Update: Satellite Radio Disrupted by iPod

Update: Feb. 17, 2009

NYT: Sirius XM averts a close brush with bankruptcy, for now...

Things looked irretrievable only a few weeks ago.

Sirius XM Prepares Bankruptcy Filing

Meanwhile, equity investors have already been effectively wiped out in the past two years, losing more than 95% of their value.

Original post: Dec. 5, 2006

Satellite radio broadcasters are reporting unexpectedly slower sales for Christmas, causing the stocks to continue their descent to earth.

In Contrast, Apple's iPod is expected to sell its best quarter ever, with 16-20 million units to be sold this quarter alone, which is more than the total 12 million satellite industry has racked up in five years.

Sirius Satellite Radio Inc. had this to say in the Wall Street Journal today to account for the slower outlook:

Sirius said it wasn't sure why retail numbers weren't stronger, given increased awareness of the product and more Sirius radios in stores compared with last year.

What's going on?

It would appear that the two satellite broadcasters, Sirius and XM Radio, are being disrupted by the iPod. After all, iPods solve the same problem, of providing a large variety of music content to people on the go. 

Here are two important new indicators of the likely sustained success of the iPod:

• 70% of 2007 U.S. model cars will come equipped with iPod connectors
• Six major airlines announced last month that they would equip passenger seats for iPod connection as well

Meanwhile the satellite broadcasters have each more than $1 billion in debt and are still losing money.  Stocks are off 40-50% this year.

Apple's total cumulative iPod sales tracked on WikiPedia will cross 80 million shortly.

**Other Information**

Unless satellite broadcasters start by inventing new profitable niche services, they may not survive. Read my full column from the Financial Post, Satellite broadcasters face grave challenge from iPod (pdf).

Complete archive of On Disruption columns from The Financial Post.

The Cranky Consumer says the problem is that satellite radios are hard to install and  suffer distortion.

PopSurfing says Sirius and XM need to merge, which echoes the public musings of Sirius's CEO Mel Karmazin last week but certainly won't solve the iPod problem. 

Mergers are a typical warning sign of an industry in disruption.

Comments

[Satellite Radio Systems]

This is a good article about Sirius satellite radio because it is the future of broadcast communications technology.
http://www.1-satellite-tv-facts.com/Satellite-Radio.html

[Ryan]

Basically, satellite radio has two disadvantages to the iPod. One: their business model is linked to a reoccuring revenue model (subscription) which, I believe, most consumers hate. And two: iPod's are all about control. The consumer can choose exactly what they want to hear. Satellite is much more limited - you can only chose the genre. These are the two reasons why I'll never subscribe to Sirius or XM (even though I enjoyed Sirius for free for six months in my new Ford vehicle), and I'll keep buying songs for my iPod.

[Alan Kearns]

Michael I agree, last year I noticed an add on the side of a TTC bus for a radio station it was a white IPOD with the headline "MP3 Free" to me it spoke volumes...this particular campaign was speaking to radios greatest threat..IPOD's etc...Listen to what I want where I want..how long I want..all the crystal clear sound and no monthly subscription. (although I do have an Audible.com monthly subscription)