Company News · June 18, 2009

Sirius XM: What’s it Worth To You?

By Edison Research

Sirius XM continues to struggle as we hit the midway point of 2009. After dodging bankruptcy earlier in the year, the satellite radio provider keeps pushing forward and looking for ways to make ends meet. But that begs the question, “Is it wise to ask for more money from subscribers during a troubled economy?”
Beginning at the end of July, subscribers to Sirius XM will see a hike of $1.98 in their subscription fees as the company passes along the cost of increased performance royalty rates. While it is being rationalized as a ‘tax,’ and not as an increase in the base subcription cost, this doesn’t change the fact that it will cost more money to listen to satellite radio. If it was a tough sell at $12.95, that increase could be a deal breaker.
Even the highly anticipated streaming audio program through Apple’s App Store (which arrives today) will not come without an additional cost. The details may change when it finally hits the marketplace but to enjoy streaming Sirius XM through your iPhone, be prepared to add another $3.00 to your regular fees or subscribe to the “Streaming Only” option for about $13.00 per month.
In theory, this new app should be widely accepted with the continued growth of mobile media and the recent reduced pricing of the iPhone 3G, but on the other hand it may prove to be too much on the wallet when competing against other discretionary expenses.
Will fans of satellite cut back other entertainment based spending on movies, downloads and the like in order to make room in an already tight budget for this new app? I suspect that many will do just that–but only if Sirius XM can make a strong case for its value over other streaming apps like Pandora and Slacker that are offered for free and have an advantage of being first out of the gate. The marketing will be key and it would have been wise to coordinate its release with the new iPhone to generate more appeal on both sides.
When the new app is finally released, it will be telling to see if the proposed subscription prices hold or if frugal consumers will force some lower price points. It could shed some light on what value consumers really place on satellite radio.

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