Satellite radio: XM versus Sirius (Case summary)

Essay by pastnieceUniversity, Master'sA, October 2007

download word file, 4 pages 4.0

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...