With the year coming to a close, it's time for that obligatory "end of year" prediction and some fine words of wisdom (with hindsight being 20/20 of course). So here's one of them: 2007 will be the year that the OEM subscriber growth will truly begin to shine.

In 2005, we were obsessed with retail. With good reason of course, because the satellite radio retail market was skyrocketing due to the buzz that Stern generated (as well as the seemingly weekly on-air celebrity contract announcements). So it's no surprise that the focus for 2006 was on retail as well. We were still high off of 2005, with noses-sniffling and teeth-grinding, we were jonesing for just another bump to recapture that feeling from the prior year.

And in the beginning of 2006, retail was doing great (thanks again to the aftershock of Stern's move to Sirius). But then the heavy hand of the FCC came down, causing halts in production for both companies (XM's occured prior to Father's Day, while Sirius' after Father's Day; Sirius clearly benefiting from this maneuver). A combination of this, and the drop in Stern-influenced subscribers, caused the retail market to wane. Anyone who was tracking NPD Group numbers clearly saw that XM was feeling the ill effects of this drop in retail more than Sirius, but the overall effects to the industry as a whole were real. This is no better illustrated than the seemingly weak reaction to satellite radio products this holiday season (though the jury is still out on exactly how bad this month will be).

The reason why the retail market has a significance in this industry is because it theoretically is a measurement of consumer interest in satellite radio. This is true to a degree. When people know they want XM or Sirius, they go out and seek it out at retail. So the obvious example is with Howard Stern fans - they knew they wanted to hear him, so they went out and purchased a Sirius. But satellite radio is an interesting product in that many people don't realize that they want it. They don't "get it" until they experience it. The reason why Stern fans wanted Sirius so bad is because they've been experiencing Stern for 20 years. It's already familiar. A softness in retail doesn't mean that there's a loss in interest in satellite radio, it's an indication that there's not enough familiarity with the product.

So that brings us to the outlook ahead. This year is all but done with (though both XM and Sirius still have a few days to aggressively encourage activations before Monday), and now the focus is on what is to come.

But first, a quick note about year-over-year comparisons. (I'm not stalling, I'm bringing it all together. Keep reading.)

While all this doom-and-gloom seems depressing, it's partially driven by unrealistic expectations and skewed comparisons. Last year was a break out year. An anomaly. The retail numbers simply cannot be considered a baseline that we should compare year-over-year results to (though the tendency is to do so, since this is such a young industry). This year was doomed to "drop" in retail because last year's conditions were simply impossible to recreate.

By this same thought, though with an opposite result, we're going to see rapid year-over-year growth in 2007 for OEM-driven subscriber additions - especially when looking at the percentages. Auto manufacturers are very slow to react to 3rd party changes, with no better example of this than that of Toyota (who likes things to be "just right" for factory installation). As a result, many of the OEM partnerships who signed contracts in the previous years will begin to come to fruition next year, and ramp up steadily for the years to follow.

For Sirius, DaimlerChrysler has promised a 40% overall penetration rate in 2007. Mercedes has promised over 50%, and Audi/VW is targeting over 80% next year. Let's not forget the 21 Sirius-capable models from Ford, BMW's increased penetration and the fact that KIA is going standard with Sirius in 2008.

XM is no slouch when it comes to OEM either. Honda has promised over 650,000 XM units, GM has slated 1.8 million XM units and Nissan has promised 500,000 XM units in 2007. XM will be factory-standard equipment for Acura in 2007, while Hyundai too will offer XM as standard equipment in 2007 (~500,000 units). Oh, and let's not forget about Toyota.

Many of these OEM partnerships have yet to see the light of day, so with the initial phases rolling out in 2007, year-over-year OEM driven subscriber additions with undoubtedly show growth. This translates to "good news" in those easily swayed investment media outlets (translating to stock price increases as the easily swayed investors react to this news).

It's not all peaches and cream of course. As penetration increases, the conversion rate will decrease. XM reports just over 50% of OEM free trial subs subscribe to the service. Sirius doesn't report their conversion rate, but it's most likely similar. As the number of new cars with satellite radio increase (from about 27% this year to around 55% in 2010), you can expect that conversion rate to go down. Craig Moffett, analyst at Berstein, expects the conversion rate to decrease to about 44% by 2010. Still not a bad number, all things considered.

So what of the effect on retail? Retail shouldn't be discounted, but the focus will shift in time. As OEM penetration increases, the need for plug-and-play receivers will drop. Think of plug-and-play receivers like the CD players of yesteryear. Before CD players were integrated in vehicles (a process that took about seven years to reach the same installation rates that satellite radio has achieved in three years), everyone was driving around with their portable CD players plugged into their tapedecks. The Discman was the CD equivalent to the satellite radio plug-and-play receiver. Eventually, as satellite is integrated into cars, we won't need them. 

