A recent report by Bank of America analyst Jonathan Jacoby states their belief that the satellite radio industry's annual retail gross adds could be nearing its peak.
Citing that the "early adoption phase appears to have passed," BofA now estimates that gross subscriber additions from the retail channel will flatten out from 2006 to 2007. What's worse, they project retail adds to begin to decline after that point.
What this does is put a greater dependency for subscriber additions on the OEM channel. Greater reliance on auto manufacturers puts both XM and SIRIUS in a weaker position when distribution agreements are up for renewal.
But while the early adoption phase may be ending - for today's receivers - I wonder if innovation in technology can combat this looming peak? The wearable receivers are evolving, and with a total of nearly 59 million iPod sold, there's obviously a market for personal music - and the possibility for satellite radio to engage even a fraction of this audience.
Then there's the home. With innovations like SiriusConnect Home and the XM Mini-Tuner, satellite radio has the potential of being embedded now into many home entertainment systems. This type of convergence that integrates satellite into home electronics exposes the technology to a whole new market. I think there's a massive potential to this market. The key? Give away free trial subscriptions with the purchase of these satellite-ready devices.
So let's open the floor to some discussion. What areas of potential growth in retail do feel are untapped? What devices do you believe will help spur a surge in retail?
no
I actually kinda agree with Jacoby. This would really suck for the SDAR that relies more heavily on retail.
The future of Sat Radio is OEM.
Westfall
What will spur growth? Any Reciver thats free with a 3 month to 5 year subscription depending on the value of the recieiver. This in connection with an Ipod or true compitition to the Ipod. Maybee even an alarm clock. Or some way like a Key chain "Key" to allow 1000's of receivers to pick up the sinal as long as the holder of the "Key" is close enough to the receiver. The one thing that buggs me with Sat Rad is that its in my car and when I get an XM or Sirius ready home receiver I would then need to take out a second subscription for my home.
Jacoby understands something some of the other "analysts" have missed: It is about OEMs, more than any other thing. The number of people who will buy Sirius receivers to hear Stern or XM receivers to hear MLB is limited. The number of people who want portability and recording off the air is limited. Over time, content will move to and away from each company (like the Young Turks move from Sirius to XM) -- but the OEM deals are more stable and lasting.
The retail devices are important, but mostly as a temporary measure to make the business work until such time as receivers become standard equipment or nearly so (as Acura, Hyundai, and Nissan are doing with XM) and find their ways into most of the vehicles on the road.
This is consistent with Jacoby's overall position that XM is the better investment of the two companies; in addition to having control of its costs, XM, for now, has the OEM relationships that ultimately will determine "who wins".
Has retail peaked? It might be premature to draw that conclusion on the basis of just a few months' numbers. But those who thought that Howard Stern or NFL or MLB or Rush Limbaugh would seal the fate of the industry are wrong. To the extent content influences OEMs or influences listeners to move to satellite from terrestrial radio, "Content is King".
As between XM and Sirius, the "Content War" is a sideshow -- marketing prowess and OEM deals, and to a lesser extent technology, all trump content offerings.
As for retail, it is tough to see anything that will salvage it. How many people would be buying aftermarket navigation systems if every car already had one as standard equipment? Regardless of the brand, most people are not likely to replace the standard equipment with a separate device that sits on the dash.
has the retail channel peaked? Well he could be correct. But with Howard going on Sirius and the enevitable decline in subscrbers running out to get howard. I feel its too early to make that claim. If you look at the Gross subscribers XM in Q2 2006 got more subscribers than ever before in Q2 on a gross basis. These are new people signing up for the service. The overall does not look too good for XM and that also is pretty simple. as many XM subs run out they may be going to sirius just for Stern. Most have already gone. I have a feeling that both XM and Sirius will suprise everyone with the total number of subscribers that sign up.
Innovation in content too. Sirius' NASCAR launch in January 2007 is a huge play. I've heard truckers torn between XM and Sirius, specifically about NASCAR. Expect a "switcher" effect this holiday season for the NASCAR heads.
satellite radio is here to stay.its just better than old borning radio. i listend to boring radio in my car this weekend.sucked.
i like XM.love sirius.hate free radio.
You are so right Sternfan73. Old radio is the pits. Even in a market where I'm at in Central NJ (I get a mix of NYC, NJ, and Philly stations), I still can't hear everything that I can hear on SatRad. The thing that the detractors don't seem to get is that SatRad is still in its infancy, just like Cable TV was back in the late 1970s. The only hurdle is that you may have more people being stubborn about paying for radio compared to paying for TV.
People are gadgetting out. Too many gadgets, chargers, etc. to keep track of. Already, PDA sales are way down, and IPODs are flattening. Eventually, cellphones and cameras and Ipods will be part of one gadget. To stay viable, satellite radio needs to strike deals with cellphone companies. I am an XM addict but won't buy an wearable because I already have too many gadgets.
Im almost ok with this. XM has strong partnerships with the some of the highest selling auto manufactures around. People will hear what XM offers and discover how great it is. Retail is a sticky market when it comes to audio devices. Not just ipods and Zunes. There are tons of very cool things coming for people that fuck over the RIAA and steal 80gig+ of audio.
This has little do with radio as an industry IMO fellas. Its about the fact that MP3's rule the world. People are forgetting what great programing was. Free Radio sucks, sure. But even if FM/HD pulled something amazing out of its ass people still want their iPods. They dont get it like we do.
people will have their ipods but some would just like to sit back and relax
or be on their computer like i do and listen to the radio i love listening to espn radio i cant get that on my i pod.
Yeah, you can
http://espnradio.espn.go.com/espnradio/podcast/index
Unless satellite radio gear is as easy to use as a transistor radio or an ipod, people are gonna stay away. i bought a skyfi for my dad and it was like rocket science for him and wanted no part of it. ya gotta make it easier and cheaper. that's just my 2 cents.
peaked?! damn, how can they peak with both companies acquiring 600,000+ new subs every quarter? i dont get it.
Because a good percentage of subscribers are aquired in OEM deals. For Sirius's Q2O6 report
"324,574 net subscribers from its automotive OEM channel, 167% more than second quarter 2005 OEM net subscriber additions of 121,664."
http://investor.sirius.com/ReleaseDetail.cfm?ReleaseID=205864&cat=Earnings&newsroom=
thanks for that link.
One does well to note that not only is Jacoby a XM hawk, that's he's being very wrong over the last 12 months.
IF you view only XM his statements are true, If you consider that Sirius is and has been taking XM share, his opinion is false.
Eventually, he will be correct that the OEM side will dominate sales. This isn't the case as of today.