Early Trends And Their Influence On Satellite Radio Retail
By Jimmy Schaeffler -- TWICE, 3/11/2002
This early in the life of the newly-developing satellite radio industry, it's not easy identifying solid trends tied to the industry's rollout. Nonetheless, with the assistance of developers Sirius Satellite Radio and XM Satellite Radio, certain observations can be made that could assist in the marketing and sales of satellite radio.
From the four retail markets where Sirius launched its service, Phoenix, Houston, Denver and Jackson, Miss., Sirius notes that it has found a remarkable level of overall retailer support. This is in large measure because retailers see several sources of revenue from satellite radio, i.e., hardware sales, installation and follow-up services.
A study conducted by The Carmel Group last September in San Diego, Calif., suggests two things XM might've done differently. These include more consistent training programs, and better control of inventory and distribution.
People like the variety and breadth of programming. People appear to be spending more and more time in their cars. As such, the importance of having better entertainment, especially music and humor, and information sources is enhanced. This speaks well for the hundred or so channels offered separately by both Washington-based XM and New York-based Sirius.
XM is seeing a trend toward mass audience deployment of the new satellite radio service. Originally, pundits predicted that it would appeal primarily to the 18-to-26 year old male, with good disposable income, and who is an early adopter. The true age spread, however, is remarkably even, indicating the substantial possibility of a mass-market CE product and service (see table).
XM finds that more consumers are purchasing as a result of both marketing and solid word-of-mouth, which is the real engine that drove the penetration of the Direct Broadcast Satellite (DBS) industry.
Rural markets are particularly receptive to satellite radio services. These underserved markets are expected to remain a focus for the satellite radio industry. Expect chains like Sears and RadioShack to be particularly receptive to this development.
Hardware manufacturers are coming to market with more choices, and existing prices are expected to decline considerably in the years ahead.
Monthly subscription fees, on the other hand, are not expected to decrease. In fact, if the service is a marked success, expect monthly prices to rise in the 3-5 years cycle, a la the DBS arena.
Several manufacturers are being benefited specifically by strong consumer loyalty. Sony and Alpine are top-level examples of this trend in the satellite radio sector.
XM states that, thus far, there is no significant sign of consumer dissatisfaction with the three-minutes/hour of advertisements that are currently carried on approximately 30 of the 71 XM entertainment channels. XM offers this "partial" ad-supported service to consumers for $9.95/month, whereas the 80 or so entertainment channels from Sirius cost $12.95/month and are completely ad-free.
XM believes it was a proper decision to offer such a huge choice of programming, with 71 total channels of entertainment, airing 24 hours a day, that produces a total of over 1,700 hours of choices a day.
XM Satellite Radio New Subscribers By Age| Age: | % |
| 18-24 | 15 |
| 25-29 | 12 |
| 30-34 | 13 |
| 35-39 | 13 |
| 40-45 | 12 |
| 45-49 | 11 |
| 50-54 | 10 |
| 55-59 | 7 |
| 60+ | 7 |
| Source: XM | |
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