The retail market, over time, will shift to handheld receivers like the Stiletto and the Inno, to home tuners and to more hybrid devices like the XM Mini-Tuner. Inclusion in other devices, like as part of home entertainment systems, will help keep retail subscribers aloft and going strong. Perhaps both companies will start using an OEM-style strategy for retail (i.e., a free 3-month subscription with the purchase of a satellite-enabled home entertainment system). And let's not forget about the fabled "convergence" of satellite radio + MP3 player + a cell phone (which I'm skeptical about). Who knows what's around the corner for retail - innovation will be a key driver - but it's inevitable that retail's focus will drift away from the vehicle as OEM penetration increases.

So while this fourth-quarter doesn't look to be the bearer of great news, take a look at 2007 and focus on the much larger OEM market. Consider that from a percentage basis, OEM growth will be significant (resulting in good press). Even with the most conservative of estimates, there's still a huge opportunity for both companies in 2007, and the doom-sayers will quickly change their tune.

(...now, about that churn issue.) 

The Pioneer Inno's name is derived from the stem of the word "Innovative."

So it's with a bit of a chuckle, a wink-wink, and perhaps even a jab to the ribs, that we see the Inno as one of PC World's 20 Most Innovative Products of the Year.

Their reasoning for bestowing this honor is the Inno's ability to receive a live XM signal and record/store songs, as well as bookmark them for purchase later.

[PC World] 

Thanks Jessica! 

Eminem will countdown 25 of his favorite hip-hop songs during his "Shady New Year" special on Sirius channel Shade 45 (ch 45) this New Year's Eve.

Eminem, who was nominated for a GRAMMY with Akon for "Smack That" will broadcast the "Shady New Year" special on December 31st from 8-10pm ET.

Replays will aur the same day at 10-12pm ET, and again on New Year's Day at 12am, 12pm, 2pm and 8pm ET.

Here's a funny article in Florida Today by columnist Breuse Hickman. The article headlines with the dramatic title of "Stern's leap to satellite the year's biggest flop" - yet it does little to support that bold statement.

First off, Breuse doesn't own satellite radio. Great. But, even though his beat is on local and national media, he justifies not owning satellite radio because... well... actually it's hard to understand his justification.

This graduate of the Univertsity of Central Florida (with a degree in technical writing) doesn't really back up his statement at all. He first says that he doesn't feel left out because of the "latest year-end reports" (let's assume he means the reduction in subscriber guidance) then he goes on to refer to Forbes' "Dethroned" article, for really no purpose.

But... then he goes on to say that regular radio is boring. Breuse, a reporter for 15 years at Florida Today, gets so distracted in plugging different local radio stations that the whole article just resorts to name-dropping. So how did "the year's biggest flop" happen? Who knows, but the title sure is catchy.

Fine reporting there Breuse!

[Florida Today]

Sirius is busting into 2007 with a series of live concerts as part of their New Year's Eve programming. With performances from The Beach Boys to The Commodores, Patti Smith to Chris Issak, and yes even Hatebread; these concerts will be broadcast live from different locations across the U, S of A.

The list is too long to simply post on the homepage, so check out Sirius' live New Year's Eve performances after the jump... 

James Brown, the "Godfather of Soul", who died on Christmas Day, will be honored by XM Satellite Radio all week on Soul Street (ch 60) and The Groove (ch 64).

Both channels will air tributes, including archival interviews with Brown and vintage concert recordings, througout the week. Yesterday Soul Street played a song of his every hour on the hour to pay tribute to the life and music of James Brown.

Brown died of congestive heart failure on Christmas morning in Atlanta at age 73. There will be a public viewing at NYC's Apollo theater where he made his debut. A private ceremony will be held on Friday in Brown's hometown of Augusta, Georgia, and another public ceremony will be held a day later at the James Brown Arena.

If you missed Opie & Anthony on The Tonight Show with Jay Leno last night, you can catch the video below:

[via Bearing Drift] 

Washington Post tech writer Yuki Noguchi and Leslie Walker, dropped by the XM Satellite Radio's headquarters (nicknamed The Eck) for a tour on Monday.

It's a great read of their experiences within the facility which is a century-old renovated printing press where National Geographic and Newsweek were once printed. Their personal account of the tour really illustrates the corporate environment that creates the music and programming we all listen to everyday.

[Washington Post: Post I.T.]
Thanks to everyone who sent this in!

Comedy gone too far? Bill O'Reilly obviously thinks so. Below is a video from a segment in his show where he talks about Opie and Anthony's recent "Homeless Shopping Spree 2006" where they took a group of homeless people shopping in a mall, giving each $200 to spend on whatever they want.

The event also drew the attention of Boston's Mayor Tom Menino, who issued a statement after it aired this past weekend.