Sirius Surges

Industry observers have long debated the ultimate fate of satellite broadcaster Sirius Radio. Front-runner XM Radio, with more than two million subscribers, is already above the break-even point, but for many months Sirius struggled against technical problems and overwhelming debt. Would the fledgling survive, get devoured by its larger competitor, or worse, get picked up in a fire sale by Rupert Murdoch's News Corp.?

The prognosis for survival is definitely positive as of mid-October. Shortly after announcing that it had signed "king of all media" Howard Stern to a multimillion-dollar contract, Sirius revealed that it had gained more than 69,000 new subscribers in September—its best month to date—had surpassed 700,000 in total subscribership, and was on track to reach the million-subscriber milestone by mid-winter. The company also has $800 million in assets to tide it over until subscriptions can sustain it, according to an October 18 announcement.

In the satellite radio business, success breeds success. Both XM and Sirius continue to add features to their already full lists of offerings. XM carries major league baseball games; Sirius has the World Series. For football fans stuck in their cars, Sirius offers NFL Sunday Drive, allowing subscribers nationwide to hear every NFL game. On October 28, Eminem's "Shade 45" hip-hop channel joins the 65 commercial-free music channels on Sirius.

The growth of programming features has been paralleled by new receivers from several electronics manufacturers, and an expansion of sweetheart deals with auto makers that will make Sirius Radio a factory-installed option in as many as 20 different vehicles over the next two years, including models from Audi, BMW, DaimlerChrysler, Ford, Infinity, and Nissan. Most music fans get their first exposure to satellite radio through rental cars—XM in Avis, and Sirius in Hertz vehicles.

Most radio listening in North America is done in cars, most Americans spend several hours per day in their cars, and most Americans buy new cars every few years—facts that point to a very rosy future for the satellite radio industry.

Approximately 73% of consumers are aware of satellite radio, according to the Consumer Electronics Association (CEA). However, more consumers say they are interested in HD Radio (digital AM/FM) than satellite, despite HD's lack of availability. A survey taken by the trade organization in July found 48% of adults "very interested" or "somewhat interested" in HD Radio, compared to 20% who said they were "likely or very likely" to go with satellite radio sometime in the near future. Of the adults surveyed, 6% said they planned to buy a satellite radio sometime in the coming year, compared to 31% who said they never would, presumably because implied in such planned purchases are subscriptions to one of the satellite services, at rates between $10 and $13 per month. Of those surveyed, 58% had never heard of HD Radio, an odd result given that almost half the respondents expressed interest in the format. Satellite radio is nearing its "prime phase . . . for growth and consumer adoption," the CEA noted.

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