Wednesday, May 17, 2006

The Positive Aspect of the Record Industry Suit

May 17, 2006

Lets face it, there is rarely a positive aspect involved with law suits. The short term effect of the record industry suit is already being felt in pre-market trading. Rational investors need to look a bit deeper however and determine if the drop in PPS is warranted.

In reality, the record industry is trying to get XM Satellite Radio to the negotiating table, and likely, the two sides are in discussions, and some sort of reasonable arrangement will be worked out.

In the meantime, the buzz that surrounds devices such as the Inno, and the S50 will increase. Consumers will begin to understand that there is a reason that the record industry has taken some exception to such devices, and will begin to figure out why.

Simply stated, these devices are VERY consumer friendly.

Looking at it simply shows what all of the fuss is about.

Napster or Urge for example charges $9.95 per month for unlimited downloads. Seems like a pretty good deal, but when compared to Satellite Radio, is it really worth it? With satellite radio, and devices such as the S50 or the INNO, you pay $12.95 per month and guess what.....You virtually get unlimited downloads, dozens of radio stations, news, traffic, weather, talk shows, sports, and many other things without having to sit at your computer downloading. At the press of a button you have stored the content you want, all for what amounts to $3.00 per month more than Napster or Urge.

The capabilities of these devices from Sirius and XM are what can drive them to becoming big sellers. Realization by consumers that they can, FOR THE FIRST TIME, instantly save a digital copy of a song can be very powerful for the satellite radio companies. This is what will make these devices a "HOT" commodity. This is what will make people want to participate in satellite radio, where before they may have been satisfied with their I-Pod or MP3 player and FM radio.

We are not saying that these new devices from Sirius and XM will put the Napsters and I-Tunes of the world out of business, but satellite radio can put a substantial dent in the market. Especially if satellite radio gets into the video download business as well.

So, while the immediate impact of the law suit is frustrating, the potential buzz that surrounds it has a very real potential to bring a groundswell of subscribers to Sirius and XM. Stay tuned

5/17/2006 09:27:00 AM

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