Satellite Radio and Diffusion of Innovations:

1. Satellite Radio and Diffusion of Innovations: How do you study the early adopters of a new technology?

2. Emergence of SDARS • World Space • The original satellite radio idea was to develop an affordable way of transmitting information and radio to rural areas in Africa. • Launched its first satellite in 1998.

3. Emergence of SDARS • Potential in the United States for such a service in the 1990s? • Disposable incomes • “Terrestrial” radio becoming inundated by commercials • Quality of AM/FM radio

4. Emergence of SDARS • American Mobile Radio (now XM Satellite Radio) branches off from World Space. • CD Satellite Radio (now Sirius) also vies for the U.S. market.

5. Emergence of SDARS • Several companies submit bids to the FCC for two newly allocated licenses. • The companies that are now called XM Satellite Radio and Sirius Satellite Radio win the bids. • They paid over $80 million dollars each to participate in this government-mandated duopoly.

6. Benefits of SDARS • The convergence of digital satellite technologies with radio-based programming allows the consumer to access his or her favorite XM or Sirius channels from virtually anywhere inside the United States.

7. Benefits of SDARS • Since 2001-2002, both satellite radio services offer approx. 100 channels of music, talk, news, sports, and weather for a monthly subscription fee of $12 - $13. • Sirius runs no commercials; XM runs commercials on several channels.

8. Complications for SDARS • The task that satellite radio companies like XM and Sirius face is to convince consumers that they should pay for a service that is readily and freely available through the FM/AM bands.

9. Complications for SDARS • Consumers must buy a new receiver that gets either the XM or Sirius signal. (AM/FM is also available with these receivers) • Currently, neither company has come out with a receiver that is both XM and Sirius compatible. This is in the works right now.

10. Competition for SDARS • It is reported that at least 200 million listeners per week still tune into commercial radio. • Out of 100 million U.S. households, satellite radio has only 4 percent of the audience.

11. Consumers of SDARS • In March of 2005, XM reported that they had more than 3.77 million subscribers, compared to Sirius who was reporting approximately 1.5 million. • With much of the nationwide audience virtually untapped, both companies are currently competing for those potential subscribers.

12. The Adoption Rate of SDARS • Most consumers have not yet adopted the satellite radio subscription service offered by either of these two companies, and reasons for this adoption rate have yet to be examined in scholarly detail.

13. Diffusion of Innovations • Adopters of an innovation are classified on the basis of innovativeness, “the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than the other members of a system” • The rate of adoption is influenced by the characteristics of adopters related to innovativeness: socioeconomic status, personality values, and communication behavior. • Most of the generalizations about characteristics have been positively related to innovativeness, meaning “innovators score higher on these independent variables than do laggards”

14. Diffusion of Innovations According to diffusion literature, there are five attributes of an innovation that determine the adoption rate of an innovation. • Relative advantage • Compatibility • Complexity • Trialability • Observability

15. Relative Advantage • Relative advantage is the degree in which an innovation is perceived as advantageous over an idea or technology that came before it. • ability to be picked up by a subscriber almost anywhere in the United States • satellite radio services also offer commercial-free programming

16. Compatibility • The degree to which an innovation is perceived as being concordant with existing values, past experiences, and requirements of potential adopters. • The satellite radio companies, from the beginning, have set out to make their product and service highly compatible with existing technologies such as personal computers and automobiles.

17. Complexity • New ideas that are simpler to understand are adopted more rapidly than innovations that require the adopter to develop new skills and understandings. • satellite radio is similar in function and design to existing AM/FM radios

18. Trialability • The degree to which an innovation may be used on a limited basis. • Consumers who buy certain automobiles with the existing satellite radio technology already installed have the option to use the product on a promotional basis. • It’s reported that six out of ten XM Satellite Radio promotional subscribers “convert to self-paying when the promotion ends”

19. Observablity • The degree to which the results of an innovation are visible to others. • Since both satellite radio services offer their products in certain stores and automobiles, satellite radio is highly observable to the consumer. • The service is also marketed on television, often with the automobile that it is offered in.

20. Who are the adopters? • Application of the diffusion model to satellite radio subscribership could provide some insight into the diffusion of this new radio service. • Because satellite radio is still in its early stages, it is important to examine who the current adopters are and how they differ from future subscribers.

21. Problems with Diffusion Studies • How does one obtain a representative sample of satellite radio subscribers? • Privacy of subscribers • Snowball sampling • Internet research? • Chat forums exist, and adopters would be attainable. • However, this study would not be generalizable, it would be descriptive at best.

22. Problems with Diffusion Studies • Findings from various diffusion studies of innovative technologies show mixed results for certain factors, such as socioeconomic characteristics and communication behavior. • However, reasons for these discrepancies may be a result of the targeted consumer audience of these innovations. • Certain technologies are directly marketed to very particular segments of the consumer market. Research I have looked at has yet to address this possibility, which may be skewing results of various diffusion studies.

23. Problems with Diffusion Studies • The diffusion of innovation model is largely linear. • Consumers are not a consideration in the development of the technology that may evolve over time. • Social Construction of Technology theory addresses this factor. (SCOT)

24. Suggestions for the Current Study • What is the best way to study adopters of a technology such as satellite radio? • Is the diffusion of innovations theory relevant to today’s adopter studies?