Satellite Radio Commissions To Range From $25-$35

By Amy Gilroy On Jul 23 2001 - 6:00am

Details of the retailer's role in selling the soon-to-be released satellite radio services are becoming clearer with many buyers telling TWICE that they will receive a $25 to $35 commission fee for signing up consumers for the two services.

Close to a dozen retailers who have seen contracts from both Sirius Satellite Radio and XM Satellite Radio confirmed the fee structure. Many said XM offered them two compensation plans: one that gives retailers $25 upfront at the time the customer signs up for service or another that offers $20 upfront and an additional $10 after a year to 14 months if the customer remains on the service. Larger retailers said that they received different contracts than smaller stores and one chain said it negotiated its own contract with one of the satellite companies.

A spokeswoman for Sirius said that a $25 to $35 commission "was in the ballpark."

Dan Murphy, VP of retail marketing and OEM distribution for XM, said, "We have various programs; they are all different. I can't confirm the terms of those programs but we have developed a compensation plan which most dealers are very happy about."

Murphy said the XM activation process will be similar to that of DirecTV or cellular phone service. "You buy the hardware at the store and there's a couple of choices you have in activating your radio." Murphy explained that consumers can activate service via an 800 number or Web site or the dealer can activate the service for the consumer by an 800 number or Web site. He added, "We are taking credit cards but other forms of payment options will be available." Murphy also said that XM is not requiring the consumer to subscribe for any given length of time. "Two months, six months or 14 months, its up to them," he said. Sirius indicated it will have a similar activation process.

Retailers said they are generally happy with the commission structure but noted there are still many specifics yet to be finalized. Speaking on the assumption that commission fees for most specialists are $25 (and not confirming or denying this assumption) several retailers weighed in.

"Basically what we'd like to know, is how much paperwork we have to do. Our sales guys don't like to do paperwork. If we don't have to dilly-dally with credit applications, and they make it easy for us, then, sure, $25 is acceptable. And if they bundle it with the price of the product so we don't have to make a separate pitch [for the service] that would be better. Then we can say, 'Here's the unit for $179 and that includes 6 months of service.' If we say its $129 and 'by the way, you need to sign up for a year,' that also hurts the process," said a West Coast retailer.

"I think the satellite companies have done their homework. It's a good program," said Steve Laplant, general manager for Jo-Di's in Hartford, Conn. "They've covered a lot of bases. The service is not a lot of money — less than $10 a month. The equipment [from suppliers including Alpine, Kenwood and Pioneer] is already in the field and it's just a new button on the radio. And they are offering us training before it comes out. In my experience, in the past 25 years, things roll out and then the training comes and the salesmen are winging it for a few months." He cautioned, "They have to be sure to get the advertising out there to get customers in the stores."

Another specialist sought assurance that the satellite companies won't give short shrift to the aftermarket. Said Tim Lavoie, president of Tim's Car Tunes, Indian Orchard, Mass., "My sincere hope is that that satellite companies will recognize how important the aftermarket is to the success of their product and consider us a valuable partner. If the support is not in money, it should be in advertising — 'see your local autosound expert'— so $25 is okay as long as they support us."

LaVoie said he would also like to see long-range signup incentives. "If they gave the retailers a larger compensation for a longer contract that would be a home run." He explained if a dealer gets a $100 compensation for a 3-year contract, he could offer a $50 discount on the hardware and pocket $50 in compensation fees. "Then the satellite company wins, the retailer wins because he gets $50 and the retailer feels empowered to make the decision. A mutual respect is necessary and that's been left out. The satellite companies are telling us what to do without looking for our input and that is a strained relationship to begin with."

LaVoie said it is in the best interests of the satellite companies to push the aftermarket. "If they want massive amounts of signups right away, it's better not to go after new car buyers but existing car owners. So the best thing they can do is promote the aftermarket specialist. And the profit potential for retailers is much greater than $25 because we'll sell the customer additional equipment."