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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 radio killer application

Satellite RadioKiller Application?

Group 8 Section 11

Eric Mollo

Mike Ferranti

Kristen Blough

Rushi Sukharamwala

presentation overview
Presentation Overview
  • How it works
  • Companies
    • What they have to offer
  • Industry Analysis
  • Drawbacks
  • Is it a Killer App?
satellite radio
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
slide4

XM Satellite Coverage

Sirius Satellite Coverage

Sirius Satellite 24 Hour Satellite Rotation

Sirius Satellite 24 Hour Satellite Rotation

fcc licensed companies
Sirius

Founded 1990

Bid for FCC License = $89.9 Million

Current Subscribers = 5.1M

130 Channels

69 Commercial Free Music

Previously known as CD Radio

XM

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
service offerings
Sirius

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

XM

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
program variety
Sirius & XM

Music

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

News

Weather

Traffic

XM

Sports – MLB, NHL, NASCAR, PGA, NCAA

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
threat of new entrants
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
bargaining power of suppliers
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
bargaining power of buyers
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
threat of substitute products
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
industry competitors
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
user perception
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
user perception15
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
initial drawbacks
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
current drawbacks
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
current drawbacks18
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
potential drawbacks
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
killer application

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:

Portability

Universal Signal

Big Name Entertainers (Howard Stern)

portability
Portability
  • 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.
universal signal
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.
big name entertainers
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.

are you sirius
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
satellite radio is
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!