Have You Noticed It's Costly To Run A Bunch Of Satellites? XM Has...

from the ain't-so-easy dept

From the very beginning of satellite radio, I was skeptical of its potential. While I admit I was wrong about the number of people it would appeal to, my bigger issue was with the cost structure of the business. Launching and maintaining satellite is extremely expensive. Just ask anyone who worked on Iridium or Teledesic. Even if you can sign up a lot of users, the capital costs are tremendous. If the costs of getting those subscribers is high, then it's a definite recipe for trouble. So far, Sirius and XM have been able to keep kicking, mainly through a ton of investment money and the promise of future potential profits -- stacked up against continued losses. It looks like a few are finally doing the math on all of this and realizing that the satellite radio business, as much as some people like it, may not be sustainable. XM posted wider than expected losses today, blaming higher than expected customer acquisition fees -- suggesting that, for all the good press, not as many people as expected have been rushing to sign up. Also, one of the company's directors resigned, citing a "crisis on the horizon," which is anything but inspiring.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Jason, Feb 16th, 2006 @ 2:58pm

    SatRadio

    And admist this "crisis" podcasts are growing and growing and growing....

    Hundreds of channels means nothing in a world of the personalized channel.

     

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  2.  
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    mmrtnt, Feb 16th, 2006 @ 3:01pm

    WTF???


    Mike was wrong about something?

    wrong?

    My world is ending...

    (this is a joke...)

    MjM

     

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  3.  
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    aidan, Feb 16th, 2006 @ 4:28pm

    other issues..

    When people are able to receive internet radio from stations anywhere on the planet on their cellphone, and tether to their home/car stereo via bluetooth, what will keep them subscribing to satellite radio? Howard Stern? NFL/NBA? Maybe for some, but they're going to lose a lot of subscribers when this happens gradually over the next 5 years.

     

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  4.  
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    nonuser, Feb 16th, 2006 @ 5:04pm

    sat. radio is probably a suburban phenomenom

    The target audience must be the people who sit in traffic jams every morning during their commutes into the city. I would think they have a ways to go before that audience is saturated.

     

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  5.  
    identicon
    Anonymous Coward, Feb 16th, 2006 @ 5:30pm

    No Subject Given

    Mike, you are mixing your accounting terms.

    The expenses associated with marketing (and growing) a fixed-cost-amortization business are large. Witness CPA trends for cellular cos.

    The initial capital investments associated with building the infrastructure for a fixed-cost-amortization business are large. Witness Iridium, Teledesic.

    The maintenance expense associated with a fixed-cost-amortization business is small. Witness all of the above.

    XMSR's broadcast and Operations costs are 10% of their op ex -- roughly $10M a quarter, versus $100M of marketing expense.

    Read their 10-Q -- it is fascinating.

     

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  6.  
    identicon
    TJ, Feb 16th, 2006 @ 5:46pm

    Too many limitations

    I bought a new car not long ago, and the option to add Sirius sat radio was almost nothing at less than $200, which included the first year of service. I liked the idea of fairly random playlists of commercial-free music in whatever genre I would be in the mood for at any given time. I still didn't order it.

    The reason was limitations. After the first year I'd be spending more than $10 a month in service fees. So for that I could buy (at extra cost) a home Sirius receiver which I could add to my same account for either no fee or a small added monthly fee, right? Wrong... add another receiver, and see a big jump in monthly service fees, despite the fact I would never use both receivers at the same time. Also, people who have sat radio have told me it cuts out at times due to interference. If there were a buffering capability that allowed a way to minimize noticable disruptions and also allow repeating a song, pausing, etc. the service would be more attractive. XM I think had talked about adding TiVo-like features to a sat receiver and the RIAA freaked. I'd rather not buy into another 'piracy' fight. And if I were a fan of a talk show like Stern I'd expect the ability to record it for later playback at a time that is convenient for me.

    Lacking convenience, I'll stick to the 6-disc CD changer in the car, and almost limitless MP3 playback at home/work. This Spring a more convenient iPod adapter will be available for my car, at which time I'll have gigabytes of MP3s for easy playback in the car too.

    Pay more than $100 a year for radio in the car that I can't control in any way except change channels, and can't enjoy anywhere except in the car? Phhht! How last century. If XM and Sirius want to grow their subscriber bases enough to stay in business, they need to make their services far more attractive, not limit their usefulness and convenience.

