XM Discounts ‘Not Accidental’ Ahead of Stern’s Sirius Debut
In the “guerilla war” of aftermarket receiver sales, it’s “not accidental” XM is pushing retail price cuts in advance of Howard Stern’s Jan. 9 debut on rival Sirius, XM Chmn. Gary Parsons told the UBS Global Media Conference in N.Y. Wed.
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“We planned for this for a long period of time,” Parsons said of Stern’s debut. “We understood there would be a lot of Howard Stern buzz, media attention and foot traffic coming through the retail outlets. So we wanted to be sure we had a wide portfolio of very attractively priced products during that time frame.” About 90 days remain in that “cycle” before that promotion “abates,” he said. Discounts aside, the costs of adding new subscribers are at levels “where we want to be and need to be,” Parsons said.
It’s “very realistic” to say XM subscribers will number 20 million by the end of 2010, based on a customer demographic reflecting “a very broad mass market appeal” for the service, Parsons said. Contrary to those -- including within XM -- who believed satellite radio would have only niche, early-adopter appeal, the service enjoys “vast, deep penetration” among U.S. households, and will keep doing so, Parsons said. “It’s the richness of the programming, not the cleverness of the hardware,” that’s fueling subscription growth, he said.
Sirius CFO David Frear, who followed Parsons at the podium, said there has been a $70 “swing” since June in the average selling price of Sirius vs. XM receivers. In June, the average XM receiver sold for $30 more at retail than Sirius, and now “it’s $40 below us. We're hopeful that situation will rectify itself,” he said. “Based on the work we've done,” there’s no reason to push leader retail price points below $49 for a satellite radio receiver,” Frear said. “We won’t lead on hardware pricing, but we'll certainly follow, one way or another,” he said.
Subscriptions will drive the satellite radio “business model” for years, Frear said. “We expect 90% of our revenue long-term will come from subscriptions,” he said. Sirius has “the opportunity” to charge more, but doesn’t plan to, he said. When XM raised its monthly fee $3 last spring to match Sirius,"they did not lose market share when they did that, and we didn’t expect them to,” Frear said.