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Since my company is significantly involved in all aspects of the Satellite radio business, I would like to weigh in and edit some of Bill's comments on this subject. The disclaimer: we sell both Sirius and XM through our wholesale distribution division and retail outlets. We have a direct relationship with both companies and a former management employee of ours is a national sales manager at XM. The chairman of Sirius, Joe Clayton, is someone I have known for 20 years, first when he was at RCA, and later when he was on the board of a company I was involved with (not Global Crossing!) We distribute Delphi, Terk, JVC, Blaupunkt, DEI ("Sportster"), Alpine, Sony, and Audiovox. We sell thousands of pieces a month in this category.
First, neither company is insolvent; both are very well capitalized through the public markets. As with any recurring revenue model, you lose money on an operating basis as you build subscription base.
This past month was a watershed for this product category. Sirius, who has primarily sold through consumer outlets, passed a million subscribers. XM, who has a bigger presence through the car manufacturers, passed 3 million subscribers. We felt we were aggressive in our inventory position going into December and still stocked out on several models.
The choice between the two really boils down to one of personal taste in programming. On an apples to apples basis, there is negligible cost difference. Sirius sells at a slight premium due to ostensibly more commercial free content and deals like the NFL.
XM is primarily activated through Delphi (nee Delco) and Terk (now part of Audiovox) equipment. Terk makes all the XM Direct pieces that put XM into an XM ready car unit from Sony, Pioneer, Alpine, et al. (Alpine, by the way has a CD/AM/FM in-dash unit with XM built in). Terk also makes the XM Commander, the sleekest outboard solution for existing systems, and a whole array of antennas. Delphi makes the Roady and Roady2 competitors to the Commander, as well as the Skyfi and Skyfi2 units mentioned by Bill, that plug into various cradles, boom boxes etc for portable use. They just introduced, with very limited supply the coolest XM product, called the MyFi. It is a truly portable, Walkman/IPOD type unit. It has programmable recording capability too.
Sirius is activated through a variety of electronics manufacturers, actually supplying the circuitry and chips to most of them. Most of their sales are via "plug and play" semi-portable units that use either direct audio outputs or FM modulation to play through existing equipment. They are just getting into their version of the "XM Direct" type solution.
As has been discussed many times on the List, this is a great product category, a boon to the long haul trucker (who is a big end user base for us) and the coastal cruiser. Both services have or are developing additional service capabilities around weather, traffic, video feeds, news and navigation. I will report back to the List when I get back from the Consumer Electronics trade show in Las Vegas taking place the end of next week.
George
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