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Satellite Radio: Xm Versus Sirius (Case Summary)

925 words - 4 pages

Sirius Satellite Radio Inc (initially called Satellite CD Radio) was one of the two initial players in the satellite radio industry created by two passionate guys David Margolese and Robert Brckman back in 1997 in Canada. The second player in the industry was XM Radio, backed by AMS Corp., and Hughes Electronic (a subsidiary of GM). Market situation for both companies was similar, but Sirius somehow fell a few steps behind XM Radio, therefore I will analyze in particular problems of and opportunities for Sirius Satellite Radio Inc.1. ProblemsA problem for Sirius as well as for XM was huge initial investments. All amounts in this case are with six figures and had to be invested without backup of powerful investors. Clear data on Sirius initial investments are not available, but they can be derived from the competitor's expenditures in the same area.Another common problem for both competitors is the competition with tall free radio (FM AM); Internet radio; satellite TV and cable systems, who provided radio services as part as their digital package for free. It is difficult to persuade a regular listener to purchase a service, which is already provided for free in good quality.A major problem for Sirius was the broadcasting delay for 2 years due to technical problems. Sirius started broadcasting 9 months later then XM started to offer its service nationwide. XM launched initial ad campaign ($100mil) and collected most of initial customers by the end of 2002 (347 vs. 30 thousand).After entering the market Sirius offered service for a higher price of $12,95 vs. $9,95 for XM. No explanatory ad campaign took place to explain to potential consumers the reasons for price difference.Income was mostly generated from the subscription fees - 85% of total income, because of the ads-free music channels. This can be perceived as a plus or minus. On the one side subscribers are willing to select music channels free from ads on the other side the company looses money it could collect from broadcasting advertisements.Unfavorable business agreement conditions with car producers and dealers (initially dealer installed option vs. factory installed meaning that customer has to request and pay additionally for Sirius radio set, also later not sufficient amount of factory installed Sirius car radio sets).Sirius chipsets required to pick up signal are more expensive than XM's, therefore bigger subsidies to car producers are required from the Sirius' side (part of the unfavorable terms of the agreement).Initially Sirius did not provide home radio equipment thereby missing 37,3- 47,3% radio potential radio subscribers. After providing radio sets for homes the most popular still remained XM radio Delphi XM SkyFi.Sirius Radio channels did not cover Latin-American (XM had 5 channels) and African American (reggae) audience. This also resulted in the loss of potential subscribers.2.Recommendations and alternativesSirius could merge with XM and carry on as...

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