Saturday, December 09, 2006

Where do we go from here?

The world of audio is experiencing a radical transformation right now. There has been a massive explosion of opportunity in not only the music market, but the broadcasting and media market as well. Thanks to the infiltration of computers into every aspect of daily life, consumer electronics and audio products are submitting to the digital revolution. Satellite radio, born of the digital era is looking to challenge the world of free radio and become the premiere choice in audio programming of consumers around the world. The main concept of satellite radio is differentiation. The objective is to discover how satellite can differentiate itself from the digital jungle that has taken over the audio world. There is no doubt that the trend of business is going in the direction of consumer-oriented and personal service, so companies must face issues of product personalization as well. The radio industry has taken an ambiguous turn for the future, as more consumers are starting to give up on terrestrial radio and the commercial storm that has plagued it. With mp3 player sales increasing exponentially every day, and with emerging technologies such as podcasts, and user generated content like YouTube, the corporate world of broadcasting is slowly dying.

A unique selling proposition being utilized by terrestrial radio is the concept of personal service. Despite the wide variety and nationwide coverage that Satellite offers, terrestrial still has a leg up in that it provides local, city specific programming that is capable of being simulcast nationwide. True, terrestrial does play an inordinate amount of commercials sometimes, but the truth remains that it is a free service available to virtually anyone. Neither XM nor Sirius can claim this.

It has become the objective of XM and Sirius to position its services as a luxury product to those who seek premium services and innovative technologies. An example of this high-end mentality is the recent integration of satellite into premium automobiles. Porsche, Acura and even Bentley motors have now agreed to include XM in its vehicles as part of the standard package. Whereas, auto manufacturers like Volkswagon, BMW, Scion and Nissan are catering more towards the mp3 world and iPod connectivity. Some of the world’s largest manufacturers like GM have created strategic, long-term partnerships with satellite radio, and major airlines such as AirTran Airways are also now incorporating the satellite experience into its in-flight entertainment. Locking people into the satellite service is becoming more successful than simply offering it as a convenience. By providing an environment in which you can’t escape satellite radio, XM and Sirius have been able to gain massive market share and increase user trials.

Integration is a crucial aspect of the digital world. Why? Because the digital world was designed to be integrated. The same computer that runs your powerpoints is capable of running an entire radio station out of the basement of some guy’s house. The same software that lets you cram tens of thousands of CDs into something the size of a 3x5 card has the capability of communicating with a website to broadcast user generated content to the world. Mp3 music management software is now in satellite radios, satellite radios are now in GPS devices and GPS devices are now in cell phones. Digital communication is just a language capable of completing an infinite amount of tasks, simultaneously. Radio and mobile DJ’s alike praise the latest digital music management software because of its organizational ability, convenience, size and portability. When you rely on a machine that can learn virtually any function of existing electronics, the possibilities are endless. The electronics industry is rapidly creating a widespread digital fusion that has given rise to all-in-one products and multipurpose gadgets.

Integration is not only important in the product category, it is equally vital in the service department as well. In addition to being included in automobiles and airliners across the nation, satellite service is now being combined with other services such as GPS and cell phone service. The synergy created by joining such powerful devices as GPS, cell phones, and satellite radio is enormous. All are dependent upon the same functions, and utilized the same technical concepts in order to provide useful resources. If a device can communicate with a satellite, then it can perform multiple tasks such as pinpoint user location, transmit audio and receive audio. Cingular Wireless recently realized this and now offers 25 XM channels through the Cingular service, which can be streamed directly through a cell phone and listened to by using special headphones. Bushnell, a GPS device company now offers GPS units with streaming XM. What is the advantage to having such all-in-ones? The advantage is synergy. For example, XM provides a special traffic service that can by synchronized with a Bushnell GPS device. Together, they provide instantaneous, customized traffic reports with alternative routes based on data provided by the GPS unit. These digital electronics are starting to show exactly how technology can become a highly-efficient workhorse for mankind.

