A Comprehensive Study of the Satellite Radio Industry: :: essays research papers

INTRODUCTION   Ã‚  Ã‚  Ã‚  Ã‚  Would people be willing to pay $12.50/month for commercial free radio beamed right to their car or home. Well two companies and many big investors are betting about $3 billion dollars that people are willing to do just that. In 1997, the Federal Communication Commission (FCC) granted a portion of the S-band spectrum for satellite radio and two companies purchased use of these bands and started the only two companies competing in the satellite radio business today, namely Sirius and XM. Analysts like William Kidd of CE Unterberg Towpin, predict satellite radio will generate about $10 billion a year in revenues by 2007 (McClean, 2001). However, to date neither of these companies has earned a dime. According to industry analyst though, â€Å"its not whether satellite radio will take off-rather it’s a matter of how fast.† (Helyar, 2004). Despite lofty predictions, satellite radio has some big issues to overcome before it becomes a serious threat to the $ 19.6 billion per year terrestrial radio industry. The article that appeared in Fortune entitled â€Å"Radio’s Stern Challenge† by John Helyar discusses Sirius’ marketing strategy to not only take market share from the entrenched and free terrestrial radio industry but also to beat its only competitor, XM. The Fortune article presents how a fat and lazy radio industry has failed to react to an eroding listening base and an increasing number of competing technologies. Issues like lack of attention to programming, no on-air talent, and an increase of 166% in the time devoted to commercials have driven listeners away from radio. Teens aged 12-17 spend 11% less time listening to radio compared to five years ago and adults 18-24 spend 13% less time compared to five years ago (Helyar, 2004). The article further discusses that terrestrial radio has much to fear from competing technologies like satellite radio, streaming digital radio on the Internet, and Apple’s iPod. What terrestrial radio does have in its favor is that it’s free compared to any of the current competing technologies like satellite radio. However, satellite radio is banking on a commercial free format to steal listeners away from terrestrial radio. Sirius offers 65 commercial free channels of music and 55 news, sports and talk stations. And the one thing that satellite has over its less lofty competitor is that you can’t loose the signal as you drive across America. The two major competitors for the satellite radio listeners are Sirius and XM.