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At XM, Boldly Going

What Fits Where

Sirius officials say they are closing the gap with XM on a variety of fronts. While XM still has more than three times as many subscribers, a year ago the ratio was 11 to 1, said Jim Collins, a Sirius spokesman. Sirius also recapitalized last year, reducing its long-term debt and boosting its cash position, which helped it make its biggest plays to date: snagging football and Stern.

Though he doesn't debut on Sirius until Jan. 1, 2006, Stern has already proved to be a marketing force for Sirius. The day of the Karmazin announcement, Stern created a spectacle in Union Square in New York, handing out scores of free Sirius radio boom boxes.

XM Satellite Radio chief executive Hugh Panero, who joined the company in 1998, keeps his office door open, shouting over to Chairman Gary M. Parsons during the work day. (Katherine Frey -- The Washington Post)

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XM had also been talking to Stern, said Panero and Parsons. But in the end, they decided they weren't willing to pay the price he was asking. The same goes for football, which Panero believes is better suited to television than radio. Given the number of baseball games played each year, and the length of the season -- nearly twice as long as that of football -- Panero and his team thought baseball offered better value.

Given what Sirius is paying to get Stern, on top of its NFL deal, some analysts have questioned whether the company is taking a big gamble. If Stern and football don't drive Sirius's subscriber numbers up, the company may not remain financially viable.

The NFL deal is already eating into Sirius's bottom line. Sirius recently reported that its third-quarter net loss grew by 60 percent from the same quarter a year earlier, hitting $169 million, in part because of expenses associated with the NFL transaction. The costs wiped out part of its gains in third-quarter revenue, which climbed to $19.1 million from $4.3 million.

By contrast, XM's third-quarter net loss narrowed to $118 million, compared with $133.5 million for the same period a year earlier. Its third-quarter revenue more than doubled, reaching $65.4 million.

Horace of Janco Partners said she is looking to Karmazin, known for his focus on cost-cutting and relationships with advertisers, to bring down Sirius's costs and boost ad revenue. Sirius spends $229 to acquire a new subscriber; XM spends about $57.

With 200 million cars on the road and 108 million households in the United States, analysts said that the market for satellite radio could reach 20 million to 35 million -- plenty of customers to sustain both companies. In the end, Horace said, consumers will decide which service to subscribe to based on content.

And in content, consumers now have a real choice. XM has hired its own shock jocks, Opie and Anthony, and the deal with NPR's Edwards gives it another popular voice. XM officials would not disclose the financial terms of either deal.

So far, the recent content deals have not boosted subscriber growth significantly. Analysts said the announcement of the NFL deal, for example, didn't have any impact on Sirius's subscriber numbers. Edwards and Opie and Anthony debuted in October on XM, but XM does not release figures on how many people are tuning in.

Of course, many of the offerings on Sirius and XM are designed to appeal to narrow segments of the population, while collectively attracting a wide range of listeners. The Starbucks Hear Now channel, for example, is supposed to draw in the coffee chain's many baby boomer customers. Market research indicates satellite radio draws subscribers of all ages, though the majority of them are male.

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