Even if the piece had not mentioned a potential merger between XM and Sirius (which is largely speculated on here), the tone of the piece would be positive.
Yes, Wall Street has not been kind to satellite radio of late, but as Craig Moffett, senior cable analyst for Sanford C. Bernstein, notes in the piece:
Satellite radio is growing faster than any consumer product except for the iPod.
And that’s a statement I find remarkable.
Wall Street’s stock-punishment stems from sat radio’s own projections of growth, aided by projections from independent researchers, which were (even at the time, in my opinion) hopelessly overzealous.
But on its own terms, satellite’s growth has been considerable (albeit from a base which is trivial compared to the number of radio listeners out there): Sirius’s base has expanded to about six million subscribers, up 80 percent from one year ago. XM has increased its numbers by more than 30 percent, ending 2006 with 7.7 to 7.9 million customers.
The article also correctly notes the secret weapon of satellite radio: Penetration into the new car market. Every year satellite becomes an option – or standard equipment – on more and more new models. And remember that ALL cars will at one time have been new ones. Meaning eventually most cars might contain a satellite radio, whether it’s activated or not.
In other words, the “work” and “pain” of installation will be eliminated. And anything that lowers the pain reflects positively on the value proposition of the product or service. Pain is, after all, mostly about hassle, not cost. And an installed satellite radio has no hassle.
When satellite is as easy as making an activation call for less money per month than it costs to buy yourself one movie ticket and a bucket of popcorn we’ll see a LOT more satellite listening going on. “It’s already in your car – just turn it on.”
Will satellite radio ever achieve some of the stratospheric levels projected even as recently as a year ago? I don’t think so. But it doesn’t need to in order to be a perfectly profitable business.
Merger or no.