Wednesday, May 20, 2009

Sirius XM Is One Of Time's Top Ten Tech Failures

You, hopefully, will indulge me a self-satisfied smile as I pass this along (now let's work hard to adopt multi-platforms to be sure that we're not on this list ourselves in five years!):
Sirius XM (SIRI) satellite radio was supposed to be one of the most successful consumer electronics devices of all time. A subscriber would be able to listen to more than 100 stations coast-to-coast in either a moving vehicle, or using a portable version of the device. Initially, the service planned to run no commercials. One of the two companies that would eventually be the merged Sirius XM was XM Satellite Radio which launched its service in September 2001. At the end of the year, the company had almost 28,000 subscribers, a figure that jumped to about 350,000 by the end of the 2002 and 5.9 million by the end of 2005. Over this period, the company accumulated hundreds of millions of dollars of debt in order to cover capital expenses, operating deficits, and sales and marketing costs. Analysts expected the company to be extremely profitable once it reached subscriber levels of more than 10 million. The business was growing so quickly that this goal seemed a foregone conclusion. Rival Sirius launched its service in July 2002. Over the next five years, it would have fewer subscribers than XM but would grow nearly as fast. Sirius also took on tremendous amounts of debt to support its operations. As both companies ran low on money, they announced a merger on February 17, 2007. The FCC reviewed the request for thirteen months while the companies were bleeding cash. Subscriber growth had slowed, most likely because of new and more popular consumer electronics devices like the Apple iPod and multimedia cellular handsets. Shares in Sirius, which had traded at $63 in 2000, dropped to $.05 earlier this year. In the first quarter of 2009, the number of subscribers for the combined service declined by 400,000 from the previous quarter to 18.6 million. Neither Sirius nor XM ever made a dime. —Douglas A. McIntyre, Time Magazine


Ellis B Feaster said...

I would love to show this article to listeners I run into who ask "How badly is sat. radio hurting you guys" or "What will you do when everyone has left regular radio for XM?"

Anonymous said...

Not so fast. To borrow a phrase, the rumors of satellite radio's demise are greatly exaggerated. The superior breadth of content available on SIRIUS XM has never been challenged; rather, it's been more of a financial struggle as the weak economy choked the key distribution outlet -- new cars. SIRIUS XM is now starting to realize much of the financial savings of the merger -- just look at the revenue results from the major radio companies from 1st quarter '09: 1) SIRIUS XM - $605 million, 2) Clear Channel - $603.6 million, 3) Citadel/ABC - $158.9 million, 4) Entercom - $75.5 million, 5) Cox Radio - $75.4 million. So based on first qtr revenue, SIRIUS XM is currently the largest radio company in the U.S. (and thus, the world) -- not bad considering the medium is only 7 years old and certainly far from the graveyard, as this article implies.

So I wouldn't be doing the happy dance just yet. Satellite radio continues to push the envelope with programming beyond the mainstream, which will continue to draw in disenfranchised listeners from FM. As long as SIRIUS XM can continue to improve its balance sheet, they may already have as many of your listeners as they need to become profitable.

Inside Radio said...

Mel: Sirius XM tops terrestrial. For the first time since the technology was launched, satellite radio revenues top terrestrial radio. Sirius XM had $605 million in first quarter revenues, more than any radio group. Despite the auto slowdown, CEO Mel Karmazin tells employees growth has been “phenomenal” since the merger.