An article by Scott Moritz on TheStreet.com yesterday about the possibility of raising subscription rates coming for SIRIUS got me thinking. With word that SIRIUS will be adding a "significant number" of repeaters this year - with the intention to provide satellite radio services like video and data delivery - thoughts of not reaching CFBE anytime soon are again swimming in investor's heads. One option? Raise prices. This isn't a new thought, as Mel brought it up in February saying that there's a "signficant opportunity" to do so, and rumors of it have been floated since before that.
Bear Stearns analyst Bob Peck brought up another scenario in his report last week to create a multi-tiered system - a premium service and a regular service - to help balance out the costs. Others feel (myself included) that a multi-tiered pricing structure would simply confuse the consumer and be yet another mental barrier to entry to try to overcome. People have a hard enough time grasping the concept of "paying for radio" to begin with, multiple pricing options just set to confuse the market.
That in itself is also the argument against raising prices in general. The higher you go, the more you stifle new subscriber growth. You may slightly increase churn, but current subscribers are already hooked. It's new subscribers that would have a problem with it.
XM isn't immune to this discussion mind you. The resignation of Jack Roberts was a clear signal about the concern of spending vs growth (a concern every business has). They're expanding their services as well, and with "The Content Wars" coming to an end, both satellite radio services need to continue progress while balancing costs. Smaller devices, newer services, improved technologies - and let's not forget about launching new satellites (XM-4 is due on the launch pad later this year). All this costs money.
But how much is too much when it comes to price? Should these new services like mobile/portable video be an added value to satellite radio? Or do they belong as a separate subscription service altogether like the weather services? I can see the value of both XM and SIRIUS disassociating themselves from "just radio" and moving more towards a satellite radio service. But The costs involved to create these new services are incurred to the company across the board - how should the profits then be distributed? Food for thought.
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