     

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  7.  
    identicon
    Aurora, Feb 16th, 2006 @ 5:57pm

    Re: SatRadio

    Podcasts are lame. People act like it's so new, when people have been recording themselves and putting files out on the internet for download for years.
    We moved beyond podcasting years ago. It was called streaming.. remember?
    That said, if Sirius got a cool little portable receiver like XM has, I'd go Sirius in a heartbeat. No interest in XM.

     

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  8.  
    identicon
    Mike, Feb 16th, 2006 @ 6:38pm

    Lets talk about sound quality also

    Lets talk about quality it sounds ok in the car and passable at home but on headphones it sounds terrible. If they up the bandwidth I might take a listen but Ibelieve it is around 66KBPS at 32KHZ not even up to MP3 standard! Also you uys need to do some more research cause Sirius has a DVR based unit for under 100 buck which you can pause rewind and fastforward music for 40 minutes. They also have a portable handheld called the S50 which can store 80 hours of programing and play MP3's

     

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  9.  
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    Adam P., Feb 16th, 2006 @ 7:15pm

    crap

    I dont know anyone that has xm or sirrus, and I dont see my friends rushing out to buy it. I think this is more of the iPod effect.

    Maybe XM and Sirrius should think about buying the iPod, build in a Satellite music reciever to it and a capability to download and purchase the music on it threw the iPod.

    I think I deserve a free iPod for this!!

     

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  10.  
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    Anonymous Coward, Feb 16th, 2006 @ 8:04pm

    Re: crap

    Pay for music? Wtf is that?

     

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  11.  
    identicon
    Andrew Strasser, Feb 16th, 2006 @ 8:14pm

    Or maybe they really did get...

    Sirius!

     

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  12.  
    identicon
    Namtaru, Feb 16th, 2006 @ 8:33pm

    Re: Too many limitations

    If they wanted you to pay $200 for Sirius then you were getting wuoted way too high. I pay $210 a year for two receivers. Everytime you add another receiver you get a discount on the price, it doesn't go up.
    Sirius DOES have buffering capabilities, I drive through downtown Detroit every dat under bridges and deep in the city around all the tall buildings, rarely does it ever cut out at all.
    Also Sirius has a portable player called the S50 that comes with an FM modulator for your car and a full color display.
    The only limitation is people not doing the research on satellite radio before they make absurd assumptions.

     

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  13.  
    identicon
    Fred von Graf, Feb 16th, 2006 @ 8:43pm

    Re: SatRadio

    That and the proliferation of WiMax with direct discrete mobile device access (think PDA, laptop, mobile phone, etc). Say bye bye to satellite radio!

     

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  14.  
    identicon
    mark, Feb 16th, 2006 @ 8:54pm

    No Subject Given

    I'm wondering how far their service is receivable...maybe they should be expanding the customer base alsewhere...there are plenty of crazy people outside North America...

     

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  15.  
    identicon
    Anonymous Coward, Feb 16th, 2006 @ 9:16pm

    Re: crap

    You don't deserve jack until you learn how to spell better...

     

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  16.  
    identicon
    fuzzmanmatt, Feb 16th, 2006 @ 9:44pm

    Re: Too many limitations

    I was in Detroit SuperBowl weekend, had my Sirius with me the whole way there, lost very little signal in the city, and Sirius has terrestrial repeaters in the larger markets (wherever they have traffic reports) to keep you from losing the signal. I'm very pleased with it, and pay so little a month for it that I don't notice it. I don't buy albums anymore, and they offer streaming to your computer, so I always have access to my favorite channels.

     

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  17.  
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    Anonymous Coward, Feb 16th, 2006 @ 9:56pm

    Re: Too many limitations

    If there were a buffering capability that allowed a way to minimize noticable disruptions and also allow repeating a song, pausing, etc. the service would be more attractive.
    My Sirius unit does have a buffer that does just that. And there's also a different portable receiver that stores several hours of content, much like a TiVo or mp3 player. Car units may not have these features yet, but they do exist.

     

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  18.  
    identicon
    Kurt, Feb 16th, 2006 @ 10:24pm

    don't knock till you try

    Looking thru the comments on your posting...I was skeptical of satellite radio as well. I recently bought a receiver for my car. Yes, I am the target: I sit in traffic 50 minutes each way going from downtown to the suburbs for work. I love music, but i grow tired of my collection (and that's an expensive and time-consuming habit -- adding 10 hrs of freshly discovered, legal music each week).

