Radio's big bounce

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The race to space did not determine the first to market in the new satellite radio arena, nor will the first to earth have a significant advantage in the long run, industry analysts say.

Sirius Satellite Radio and XM Satellite Radio Holdings both planned to launch their subscription-based, digital-quality, satellite-transmitted radio services in late spring or early summer of this year. But satellite and equipment delays pushed back start times to this fall or later. With summer nearing a close, both companies say their services soon will be earthbound and ready for listeners.


XM, kicking off its much-anticipated $100 million ad campaign earlier this month in movie theaters and next month on TV, is scheduled to begin service Sept. 12 in Dallas/Fort Worth, Texas, and San Diego, rolling out nationwide through the fourth quarter. Omnicom Group's TBWA/Chiat/ Day, Playa del Rey, Calif., handles the "Radio to the power of X" campaign, featuring music stars David Bowie, B.B. King and Snoop Dogg.

Sirius plans to launch its consumer service sometime in the fourth quarter and hasn't yet unveiled marketing plans from sibling Omnicom shop Goodby, Silverstein & Partners, San Francisco. But Sirius doesn't think the later launch will hurt it.

"We think the market for satellite radio is going to be huge," says Doug Wilsterman, VP-marketing and distribution at Sirius, calling his target market the 200 million vehicles registered in the U.S.

Industry analysts, closely watching the birth of this new medium and its two competitors, think there's room for both to exist and don't assign a significant advantage to either player.

Both companies will transmit 100 digital-quality, coast-to-coast radio channels to consumers for a monthly subscription fee. Both will have genre-specific music channels. Both have content agreements with Walt Disney Co.'s ABC Radio Networks and AOL Time Warner's CNN. Other content providers include E! Entertainment Television with Sirius, and Viacom's MTV with XM.

XM's satellite launches were delayed until March and May. Sirius had manufacturing problems, forcing it to postpone radio receiver shipments to its automaker partners BMW of North America, DaimlerChrysler and Ford Motor Co., and the company says compatible radios won't be widely available until 2002. XM, which has a similar relationship with General Motors Corp., plans to introduce its radios in Cadillac Deville and Seville model cars this fall and expand into other vehicles next year.

Minor differences are that XM will air 71 music channels and 29 news, sports and entertainment channels, with a total of 36 being commercial-free. Sirius plans to air 50 music channels-all commercial-free-and 50 others. Both claim that channels with commercials will air only about 6 minutes of advertising per hour, vs. the 15 to 20 minutes heard on traditional radio.

"We have felt all along that what's really going to drive people to selecting our service vs. our competitor is going to be the quality of the content, the programming," says XM Senior VP-Marketing Steve Cook. "We do have a lot more music."

Yet Sirius' Mr. Wilsterman thinks consumers will be attracted by the existence of fewer commercials. "All 50 of our music channels are commercial-free, and that's going to be a real strong selling point," he says.

The monthly price is $9.95 for XM and $12.95 for Sirius. "Based on the research ... we're confident that there's no discernible difference in the consumers' willingness to purchase this service at $9.95 or $12.95," Mr. Wilsterman says.

Analysts believe Sirius might be forced to lower its price, however.

Sirius "can go out and charge more, but at the end of the day, if you walk into a Circuit City and the two products are very similar, and you can sign a contract to pay 13 bucks a month or 10 bucks a month, which one would you sign?" asks Robert Peck, an analyst at Bear, Stearns & Co. "I think that Sirius, by the time they come to market, will probably lower their price to match XM."


The satellite companies and analysts all agree this space-age radio revolution is big enough for both players to survive. "We think there's room for both of them," Mr. Peck says. "They have their different car alliances, and you'll also have the market split with having different programming choices."

But subscribers will be minimal at first, with Sirius estimating only 20,000 by yearend, and analysts anticipating 500,000 to 600,000 for each company by the end of 2002.

Consumers will pay a fee, says Robert Berzins, high-yield analyst at Lehman Bros., because "they are paying for [terrestrial radio] now-they're paying for it with their time," about 15 minutes of commercials for every 45 minutes of radio. The analyst adds: "Time is money."