Can Satellite-Radio Survive the iPod?
November 27th, 2006 Posted in Main Page, Uncategorized
Michael Urlocker, who writes the OnDisruption blog, has a column in today's National Post looking at whether satellite-radio can survive the growing popularity of the iPod in the mobile music battle. One fact that jumps out is that 70% of 2007's U.S. car models will have built-in iPod connectors, which will give the 67 million iPod owners another way to enjoy their devices. Urlocker, a former telecom analyst, suggests XM and Sirius must implement some “tough measures” to compete such as pursuing lower growth targets so they can become profitable, and “looking for marginalized customers who don't want or can't afford iPods”. When it comes to the challenges facing satellite-radio, Mike and I are perfectly aligned.
November 27th, 2006 at 1:49 pm
Seriously Mark, who can't afford an iPod. They're selling for as little as $50 in some places. That's a mere couple of months of XM fees.
November 27th, 2006 at 11:05 pm
The point which I did not make very effectively was that you can often sell services as a lower-cost substitute for products requiring an up-front investment.
Also some people don't want iPods and some people don't have the required equipment, such as a computer, to make full use of an iPod.
This may not be a great business. And it may not be a mass-market business, at least in the U.S. and Canada. I would not bet the farm on it.
But I would consider it as one of several new approaches satellite broadcasters can experiment with in an attempt to discover profitable niches which they can grow.
Trying to discover a profitable niche makes a lot more sense than what the satellite radio companies are currently trying to do, which is to be the mass-market huge-content variety music option, a business which has been unable to make a profit since XM launched five years ago and now looks like it is getting tougher because of disruption by the iPod.
Larry is correct that a low-priced iPod accounts for a few months of satellite radio service. (US$79 for a new iPod Shuffle compares to about six months of basic XM radio at US$13 per month.)
The deduction I would draw is that the satellite service's price may have to fall, reversing a recent trend of price hikes. Financial risk is rising.
Re-orienting the satellites to another region where the monthly service option is more appealing and where an up-front iPod purchase is less appealing may be the right course of action.
Mike
http://www.OnDisruption.com