Yet another form of integration is the marriage of traditional and new, or terrestrial and satellite. In 2006, XM successfully achieved one of the biggest business stunts ever conceived in the world of radio. The satellite giant actually merged with terrestrial radio to provide a simulcast of programming content to both XM subscribers and terrestrial radio listeners. Opie and Anthony successfully bridged the canyon between satellite and terrestrial formats by simulcasting their show on both XM and CBS broadcasting stations each morning during drive time. In a move that hugely benefited satellite’s main competitor, XM provided a major advertising opportunity to CBS terrestrial intravenously through its own premium programming. XM demonstrated to the satellite world that it is actually better to live in harmony with the enemy than to ignore it, which is as shocking as it is perplexing.

Apart from integration, the way satellite radio has uniquely positioned itself for the fierce competition of the future is by signing promising talent and acquiring exclusive broadcasting coverage rights of events like football, NASCAR, and baseball. XM has signed shock jocks Opie and Anthony long-term, and Sirius has followed with its signing of Howard Stern. On a daily basis, new talent like Oprah and The Who are granted their own channels on satellite, and thus making the service even more attractive to skeptics and potential customers. Expansion is the number one priority of the satellite industry, in order to keep up with established mediums such as terrestrial and mp3’s.

Satellite continues to expand content-wise as well as geographically and demographically. XM and Sirius both started within the United States, but are now successfully broadcasting throughout Canada. XM and Sirius look to expand globally and stomp their weak competition, while appealing to new and unsought demographics at the same time. Adding specialized channels that appeal to niche populations, like the Catholic channel on XM, and focusing sales promotions on new target markets such as college students has become the adventurous new goal of satellite radio. With new players entering the market recently, including Canada Satellite Radio and WorldSpace – worldwide satellite radio, the satellite industry is becoming increasingly competitive on many fronts of the audio and music industries. Radio technology also continues to evolve into new ideas such as High Definition (HD) radio, forcing satellite to raise the bar even higher in order to attract and retain customers. HD radio offers sound quality equal to satellite, and programming that comes directly from the “hometown.” HD radio is even offered commercial free in some cities, providing a free alternative to satellite programming. Satellite has somewhat of an advantage, however, in that it does not require the purchase of a $400 receiver, it has more offered content, it is commercial free and all channels are broadcast nationwide, not just some.

The satellite radio market has recently slowed down in subscriptions and sales. Similar to mining, where the initial quantity of a resource is always easier to get than the last, there has been a plateau of revenue for XM and Sirius because they have already skimmed the market for easily convinced, affluent, risk-taking consumers. The next batch of customers will only come with increased marketing and sales promotion costs. Therefore, the marketing objective of satellite has become an effort to solicit potential customers who are not overly impressed with the benefits of satellite radio already. New technology in portability has helped satellite in this area, but improving one-on-one relationships with customers and improving the viability, pricing and operational capability of satellite radio is what the industry must focus on the most. Consumers markets, like the college-aged demographic expect their electronics to fully complement their individual personalities. This being said, it is in the best interest of the satellite industry to continue personalizing its products and services similar to the way mp3 players have. Personal selling is not the only thing necessary for future prosperity, though; sales promotions are just as vital. Sales promotions have been instrumental for XM and Sirius in obtaining new customers. XM’s provides free trials of its service on every AirTran airplanes, and earlier this year gave every AirTran passenger a free satellite receiver with proof of ticket purchase in hopes of increasing subscriptions. Sirius just completed a two-day, free trial period in October, in which the world was offered free access to Sirius satellite radio through the internet for two full days. Though it was a promotion for Howard Stern, Sirius is already reaping the increased sales benefits overall. Going into the holiday season, both XM and Sirius are confident that sales will increase significantly as a direct result of their promotional efforts.

