Xm Satellite Radio Case Analysis Essay Example
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XM Satellite Radio Case Analysis
XM Satellite Radio’s vision is to provide audio entertainment throughout the continental United States using a satellite-based digital radio broadcast system. Robert Acker, director of strategic planning, must raise the necessary $1 billion in up-front capital before the company can launch its services. To get conviction from potential investors, XM first has to decide on a business model. A second issue that needs to be resolved is how to approach radio manufacturers. Finally, Acker must choose how best to direct marketing for product launch.
XM is entering a new radio market, with only one direct competitor, SIRIUS, and it appeared to have a head start on XM both in terms of financing and technology. SIRUS’s business model is using a subscription-based model of about $10 per month for 50 channels of commercial-free radio. In addition, SIRIUS has already gone public therefore financing is not an issue for the company. XM can either copy SIRIUS’s model of having subscribers pay for its service or it can do what traditional radio companies do and have advertisers pay.
Other radio companies are focused on advertising because it pays for the service. Advertising has increased from approximately six minutes per hour in the 1960s and 1970s to twenty minutes per hour in the 1990s. Radio became a big a profitable business in the 1980s and 1990s which resulted in mergers and acquisition of radio companies. Consolidation and the consequent increase in debt forced major radio groups to focus on increasing revenues through more advertising. As a result, there were fewer radio stations in a region, more advertising, and more songs that were being played by several stations simultaneously.
XM should capitalize on the problems of the current format of AM and FM radio. The company should redirect the focus from advertising to the customer. A survey undertaken by XM showed that listeners are willing to pay for a subscription
XM Satellite Radio Case Analysis
XM Satellite Radio’s vision is to provide audio entertainment throughout the continental United States using a satellite-based digital radio broadcast system. Robert Acker, director of strategic planning, must raise the necessary $1 billion in up-front capital before the company can launch its services. To get conviction from potential investors, XM first has to decide on a business model. A second issue that needs to be resolved is how to approach radio manufacturers. Finally, Acker must choose how best to direct marketing for product launch.
XM is entering a new radio market, with only one direct competitor, SIRIUS, and it appeared to have a head start on XM both in terms of financing and technology. SIRUS’s business model is using a subscription-based model of about $10 per month for 50 channels of commercial-free radio. In addition, SIRIUS has already gone public therefore financing is not an issue for the company. XM can either copy SIRIUS’s model of having subscribers pay for its service or it can do what traditional radio companies do and have advertisers pay.
Other radio companies are focused on advertising because it pays for the service. Advertising has increased from approximately six minutes per hour in the 1960s and 1970s to twenty minutes per hour in the 1990s. Radio became a big a profitable business in the 1980s and 1990s which resulted in mergers and acquisition of radio companies. Consolidation and the consequent increase in debt forced major radio groups to focus on increasing revenues through more advertising. As a result, there were fewer radio stations in a region, more advertising, and more songs that were being played by several stations simultaneously.
XM should capitalize on the problems of the current format of AM and FM radio. The company should redirect the focus from advertising to the customer. A survey undertaken by XM showed that listeners are willing to pay for a subscription