Sirius-XM Interoperability Not Far Off, XM Chmn. Says
An aftermarket one-box radio that’s truly interoperable for Sirius and XM reception is possible within a couple of years, but interoperability as a feature is likely to have niche rather than widespread appeal, XM Chmn. Gary Parsons told a Banc of America investors conference Wed. in N.Y.C.
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Sirius and XM have “gone a long ways down the line” toward achieving true interoperability between the services, Parsons said. For example, he said, Sirius and XM share a common antenna and wiring harness, he said. Moreover, he said, radios installed in Audi and Volkswagen vehicles are interoperable for Sirius or XM reception. “The only thing that’s necessary to do is plug one box versus another box in there. Quite candidly, you could put duct tape around 2 boxes, plug them both in and you'd have an interoperable radio.”
Parsons said Sirius and XM were mandated under their FCC licenses to assure “there were no barriers” to CE makers wanting to build interoperable radios. Joint development work between Sirius and XM has focused on “shrinking that dual box.” Parsons said an all-in-one interoperable radio was more likely to emerge first in aftermarket receivers; the first such products were possible “in a couple of years” from makers wanting to build that functionality into the product. But he said that although interoperability would lure only a “minority” of consumers the feature will be important, analogous to the market for GSM phones that appeal to the small segment of consumers who demand that capability because they travel frequently to Europe.
Many see mobile Internet as mounting the biggest potential competitive challenge to satellite radio, but XM isn’t fretting about that, Parsons said. “All of the various 3G architectures are not made well for streaming,” he said. “There are various streaming services out there, but I think you'll find all those companies that are deploying service networks know and understand they can only take a very limited penetration of that before they collapse their networks.”
Ultimately a “significant, positive dual revenue stream” from satellite radio will develop out of advertising, Parsons said. As for heightened awareness toward building a satellite radio ad revenue stream, he again credited Sirius CEO Karmazin; that outlook is “something he brings to the table.” Karmazin “has pushed advertising for years in many different forms, and I think it will heighten the visibility to it,” Parsons said. XM believes ad revenue someday will comprise 10% of its total sales, he said. As to whether it would approach 15%, Parsons said “it probably could, but we'll do that with a fine hand. We'll be very careful not to disturb the value equation that is there” for satellite radio. So long as music on satellite radio remains commercial-free, “a lot of the most compelling talk content has natural breaks anyway” that are conducive to the placement of ads, Parsons said. “The advertising loads there are going to be more like the normal load you would get from watching cable TV or listening to terrestrial radio.”