XM’s One Million

XM has been working for months on its marketing and promotional materials to ensure maximum benefit when it notches 1 million subscribers on its own. As of early October, the Washington-based satellite radio pioneer reported 929,000 total subscribers; it is expected to hit 1 million by the end of this month. XM projects that it will amass 1.2 million subscribers by year-end. After that, The Carmel Group projects XM will grow to 2 million subscribers in the third quarter of 2004.

XM sees the 1-million-subscriber level as a chance to boost its profile and stimulate additional word-of-mouth advertising about its cutting-edge service. The combination of marketing and satisfied customers who recommend the product to their friends and families will drive satellite radio’s growth. Consumers tend to react more favorably to marketing when it is accompanied by a recommendation from someone trustworthy who has little or nothing to gain from giving an endorsement.

XM has rolled out a new marketing campaign, entitled “March To A Million,” to highlight its approach to that milestone. “XM is the fastest growing audio product in the past 20 years,” according to the company’s web site.

Chance Patterson, XM’s vice president of corporate affairs, said, “The crossover to the 1-million subscriber milestone marks the beginning of the transition from a niche product to a mass consumer electronics market product. That’s why it’s so important to us and to the industry.”

Sirius Subscribers

For New York-based Sirius, reaching the 1-million-subscriber mark will be a difficult but rewarding event. However, until Sirius holds a conference call at the end of this month to update its progress for industry analysts, the company is unable to comment further on its projected subscriber growth.

The Carmel Group estimates that Sirius will crash through the “Magical Million Milestone” toward the end of 2004. This will come after the introduction, next September, of a substantial fleet of Ford [NYSE: F] and Chrysler cars with Sirius radios as an original equipment option. In the meantime, consumers will have to make a special effort to obtain Sirius radios and service because they are not widely available as factory-installed options. The additional burden for a consumer includes: 1) requesting a Sirius satellite radio, 2) agreeing to costly and time-consuming post-factory installation, and 3) calling Sirius to activate the unit. Sirius needs to offer its customers simplicity, one of ten “hot trends” that The Carmel Group has identified as keys to success in the consumer electronics marketplace.

And The Numbers, Please…

The Carmel Group estimates that XM holds an 87 percent share of the U.S. satellite radio marketplace, while Sirius accounts for the remaining 13 percent. Overall, the U.S. satellite radio industry has amassed an estimated 1.1 million subscribers as of Sept. 30.

The improvement in satellite radio’s estimated quarterly subscriber levels is quite impressive: 164,000 net new subscribers in the fourth quarter of 2002; 174,000 in the first quarter of 2003; 246,000 in the second quarter of 2003; and 312,000 in the third quarter of 2003.

The estimates from these four quarters equals nearly 900,000 net new subscribers added in the twelve months from Oct. 1, 2002, to Sept. 30, 2003.

The Carmel Group estimates that XM added 237,000 net new subscribers during the third quarter of 2003. That total marks a 13 percent improvement from the 209,000 net new subscribers the company added during the same quarter a year earlier.

Sirius almost doubled its growth for the third quarter, compared to the same quarter a year ago. The company added an estimated 75,000 net new subscribers for the July to September 2003 period, whereas it added only 37,000 in the same period last year.

For the industry as a whole, the third quarter of 2002 saw a total of 312,000 net new subscribers added. For the same quarter this year, an estimated 797,000 net new subscribers were added. That year-over-year improvement totaled 485,000 net new subscribers or a gain of 155 percent.

According to current estimates, one in every 200 registered automobiles in the United States features an operating satellite radio system. When that number reaches one in every 100 automobiles, let’s hope someone at a trade association or at one of the companies will make a big deal out of the occasion.

Sometimes a trade association, a media representative, a Wall Street denizen or a quasi-objective third party can help to bring the disparate interests of the rival satellite radio companies under one umbrella. After all, if the satellite industry is to continue maximizing growth, it has to keep maximizing its marketing, public relations and word-of- mouth opportunities. Then everyone wins.

Jimmy Schaeffler is a subscription services analyst at The Carmel Group, a publisher of industry databooks and newsletters, as well as a consultancy based in Carmel-by-the-Sea, Calif. (http://www.carmelgroup.com). The company specializes in telecommunications, computers and the media. He can be reached at e-mail or at telephone number 831/643 2222.