SatRad: What Does The Future Hold?
1) In the conference call today, Mel Karmazin repeated the fact that a-la-carte would require a new radio. The technology is available to do this on existing radios, to some extent. While true a-la-carte would probably require a new radio, XM does have some content/channels which requires the consumer to call to activate. They also offer the ability to block certain channels, such as the extreme language channels. Sirius needs to quickly reach out to the XM subscribers and offer their biggest asset, which is Howard Stern. Perhaps with Stern broadcasting on both spectrum’s, they can set Stern to be premium content for XM sooner rather than later. If the move would entice even 5% of XM’s subscribers to pick up this premium channel at $4 per month, this would bring in an additional $22 million dollars per year in just subscriber fees, at no added expense to the company and does not factor in additional ad revenue. A change like this can be done immediately.
2) Interoperable Radios really need to be available before Thanksgiving. “Black Friday” is traditionally the busiest shopping day of the year. In order to truly breathe some new life into the retail market, SIRIUS XM Radio need to make a concerted effort to get these radios on store shelves by Black Friday, and have a large advertising campaign at least a month before that. The regulatory delay may have made this difficult, but hopefully Interoperable Technologies, Inc. has been working behind the scenes to make this a reality.
3) Renegotiate OEM contracts in a way that make sense for EVERYONE involved. As Tyler pointed out in his article Serious OEM Potential For SIRIUS XM Radio, there is a way to renegotiate these deals where EVERYONE makes money. In addition to this, SIRIUS XM needs to push OEM’s to transition to interoperable radios as soon as possible, and push for 100% penetration as soon as possible. It only makes sense, and if the OEMs are making decent money off of these deals, why would they have a problem with it?
4) Transition to an advertising-based business model. WHAT?!?! Yes. Sirius has the capabilities (and the patents) to switch their business model to an advertising based business model, while still maintaining their subscription based business model. It is called a layering technology. By using the radio ID, it accesses the system to see if you have a subscription. If you do have a subscription, then all you hear is music….No commercials. If you do not have a subscription, then for 10-15 minutes each hour, instead of a song that lasts 2 minutes 30 seconds, you get 2 minutes 30 seconds worth of advertising. Of course, each burst of advertising has a voice over saying something like, “If you are tired of these commercials, call customer care to subscribe today for as low as $6.99/month!”. This will effectively cause all radios to be usable, and allow you to create additional advertising revenue. Of course key content such as Howard, O&A, NFL, etc., will not have any free listening privileges (content is king, after all).
5) Continue to work with dealerships to work on the Used Car market. In the article Betting On Used Cars, Tyler states that in his opinion, the used car market should be considered an added bonus for now. While I understand his point and I do agree, I feel that if the dealerships are able to sell the deal mentioned above in new cars, they will probably be willing to do something similar in the used market. There is a potential 20 million radios out there that could be reactivated, with more being added to this number every day.
In summary, I am looking for the combined SIRIUS XM Radio to start delivering some impressive products and services pretty quickly. Mel already had a plan in mind when he proposed this merger, and I do not see him slowing down now. I eagerly await the future of SIRIUS XM Radio. Do you have ideas on what important moves these companies need to make? Feel free to share them here, or over in the Forums.
Disclosure: Long SIRI
A la carte satellite radio, while theoretically
possible from a technological standpoint, is economically problematic because of costs associated with traps the satrad provider would have to install and maintain. IMO, it’s a pie-in-the-sky promise that’ll never happen. What we’re more likely to see is a twist on ‘on-demand’ programming — assuming Sirius XM comes up with a simple process, e.g.; commands from the head unit only, that accommodates micropayments.
Interoperable radios need to be built and put on the market ASAP, no question. But an immediate priority should be placed on each division’s transfer of certain proprietary channels to spectrum belonging to the other. Undoubtedly both divisions may have to restructure their channel packages and/or drop specific channels altogether to make such transfers possible.
Resolution of the OEM issue will become academic once Sirius XM begins the cross-migration of select channels and introduces an interoperable head unit.
I believe Sirius XM’s evolution toward ad revenues accounting for a larger part in their business model is inevitable. However, I also believe it’ll work opposite from what you’re predicting, e.g.; ad-free programming will come with a premium.
Given the economics of used car sales, directing more resources there to cultivate new subs (presumably through outlets like CarMax) would be a poor idea. Sirius XM would be better served developing new revenue streams from content acquisition and distribution.
Sirius/XM need a bigger footprint in the cellular market. I say they should work to develop internet-only subs and a slightly lowered cost over a normal sub. Establish a mechanism to track trial users based on IP address and/or email address. Most cell phones or home users have a static IP. This prevents some misuse of internet services. Release a secure API for 3rd party developers to develop applications for listening to Sirius/XM. This allows wider adoption of Sirius/XM via cellular wireless access. Allow access to various tiers of internet listening. By doing this, we open our programming to the world.
By doing all of the above, we could easily use cellular growth to grow our own business. We could even offer Sirius/XM programming for one month free with each new cell phone purchase.
I sent this idea on to investor relations and was told it had been passed on to Sirius/XM management. Hopefully, this is true.
Great take on the sitation.
2 points I’d add
Stern is huge and I don’t think 5% is unreasonable to guess. However, that brings me to my bigger topic – the dual-sub subscriber. How many of us are listeners of both XM and Sirius?? In my case, I plan to add Stern to XM but will deactivate a Sirius one at the same time. Only 1 receiver needed at work now.
But there seems to be an issue/opportunity here for Sirius/XM – they need to look at the dual subs and figure out how to keep them onboard for equal or more revenue.
my 2 cents
We need the new company to produce an official app for the iPhone soon. There will be millions of iPhones all over the world that can get Sirius XM. Can you think of a better player for Sirius XM than an iPhone? Can you think of a bigger audience? Estimates put near future iPhone sales at approx 40 million per year, worldwide. Hello! Is anyone listening?