Last year ended with a bang in satellite radio. Growth in the number of new subscribers signing up with competing services XM and Sirius was stronger than many expected. XM's subscriber base grew from 1.3 million subs at the end of 2003 to 3.2 million at the end of 2004, surpassing the company's own projections. The company anticipates a subscriber base of 5.5 million by the end of 2005 and was well on its way by the end of the first quarter, adding more than 540,000 new net subscribers for a total of 3.77 million subscribers, according to the company.

Sirius, too, had a very good 2004, chalking up a 300 percent increase in year-to-year subscriptions, from just over 300,000 at the end of 2003 to more than 1.1 million by January 2005. The company expects to double its number of subscribers this year to more than 2 million.

Both services have focused on wooing consumers by signing big-name on-air personalities. Sirius brought national attention to satellite radio when radio personality Howard Stern appeared on David Letterman’s late night show to talk about his lucrative five-year contract with Sirius, beginning in January 2006. In addition to Stern, Sirius has provided a satellite radio platform for rapper Eminem, skateboarder Tony Hawk and the National Football League. Sirius’ seven-year programming partnership with the NFL includes such programs as NFL Radio and NFL Sunday Drive.

XM counterpunched by adding live celebrity hosts, including Snoop Dog, Jay Z and Tom Petty as well as pop psychiatrist talk radio host Dr. Laura, political pundit G. Gordon Liddy, sports-caster Tony Kornheiser and radio jockeys Opie and Anthony. XM also signed an exclusive 11-year agreement with Major League Baseball.

This explosion of satellite radio service usage has driven a large increase in demand for new hardware. Pioneer and Alpine now offer headunits that can work with either an XM or Sirius tuner. During 2004, shipments of satellite radio receivers topped 2.6 million units, representing a whopping 122 percent increase over the previous year’s results, according to CEA. Dollar volume generated a very healthy 125 percent increase to $209 million. CEA expects similarly positive results this year.

Automakers have been testing the waters of satellite radio for a couple of years and now are embracing it on a wide scale. Sirius announced that Mercedes, Jaguar, Volvo, Volkswagen, Mitsubishi, Toyota and Land Rover plan to offer Sirius in specific 2005, -6 and -7 models of their vehicles. Mercedes will offer the service as a factory installed option on the 2006 M-Class SUV, and on future 2006 and 2007 year models. Jaguar will offer Sirius as a dealer-installed option on its 2005 X-Type and S-Type vehicles.

XM-equipped audio systems are available on about 100 new cars in the 2005 model year with Hyundai becoming the first automaker to launch XM as standard, factory-installed equipment in every vehicle across its entire line-up. XM Satellite Radio also announced that Nissan North America has chosen XM to supply satellite-delivered data and telematics services, such as in-vehicle messaging and XM NavTraffic, which delivers current traffic information to Nissan and Infiniti vehicle navigation systems.

XM and Sirius are each looking to grow the brand by means of plug-and-play receivers that include everything you need to enjoy satellite radio in the home, in the car or on-the-go. XM introduced the world's first personal, handheld satellite radio in December 2004 with the Delphi MyFi XM2go radio. The company is expanding the XM2go product line with new models by Pioneer and Tao. Every radio in the XM2go product line-up offers a compact, handheld XM receiver with a built-in XM antenna and rechargeable battery, plus headphones and other accessories.

Sirius Satellite Radio’s smallest "Plug & Play" satellite radio is called Star Mate. About the size of a deck of cards, it is a transportable unit that can be used in vehicles, boats and homes. XACT Communications’ "ReGo", dubbed by industry watchers as the Sirius’s answer to MyFi, is a portable receiver that records satellite radio and plays MP3 files through a compact flash card. It can play back and record as much as four hours’ worth of MP3 audio and features a USB connection.

 

 

Source: CEA Market Research, 1/05