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XM First To Market With Satellite Radio Service

Washington D.C. – XM Satellite Radio came from behind last Tuesday to inaugurate the nation’s first commercial satellite-radio service, teaming up with such retailers as Best Buy, Good Guys and Tweeter to offer XM tuners in Dallas/Forth Worth and San Diego.

‘We were considered a year-and-a-half behind [rival Sirius Satellite Radio] three to four years ago when I got here,’ said president Hugh Panero during the XM’s launch event at the company’s 80-studio Broadcast Center only a few miles from Capitol Hill. Despite its slow start, XM edged out rival Sirius Satellite Radio to become first to market with a 100-channel, around-the-clock national service. XM service will roll out to the Southwest and Southeast in less than 30 days from the Sept. 25 launch and then to the rest of the country 30 days later.

Sirius still expects to launch service nationwide in Q4. In mid-October, it hopes to announce a specific launch date.

Panero expressed confidence in the appeal and eventual profitability of XM service. He projected a subscriber base of 4 million in 2004, each paying $9.99/month and enabling the company to ‘break even’ on an EBIDA (earnings before interest, depreciation, and amortization) basis.

XM, however, has a long way to go in reaching its subscriber goals. In the week preceding the formal launch, XM dealers signed up about 400 subscribers in Dallas/Fort Worth and San Diego, and by the end of the year, the potential subscriber base could exceed 100,000. That number reflects the 100,000 XM aftermarket tuners will have been shipped to more than 6,000 retail stores nationwide through December, Panero projected. To that, XM adds the factory-installed tuners that will be available from GM on the Cadillac Seville and Deville beginning in November.

Purchasers will be attracted to programming diversity lacking in most terrestrial-radio markets, seamless nationwide service, and channels that give ‘the programming of radio back to artists,’ Panero told an audience that included investors General Motors, DirecTV, Honda, and Clear Channel, operator of a nationwide network of local radio stations. The service will offer 71 music channels, more than 30 of them commercial-free, and 29 news, information and entertainment channels, including 24-hour news services like those available only through cable TV and DirecTV, he said.

Based on initial customer response in the two launch markets, ‘there is a good potential that we will exceed our expectations’ in the fourth quarter despite the nation’s economic uncertainty, said Dan Murphy, VP of retail markets and OEM distribution. ‘Christmas will be challenging for certain product categories,’ he said. ‘With portable MP3 players at $229 and with their limited entertainment value, we’re very well positioned from a price point standpoint starting at $299,’ he said. ‘We offer the benefits of CD and DirecTV combined, so you’ll see very strong demand.’

Murphy advised retailers to ‘sell the service first.’ In the weeks preceding the formal launch, XM staged demo events at local stores and other venues and found that ‘consumers are more interested in understanding the breadth of programming first and the hardware requirements second.’

‘There’s a golden opportunity to sell a hot product that can deliver unprecedented news programs and more genres of music [than terrestrial radio],’ he added.

Car tuners from Pioneer and Alpine were available for the launch, with Sony’s combination home/car tuner due in October, XM said. Also available at launch was a series of roof-mount antennas and a Terk on-glass model, which has generated the most demand among tuner options, dealers said.