    Podcasting? Right. Sorry, that was enjoyable for about 13 minutes in 1997.

    There's a reason that folks listen to the pros - they are better. Where else can i get sports, bbc, and 4 varieties of live NPR?

    The detractors of the consumer value proposition of satellite radio should try it before they rag on it. You sound old and GOP, not like early adopters of technology.

     

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  19.  
    identicon
    Anonymous, Feb 17th, 2006 @ 1:30am

    Re: don't knock till you try

    I'm GOP and I love XM. I spend alot of time on the road for work, frequently driving more than 2000 miles per month and it's nice not trying to find a radio station in every small town I pass through, or messing with changing out CDs all the time.

     

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  20.  
    identicon
    Former FM Fan, Feb 17th, 2006 @ 5:34am

    Re: don't knock till you try

    Ditto. I had the Sirius for almost a year (got it for "free") before I started taking it in the car - my commute is pretty short (15 mins)(western NY if you're curious). Have a ton of CDs and portable music players but once I started using the Sirius, especially on a long trip, I was sold. Then DirecTV started carrying XM music channels and I found My Channel: Deep Tracks. Now XM is on the ropes; just my luck, whenever I find a channel/station I dearly love, something comes along to f' it up.

     

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  21.  
    identicon
    knight37, Feb 17th, 2006 @ 6:53am

    Why should we pay for radio?

    I just don't like the idea of having to spend extra money for special hardware and then paying monthly fees just to listen to radio. I don't care what kind of content they have, radio for me has always been about listening to whatever was on just to pass the time in the car or whatever. To me that's the reason this idea hasn't really caught on. There's just not that many people out there that value radio so highly.

     

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  22.  
    identicon
    Don Thornhill, Feb 17th, 2006 @ 6:56am

    Re: SatRadio

    Here Here

     

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  23.  
    identicon
    Joe T, Feb 17th, 2006 @ 7:23am

    No Subject Given

    XM would probably fare better if they spent less time on signing up big names and content (Oprah and MLB come to mind) and lower the subscription price a tad to undercut Sirius. While I emotionally love that they have MLB, I have to admit that the number of games I hear in the car is low; and I'd rather be watching them on TV.

    What I do love about XM is the fact that I can always get my favorite station, no matter how far I drive; the fact that news, traffic, and weather are always available; and the fact that no matter what genre I (or my passengers) might want to listen to, it's there. My dad just picked up a Roady and plans to use it in the car, at home, and on the boat - and couldn't be happier.

    What dismays me is the fact that when you buy a new car, several manufacturers only offer one or the other - not a choice. My new Jeep will only offer Sirius - and I can't replace the head unit lest I lost several vehicle features that use it - and so I will listen to it for my free year, and if I can't figure out how to get XM on it (there may be an aftermarket solution that wires right into it), I may wind up staying with Sirius.

     

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  24.  
    identicon
    woodhead bitwrangler, Feb 17th, 2006 @ 8:03am

    Re: Why should we pay for radio?

    If you enjoy listening to ads, searching for a channel actually playing something other than a commerical, or having your content decided for you by Clear Channel and a couple of others, more power to you.

    I'm rather enjoying spending a little over $10 a month for 60+ channels of commercial free music, unedited talk content, the BBC, several varieties of NPR, NFL and NBA games live with the choice of which team's announcer I want to listen to, &c. Plus most of the channels are streamed over the internet. And regardless of whether I'm traveling, at home, commuting or out at the cabin 50 miles from the nearest FM station all my favorite channels are available to me.

    For less than $200 I bought a unit that works in both the house and in the car, buffers up to an hour of audio with a rewind, fastforward, pause feature, alerts for favorite artists or songs playing on different channels, alerts for favorite sports teams games and scores, and a builtin FM transmitter.

     

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  25.  
    identicon
    Steve from Yellowstone, Feb 17th, 2006 @ 8:40am

    Re: Too many limitations

    Namtaru wrote: Also Sirius has a portable player called the S50 that comes with an FM modulator for your car and a full color display.

    However you cant listen to live broadcasting unless its plugged into the home dock. They need to work on something that isnt the size of an EKG machine and has lively portability or they wont be around for long. XM has the mp3/live broadcast units coming out in March. Sirius, who who howie and that gravely voiced faggot beware....Opie and Anthony and XM will always win in the end.