In summary, the concepts of integration, collaboration, global expansion and mass customization are what will guide the future possibilities of satellite radio. The direction of business is headed towards personal interaction, and both XM and Sirius are lacking in the relationship department. By making a comprehensive assessment of the potential satellite market, XM, Sirius and other satellite providers can increase sales through a general pull strategy. By getting into the life of their consumers, satellite providers can learn a lot about the demands mass populations have for the radio industry. Studies of consumers’ daily life, likes, dislikes and preferences can provide the essential information needed to modify satellite service according to its consumers. Providers can also figure out which formats and stations are most popular among the different target markets and create content accordingly. Advertising and sales promotions for satellite should follow the same direction. Altogether, with an innovative product, solid service, and a profound understanding of the consumer’s wants and needs, satellite will be propelled past its competition into a prosperous future.

Saturday, December 02, 2006

Ever consider marrying your sister?...didn’t think so.

In the past week it has been rumored that Sirius CEO Mel Karmazin has leaked certain hints of a possible XM/Sirius merger. Right now, these two companies dominate the satellite world and are very successful as competitors. However, if they were to combine forces it would create a complete monopoly over the industry. As I see it, like brother and sister, there would be no way these two could get along and play nice.

At this point, not much good can come from a satellite radio merger. As seen in the past when moguls join, it’s like two single people moving into a house together; everything goes into the same pot and most assets are assimilated into one collection. Unique corporate identity is lost, and the result is less-than-satisfied customers. In the case of XM and Sirius, the unique programming of each provider will be severely compromised if a merger of this magnitude were to occur. It could detrimentally “wipe out the sounds that enticed some people to subscribe in the first place” as the New York Daily News puts it.

XM claims that the merger is just a rumor, and Sirius claims that it is just “one of those ideas you kick around.” The possible merger question came about as a result of both XM and Sirius losing significant stock value recently, and having increasingly pessimistic holiday sales predictions. If both companies do join, I can’t see them gaining any monumental benefits, but I do see them sacrificing valuable quality.

This also presents the question of, why does everything have to be under the same company anyway? Monopolies are detrimental to a capitalistic society like the United States, decreasing competition and giving consumers no other choice. The merge would indeed decrease operating costs for each company, but the fact remains that a merger between XM and Sirius is a horrible idea on many fronts. That’s why I think it’s safe to assume that this fantastic idea is indeed a rumor, and should remain just that.

Thursday, November 30, 2006

Digital Fusion – All in ones reign supreme.

If you try and think of all the services offered today via satellite, you probably can’t count them on one hand. Cell phones, GPS, Satellite Radio, Television, Automobile tracking devices, Weather, even pictures of your house from space! The possibilities of integrating all these functions and services are now apparent, and becoming quite lucrative.

If there’s one thing that’s true today, computers perform a lot of functions that used to require massive amounts of bulky equipment to execute in the past. Thanks to digital, many electronics now multitask and complete functions virtually, allowing for comprehensive integration. Two new satellite products have just been introduced the market that promise to integrate digital satellite services in a truly unique and marketable way. The Raymarine SR100 Sirius Satellite weather receiver and the Bushnell ONIX400CR GPS/XM handheld are the latest innovations combining multiple digital powers into one convenient package.

GPS has been the easiest convenience to integrate with electronics, because it can be manipulated in so many useful ways. It’s installed into nearly all new cell phones as part of a 911 locating system, and can be found in most new automobiles and satellite radio receivers. Bushnell, a GPS device manufacturer realized this opportunity and decided to include an XM receiver chip in its newest device. What makes Bushnell’s product so cool is that it’s capable of synchronizing GPS capability with XMTraffic and XMWeather. This means that if you’re jamming to XM on the way to work in the morning, your radio will alert you of any delays, accidents, inclement weather or complications ahead, and suggest an alternate route for you to take based on your current position. Raymarine's E-Series Navigation Displays is the first to integrate with SIRIUS Satellite Radio's Marine Weather Service to show advanced, animated weather forecasts for boaters.

The concept of the digital revolution feeding off of itself is creating major possibilities for today and the future. It will be tricky trying to embrace this rapidly growing industry, and even a little bit scary. However, at least the kinds of services these toys now offer somewhat justify their outrageous price tags.

