Ah remember the days when research firms were forecasting 30+ million satellite radio subscribers by 2010? It actually wasn't that long ago, but now it seems unlikely that number will be reached - let alone XM's own 20 million in 2010 long-term goal (have they ever adjusted that? I don't believe so... at least not publicly).
Well, the tide is turning, because the 800-pound gorilla is WiMAX, and her time is rapidly approaching. Yankee Group is forecasting 28 million WiMAX subscribers by 2011. Research firm In-Stat says WiMAX infrastructure equipment and devices will become a $5 billion market within four years, up from only $177 million today.
Maybe that's why so many of you investors are watching Clearwire so closely.
And If you think this statement is resonating a lot today: "Why should I get satellite radio when I already have an iPod?"
Then imagine what that statement will be in 4 years. Sprint is set to roll out its WiMAX service later this year, and Clearwire boasts 250,000+ subscribers already. The future is coming fast, and with FCC chairman Kevin Martin calling for "openness" for the upcoming auction of the 700 MHz band, it's only going to come faster.
It's time to step up SatRad. Now isn't the time for "slow and steady wins the race" strategies. The landscape is changing way too fast for that approach. Times are 'a changing, and if the industry doesn't evolve to keep up, people will just... unsubscribe.
[Business 2.0 via Hear 2.0]
Great post Ryan. And you are so right. The landscape is changing so fast it's hard to keep up now.
This is the MAIN reason XM/SIRI should never have had the content war and allowed subscriber costs to skyrocket, because it is really coming back to bite them both in the *ss. Merger or no merger, things haven't been looking peachy for SDARS in nearly 2 years. And here we sit with yet more competition per se for ways to get entertainment on the go.
Ryan,
Sat radio has NO competition, now or ever..
Love,
NAB
I have said to watch Wimaxx for years now. Finally someone else gets it too. I have said that Sat Rad MUST be STANDARD FACTORY INSTALLED in all OEM's before Wimaxx rolls out... its gonna be close.
Its not like WiMax will be a free service. The web site says its between 30 and 50 dollars per month. Then the car companies have to get on board which would be a big investement in time and money for them and would take a long to to get to the point where the equipment was factory installed.
I'm not dissagreeing that WiMax is an issue. Its just not as obvious of a problem as to say, "who needs XM and Sirius if I you have WiMax".
I am long XM and Sirius.
Jon
You would think that at that $30-$50 price tag, it wouldn't pose much of a threat to consumers - but given the recent iPhone hype, it goes to show that customers aren't always so value-oriented. If WiMax can create some buzz with flashy units and services, it will definitely lure away some satellite radio subscribers looking for the next shiny toy. After all, over 40 million Americans already pay $50 or more a month for internet on their cell phone, and it would be a stretch to say that half of those people actually need it. Hell, if XM/Sirius wants to get some buzz going, all they need to do is put the service on a cell phone and triple the price, then people will flock to it.
I'll stick to the $13/month for satellite radio too, but I don't think we can speak for all subscribers when the WiMax marketing buzz comes around.
What will WiMax provide that Sirius/XM can't? Isn't the whole royalty rates thing gonna change things anyways for many internet radio providers? Its gonna weed out the small players.
Ryan - You are absolutely incorrect. It doesn't matter what device or format audio entertainment takes - wi-max, mediaflo or whatever else they call it. Just like cable network TV proved decades ago, in media its all about CONTENT.
muscle 13, with your above comment in mind how do you explain the "iphone" frenzy?
If I can receive a wimax signal with my laptop than I think it would be great but just like the current mobile phone rated I can not use my phone minutes with air card which is just stupid.
I would you wimax for data not music streaming in my car.
It is funny to see if this takes off. Kind of makes the mayor of Philadelphia look like an idiot since he is trying to make a wifi city. Oh too late :)
rkb - There will always be new forms of distribution coming out. It never ends. But one has to realize Sirius is not a tech company, its not a telecom com company, its a media company. Did the internet destroy ESPN or MTV or Oprah or Howard Stern? In media its all about CONTENT.
The real question is when internet radio makes it into the car will it be able to compete with Sirius/XM on content? I seriously doubt that.
