Satellite radio: a match made in Heaven

Satellite radio: a match made in heaven
The proposed merger of the Sirius and XM satellite radio businesses addresses the biggest issue we identified the last time we looked at the business: building a stable subscriber base. Of course, combining their businesses will greatly decrease their overhead and programming costs, but this merger is very much about subscribers.
Both services are trying to expand rapidly and reaching the limits of the early-adopter market. They’re moving from pre-installation in luxury auto brands to economy brands. We’ve been concerned for a while that as they expand their target market, churn could increase to a point where their subscriber buckets were leaking faster than they could fill them.
It doesn’t help that more and more cars are coming pre-installed not only with satellite radio systems, but with connectors for MP3 players. So, they’re not only competing with free radio, but with the customer’s own music collection on a device they know and love.
By combining their businesses, Sirius and XM will not only greatly improve their chances of reaching a stable and profitable subscriber bases, they decrease any consumer uncertainty over which to choose and whether either service will be around in a couple of years.
Originally published on my blog at JupiterResearch.