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Satellite Radio Killer Application?. Group 8 Section 11 Eric Mollo Mike Ferranti Kristen Blough Rushi Sukharamwala. Presentation Overview. How it works Companies What they have to offer Industry Analysis Drawbacks Is it a Killer App? . Satellite Radio. How does it work?

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Satellite RadioKiller Application?

Group 8 Section 11

Eric Mollo

Mike Ferranti

Kristen Blough

Rushi Sukharamwala

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Presentation Overview

  • How it works

  • Companies

    • What they have to offer

  • Industry Analysis

  • Drawbacks

  • Is it a Killer App?

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Satellite Radio

  • How does it work?

    • Communication Satellites

      • XM - Geosynchronous orbit

      • Sirius - Geosynchronous elliptical 24 hour orbit

    • Terrestrial Repeaters

      • Designed to rebroadcast at higher power levels

    • Antennas/Tuners

      • Cars, Buildings, Homes

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XM Satellite Coverage

Sirius Satellite Coverage

Sirius Satellite 24 Hour Satellite Rotation

Sirius Satellite 24 Hour Satellite Rotation

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Founded 1990

Bid for FCC License = $89.9 Million

Current Subscribers = 5.1M

130 Channels

69 Commercial Free Music

Previously known as CD Radio


Founded 1992

Bid for FCC License = $83.3 Million

Current Subscribers = 6.9 Million

170 Channels

69 Commercial Free Music

Previously known as American Mobil Satellite Corp.

FCC Licensed Companies

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Purchase Receiver

$59.95 - $119.95

$10 or $15 Activation Fee

Inclusive Package

$12.95 Monthly

$499.95 lifetime subscription

Other Offerings

Marine Weather

Sirius for the Work Place

Internet Radio


Purchase Receiver

$59.95 – $99.95

Inclusive Package

$12.95 Monthly

Discounts to as low as $9.99 with 5 year plan

Other Offerings

Marine Weather

XM for the Work Place

Internet Radio

Service Offerings

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Sirius & XM


Pop, Rock, Electronic, Hip Hop, Country, Christian, Jazz, Classic, International






Comedy – Opie and Anthony, other stand up

Bob Dylan, Oprah, Al Franken

Program Variety

  • Sirius

    • Sports – NBA, NFL, NCAA, Soccer, Horse Racing, NASCAR

    • Comedy – Howard Stern, other stand up

    • Martha Stewart

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Threat of New Entrants

  • Low because of high barriers to entry

  • Need FCC approval to access digital spectrum

  • Cost XM and SIRIUS $200M to use

  • Record industry lobbies Congress

    • PERFROM Act of 2006

    • XM Inno

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Bargaining Power of Suppliers

  • High

  • Record industry controls content

  • Want to increase licensing fees

    Ex: Can’t have Elvis satellite radio station without approval from Elvis’ record label

  • Forces satellite radio companies to pay prices demanded by record industry

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Bargaining Power of Buyers

  • Low because of switching costs

  • Specialized content

    • SIRIUS offers Howard Stern

    • XM offers Weather Channel

  • Real-time traffic info and GPS navigation

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Threat of Substitute Products

  • High

  • HD radio – offers enhanced sound quality and clear reception

  • Google AdWords & dMarc Broadcasting

    • Offers services that dynamically generate and change commercial content

    • By the 4th quarter of 2006, Google expects AdWords clients will be able to place advertising in both terrestrial and satellite radio spots

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Industry Competitors

  • High because it is expensive to leave the industry and low differentiation between products

  • XM & Porsche vs. SIRIUS & VW/Audi

    • Exclusive deals to be respective providers of satellite radio to these car companies

    • Porsche has 25.1% stake in VW

  • XM & Hyundai vs. SIRIUS & Kia

    • Hyundai is parent company of Kia

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User Perception

  • When it comes to technology, there are two kinds of people in society

    • People who prefer control over comfort

    • People who prefer comfort over control

  • Younger people are usually more controlling

    • People 12-17 use MP3 players the most

    • Dislike commercials and commentary between songs

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User Perception

  • Older people usually prefer comfort over control

    • Have the general idea of, “Don’t fix what isn’t broken”

    • Listen to the radio for personal connection with DJ

    • Have become accustomed to AM/FM radio

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Initial Drawbacks

  • Forced to pay almost $200 million for use of airwaves

  • Digital Performance Right in Sound Recordings Act of 1995 forced payment of royalties to performers

    • Costing XM about $20 million in two years

  • National Association of Broadcasting (NAB) didn’t like satellite radio from the start

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Current Drawbacks

  • High hardware/service costs

    • About 12% of control seeking users would turn down free satellite radio

    • About 30% of comfort seeking users would turn down free satellite radio

  • Lack of local broadcasting

    • FCC doesn’t allow them to broadcast locally

    • Broadcast a limited amount of local channels across the nation through a loophole

    • Local coverage still doesn’t compare to AM/FM radio

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Current Drawbacks

  • Service charge causing users to prefer portable receivers

  • But…problems with portable devices

    • Limited battery life (5 hours)

    • Lack of adaptability with iTunes

    • Dead spots

    • Need to power off devices during scheduled recording sessions

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Potential Drawbacks

  • Limited censorship

    • Satellite radio not licensed by the FCC

      • Receive strict First Amendment protection

    • The NAB has been leaning on the FCC to provide oversight and regulation

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Killer Application

A killer application is a good, service, or way of doing business that dramatically changes the accepted order or the old way of doing things.

Satellite Radio is on its way to being a killer app to terrestrial radio for a number of reasons:


Universal Signal

Big Name Entertainers (Howard Stern)

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  • Initially portability was a problem with satellite radio.

  • Now there are gadgets that make portability no longer a problem.

  • The Inno is the newest and latest player made from Pioneer.

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Universal Signal

  • One of the main problems that people experienced with terrestrial radio is that a signal is not always available.

    • Rural or lesser populated areas

    • In tall building and in tunnels

  • 3 Universal satellites assure premium quality programming.

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    Big Name Entertainers

    • In early 2006 XM signed Oprah to a 3 year $55 million deal.

    • XM also signs shows such as Friends and other sitcoms.

    Most notable signing was that of Howard Stern in 2004. He signed a multi-million dollar agreement with Sirius that would be fulfilled over a 5 year span.

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    Are You Sirius ???

    • Howard Stern was paid $500 million for a 5 year exclusive contract with Sirius.

    • On Sirius he is able to have his show censor free.

    • So why the high price tag ?

      • Both he and Sirius target the 18-49 year old male segment.

      • Main reason was to compete with XM; increase market share

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    Satellite Radio is…

    • Still in the development stage of its life cycle…

    • Satellite radio and its features are far superior to that of terrestrial radio already…

    • It may not be a killer app right now but…

      • Contracts with big name entertainers

      • Contracts with all major sporting leagues

      • Constantly improving sound quality

      • Commercial Free radio!

      • What more could you want?!?

        Only we can make it happen, so go out and try it!