Providers add new features, branch out to cellphones, auto market
Peter Wilson
Sun
A year after satellite radio launched in Canada the initial buyer frenzy is over.
A year after satellite radio launched in Canada the initial buyer frenzy is over.
With some 300,000 subscribers to Sirius Canada and XM Canada, the urge to splurge on hundreds of channels of commercial-free music and talk — brought on by years of regulatory dawdling — appears to have dwindled.
But that doesn’t mean the excitement is over.
“Last December just smoked because people were rushing in to get satellite radios, due to pent-up demand,” said Wynne Powell, president of London Drugs, which sells both the Sirius and XM brands.
“So last year’s figures were probably over-inflated, but we do think we’re going to have a strong Christmas again, just more orderly,” said Powell. “And people do seem to like to buy them as a Christmas gift.”
Particularly enticing this year could be receivers that allow users to add their own MP3s, and record satellite radio shows.
To add to the mix, entire new markets aside from retail plug-and-play are in the near future:
– Cable companies like Shaw will likely offer satellite radio packages — as a premium service — within the next year. And it may also be offered by satellite TV companies eventually.
– Satellite-ready vehicles from automakers like Toyota, Honda, GM, Ford, Chrysler and Nissan are either on the road or about to hit it.
– XM Canada already has a deal to have its programming carried on cellphones, and Sirius might follow.
And, despite ominous predictions that satellite radio is facing a threat from the seemingly omnipresent iPod juggernaut, industry analysts Yankee Group foresees continued adoption in Canada.
“At the moment, I’m sticking with my forecast of a total user base of just under 2.4 million by the end of 2009,” said Jeff Leiper, Yankee Group’s Canadian research director, who plans to revisit his prediction after the Christmas sales figures are in.
He said that holiday sales would depend on whether or not those who are already subscribers recommend satellite radio to their friends.
Judging by subscription figures released recently, Sirius Canada — with 200,000 paying subscribers — seems to be the clear winner over XM Canada with just under 130,000 subscribers (91,000 of whom pay for their service).
However, that’s more than a little deceptive, since the Sirius numbers (which include the claim that they represent seven out of every 10 units sold at retail) are as of late November this year, while XM’s date from the end of August.
“We’re happy with how we’re doing, and good numbers are good numbers, whether they’re for Sirius or for us,” said XM Canada president Stephen Tapp. “It means that the category is healthy.”
Powell confirms that, at least at his 64 London Drugs stores across Western Canada, the seven-to-three ratio in favour of Sirius is correct, possibly because of the type of people who buy the product.
“It’s people who travel a lot, like truckers or any travellers, especially those who go into remote areas like Grande Prairie or Gibsons or even Prince George,” said Powell, who added that outside of the Lower Mainland Sirius’ coverage is better.
“I feel sorry for XM because I think their service is very challenged to provide sufficient signal in the areas that want to buy the product.”
Sirius Canada CEO Mark Redmond said he attributes the lead to a combination of content — including the lure of the offerings of CBC, a part owner of his company — marketing, and better coverage.
“The only reason XM was ahead of us in the States was that they launched before us there,” said Redmond. “From day one, we said that under no circumstances are we going to be less than 50 per cent of the market, and we want our unfair share above 50.”
However, XM’s Tapp said that he expects what he sees as his company’s superiority in the automotive market to even things out.
“We have under contract the makers of approximately 60 per cent of the cars sold in this country,” said Tapp. “That includes General Motors, Honda, Toyota, Nissan and Suzuki, and another one we’re negotiating with.
Sirius’ Redmond challenges this, saying that the automotive playing field will be more like 40 per cent to 40 per cent, when all the deals are signed and in. (The other 20 per cent involves vehicles that offer either service.)
Since Sirius Canada is a private company, there are no figures available as to how it’s doing financially, but XM Canada, actually Canadian Satellite Radio Holdings Inc., had a loss of $103 million for its first year ending Aug. 21, although revenue was up 46 per cent to $3.4 million in its final quarter.
CSR shares (TSX: XSR) have plunged from their IPO price of $16 a share to close Thursday at $7.65, although that’s up from the yearly low of $6.19.
Although neither Sirius Canada nor XM Canada will say exactly what will happen with cable and satellite delivery of their services, they are both highly interested in the new market.
Shaw Cablesystems President Peter Bissonnette said that his company would definitely be asking the Canadian Radio-television and Telecommunications Commission — which has already approved Rogers Cable in the East — for the right to carry satellite radio offerings, and will sell it at a discretionary price.
“No pricing at this time, as we need to review the overall radio carriage strategy,” said Bissonnette.
Ontario-based consultant Michael Urlocker, who specializes in what are known as “disruptive innovations,” says the iPod is a particular threat to satellite radio.
“Unfortunately, the problem that satellite radio was built to solve, which was ‘Give me lots of music in my car,’ has been solved by the iPod,” said Urlocker. “So the satellite providers could continue to try to solve that problem, but they will get increasingly nowhere doing that.”
Arguments that the iPod, which plays MP3s, offers less quality of sound, don’t wash with Urlocker, especially if the music is in a car where road and other noise is a factor.
Not unexpectedly, Tapp and Redmond disagree on whether the iPod is a threat.
“The iPod is essentially one-dimensional. You have to program it. There’s no surprises. There’s no sense of discovery. It’s not live, and it’s just music,” said Redmond.
Tapp, whose company offers a similar receiver, the SL100, said that in its entire history iTunes has generated $1.5 million in revenue, while satellite radio could well generate $1.8 billion in 2007 alone.
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SATELLITE RADIO IN CANADA
$14.99 a month from both providers with deals, depending on length of contract, etc. Cost of radios is subsidized.
Sirius Canada had 200,000 fully paid subscribers as of mid-November 2006.
XM Canada had 91,200 paying subscribers as of Aug. 30, 2006. Another 30,000 do not pay.
The Yankee Group predicts the number of subscribers in Canada could reach 2.4 million by the end of 2009.
Canadian subscriber profile, according to the Yankee Group, from its 2006 technologically advanced family survey:
27.5% are also digital cable subscribers
45% also subscribe to satellite TV
25% have two MP3 players, far above the national average of 10.3 per cent.
Big 3 Heaviest areas of subscribers are Ontario, Alberta and B.C.
40% are from what Yankee Group calls “early mass adopters”.
AOL CANADA ADDS ANOTHER CHOICE
As if there weren’t enough competitors in the music business for the likes of this country’s two satellite radio operators, now AOL Canada has stepped in with yet another alternative.
AOL Radio, with more than 170 stations of commercial-free music is now online at www.aol.ca/radio
And the channels — which range from hip hop to Workout Songs to One-Hit Wonders to jazz and classical, and include Japanese pop, Bollywood sounds, and African music — are all free.
AOL Canada said the music is ideal for those who want to listen in an office setting.
© The Vancouver Sun 2006
