From Radio Business Report:
Serious trouble for satellite radio Not just for Sirius, but for XM as well. Citing data from NPD Group, Bank of America analyst Jonathan Jacoby says the year-over-year decline in retail sales of satellite radio receivers is accelerating. XM sales were down 23% in October and Sirius sales were down 26% – the first month since April 2005 that Sirius had a worse month than XM. For the entire US satellite radio industry – two companies – unit sales were down 25% in October, following drops of 12% in September and 3% in August. Jacoby is now projecting that Q4 retail sales of satellite radio receivers will be down 20% from a year ago. The analyst says Sirius will now be struggling to make its year-end target of 6.3 million subscribers and that both companies are moving increasingly to an OEM-driven model, where XM is better positioned for receiver sales in new cars. Jacoby maintains a buy rating on XM, saying the stock valuation gap with Sirius should narrow over the next 6-12 months.
Both Sirius and XM should be moving to an OEM-driven model. This is presented here as an unfortunate outcome rather than an optimal strategy. If you have seen our recent NAB presentation, then you’ll understand why this is the right move. Just take out the term “HD” from our presentation and insert the term “Satellite.” Indeed, this should be required viewing at both satellite companies.
What’s playing out here isn’t surprising to us in the least. There’s plenty of headroom for Satellite Radio but there are strategic pieces that that side of the industry is getting terribly wrong for one reason and one reason only:
They are obsessed with selling radios.
Is there a lesson here for HD radio’s future, too? You bet there is.