In today's Wall Street Journal they write about the current state of Satellite Radio XM and Sirius. Among the people who have it, some don't pay for it and when their free trial is up many opt not to pay. Because of sports, and big names like Howard Stern the costs for content on each service has grown.
The major points:
1) Many people are picking iPod adapters over satellite radio when adding on to their car systems.
2) Both have heavy losses despite hitting the 4 million subscriber mark, a number they thought would be break even for each service.
3) Last year XM lost $667 million and Sirius lost $863 million while stock prices are down 60% for XM and 44% for Sirius.
4) XM has twice lowered subscriber targets for the year.
5) The hardware and subscriptions for both are heavily subsidized with radios sold below cost and free trial service being offered. Over 1/2 of Sirius's 1.4 million car based subscribers don't pay for the service as it came with the new car purchase. Many of these free rides are ending soon.
6) Cost for content has skyrocketed. Examples Sirius paid 220 million dollars for 7 years to get the NFL rights. Howard Stern came to Sirius at a price of 500 million for 5 years. XM paid Major League baseball 650 million for 11 years.
7) Sirius CEO Mel Karmazin, ever the optimist, says "I don't think there's a person out there in the financial community that doesn't believe that both companies will be successful."
8) Not in the article but true is that Sirius counts unsold cars on dealers lots with free Sirius trial accounts as "subscribers."
Much more at the Wall Street Journal. You have to pay to read it online, or just subscribe. I do and I think it is great. I don't read the editorial pages much, but the rest of the paper is a really good daily read.
I don't know what will be the future of Satellite radio. It offers lots of content that could never make it on local radio. A bluegrass only station in San Francisco?
I think maybe there will be 1 of them not 2, and maybe some giant media company will buy them. The cost to get to service (literally) launched for each was so expensive it might be impossible to dig out of that hole.
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