What Now SIRIUS?

By: Lee Distad

Something that hasn’t gotten a lot of attention in the CE trade media is that since the merger between satellite radio companies Sirius and XM, the combined stock SIRI has been absolutely hammered on the Street, hitting an all-time low last Friday of $0.36 a share, from a pre-merger price of $2.50.

Granted the equity markets have taken a beating worldwide, and every CE and tech company has seen their market cap take sometimes-severe haircuts. At issue for Sirius in particular is concern over their ability to grow their subscriber base, as well as to be able to service the debt issues that are coming due early next year. Talk about avoiding delisting from NASDAQ by engineering a reverse split – exchanging shareholders’ multiple shares for one share at a combined valuation, something that seldom goes well, have further alienated shareholders.

On the CE business front, given how well CE manufacturers have played ball with Sirius (not to mention XM), and the millions of devices in homes and cars that are Sirius-equipped, while it’s still remote, it would be a damn shame to see them go under.

Then again, talking to reps for the various HiFi brands, consumer feedback seems to indicate that Sirius is more popular for mobile applications, than home audio. According to a couple of sources at the big Japanese audio companies, Ethernet audio has proven to be a more popular feature on their AV receivers than Sirius.

What do you think? If Sirius goes under, will you notice? Let us know in the comments.

Should Sirius & XM Merge?

Should satellite radio providers Sirius and XM merge in the U.S.? This has been the question on many minds over the past few months, as the companies, their investors, and the Federal Communications Commission (FCC), go back and forth on the issue.

On the one hand, a merger would unify the two competing brands, allowing them to more effectively compete against other forms of music entertainment, which range from standard, terrestrial radio, to streaming Internet radio, digitally downloaded tunes, store-bought CDs, and even the relatively new HD Radio format. On the other hand, Sirius and XM are technically the only two providers of satellite radio technology in the U.S. (not to mention Canada), so a merger would see them effectively competing against, well, no one. Without competition, one really has zero incentive for providing attractive promotions and pricing.

According to SkyREPORT, several groups, including the Consumer Federation of America, Consumers Union, and Free Press, are urging the FCC to reject the proposed merger. I often find myself in opposition of large lobbying groups (like those that wish to impose a levy on hard drive-based music players or pretty much those in favour of stifling technological innovation in any way), but I'm actually on the side of these groups this time. Competition is good for the consumer and good for business. The satellite radio arena needs it in order to remain fresh, and work toward giving consumers a valuable reason to switch from standard radio to a paid, commercial-free service.

I do understand that, although Sirius and XM are the only two satellite radio providers in the race, they are technically competing with other services: terrestrial radio in the car, streaming Internet radio in the home, for example. In that case, they would indeed have to offer some sort of incentive in order to get customers to pay for their radio service, whether there was only one provider, two, or 20. But then we can take it one step further and say they're also competing with iPods, because these nifty players can easily dock in a car to playback tunes through the vehicle's audio system; and manufacturers like Sonos and Squeezebox, which provide hardware that makes streaming tunes throughout the home just as easy as docking your satellite radio receive with your stereo system. Where do we draw the line? More important, if a significant chunk of consumers get hooked on satellite radio, where, then, is the incentive to offer better deals that go beyond "commercial-free music"? Even though the companies would likely operate independently from one another, the bottom line is that, if there's only one provider, why bother with great promos that we might have otherwise seen in the market?

The situation can be likened to GSM phones in Ontario, which I've mentioned before in previous blog entries. If a customer wants to move to a new GSM carrier, his choice is limited to Rogers or Fido, the latter of which is owned by the former. Sure, a customer could always just opt for CDMA and go with another carrier altogether; but if he wants GSM for its world-roaming capability, or perceived better reliability, he has one option.

The groups cited above claim that a merger would "reduce the number of channels and formats available, and result in fewer cost-saving incentives." They add that without competition, the industry would see a "dramatic drop in spending on talent and retail". Here, here.

Digital Radio Set for Major Growth

Despite what some nay-sayers might believe, digital radio is set for major growth, with satellite radio leading the pack in the U.S. According to a study conducted by market research firm In-Stat, sales in the digital radio market are expected to rise three-fold from 2006 to 2011, reaching almost 32 million units four years from now.

It's interesting that satellite radio technology is still numero-uno south of the border, especially given the growing consumer awareness of HD Radio, which permits participating stations to simulcast in digital format. Further, HD Radio is actually free, whereas satellite radio requires that you pay for a subscription to access it!

The In-Stat study reports that 'increased choice of programming" is the primary driver of digital radio. In my opinion, the absence of commercials is just as significant a driver. Sure, it's important to be able to hear the local news, commentary, and traffic updates; but on the other hand, if I have a 20-minute commute to the office, I don't want to spend half that time listening to commercials in between tunes and the DJ's witty repertoire. Heck, on some days, I don't even want to hear the DJ, which is where a station with constant song after song after song is a welcome option.

Of course, there are customers with whom the music offerings on satellite radio simply don't appeal (major classical music aficionados, come to mind as an example). But for others, a few weeks with satellite radio will have you hooked; and the nominal, yearly fee likely won't phase you.

The results of the In-Stat report are even more topical, given the possible merger that's surrounding the two satellite radio providers, Sirius and XM. Personally, I think competition is a good thing, and with one, powerhouse provider, we might see less appealing deals and offerings. Let's hope this isn't the case. And even if a merger happens, it will take plenty of time to smooth out details; and since the Canadian counterparts operate independently from the U.S., the changeover may take even longer to happen here.

Tag Your iTunes

Here at CEDIA, tons of new high-end A/V products and integration tools are being launched, but there have also been some cool new consumer-oriented gizmos and gadgets that will be making waves during this upcoming holiday season. Given the recent launch of the latest sixth-generation iPods, I thought I’d mention one neat product/feature that might catch the eye of digital music lovers: iTunes tagging.

By pressing a simple “tag” button on the front of any product that has this feature along with HD Radio, the currently playing tune will be “tagged” and transferred to a connected iPod. Don’t get too excited just yet: the actual tune isn’t yet yours to keep. Once you connect your iPod to the PC, the “tagged” tracks will appear in a dedicated tagged section in iTunes, at which point you can preview them, and download and purchase should you so desire.

This iTunes system reminds me of the XM + Napster partnership, which allows customers of certain XM Satellite Radio receivers to perform much the same task. However, this is the first service of its kind to integrate with the widely popular iTunes, and will probably be popular amongst the iPod crowd.

One neat new product that will include iTunes tagging is a tabletop radio from Polk Audio called the I-Sonic Entertainment System 2. This funky-looking unit has an iPod dock on top, with cleanly-designed buttons on the front. Up to 50 songs can be tagged and stored at a time; and the unit works with all dock-connecting iPod models. I haven't had a chance to listen to it yet, but I have heard its predecessor model (which offered a CD player instead of iPod dock), an it was impressive for a radio of its small stature. As for HD Radio, although it isn’t yet available in Canada, it has been approved by the CRTC, so it’s only a matter of time.