AOL and XM
August 14, 2006
Last week the LA times ran an article about AOL going to a free service for those with broadband connections. We here at SSG covered the piece (
HERE)
because AOL has a deal in place with XM Satellite Radio by which XM radio channels are available to AOL subscribers.
An SSG reader sent the following comment:
"And nothing's changed: they still only offer 20 channels, at a low bitrate...same number of channels at the same bitrate that they offered BEFORE AOL went "free". It's a "non-story"."The story here is not so much that AOL offers XM Satellite radio, it is that the availability of it has now changed dramatically. Prior to becoming free, AOL had about 19,000,000 subscribers (6,000,000 of which have broadband connections). This service was available only to those that were subscribed to AOL. Now, the service is available to a whole new segment of the population that did not have access to it before. It is estimated that nearly 65% of internet users have broadband.
What XM gains here is wider exposure. Their service is now available to a far bigger audience than it was prior to AOL deciding to "go free". Further, Braoadband customers are the most likely to try listening to music on the net. I can not picture to many "dial-up" consumers making the effort to stream music on their computer.
XM also gains something more. They now have no need to negotiate with the Yahoo's, Googles, and MSN's of the internet world. They "can" negotiate if they want to, but they now have a platform to deliver a sample of their music to anyone with a broadband connection. This is a very important thing to take note of.
There are some potential downsides, but in our opinion, the upsides outweigh the downsides by a healthy margin. Among the downside is that the AOL service may allow someone to get what they want out of XM without subscribing to even the basic "internet-only" subscription to XM. We see this as a small issue however, given that the XM line-up is not complete, and the number of subscribers garnered could outweigh this negative by a healthy margin. Another potential negative is the "dilution" of the service. Wide availability means that consumers may feel less of a need to get onto XM's subscriber rolls. Again, we do not see this being a huge impact. At $12.95 a month for the whole service, the AOL streams offer a nice "exposure" and the subscribers garnered can easily outweigh the "freeloaders".
A big part of the business of satellite radio is getting people exposed to it. The free AOL platform goes a long way into accomplishing this. In our opinion this is not a "non-story".....It is instead a "developing-story" which has a much better chance now of bearing fruit for XM than it had only one month ago.
We would like to thank our readers for their input, and encourage all readers to submit comments or questions.
UPDATE:
Another SSG reader had the following comments:
"Just wanted to make a clear statement on the AOL/XM deal. Out of the top five stations on AOL radio XM only has two of their stations represented. This isn't a good sign considering the whole point of the partnership is to expose their "superior programming". Also XM has given away their services in a lot of avenues including JetBlue, Hertz, AOL, CBS and OEM freetrials. Last quarter they dropped over 60% of their gross subs with all of this "free XM" marketing backing them up. It's very clear to me that this is a product that they can't even give away. My point is that mabye they should switch focus to making it "exclusive and worth the price of admission" like Sirius is doing. Giving away 20 channels here and their top talk show (Opie & Anthony) there is garnering exposure but costing them net subs. There ya go"
8/14/2006 12:43:00 PM
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