Satellite Radio Faces Challenges
By Joseph Palenchar -- TWICE, 2/11/2008
NEW YORK — The widespread availability of OEM satellite radio in vehicles is taking its toll on sales of transportable (plug-and-play) tuners and satellite headphone stereos, but surprisingly, dedicated aftermarket car tuners are holding their own, according to analysts and retailers.
Other factors are also contributing to declines in particular satellite radio segments. The popularity of portable navigation devices (PNDs), for example, is testing consumer's willingness to clutter up their dashboards with add-on electronics. In addition, the ubiquity of iPods and MP3 players with huge storage capacities is testing consumers' willingness to carry multiple music-playback devices when they're on the go.
"The iPod is a lot easier to understand and use than a satellite radio playing some limited MP3s," said Strategy Analytics VP David Mercer. "We do argue that people will carry two or three 'best-of-breed' portable devices, such as the iPod, digital still camera and cellphone, but they are unlikely to carry two portable audio-only units with them."
The iPod is likewise having an impact on transportable sales, according to Strategy Analytics director Joanne Blight. "Listening to MP3 in the car is increasing rapidly," she contends. "The Ford Sync has done well, selling 30,000 units in the first six months, and aftermarket iPod kits [for the car] are selling well, too." Consumers could opt to install both devices (transportable tuner and iPod kit) in a vehicle, she said, but "do you want multiple devices in the car?"
Competition from another unexpected quarter — the PND — could also depress transportable-tuner sales, according Carl Mathews, Crutchfield's mobile merchandising senior director. "Once you reach 16 million subscribers, you've taken the first wave of early adopters out of the market." Later adopters may be less willing "to hang wires in their car, especially with the popularity of portable navigation," he said.
Of course, the biggest factor in declining retail-level sales of satellite radio is the rapid ramp-up in automakers' availability of OEM satellite radios, Mathews and Blight agreed. "Satellite radio is pretty universally available [at the OEM level] in the U.S. market," Blight said. "That would reduce the necessity for a transportable kit."
Indeed, transportable tuners have taken the biggest percentage hits in retail-level sales in 2006 and 2007, and the decline accelerated in 2007, according to The NPD Group's retail tracking service (see table at right). The accelerated decline in transportable sales coincided with accelerated net-new subscriber additions through the OEM automotive channel, Sirius and XM statistics show. For the three quarters ended Sept. 30, 2007, Sirius added 1,262,379 net new subscribers through OEM channels and only 386,921 net new subscribers through the retail channel. The ratio was reversed in 2006, when for the full year, Sirius obtained 1,585,463 net new subscribers through retail channels and only 909,973 through the OEM channel.
At XM, the number of net-new OEM subscribers was almost four times that of net-new retail subscribers, or 392,000 to 96,000, in the first half of 2007.
Although accelerated OEM adoption may have reduced demand for transportable tuners in the car, retail-level sales of installed aftermarket tuners controlled by head units actually rose in 2006 and 2007, The NPD Group found. Crutchfield agreed with the statistics. "Our direct-connect [aftermarket car] business is strong," said Crutchfield's Mathews, "and was up a little last year" despite shortages of XM and Sirius adapters for specific models of aftermarket head units. "The sense that I get is that maybe second-time purchasers realized they never moved it [the transportable tuner]" from car to car or from car to home, he said.
Demand by later adopters for a wire-free look in the car might also be contributing to the uptick in installed aftermarket sales, said Blight. Early adopters were attracted to satellite radio's content and commercial-free music channels and "might have been less concerned about the system that delivers them," she said.
For his part, Mathews believes car direct-connect tuners could continue rising in 2008 as adapter shortages are resolved. Sirius has begun shipping adapters for all key aftermarket head unit brands, and XM has three to four down and three to four to go, he said.
Mathews believes transportable tuner sales might also reverse their decline in 2008, in large part because "we backtracked so much in 2007."
As for satellite radio listening at home through transportable tuners and home tuners, Blight and Mathews see that remaining a small part of the satellite radio market. "At home, we've satisfied immediate latent demand," Blight contended. Satellite radio remains largely a car experience, Mathews added, because at home, "people are watching video."
Tuner sales, however, don't completely reflect the full extent of satellite radio listening in the home. Satellite radio content is available through XM and Sirius streaming services to the PC, and select satellite radio channels are available through satellite TV services. XM and Sirius, however, declined to comment on the number of subscribers listening to their programs through these pipes."
Retail Satellite Radio Sales(2005-2007)
| 2005 | 2006 | % Change | 2007 | % Change | |
| In Units (thousands) | |||||
| Plug-and-Play* | 2,300 | 1,700 | -26.1% | 956 | -45% |
| Personal | 382 | 334 | -12.6% | 250 | -25% |
| Car Direct Connect | 256 | 285 | 11.3% | 388 | 36% |
| Home Component** | 9 | 6.8 | -24.4% | 6.7 | -2% |
| In Dollars (millions) | |||||
| Plug-and-Play* | $229.3 | $157.8 | -31.2% | $73.8 | -53% |
| Personal | $99.5 | $81.4 | -18.2% | $47.8 | -41% |
| Car Direct Connect | $23.5 | $28.3 | 20.4% | $35.8 | 27% |
| Home Component** | $2.5 | $1.7 | -32.0% | $1.2 | -32% |
| Home Plug-and-Play Kits+ | |||||
| Units (in thousands) | 615 | 523 | -15.0% | 279 | -47% |
| Dollars (in millions) | $27.4 | $25.6 | -6.6% | $12.8 | -50% |
| * Transportable plug-and-play tuners can be used in the home or car when docked with home or car docking kits. Plug-and-play tuners are usually packaged with a car dock, and home docks are sold separately. ** Home component tuners lack amplification, whereas radios combine tuner with on-board amplification. + Consists of docks that connect plug-and-play tuners to home audio systems as well as antenna/tuner combinations that plug into XM-ready and Sirius-ready home audio products. Source: The NPD Group/Retail Tracking Service © TWICE 2008 | |||||
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