Content Matters

OK, I’m cheating on this post, including two companies: Sirius Satellite and XM Satellite Radio.  Together, these two companies have signed up more than six million paid subscribers to satellite radio.  With 4.4 million subscribers, XM has about double that of Sirius, due in part to the fact that they arrived on the scene a year earlier.  Sirius has begun to close the gap by signing exclusive content including Howard Stern, the NFL and Martha Stewart.

During the past year, both companies have signed a number of key partnerships which should drive growth substantially in the next few years.  XM Satellite can be factory installed in GM vehicles and got a boost from the recent “employee pricing” drives by GM.  Sirius has signed an exclusive deal with Ford, but won’t be available until the 2006 models roll off the lots, so didn’t see the same pickup recently. 

Each company has now launched portable players and have signed partnerships with various industry players (XM with AOL, Audible and even Hyatt Hotels; Sirius with Sprint for delivery of music through Sprint’s phone network).

XM has recently launched a player with “Tivo-like” capabilities (MyFi), allowing users to record up to five hours of audio for later playback.  This can become a real differentiator and reason to purchase satellite radio.  Unlike traditional radio, which often is relegated to background noise, the ability to “time shift” means you can record Howard Stern, Jimmy Buffet, or whatever your preference may be, then listen to it at the gym or on the commute home.  I am sure that Sirius will provide a matching capability soon.

A year ago I thought that satellite radio was, at best, a niche product.  Now, by developing the sales channels through the automotive OEMs, these devices are beginning to become ubiquitous.  Wall Street estimates are for total satellite radio subscriptions in the 55-60 million range by 2015.  That's amazing growth, particularly when you compare it to cell phones, DVD players and other products that took much longer to take hold.

In a recent Institutional Investor interview, Sirius CEO Mel Karmazin indicated his belief that customer demand will be fairly inelastic, so both these companies should be in position to raise their subscription rates when growth slows down.

Satellite radio seems to be here to stay.  I don’t know which of these two formats will win in the end (or whether they will end up merging), but in the near term, they both clearly belong in the 50 Content Companies that Matter.