Harris+T.+Strategy+Report

Harris T.

TO: Proximity Music Team FROM: Tyler Harris DATE: March 3, 2010 SUBJECT: Sirius XM Strategy Report

Sirius XM is the only service of its kind. They are a monopoly, and still the weak economy is hurting the satellite radio business. This is due mainly to the amount of disposable income people are willing to spend on premium satellite radio, verses receiving their local radio for free. Whether Gen Y users will adopt Sirius XM as their primary source for radio depends on Gen Y users willing to pay for the premium service due to the perceived value to them.


 * Profile**

Sirius and XM were competitors until they merged in July 28, 2008 (Wikipedia). For a monthly fee, subscribers get approximately 135, CD quality satellite radio stations right to their car. The stations offered are very diverse and include everything from talk shows, sports channels, weather updates, to commercial-free music of all kinds. "This unique listening experience is available to subscribers from coast-to-coast in the United States. The service can be used in cars, trucks, RVs, homes, offices, stores, and even outdoors. Boaters around the country and up to 200 miles offshore can also hear Sirius" (Sirius).

Sirius XM users can take advantage of two additional features:

• //Sirius XM Internet Radio//- CD quality music on an Internet only version of the satellite service. There are over 120 channels of commercial-free music, talk shows, and sports.

• //Sirius XM Backseat TV//- Subscribers have access to three channels of popular children’s programming channels such as Nickelodeon, Disney Channel, and Cartoon Network. It is the first ever live-in vehicle TV network.

Sirius XM was threatened with bankruptcy in 2009 posting a profit of only $14.2 million (less than a penny a share), but revenue from this quarter rose 8 percent to $676 million. The company also added over 250,000 customers this quarter bringing their subscription total to 19 million (Digital Daily).


 * Competitive Landscape**

When the Satellite radio company started in the 1990’s, the government was regulating AM / FM radio. Local broadcast radio was the only type of radio one could get in their vehicle. This landscape no longer exists because the radio is driven by user power, while AM / FM radio was driven by supplier power under government regulation. The idea of satellite radio was very intriguing to people because in such a regulated and specific market of AM / FM radio to have not one, but two companies (Sirius and XM) that had user power, went against the system that most people were used to.

Sirius and XM were the two competitors of satellite radio until they merged. The merger was quite controversial because in 1997, the FCC granted the two companies licenses and to make sure there was competition, the agreement stated that one company could not take control of another (Wikipedia). The only competition that exists now for Sirius XM is the free local broadcast radio. Subscribers have to pay for their satellite radio service, which is the main limiting factor for adoption.


 * Sirius XM Strategy**

Sirius XM is trying to create a “need” based on their service offerings, in turn providing their paying customers the value they desire. Merging with XM essentially took away the competition between satellite radio companies leaving AM / FM radio as the company’s main competitor. Sirius XM is trying to distance themselves from AM / FM radio by demonstrating that their service offers better audio quality, more content and channels over broadcast radio. These advantages have helped to expand their user base, and in turn generate more profit. Extending their services out to Canada, boaters, and rural areas that do not receive broadcast radio, as long as they can receive satellite signals, is another advantage for Sirius XM. The company hopes that these advantages will persuade consumers to subscribe to their service instead of listening to AM / FM radio.


 * Gen-Y Implications**

Gen-Y consumers do not find a subscription service radio very attractive. Financial statistics and information is showing that despite the slight increase in profit from this quarter, the company is in trouble and might not survive in the upcoming years (Google Finance). In order for the company to survive, Sirius XM really has to capture the Gen-Y market. In order to capture the market, Sirius XM satellite radio needs to distance themselves from AM / FM radio. The future of Sirius XM satellite radio is dependent on Gen-Y consumers making the decision to adopt satellite radio service.


 * References**

Corporate Overview. Sirius.com. Retrieved Feb 26, 2010 from http://www.sirius.com/aboutus

Pazckowski, John. Sirius XM: Back from the Brink. (2010, Feb 25). All Things Digital. Retrieved Feb 28, 2010 from http://digitaldaily.allthingsd.com/20100225/sirius-posts-a-profit/

Sirius XM Radio Inc. (2010, Feb 26). Google.com/finance. Retrieved February 27, 2010 from http://www.google.com/finance?q=NASDAQ%3ASIRI

Sirius XM Radio Inc. (SIRI.O.). Reuters.com Retrieved Feb 25, 2010 from http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=SIRI.O

Sirius XM Radio. Wikipedia.org. Retrieved Feb 25, 2010 from http://en.wikipedia.org/wiki/SIRIUS_XM