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Point/Counterpoint: Clayton, Panero On Satellite Radio

1/08/2004 02:00:00 AM Eastern

In all of consumer electronics there isn't as intense a competition between two manufacturers as in satellite radio. XM Satellite Radio, which got to the market first, and Sirius Satellite Radio are companies with sophisticated technology and market strategies to match.

Each company is also led by able, well-known and well-respected CEOs, Hugh Panero of XM Satellite Radio and Joe Clayton of Sirius Satellite Radio.

TWICE interviewed Panero and Clayton separately in the weeks just prior to CES to gauge their opinions on this still relatively new product category. We have published each interview here, side by side, so those interested in this growing category can get a sense from the executive suite as to what their thinking is as they enter the New Year. — Amy Gilroy

Hugh Panero, XM Satellite Radio

TWICE: What is the direction of new technology for satellite radio heading into the future?

PANERO: With the lower cost of memory and greater availability of data, we can begin to introduce products that take advantage of both of these. You'll see a shrinkage in the size of all these devices. What will expand is the information — they can include data and other kinds of content. We can deliver a video channel. It's just a matter of allocation of bandwidth. We've already tested and demonstrated it.

TWICE: What is your main focus for 2004?

PANERO: We'll continue our leading position, expanding our product line of plug-and-play and home products, and doing it in an cost efficient way.

TWICE: When will we see products based on third-generation chip sets?

PANERO: Third generation will be introduced in six or seven months. That is what allows us to shrink the devices. We believe they will get thinner and more attractive and will easily sit on the dash of any car.

TWICE: Third-party converters that allow Sirius equipment to work with XM service are becoming more prevalent from companies such as Blitzsafe. What effect will this have on the market?

PANERO: We are participating in the third-party development business that has existed in car stereo for years. There are people who, under any condition, want to get XM. Blitzsafe helped alleviate the CD changer dilemma when there were problems for consumers in adapting their existing audio system to get CD in the car. Now they are doing the same for those who want XM.

TWICE: Any changes planned for programming this year?

PANERO: We continue to focus our attention on the music side of the business because we really believe that's what's driving the consumer to satellite radio. Many other non-music services are available from other mediums. What people want in satellite radio is an HBO-like service and not a jukebox, so we're focusing more on live programming and doing it in a cost-effective way.

TWICE: Will plug-and-play remain the preferred hardware format for satellite radio in 2004?

PANERO: I see plug-and-play being the preferred format. BusinessWeek just named the Roadie "Product of the Year" for the second time. People are looking for the solution to what product, in what form can satisfy their need for entertainment in the car. We think it's plug-and-play with car kits and home kits.

TWICE: Will the launch of HD Radio have any impact on satellite radio?

PANERO: I believe that's a technology in search of a business plan. People have been talking about it for ten years. Even when launched, it has a marginal improvement over analog radio and it has limited delivery. o

Joe Clayton, Sirius Satellite Radio

TWICE: What is the direction of new technology for satellite radio heading into the future?

CLAYTON: As products evolve, we'll see smaller units that use less power and are less costly. In the services going forward, we'll see customized data, where you can put in your favorite stocks, and sports teams for quotes and scores. We'll show you how far we've progressed at CES.

TWICE: What is your main focus for 2004?

CLAYTON: Since we're an entertainment company, our focus is on programming and differentiating ourselves from traditional radio and our competitor. We'll be expanding talk programming, expanding new offerings with exclusive agreements with NPR and public radio [for] entertainment [programming], and our current sports will be complemented with collegiate sports.

TWICE: When will we see products based on third-generation chip sets?

CLAYTON: We'll show generation 2.5 in the second half and generation 3 in 2005. Interoperability [on equipment that can work with both Sirius and XM service] is still some ways off. If we started today, you would need two or three years to do customized ICs. What you will see is interoperable antennas early in 2004. We have a team working on an interoperable front-end interface.

TWICE: Third-party converters that allow Sirius equipment to work with XM service are becoming more prevalent from companies such as Blitzsafe. What effect will this have on the market?

CLAYTON: Well, you know how technology works. If one company can do it, the other can. We will have conversion products at CES.

TWICE: Any changes planned for programming this year?

CLAYTON: We'll change programming and make improvements as are warranted.

TWICE: Will plug-and-play remain the preferred hardware format for satellite radio in 2004?

CLAYTON: Plug-and-play will be the preferred format for the next couple of years as we migrate to built-in product in vehicles.

TWICE: Will the launch of HD Radio have any impact on satellite radio?

CLAYTON: Just as satellite TV helped make terrestrial and cable TV better, I think satellite radio will do the same for terrestrial radio. So that is good for the consumers. With HD radio, you still have commercials and limited coverage and it will take a while for it to roll out. We don't see it being debilitating at all.

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