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Satellite Radio: Retailers Ready, Waiting

Satellite radio will go into orbit when it’s launched commercially later this year, attracting a broad demographic that includes older and younger music enthusiasts and consumers drawn to niche programming, major retailers told TWICE.

The retailers, including Tweeter and Sound Advice, said they believe consumers have gotten used to paying subscription fees for services such as satellite TV, wireless phones and Internet access. These people will be open to paying $9.95 per month for almost 100 channels of programming not available on most terrestrial radio stations, they said.

To tap demand, these dealers plan prominent in-store displays, aggressive direct-mail or e-mail promotions to past customers and newspaper ads.

Some retailers, however, believe subscription-based radio will take some time to gain momentum because of the monthly fee, but they expect the services to be successful.

“The first wave should be incredible if vendors can keep up with demand,” said Dan Jeancola, mobile electronics VP for Florida’s Sound Advice chain, which will offer both services at launch. “If it goes the way I think, it will be a great two- to three-year ride [to satisfy pent-up demand], and then as it gets more competitive, there will be another big run.”

Most likely through direct mail or through its catalog, Sound Advice will target “our older higher-end demographic based on our home A/V business. An older demographic will pay $9.95a month,” Jeancola said. Satellite radio will give our base-“the guy with the Lexus with no reason to walk in the [mobile] showroom before”-a reason to enter the mobile departments.

The services will also attract “a whole other avenue of people,” whom he described as non-mainstream radio listeners. Such customers include people attracted by such niche programming as XM’s planned 24/7 NASCAR channel, he pointed out.

The youthful core car audio demographic will be attracted to “unedited radio” in much the same way they’re attracted to unedited cable TV, Jeancola continued. To capture these customers, however, the satellite companies might have to offer younger customers the option of prepaying service rather than billing it to a credit card.

Satellite sound quality is high, he said. During Jeancola’s audition of Sirius service at CES, he said, “I was impressed. [The broadcasts] had bottom end, and all the highs were very, very nice.”

The services are so attractive to music enthusiasts, he maintained, “it could put the kibosh on CD changers.” Sound Advice will demonstrate the services with live satellite feeds in dedicated kiosks, possibly provided by the satellite companies or designed by the chain.

To bring people into the stores for a demo, Sound Advice will most likely focus on direct mail and catalog distribution to past customers but also place some newspaper ads. In its full-page newspaper ads, Sound Advice devotes 90 percent of the space to a single technology.

For Jeancola, one downside is that the technologies won’t be “readily” available for the home at first, with the exception of a Sony-made transportable home-car unit.

Tweeter marketing VP Noah Herschman claimed “the market is absolutely right for this,” pointing out that most Americans receive only five FM stations. And what’s on those stations “leaves a lot to be desired.”

“It’s a whole new world for music enthusiasts,” Herschman said. “We’ll support both companies full-bore at launch.” The services will appeal to a broad customer base, not just to early adopters, so there will be a “much quicker uptake” in sales-despite the subscription fee, he said. “People are used to paying a subscription fee.”

Herschman said the providers are correct in focusing initially on the car market because “the car is where people really listen to radio. At home, you have CDs and DirecTV music channels.” Nonetheless, Sony’s transportable XM solution “makes sense” because many people will use it to listen to satellite radio at work, he pointed out.

Direct mail and newspaper ads will be part of Tweeter’s promotion strategy, as will music-focused promotions tied into two outdoor music venues bearing Tweeter family names: the Tweeter Center in Boston and the HiFi Buys Amphitheater in Atlanta.

Eighty-four of the chain’s 96 stores sell car stereo, and all but three or four older stores among the 84 stores selling car stereo will roll out satellite displays as soon as the services are commercially available, said Tweeter car buyer Mark Spatz. Satellite radios will be part of a three-sided “mobile tech” display in which mobile video, navigation and satellite radio will each be featured on separate sides.

For its part, Good Guys plans to launch “heavy ad support” when it begins selling the services, in part to help the chain strengthen its mobile presence, a spokeswoman said. Mobile “wasn’t a major emphasis before, but we spent the past year upgrading our mobile merchandising, increasing mobile advertising and expanding the installation side,” she said. The chain will “prominently display” both services in all stores.

Best Buy, though enthusiastic about the services, said “it’s too early to discuss our rollout plans because we’re awaiting” service launches.

Similarly, Denver’s Quality Autosound is also cautious about outlining its rollout plans. “We’ll get more serious about it when they [satellite companies and manufacturers] come in with more factual details,” said co-owner Larry Weingart. “We want to look at what the installation will look like.

“My suppliers haven’t even finalized the antennas. And before we promote it, we want to do our own testing in our area. When there’s more to show us, we can make decisions quickly.”

Nonetheless, Weingart sees a broad potential demographic that includes “anyone who spends a lot of time in a vehicle, and that could be a young kid to a truck driver. They’re all candidates. Even the young can afford it.” One selling point could be the ability to pick up satellite broadcasts in Denver-area canyons that are only marginally covered by terrestrial radio, he said.

“It will definitely be a positive addition,” Weingart said, but “it will take some time to get people to warm up to monthly subscription costs.”

Russ Weldon, president of the Boomer McLoud 12-volt franchise chain, doesn’t think it will take long. “How long did it take for people to get accustomed to paying for cable TV?” he asked.

For the Lexus and BMW owners that he wants to see returning to car audio specialty stores, the subscription fee isn’t an issue, especially for music enthusiasts who buy at least one CD per month. This customer will appreciate access to quality music without the hassle of going to a store to buy it, he reasoned.

“Lexus and BMW owners get a pretty decent integrated car audio system with their car, but now I have something demonstrable to sell that person, and once he’s in the store, I might be able to interest him in a subwoofer or amplifier,” Weldon said.