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XM Reports Big Subscriber Gain

By Mike Musgrove
Washington Post Staff Writer
Saturday, April 2, 2005; Page E01

XM Satellite Radio Holdings Inc. said yesterday that it picked up 540,000 new subscribers during the first three months of 2005, a 68 percent increase over the comparable period a year ago.

The new figures bring the District-based satellite-radio service to a total of 3.77 million subscribers, compared with 1.2 million for rival service Sirius Satellite Radio Inc., which last reported its subscriber numbers in January.

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The company did not break out how many of its new subscribers had come to the service as a result of purchasing new cars with XM radios built in. Chance Patterson, an XM spokesman, said that about half of new customers in an average quarter come to XM through a new car purchase. XM comes as a factory-installed option in many new models from General Motors Corp.; new owners of cars with the XM satellite radios get 90 days of free service.

April Horace, an analyst at Janco Partners Inc., said that XM's numbers also may have been helped by shortages of a new, portable XM radio player device called the "MyFi" over the holiday season and that some subscribers may be only now signing up. XM also can count baseball fans among its new subscribers, as XM will be broadcasting all Major League Baseball games on its channels when the season commences tomorrow.

XM and Sirius still have a ways to go before subscription-based satellite radio becomes a profitable business. XM lost $642.4 million in 2004, compared with a loss of $584.5 million in 2003, largely due to one-time costs associated with signing up new customers.

Over the past three months, XM has started deploying its service in rental cars from National and Budget, as well as in AirTran jets, to attract new customers. The company has also started putting its radios in Starbucks coffee shops.

XM Chairman Gary M. Parsons said yesterday that such outlets are more important than traditional advertising outlets in winning new subscriptions. "Any way we can get people to hear it, rather than hearing about it, then we've got a customer," he said in a phone interview.

The marketing efforts come as XM raises the price of its basic service package to $12.95 per month from $9.99 beginning today, matching the monthly rate for Sirius.

Sirius has been working hard to line up exclusive programming content, such as shock jock Howard Stern, who signed a $500 million multi-year deal. Sirius recently picked up rights to broadcast NASCAR races for five years, after XM's contract with the franchise runs out in 2007. And rappers Eminem and 50 Cent are slated to produce a channel for Sirius's service.

XM's Parsons surprised some who had followed the sometimes strident, no-holds-barred competition between the two companies with his response to a question at a Banc of America Securities conference earlier this week. When asked after a keynote speech whether he would consider letting manufacturers build radios that could play both XM's and Sirius's service, Parsons said he'd have "no problem" with such a product.

"I guess I responded in a not-adversarial way, and I guess people were surprised," Parsons said yesterday. "This is a new market -- we will be strong aggressive competitors, and we understand there will be good times to cooperate."

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