Content is useless if no one can access it. Distribution enables it. WiMax is another distribution channel, and without the content, it's useless. But to ignore it as a potential threat is like sticking your head in the sand. The whole argument for the merger is that the lines of "distribution" are being blurred.
You do realize that Sprint is partnered with the NFL right? Exclusive content, like watching the Superbowl, is available right in the palm of your hand. Currently it's an awkward experience, but give it time, and they'll perfect it. And with WiMax as an enabler, that will speed up the process.
XM and Sirius have spent BILLIONS in building out that distribution aspect. Satellite Radio saying that WiMax is not a competitive threat, is no different than Terrestrial Radio's position against Satellite three years ago.
Ryan - Read my argument with a computer scientist at Yahoo in the comments section here, and then tell me if you still disagree with me
http://blog.oddhead.com/2007/04/18/betting-on-sirius-and-xm-to-die/
Sorry MUSCLE13, I also have to disagree.
Your first big mistake is simply calling Sirius a "media" company. This is a false premise. It also created the technology and the distribution (just like XM) The "triad", or three legs, in the entertainment industry are equally important. One cannot do well without the others.
You seriously underestimate the importance of distribution. Look at internet radio. They have half the content of SDARS, yet are (rather were, due to royalties about to take effect) gaining momentum very fast. Why? The technology and the distribution. All the content means nothing if you can't get it to your people in the best possible way. Also your comparison of "5 listeners" on one channel of internet radio to all of Sirius was just silly. Internet radio is the whole package.
With the impending threat of services like WiMax, or even Slacker, give consumers more choices to listen to content than ever before. Heck, Sirius and XM have arguably the "best" content there is, yet, after 5 years, they still cannot make a dime....why is that? Because others are coming along to threaten them with better technology and distribution, and shareholders are leaving SDARS in the dust for those companies. Once those companies get distribution and technology into play, then they can focus on the content.
SDARS needs to do something fast. Having SDARS as STANDARD equipment in vehicles should have been it, and it should have been done 4 years ago!
@MUSCLE13: I don't disagree with you that content is important, but that's not the point of this post. The point of this post was to highlight an impending threat in distribution. We can't ignore competitive threats like WiMax and Mobile Audio, simply by beating the content drum.
Content may be King, but without a Kingdom, it rules over nothing.
Remember - only 3 years ago Terrestrial Radio thought they had Howard Stern exclusively. The tides of exclusive content can be changed with the simple waving of a pen.
Basically Ryan, the internet has already made distribution just about meaningless in media and only increased the importance of content.
Ryan I can listen to WFAN sports radio in NY. I can listen to the same station in Bismark, North Dakota. I can even listen to WFAN in Paris, France.
There are 1 million internet radio stations right now Ryan. Name one internet radio company that has a tenth of the content of Sirius/XM. Why is this, with worldwide distribution? Because distribution is becoming less and less important in media.
MUSCLE13 wrote "There are 1 million internet radio stations right now Ryan. Name one internet radio company that has a tenth of the content of Sirius/XM. Why is this, with worldwide distribution? Because distribution is becoming less and less important in media."
You do realize the cost to acquire exclusive content to one internet radio station right? This comparison is totally ludicrous! XM and SIrius paid DEARLY for the content they acquired. You think the NFL or MLB (for example) would sign a deal with a internet company for less than a BILLION dollars??
Internet also competes with television, why listen to a broadcast on internet radio when you can WATCH it on television?
SDARS main listening is designed to be in a vehicle, and whether you want to believe it or not, it is threatened by other distribution and technology companies that will come in with a better mousetrap. This is the point that Ryan is trying to make, which (no offense) seems to be flying over your head.
Quite honestly Ryan runs a great blog and is very open to criticism which is very very rare on the internet. It shows an extremely high intelligence level that is far beyond most bloggers. But I'm going to criticize - I don't believe Ryan or any of the other sat radio bloggers really follow the media industry at all and they don't have a grasp of what the media business is all about. Radio is a media business, plain and simple. Its not tech, its not telecom, its media. Wall Street doesn't have that grasp that sat radio is media either. They will.