Saturday, November 18, 2006

Your complimentary in flight magazine and satellite radio.

In a bold, yet unprecedented move, AirTran Airways recently announced it will be giving every single one of its passengers a voucher for a free Roady 2 XM satellite radio receiver. That’s right; every single passenger gets one just for flying. According to Orbitcast, the vouchers for the free RoadyXT radios will begin on flights starting today, and continue throughout the holiday season or until flight attendants have given them all away.

In a stunt that mimics Oprah’s car giveaway some years ago, XM and AirTran have teamed up to execute quite possibly the greatest hardware promotion yet. Now, of course the radio is free, but the subscription service isn’t. This is a strategy that Gillette figured out a long time ago with its “free razor on your 18th birthday” promotion idea. Gillette incurs the minuscule cost of giving you a free razor, and expects in return to make hundreds off your purchase of replacement blades. Similarly, XM is incurring the minimal cost of giving away a receiver, in hopes that it’ll reap unbelievable profits from new subscribers.

Interestingly enough, AirTran already offers complimentary in-flight XM Satellitite radio service at every seat on their airplanes. With a regular set of headphones, passengers can enjoy the blissful, commercial-free satellite radio experience that so many have come to love. Not only does this provide a 170+ channel alternative to the traditional 7 channel in-flight radio, it is a major promotional tool for XM. All passengers receive a free XM radio trial that lasts the entire length of the flight, and it is as simple as plugging in your headphones.

It’s becoming apparent that satellite radio is being forced to become more and more creative with its solicitations lately. As the audio market becomes more saturated every day with mp3 players, new satellite providers and HD radio, the competition is becoming fierce. Not to mention, XM and Sirius’ main efforts now are to attract the very niche, yet populous crowd of people who don’t have much interest in satellite or personal audio in general. As the holidays approach, there will be a major opportunity to increase subscriptions for satellite, and judging by this promotional event it looks like XM is thoroughly prepared.

Thursday, November 16, 2006

New Players in Satellite Radio

Satellite beware! There’s a new satellite radio startup company sneaking up on the industry from behind lately, called Canada Satellite Radio (CSR). CSR is one of two satellite radio providers in Canada that started service over a year ago. CSR is the provider of XM Canada, and the other Canadian provider is Sirius Canada, the direct competitor of XM. CSR’s mission statement is that it is “seeking to become the market leader in providing subscription-based satellite radio entertainment to the Canadian market.” Though it is still too early to tell, this mission could become somewhat of a losing battle real fast. CSR recently reported that it lost $102.7-million in its first fiscal year. Executives at Canada Satellite Radio attribute the $100 million loss to massive startup costs including the launch of a satellite, marketing costs and satellite receiver sales promotions.

What’s notable is that if CSR does eventually gain it’s footing, it could potentially become the third leading satellite provider in the world. Considering XM Canada is provided in partnership through CSR, the Canadian company at least has some solid training wheels to help get it going. Comparatively, XM reported 76,242 total subscribers after its first fiscal quarter in business. CSR has recently reported gaining over 120,000 subscribers within its first year. Considering the satellite radio market is slowing down, as providers try to scrape up every last subscriber they can, CSR isn’t really doing that poor of a job (subscription wise).

I would just like to point out that, regardless of the financials it’s nice to start seeing some diversity within the satellite world. Granted, there are extreme startup costs, as CSR has shown, only two companies (XM and Sirius) orchestrate the satellite radio world right now. Increased competition in general, will mean slower-rising prices, and better quality service. It feels as if currently, the world is being taken advantage of by only having two major satellite radio companies. WorldSpace, a startup “international” satellite radio company in the eastern part of the world has also entered the industry, but shows little promise as it continues to lose around $30 million each quarter.

Most businesses aren’t as risky as satellite radio. For instance, typical businesses aren’t required to launch multi-million dollar satellites into orbit just to get started. However, money is made where the risk is high, which makes the entire satellite radio concept such a big gamble. In fact, so far neither XM nor Sirius has broken even after being in operation for about five years now. This only shows what’s in store for CSR down the road, so I hope they’re prepared.

