Until recently, XM Satellite Radio Holdings Inc. and its rival Sirius Satellite Radio Inc. were engaged in a tit-for-tat, deal-for-deal face-off. Sirius landed the NFL; XM responded with baseball. XM signed an exclusive deal with General Motors Corp.; Sirius partnered with DaimlerChrysler AG. XM scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock jock Howard Stern from terrestrial radio giant Infinity Broadcasting.
But for all the billions the two companies have committed to differentiating themselves from each other, they are increasingly following similar business strategies, analysts say. And that might not be a bad thing for the satellite radio business, which while growing rapidly, has so far attracted only a tiny portion of the 193 million people market research firm NDP Group estimates listen to traditional radio. Satellite radio subscribers pay a monthly fee to receive more than 100 channels, including music, news, talk and sports.
Analysts expect XM and Sirius to generate enough revenue to cover the cost of their operations in the next two years. But as the two companies move into the home, laptop and personal music player, they are vying for consumers’ attention with podcasts, online radio and downloaded music. Which prompts the question: Will satellite radio’s audience be eroded by whiz-bang gadgets before the industry escapes the red?
A recent NPD Group survey found that more people still listen to downloaded music than satellite radio. But the satellite radio audience is likely to grow as deals the two companies have made with automakers start to generate a critical mass. April Horace, an analyst for Hoefer & Arnett Inc., estimates the total number of satellite radio subscribers will reach 20 million in five years.
So far, so good. D.C.-based XM, for example, reported yesterday that its second-quarter loss narrowed and revenue more than doubled. It added 647,226 subscribers during the quarter and expects to hit 6 million by year’s end. Sirius, based in New York, will report earnings Aug. 2.
XM remains dominant, thanks to an edge in technology that dates back to 2002, when XM launched its service — a year earlier than Sirius. That lead has helped XM attract 4.4 million subscribers, compared with 1.5 million for Sirius. The differences between the two companies may not remain stark for long. The same outfit now manufactures microchips for both companies. The two companies now charge subscribers the same monthly fee — $12.95. And to the average consumer strolling down the aisle at Best Buy, “the products being offered are not a ton different from either company,” said Jason Helfstein, an analyst with CIBC World Markets.
“The biggest differences today are in technology and content. Both advantages will start to disappear over time,” Helfstein said. “They’re both going in the same direction.”