Fm Radio – Analysis
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XM Overview
Financial overview
Operations
Products and services
Strategic alliances
Current crisis:
Market Analysis:
Market share
Market size and trend
Target customers and Segmentation
Future and forecast
International market growth opportunities
Distribution channels Analysis:
The most useful segmentation of the satellite radio market is by the channel through which the subscriptions are obtained. Net subscriber additions refers to the total number of subscriptions acquired in a given period of time and deducts all non-renewed subscriptions–including expired promotional subscriptions that were not converted to normal subscriptions. XM segments it market through three channels.
Distribution through OEM: Satellite radio subscriptions that come in through the OEM auto maker channel are frequently attached to a promotional period in which XM or Sirius receives approximately half of the subscription revenue as it would with a non-promotional subscription. Depending on the satellite radio providers role in the promotion, the revenue amount received for a promotional subscription may be higher or lower. The OEM promotional periods typically range from three months to a year and are paid for, in part, by partner manufacturers.
Consumers who obtain their satellite radio with the purchase of a new–or recently manufactured–car simply activate their service through one of the broadcast providers. These radios are specially designed for individual car models. In a new car, the satellite radio is an original equipment manufacturer (OEM) component that is either pre-installed in all of the models or is an optional upgrade. In an increasing number of models, the radios are AM/FM/SAT, which receive both satellite and traditional radio broadcasts.
Figure 7: Net OEM subscriber additions for XM, 2002-2004
Net subscriber additions
% change from previous year
2002 OEM
2003 OEM
669,718
7,624.9
2004 OEM
989,781
Distribution through Retail: While XM and Sirius have formed partnerships with a variety of electronics retailers and mass merchandisers, industry leaders have indicated that OEM holds more potential than retail in the long run. The retail market is primarily served by larger retailers such as Best Buy, Circuit City, Wal-Mart and Sears, but also includes specialized retailers like Tweeter, Good Guys, RadioShack, and Advance Auto Parts.
Figure 8: Net retail subscriber additions, 2002-2004
Net subscriber additions
% change from previous year
2002 retail
338,480
2003 retail
669,718
2004 retail (est.)
752,003
Source: Mintel/XM Satellite Radio/Sirius Satellite Radio
Distribution through Rental car: Subscriptions through the rental car segment consist of satellite radio receivers installed in rental car vehicles. Average monthly subscription revenue through this channel is typically lower than other channels. In the first quarter of 2004, XM reported the average monthly subscription for rental cars to be $7.72, compared to $8.66 for the rental, OEM and retail channels combined.
Figure 9: Net rental car subscriber additions, 2002-2004
Net subscriber additions
% change from previous year
2002 rental car
2003 rental car
20,792
2004 rental car (est.)
30,923
Source: Mintel/XM Satellite Radio/Sirius Satellite Radio
Industry Overview
Satellite radio Market:
While the concept for satellite radio began development in the early 1990s, consumers were not introduced to the technology until 2001. Since that time, satellite radio has grown as a result of the efforts of two firms–XM Satellite Radio and Sirius Satellite Radio. Both firms were scheduled to launch in Fall 2001, but Sirius was delayed for eight months due to chipset conflicts.
The satellite radio industry finished 2003 with $91 million in subscription sales. This represents a jump from $16 million in 2002, rising from less than $1 million in 2001–the first year that the technology was made available to consumers. The market consists of two players: XM Satellite Radio and Sirius Satellite Radio. XM commanded most of the market share up through 2002, primarily due to the fact that it was first to launch satellite radio service in the U.S. However, by the beginning of the year in 2004, Sirius captured 14% share of the market and continues to push competitively, further reducing XMs share. By the second quarter of 2004, XM declined further to 83% of the market.
XM announced in the second quarter of 2004 that it had amassed 2.1 million net subscribers. While Sirius had not released 2004 second quarter data during the review period, first quarter net additions for the company in 2004 totaled 91,000 subscribers. While Sirius has gained a significant stake in the market, XM remains the strongest player in the market, adding 320,000 in the same time period. In late July of 2004, XM and Sirius reported approximately 2.1 million and 500,000 subscribers respectively, bringing the total market to 2.6 million subscribers. Market shares in the satellite radio market frequently fluctuate from quarter to quarter.
The satellite radio market is best characterized by complex stages of development. The industry is currently focused on customer acquisition, which is driven by subscription sales. XM and Sirius both have promoted heavily since the industrys launch, and both project positive cash flow in 2005.
A primary driving force that has enabled