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Satellite Radio Killer Application?

Satellite Radio Killer Application?

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Satellite Radio Killer Application?

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  1. Satellite RadioKiller Application? Group 8 Section 11 Eric Mollo Mike Ferranti Kristen Blough Rushi Sukharamwala

  2. Presentation Overview • How it works • Companies • What they have to offer • Industry Analysis • Drawbacks • Is it a Killer App?

  3. Satellite Radio • How does it work? • Communication Satellites • XM - Geosynchronous orbit • Sirius - Geosynchronous elliptical 24 hour orbit • Terrestrial Repeaters • Designed to rebroadcast at higher power levels • Antennas/Tuners • Cars, Buildings, Homes

  4. XM Satellite Coverage Sirius Satellite Coverage Sirius Satellite 24 Hour Satellite Rotation Sirius Satellite 24 Hour Satellite Rotation

  5. Sirius Founded 1990 Bid for FCC License = $89.9 Million Current Subscribers = 5.1M 130 Channels 69 Commercial Free Music Previously known as CD Radio XM Founded 1992 Bid for FCC License = $83.3 Million Current Subscribers = 6.9 Million 170 Channels 69 Commercial Free Music Previously known as American Mobil Satellite Corp. FCC Licensed Companies

  6. XM and SIRIUS Subscribers

  7. Sirius Purchase Receiver $59.95 - $119.95 $10 or $15 Activation Fee Inclusive Package $12.95 Monthly $499.95 lifetime subscription Other Offerings Marine Weather Sirius for the Work Place Internet Radio XM Purchase Receiver $59.95 – $99.95 Inclusive Package $12.95 Monthly Discounts to as low as $9.99 with 5 year plan Other Offerings Marine Weather XM for the Work Place Internet Radio Service Offerings

  8. Sirius & XM Music Pop, Rock, Electronic, Hip Hop, Country, Christian, Jazz, Classic, International News Weather Traffic XM Sports – MLB, NHL, NASCAR, PGA, NCAA Comedy – Opie and Anthony, other stand up Bob Dylan, Oprah, Al Franken Program Variety • Sirius • Sports – NBA, NFL, NCAA, Soccer, Horse Racing, NASCAR • Comedy – Howard Stern, other stand up • Martha Stewart

  9. Threat of New Entrants • Low because of high barriers to entry • Need FCC approval to access digital spectrum • Cost XM and SIRIUS $200M to use • Record industry lobbies Congress • PERFROM Act of 2006 • XM Inno

  10. Bargaining Power of Suppliers • High • Record industry controls content • Want to increase licensing fees Ex: Can’t have Elvis satellite radio station without approval from Elvis’ record label • Forces satellite radio companies to pay prices demanded by record industry

  11. Bargaining Power of Buyers • Low because of switching costs • Specialized content • SIRIUS offers Howard Stern • XM offers Weather Channel • Real-time traffic info and GPS navigation

  12. Threat of Substitute Products • High • HD radio – offers enhanced sound quality and clear reception • Google AdWords & dMarc Broadcasting • Offers services that dynamically generate and change commercial content • By the 4th quarter of 2006, Google expects AdWords clients will be able to place advertising in both terrestrial and satellite radio spots

  13. Industry Competitors • High because it is expensive to leave the industry and low differentiation between products • XM & Porsche vs. SIRIUS & VW/Audi • Exclusive deals to be respective providers of satellite radio to these car companies • Porsche has 25.1% stake in VW • XM & Hyundai vs. SIRIUS & Kia • Hyundai is parent company of Kia

  14. User Perception • When it comes to technology, there are two kinds of people in society • People who prefer control over comfort • People who prefer comfort over control • Younger people are usually more controlling • People 12-17 use MP3 players the most • Dislike commercials and commentary between songs

  15. User Perception • Older people usually prefer comfort over control • Have the general idea of, “Don’t fix what isn’t broken” • Listen to the radio for personal connection with DJ • Have become accustomed to AM/FM radio

  16. Initial Drawbacks • Forced to pay almost $200 million for use of airwaves • Digital Performance Right in Sound Recordings Act of 1995 forced payment of royalties to performers • Costing XM about $20 million in two years • National Association of Broadcasting (NAB) didn’t like satellite radio from the start

  17. Current Drawbacks • High hardware/service costs • About 12% of control seeking users would turn down free satellite radio • About 30% of comfort seeking users would turn down free satellite radio • Lack of local broadcasting • FCC doesn’t allow them to broadcast locally • Broadcast a limited amount of local channels across the nation through a loophole • Local coverage still doesn’t compare to AM/FM radio

  18. Current Drawbacks • Service charge causing users to prefer portable receivers • But…problems with portable devices • Limited battery life (5 hours) • Lack of adaptability with iTunes • Dead spots • Need to power off devices during scheduled recording sessions

  19. Potential Drawbacks • Limited censorship • Satellite radio not licensed by the FCC • Receive strict First Amendment protection • The NAB has been leaning on the FCC to provide oversight and regulation

  20. Killer Application A killer application is a good, service, or way of doing business that dramatically changes the accepted order or the old way of doing things. Satellite Radio is on its way to being a killer app to terrestrial radio for a number of reasons: Portability Universal Signal Big Name Entertainers (Howard Stern)

  21. Portability • Initially portability was a problem with satellite radio. • Now there are gadgets that make portability no longer a problem. • The Inno is the newest and latest player made from Pioneer.

  22. Universal Signal • One of the main problems that people experienced with terrestrial radio is that a signal is not always available. • Rural or lesser populated areas • In tall building and in tunnels • 3 Universal satellites assure premium quality programming.

  23. Big Name Entertainers • In early 2006 XM signed Oprah to a 3 year $55 million deal. • XM also signs shows such as Friends and other sitcoms. Most notable signing was that of Howard Stern in 2004. He signed a multi-million dollar agreement with Sirius that would be fulfilled over a 5 year span.

  24. Are You Sirius ??? • Howard Stern was paid $500 million for a 5 year exclusive contract with Sirius. • On Sirius he is able to have his show censor free. • So why the high price tag ? • Both he and Sirius target the 18-49 year old male segment. • Main reason was to compete with XM; increase market share

  25. Satellite vs. AM/FM

  26. Satellite Radio is… • Still in the development stage of its life cycle… • Satellite radio and its features are far superior to that of terrestrial radio already… • It may not be a killer app right now but… • Contracts with big name entertainers • Contracts with all major sporting leagues • Constantly improving sound quality • Commercial Free radio! • What more could you want?!? Only we can make it happen, so go out and try it!