Thursday, December 21, 2006

The Gift Card Effect

December 21, 2006

There is a new satellite radio, it is smaller than any SDARS receiver ever manufactured and it will appear under holiday trees across the nation. The receiver sizes up at only 3.9” wide x 2.1” tall x .02” thick, and is capable of giving the user either Sirius, XM, or both!!!!!

Enter the GIFT CARD and the GIFT CARD EFFECT. While gift cards have been around for quite some time, they have traditionally carried little impact in Q4 for satellite radio. The reason is that in the past, selection of satellite receivers after Christmas has been slim or non-existent. Sirius and XM have both run into short supply in previous years. This year differs.

For the 2006 holiday season both Sirius and XM stuffed the retail channel. This, coupled with weaker sales means that satellite radios will be in ready supply in the week between Christmas and New Years. Add to this the fact that the post Christmas week is capped by a weekend, and we have potential for satellite radio purchases and activations that simply have not happened in the past.

Will this make a substantial difference? That is an unknown. There is little doubt that a subscription based service makes a more difficult gift than other types of items, but gift cards will facilitate that process, allowing the recipient to choose whatever they desire.

Another factor to consider as 2006 comes to a close is that there is 1 weekend left, and that will mean a very busy Saturday and Sunday at retail. Satellite Radio could be the benefactor of last minute gift ideas. Both Sirius and XM have choices that can deliver a receiver and a short term subscription for about $100.

Will the GIFT CARD EFFECT be huge? No, not likely, but it will have a small impact on the sector, and should help insure that these companies meet their respective subscriber guidance targets.

12/21/2006 09:13:00 AM

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