     

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  26.  
    identicon
    Old Guy, Feb 17th, 2006 @ 10:17am

    Re: Too many limitations

    Ramone! Bring me a satellite receiver that isn't the size of an EKG machine!

     

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  27.  
    identicon
    Anonymous Coward, Feb 17th, 2006 @ 11:53am

    Re: crap

    PEOPLE STILL BUY MUSIC?....

     

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  28.  
    identicon
    TJ, Feb 17th, 2006 @ 3:50pm

    Re: Too many limitations

    If you'll reread my post you'll see I was talking about buying the satellite capability integrated into a new car, not some tacked-on FM modulator gizmo that doesn't integrate into the car, and would still have to be carried back and forth between the car and other locations to listen in more than one location. As for issues with buffering and dropouts that is information I got from people who do have the service, and I don't know if you or right or they are or if you have different units and are all right. Of course since you say it rarely cuts out still tells me that at times it still does. Based on what you are paying a year you appear to be paying close to twice the subscription price to have your two receivers, which confirms one of those "absurd assumptions" of mine.

     

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  29.  
    identicon
    spam, Feb 17th, 2006 @ 9:44pm

    Re: Too many limitations

    WTF?

    "right? Wrong... add another receiver, and see a big jump in monthly service fees, despite the fact I would never use both receivers at the same time."

    Hrm. I pay an extra $6 for my extra receivers. I have an Alpine unit in my car and a Kenwood unit in my office. My girlfriend has a unit in her car too. Not really a big jump in service fees overall.

    "Also, people who have sat radio have told me it cuts out at times due to interference."

    Yeah, usually because of overpasses or streets that have thick trees on both sides. But I spend a lot of time outside of urban areas and it's *amazing* to have. Sirius is fantastic to have on long drives & camping trips.

    "If there were a buffering capability that allowed a way to minimize noticable disruptions and also allow repeating a song, pausing, etc. the service would be more attractive. And if I were a fan of a talk show like Stern I'd expect the ability to record it for later playback at a time that is convenient for me."

    You can do all of those with the Sirius S50.

    "Pay more than $100 a year for radio in the car that I can't control in any way except change channels, and can't enjoy anywhere except in the car?"

    I enjoy mine outside of the car. To have that many channels of ad-free music, it's well worth it. The playlists on Sirius are great. I hear more new bands on Sirius than anywhere else.

    "subscriber bases enough to stay in business, they need to make their services far more attractive, not limit their usefulness and convenience."

    They're not limiting them. Maybe one day the price will drop a bit, but come on, don't be such a cheap bastard. If you want to save a whopping $12/mo (which you'll probably blow at Starbucks anyway) and deal with mp3s and standard RIAA-infested FCC mandated radio, go ahead. But millions of us have gone the other way, and we like our Sirius units.

     

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  30.  
    identicon
    spam, Feb 17th, 2006 @ 9:46pm

    Re: SatRadio

    Dude, use Google. Sirius already has one. The S50. Reviews of it are *excellent.*

     

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  31.  
    identicon
    spam, Feb 17th, 2006 @ 9:48pm

    Re: Why should we pay for radio?

    "I don't care what kind of content they have, radio for me has always been about listening to whatever was on just to pass the time in the car or whatever."

    Then have fun listening to whatever Clear Channel feeds you. Ads & all.

     

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  32.  
    identicon
    SimonTek, Feb 17th, 2006 @ 10:51pm

    XM

    I love my XM in the car. 90% of the time I am listening to the comedy channel in the car. When you drive as much as I do. You get sick of FM/AM the same songs 4 times an hour. I like varity. You say CD's/MP3's etc. I rather hear something new, I love my cds once in a while, But I rather listen to music that I normally wouldn't be able to. nice change. I haven't listened to FM once since getting Sat radio.

     

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  33.  
    identicon
    Pope Ratzo, Mar 3rd, 2006 @ 1:51pm

    Re: SatRadio

    The only problem is that podcasts all suck. I'm still looking for my first interesting podcast.

    Please feel free to contact me if you have one that you think has merit.

     

    reply to this | link to this | view in thread ]

  34.  
    identicon
    DREi, Mar 15th, 2006 @ 12:57pm

    Re: Re: SatRadio

    Podcasts are new to most people because now most of us have wider access to content. But I do feel you on streaming nothing beats using ORB Networks software to stream all my digital content to any device with a media player or web browser. www.orb.com

     

    reply to this | link to this | view in thread ]


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