I really do believe that satellite radio IS a media industry, not technology. I won't argue with you there. Satellite radio doesn't sell the fact that they have satellites, that means nothing to the consumer - they ultimately sell content because that's what ultimately we listen to.
To the consumer, distribution has no meaning. They just listen to music. Hear a baseball game. Or laugh hysterically on their way to work.
But I also feel it's far more complicated. It's not black/white. It's the availability of content. It's the ease of accessibility. It's the organization. It's the overall experience that satellite radio sells. Yes, it all revolves around the Content, but there's many moving parts to make that happen. Technology is a huge part of that. The Artistic sense of programming a channel. The Skill of delivering play-by-play sports calls. That all contributes to the Experience of the product.
(Oh, and as for the criticism thing. I'm not just open to it, I welcome it.... things would be rather boring otherwise.)
:)
One thing in media Ryan, great content always finds distribution. Great distribution usually can't find great content. Thats why there are hundreds of thousands of crap internet radio stations out there that can be heard all over the world. You can bet that with Sirius/Xm's great content they will be a leading internet radio company as the internet slowly enters the car. They won't be JUST a satellite radio company as you can already see the development of their internet strategies online.
In listening to Mel's earnings calls and presentations online I have heard him say on more than one occasion if there was a compelling internet radio company out there, Sirius would have bought them already.
There is nothing compelling out there. Just a huge fragmented business mess online in my opinion. A million internet radio stations is a good business? Where is the barrier to entry? A 5 year old can start a radio station online.
>>>"To the consumer, distribution has no meaning."
Tell that to the hundreds of MILLIONS of iPod owners. Is that not a distribution device?
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>>>"You can bet that with Sirius/Xm's great content they will be a leading internet radio company as the internet slowly enters the car."
>>>"Where is the barrier to entry? A 5 year old can start a radio station online."
Why have XM/SIRI taken so long to make themselves available worldwide on the internet until the last year or so? And why are the sign-ups so slow?
More importantly, why is SDARS slumping in sales year over year with king content? Why are car manufacturers scrambling to get iPod adapters standard equipment but not SDARS? With king content and decreasing sales (remember they were originally supposed to have 60M subs by 2010 combined, now they'll lucky to have half that), what is holding them back? The distribution? The technology? What? Other than Rush Limbaugh, they have pretty much all the content!
If comparing just radio to radio, why do 95% of the american people still have terrestrial radio as opposed to 5% for XM/SIRI? With king content on radio (by a long shot), why are they not raking in tens of millions of new subs each year? The barrier for entry is ridiculously low now, compared to say, the iPod (which you must include the $1 per song).
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I love these debates by the way, gets our thinking caps going :D.
Point is, everyone here has made great points, and none of us are really wrong. Ryan is correct, it is no longer black-and-white. There is now a TON of gray!
Internet radio is not in the car yet so where was the urgency to develop an internet plan quickly? Most radio listening is done in the car. Around 70% by some studies. MP3 players serve as a growth opportunity satellite radio as you can see by the creation of the stilleto and the inno. But over the history of radio only about 5% of radio listening is done in the portable mode. Remember before ipods, there were transistor radios and the Walkman which sold over 100 million units but still only 5% of radio listening was done in that portable mode. Learn radio.
>>>"Learn radio."
Listen wiseguy, we get it. Most of us understood since the dawn of radio, yet nobody can answer a simple question: Why is it SDARS is not taking off faster, especially with better content now than 3 years ago. Why have sales been shrinking the last 2 years? Why is churn not falling and disconnections going up if they have superior content? They can't grab much better content than they have now!
Why do these other companies, which are basically forms of distribution, threatening to take away more of XM/SIRI's thunder?
At the beginning of this year sat radio had close to 14 million subs. By most analyst accounts they will have over 20 million subs by the sometime in 2008. In its short 5 or 6 year life satellite radio rivals any media business growth that ever existed including cable TV which is the most successful media business ever created. Yes sat radio compares favorably to cable TV's growth in its early years. Learn media.
Also there is a very easy explanation in the blip in year over year growth. One time event - Howard Stern. The bulk of his subs came in a 3 or 4 month period, although they continue to migrate over.