Wednesday, January 24, 2007

Content, Freedom and Choice - A Winning Combination

January 24, 2007

One of my biggest issues and concerns with satellite radio has always been the OEM side of the equation. I have always been of the opinion that the exclusive OEM deals, while they may seem attractive to the respective companies has cased a major delay in the adoption of satellite radio.

Consider for a moment if the exclusive install deals were not existent, and interoperable radios (even as simple as both chipsets being installed behind the dash) were utilized. Factory installation of satellite radios would have evolved much faster, and installation penetration would have been much deeper more quickly.

By nature, consumers do not like certain things dictated to them. What they watch and listen to is high on the list.

What if instead of exclusive install deals the exclusiveness was on the marketing side of the equation? You buy a GM and both XM and Sirius are available. GM automatically comes with three free months, and GM promotes XM in their advertising, etc. However, the receiver is capable of receiving Sirius, and the consumer, should they choose to do so, can make a call and activate the service they want. What if Chrysler did something similar, and so on down the line?

Should a consumer be denied the service they really want? Should a Ford buyer who wants XM be forced into an aftermarket situation, or to order a port or dealer install? A GM buyer that wants Sirius? Are Sirius and XM really happy that this segment of their base is not necessarily there by choice, but rather dictation? I would venture to say that the adoption rate of satellite radio as a sector would show impressive improvement over current take rates if the consumer was not boxed into a decision. Wouldn’t it be better if the option was already there, and the consumer only needed to make a phone call?

I remember the days when loyalty to a cell phone company was based on the fact that the consumer did not want to give up their phone number. Now, consumers have the freedom to take their number to any carrier they want. The consumers decision rests with coverage area, hardware prices, reliability, marketing, and contract terms rather than the phone number.

Satellite Radio is about freedom. It is about unprecedented content offerings available to consumers on a nation-wide basis. It is about being a country music fan in New York City, and having the ability to listen to several channels of that content. It is about being a Hip-Hop fan in the middle of Kansas and having the ability to catch the latest tunes. It is about being able to take Fox News with you as you leave the house and start your commute. It is about being a Howard Stern fan or an Opie and Anthony fan and having access to them wherever you might be.

Why should something that represents so much freedom and choice be restricted when it comes to the car you buy? There exists a DISCONNECT in this situation. As an investor I would rather see 10,000,000 "satellite-choice" cars a year with a 65% take rate than 5,000,000 "restricted-choice" cars with a 50% take rate. Imagine the tag line "Satellite-Choice Comes Standard". They would be marketing the concept of satellite radio, and at the same time expressing the freedom that the consumer has with satellite radio.

As a consumer I would love to see something along the lines of what XM has done with the Passport applied to satellite radio as a whole, and implemented (particularly in the OEM side of satellite radio). I would love to see all satellite radios carry a slot by which the consumer can insert either a "SiriusCard", and "XMCard", or a dual mode "SATCard". These cards would be standardized in size and the consumers subscription(s) would tie to the card. A satellite radio consumer could buy the card for a nominal charge ($30 for a Sirius or XM card and $45 for a dual card), and that card could be inserted into a slot in the dash receiver of the car, into a plug and play device, into a home receiver, or virtually any other application. This would solve the other consumer issue of the subscription being tied to the car. Personally, I am a plug and play consumer, who prefers the ability to take my subscription with me to the house, the condo, the boat, etc., and would be a consumer that would fall into the bad side of the "take rate" category even though I have 3 satellite radio subscriptions on my account. Simply put, I see more value in a plug and play receiver than I do an OEM receiver tied to the car. The "SATCard" solution would be a great benefit to the sector as a whole in my opinion. I actually would not mind the OEM’s offering one "SATCard" over the other so long as I had an easy and viable option to obtain the content I want. If such a device existed, I would have a dual subscription.

It has often been said that it is the speakers that "make" the stereo system. A great stereo with sub par speakers will sounds sub par. Satellite Radio is about freedom, content and choices. Market it that way in the OEM channel and you will have better adoption, more installations, and a healthier sector.

With all of the speculation about a merger, we may well wind up with something such as this anyway, but only time will tell.

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1/24/2007 10:27:00 AM

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  • Have you forgotten all the problems DTV had with their cards? Lost how much revenue in the hackability of those cards? The interoperable technology is out there and from what was announced last year will be out this year. You speak of aftermarket products. The vehicle radio aftermarket has been around a long time. As an investor Id rather see the retail market maintain as an aftermarket install than direct factory install. Then again any car salesman wanting to make that sale can and will get either service in a vehicle upon request.