As for me, I think I’ll stick to opening up a small pizza shop.

Friday, November 10, 2006

Can Satellite Say "Jackpot?"

A recent report by Bridge Ratings, extensively outlined the purchase rates and demand of satellite radio. Among other things, it numerically showed who the most promising consumer is in satellite’s future. So who is it?…drum roll please….College Students! That’s right, us college students are crazy about satellite and are proving it with our wallets (and our parents wallets) as the holiday season approaches.

If we can learn anything from generation Y, it’s that we hate commercials and want them to suffer a slow, miserable extinction. One way of doing that is by turning off terrestrial radio and blowing $400 on an iPod. The second way to avoid advertisements in our (music) life, now more apparent than before, is by purchasing a satellite radio receiver. It’s not certain whether Sirius and XM include the college-aged demographic as a “heavy user” when marketing, but they better start focusing more resources on them. The numbers have spoken, and they are telling the satellite industry there is a huge, untapped pool of potential subscribers among America’s higher-ed institutions.

Looking for alternatives, or even complements to the portable mp3 player, it is not surprising that the majority of satellite-curious college students are looking to buy portable receivers (57%), with Sirius subscriptions (60%). Sirius, being the preferred service provider is somewhat surprising, considering XM has more actual subscribers. However, this is congruent with Sirius’ latest pushes to increase sales. Sirius has been advertising like crazy on college football, and college watched sports. It includes certain college-aged programming like Howard Stern, and generally appeals to the college demographic by providing tons of commercial free music. As Orbitcast points out, Sirius has an advantage in awareness for college kids, mainly led by Stern.

Who knows how many college-aged generation Yers there are? And many of them have lots of mommy and daddy’s money to spend on luxury gifts like portable satellite radio receivers. Even if their parents aren’t loaded, the holidays are a comin’ and satellite radio is on a lot of gift lists. Bridge reports that “Follow-up interviews with this demographic show that the lure of the forthcoming holiday season has instigated new interest as the possibility of receiving satellite radio systems - especially portable ones - as gifts this year is a reality.” Well satellite, all I have to say is, DON’T SCREW THIS ONE UP.

Wednesday, November 08, 2006

Dead Air

So, it’s been two weeks since I emailed both Sirius and XM satellite radio about certain concerns I had with their service, specifically their websites. I was concerned that neither XM nor Sirius really strived to connect with their customers on an intimate level. I was right, and now I have proof that both companies could cares less. So, I figured I would let the two in on a little secret: In the world of relationship marketing, it would be most beneficial for companies to rise above the standard, typical, boring e-newsletter and start to really show concern for their hard-paying customers. Technology has evolved from the days of automated emails and websites with cool colors and no features. So why do multi-million dollar companies insist on lethargically sticking to primitive media. Both XM and Sirius act like the e-newsletter is this revolutionary solution to customer satisfaction, when in reality…it’s pretty lame. Not to mention, there’s no “what’s new” feature on either website…so I never know.

How do XM and Sirius choose to keep me informed with new innovations and products? The e-newsletter, wow good job guys. How does XM respond to my comments about their communications being just as good as dead air? They respond with even more dead air and don’t even email me back. How does Sirus respond to my comments? They send me the exact email I scrutinized them for in my previous post; three lines of superficial concern and then three pages worth of promotions and ads. Same old, same old, guys. Your satellite technology seems to be in touch with the 21st century, when can I expect your PR department to join?

Let me put it this way. Each day I wake up and am bombarded by flashy corporations trying to get my attention. In fact, one of those corporations is Apple, a direct competitor of satellite radio. Consumers’ attention these days is worth gold, and lots of it. That’s why when companies finally do succeed in getting a consumer’s attention, they usually treat it with the utmost care in order to encourage repeat business. In reality, XM and Sirius’ care for, and response to the customer is just as robotic as its digital broadcasts.