When Sirius Satellite Radio brought the controversial disk jockey Howard Stern to its network earlier this month in what the company described - without a trace of humor - as "the most important deal in radio history," it may have moved satellite radio a step closer to going mainstream. Experts at Wharton and elsewhere say there's little doubt that satellite radio will eventually become big business. The question, though, is when.
Satellite radio offers a nearly unlimited selection of largely commercial-free music channels - 80s hair bands, underground garage rock, bluegrass, jazz, classical music and even Broadway show tunes - for monthly fees ranging from $9.99 to $12.95. The radio signal is sent from satellites to receivers that primarily reside in new automobiles for now, but increasingly are becoming portable. The two providers on the market - XM Satellite Radio and Sirius - have deals that include their receivers as options on new GM, Ford, Honda and Chrysler cars.
XM launched nationwide in Nov. 2001 a year ahead of Sirius, which was late getting its receivers on the market. As a result, XM had 2.5 million subscribers as of Sept. 30 and is targeting 3.1 million by the end of 2004. In contrast Sirius has 700,000 subscribers in October and is targeting 1 million by the end of the year. "I'm a fan of the technology and the subscription model," says Wharton marketing professor Peter S. Fader. "There's a bright future for them, but it may be a long time before that future manifests itself."
Meanwhile, neither satellite radio provider is profitable; both companies burn through cash and frequently raise capital on Wall Street. For the second quarter ending June 30, Sirius reported a net loss of $136.8 million on revenues of $13.2 million. For the same quarter, XM lost $166 million on revenues of $52.9 million.
At this stage, both XM and Sirius are building out their programming.
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