isn’t mentioned is what will multiple electronic gadgets in your car do to your insurance rates? Speaking as one who has spent his bus. career traveling, driving is all about driving, keeping you attention on the road.
Insurance companies will charge you nicely for your electronic distractions.
Is there any advantage of having sirius xm vs sirius vs xm ?