lewinski+strategy+report

TO: Proximity music team FROM: Derek Lewinski DATE: January 11, 2010 SUBJECT: Sirius XM strategy analysis

Here is my Sirius XM strategy report. Although Sirius XM is the leader in satellite radio broadcasting it faces many problems including loss of subscriptions and stock value. Many believe that Sirius XM is in the final stages of life and will soon fall to bankruptcy. Gen-Y users find no use in this product anymore due to mp3 compatible cars and easy access to downloading free music and podcasts (digital media forms of radio talk shows or sport shows).


 * Profile**

Sirius XM Radio started out originally as two separate competing radio stations- XM in 1992 and Sirius in 1990. In July of 2008 the two companies merged to become Sirius XM. The company is located in New York City and is run by CEO Mel Karmazin and chairman Eddy Hartenstein (Wikipedia, 2010).

Sirius XM has two major sources of income:
 * //Consumers// who purchase the companies radio receivers and pay monthly subscription fees for the service
 * //Advertisers// who purchase air time to have stations promote their products

Upon merging the total number of subscriptions to Sirius XM topped 18.5 million (Wikipedia, 2010). The last quarter of 2009 showed a loss of over 400,000 subscriptions (Businessweek, 2010). Also, stocks have plummeted to just $.68 a share (Sirius, 2010), a considerable drop from XM’s initial stock value of $ 17.02 (CNNMoney, 2007).


 * Competitive landscape**

The primary force driving competition in the satellite radio industry is the access to hundreds of music, sports, news, and talk show stations it provides. While standard radio offers much of the same it does not come close to the variety of satellite. Sirius XM holds a monopoly on the satellite radio industry and therefore faces no competition from competitors.

One of Sirius XM's biggest problems comes from the increasing popularity of mp3 players (iPods and Zunes). Mp3 players provide consumers with even more control over their radio then what satellite provides. Also, with mp3 players there is only a one time cost (the purchase of the device) and in these bad economic times, consumers would be more inclined to this idea rather than the monthly payments a Sirius XM subscription requires. Besides uploading music mp3 players compete with talk shows by offering things like podcasts. These downloadable items are digital media forms of things like talk shows.


 * Sirius' strategy**

Sirius XM is facing severe economic problems. The company is considering filing for chapter 11 to help protect itself from creditors (Businessweek, 2009). According to businessweek.com Sirius is considering two strategies to help prevent bankruptcy.


 * //Renegotiate Contracts-// Sirius may rework contracts with its top paid channels. They currently pay Howard Stern $80 million a year. The Major League Baseball channel is another channel they would like to renegotiate. Some analyst believe that revenue sharing deals with auto makers may also be halved due to poor car sales.
 * //Expand Business Model-// To increase profits Sirius may start streaming its audio content over the web. With this they can also sell their exclusive content online as a download at a certain fee.


 * Gen-Y implications**

While Sirius XM single handedly dominates the satellite radio industry it is still ultimately worthless. In terms of music the biggest attraction of Sirius is the wide variety of commercial free music stations. Torrents have now made it possible to get unlimited amounts of music without having to pay for the CDs. Also with smartphone technology news and sports updates are available at any moment and can be accessed faster then through radio broadcast.

Sirius XM is a dying business in a dying industry. It is not a market that Gen-Y consumers should even consider investing in. Sirius' ability to access a broad assortment of music could be attractive to those trying to find new music to listen to however, sites like Pandora allow individuals to do this for free. Sirius XM's last hope would be to move its content to the web for download. Even then the Gen-Y consumers will still be able to find ways to get the media downloads for free.

References

Corporate Overview. (2010, January 11). Sirius.com. Retrieved January 11, 2010 from []

Ellis, David and Monica, Paul. XM, Sirius ANnounce Merger. (2007, February 20). Retrieved January 11, 2010 from []

Kharif, Olga. Sirius XM’s Subscriber Drain. (2009, May 7). Retrieved January 11, 2009 from [|__ http://www.businessweek.com/technology/content/may2009/tc2009057_956955.htm__]

Kharif, Olga. Sirius XM: What Price Bankruptcy? (2009, February 11). Retrieved January 11, 2010 from [|__http://www.businessweek.com/technology/content/feb2009/tc20090210_831883.htm__]

Wikipedia. (2010, January 8). Sirius XM. Retrieved January 11, 2010 from []