Until recently, XM Satellite Radio and its rival, Sirius Satellite Radio, were engaged in a deal-for-deal face-off. Sirius landed the NFL...
WASHINGTON — Until recently, XM Satellite Radio and its rival, Sirius Satellite Radio, were engaged in a deal-for-deal face-off.
Sirius landed the NFL; XM responded with baseball. XM signed an exclusive deal with General Motors; Sirius partnered with DaimlerChrysler. XM scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock jock Howard Stern from terrestrial radio giant Infinity Broadcasting.
But for all the billions the two companies have committed to differentiating themselves from each other, they are following similar business strategies, analysts say.
And that might not be a bad thing for the satellite-radio business — which, while growing rapidly, has so far attracted a tiny portion of the 193 million people market-research firm NDP Group estimates listen to traditional radio.
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Satellite-radio subscribers pay a monthly fee to receive more than 100 channels. Analysts expect XM and Sirius to generate enough revenue to cover the cost of their operations in the next two years.
But as the rivals move into the home, laptop and personal-music player, they are vying for consumers’ attention with podcasts, online radio and downloaded music.
Which prompts the question: Will satellite radio’s audience be eroded by whiz-bang gadgets before the industry escapes the red?
A recent NPD Group survey found more people still listen to downloaded music than to satellite radio. But the satellite-radio audience is likely to grow as deals the two companies have made with automakers start to generate a critical mass.
April Horace, an analyst for Hoefer & Arnett, estimates the total number of satellite-radio subscribers will reach 20 million in five years.
So far, so good. Washington, D.C.-based XM, for example, reported that its second-quarter loss narrowed and revenue more than doubled. It added 647,226 subscribers during the quarter and expects to hit 6 million by year’s end.
Sirius, based in New York, reported that its loss had widened to $177.5 million in the second quarter of 2005 from $136.8 million a year earlier. Sales reached $52.2 million, up from $13.2 million. It had 1.8 million subscribers at the end of the quarter.
XM remains dominant, thanks to an edge in technology that dates to 2002, when XM launched its service a year earlier than Sirius. But the differences between the two companies may not remain stark for long.
The same outfit now manufactures microchips for both companies. The two companies now charge subscribers the same monthly fee: $12.95. And to the average consumer, “the products being offered are not a ton different from either company,” said Jason Helfstein, a CIBC World Markets analyst.
“The biggest differences today are in technology and content. Both advantages will start to disappear over time,” Helfstein said. “They’re both going in the same direction.”
XM and Sirius are betting that most of their customers will tune in when they’re behind the wheel. The technology “is designed for vehicles,” said Jim Collins, a Sirius spokesman who cites the same figures as analysts: There are 220 million cars on the road and 16 million to 17 million new cars sold each year.
By now, most of the major automakers are committed to offering one service or both, but it will be at least five years before automobile sales will be the primary source of new subscriptions, Helfstein said.