    By Anonymous Anonymous, at January 24, 2007 5:30 PM  

  • Technology has come a long way since those days< and the card does not have to contain the "WHOLE" of the subscription component. The device or dashboard unit could contain "HALF" of the components needed for the card to operate. Yes, there will always be issues with those that steal the service in one way or another. XM has not seemed to have a problem thus far with their Passport card.

    By Blogger SSG, at January 24, 2007 6:46 PM  

  • Yes, tech has come a long way since then.. Ahhh the good old days..... Now this half n half interoperable card ( a key in sense ) will also mean a 50% interoperable devise. Here is one thing I see as a card being bad. Some people right now (myself) have individual units providing content at different locations at different times.
    ( portable) As a user I know these units are subject to being abused, dropped ect.. A card concept may just arouse people to experiment and being curious, allow misplacements, abuse and damage.

    Not knocking the card thing just weary of it. Now, Should a merger happen, a card concept may be a quicker interoperable solution per unit for dual services but what helps us original subscribers? Explain the cost of the interoperable unit, the card and the replacements needed to satisfy us...( early subs) Do you believe both companies could come up with a card and unit to combine content this quickly ? That concept should have happened pre Stern. Either way, it'll take 4 more years for me to even think about wanting any content from XM. Remember, It's the content that lures and keeps the subscriber! This card I believe is on an as needed basis. You no doubt need to maintain both services where as I as a common sub dont.
    Ive been in (Siri) for a long time. I've developed the nerve to wait.
    I can see a merger being just as a long term positive/negative as the individual shares I purchased. I can see it now, Stern merges with O&A and Oprah.......... It'll take weeks to get the whole story accurate..
    Stay on course, stop the mega deals and let the past building of content lead the way.
    Show me a plan for a card that will help both the new and current subs and I'm game. In the end there will be a charge for an equipment swap or any 50/50 content tech deal. I'd call the split (50/50) a draw and useless... No?
    In the end I believe any card concept should have been from the beginning. Chips in plastic cards are cheaper to replace than individual 1st/2nd generation hardware/units.

    By Anonymous Anonymous, at January 24, 2007 10:34 PM  

  • One problem I see though is that xmsr would not have any reason to do this cause they already have the majority of the big oems on their side. why would they give that up surely after they have spent all this money will gm for exclusivity and siri withchrysler too?

    the other problem is that xmsr's mgt said at a investors conference a month or two ago that they cannot change (the oems i mean) cannot change from one service to the other now because of the extra services they are adding like video, maps, weather, and parking lots etc. some of these things xmsr has (weather, traffic, parking) and others (video) siri is going to have but xmsr has not given any real plan for it. so what do you do if a chrysler buyer wants xmsr radio but now he has usless back seat video screens?

    it seems like xmsr has grabbed the car mfgrs. and siri has grabbed the retail. i cannot see why xmsr would give up the territory they own by supporting such an arrangement as this.

    By Anonymous Anonymous, at January 25, 2007 2:01 PM  

  • At the risk of setting off a debate, let me say this.

    XM has factory install deals with manufacturers that represented 60% of the OEM market in 2006.

    Sirius has factory install or port/dealer install deals with manufacturers that represented 63% of the OEM market in 2006.

    The tippinig of the scales rests with Toyota (16%) and Nissan (6%). To date, the port and dealer install programs for both of these have been far more substantial than the factory install programs.

    At the end of the day, the OEM's who were not made exclusive by the settlement of the CD Radio vs. XM lawsuit (this includes Toyota and Nissan) have a lot of lattitude in how they approach satellite radio.

    By example, Nissan uses an interoperable antenna, and the Visteon head unit can control either service with the swap out of a box. I would not be suprised to see Nissan go all XM, but the landscape as it exists today is that both services are being installed.

    The extra services such as video, navigation, etc. are hurdles but not insumountable. Both Sirius and XM use Naveteq for navigation for example. The rear seat video screens will not be exclusive to SATRAD. DVD's, etc can also be used.

    I have never ever been a fan of the exclusive OEM deals, and feel strongly that these exclusive deals have held back the integration of satellite radio.

    I would much rather see satellite radio as a choice, and have always felt that OEM adoption would have happened far sooner, and with far deeper penetration had the OEM's and by extension the consumer, not been boxed into a corner.

    By Blogger SSG, at January 25, 2007 3:38 PM  

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