XM's chief foresees a satellite revolution
By David Lieberman, USA TODAY
If you doubt that entertainment can be a volatile business, consider what's happening at XM Satellite Radio. The company is sky-high now. On Tuesday — just four years after it introduced its satellite radio service — XM announced it has signed up its 5-millionth customer.
That's a substantial lead over rival Sirius Satellite Radio, which has 2.1 million. But this holiday season, which accounts for about 40% of the year's new satellite radio customers, Sirius will try to close that gap with a marketing blitz promoting popular radio shock jock Howard Stern. He'll join the Sirius roster on Jan. 2.
Meanwhile, Apple poses a potential threat to XM sales among car buyers, who account for about half of new satellite radio subscribers. Apple projects that nearly a third of next year's new cars will have connections into the car audio system for its iPods.
XM and Sirius are fighting back with portable satellite radios — including soon-to-be-released models that also can store music MP3 files.
At the center of these battles is XM Chief Executive Hugh Panero, 49. He sat with USA TODAY media reporter David Lieberman to discuss prospects for his company and satellite radio.
Among his thoughts:
Q: You have 5 million customers and expect 6 million by year's end. How high can you go?
2010 — some analysts say that satellite radio could be at 40 to 50 million by then — is really just a matter of us executing and expanding the places where satellite radio can go. We want to be everywhere.
Q: How willHoward Stern's move to Sirius affect XM?
A: He is a half-billion-dollar gamble on the part of my competitor. His announcement gets headlines, and what we're about is getting subscribers. Since the announcement that he's moving to our competitor, we have added 2 million subscribers. They come on because we offer the best sports, the best music and the best talk.
Q: Couldn't all the attention he'll get lead potential subscribers to focus on Sirius?
A: Our service is identified with Major League Baseball. Between 16% and 20% of people who have subscribed, when asked what piece of content made them choose XM, said "baseball." And we're going to find the same attributes when we introduce hockey in October.
But what people really love is music. We have 125 music directors dedicated to putting passion into our music channels. That's different than our competitor, who treats it more like FM. And advertising is not part of our music lineup.
Q: Lots of people get ad-free music on their iPods. What happens to satellite radio as automakers roll out models with plugs for iPods?
A: What the iPod offers is an individual, somewhat isolating, music experience. With XM you can listen to four or five channels covering the John Roberts hearings, or Fox News or a hurricane-relief concert. That is the kind of shared community experience that used to be a hallmark of radio and clearly of television — and that is unique to our service. And now we've added MP3 capabilities to our devices.
People who are very busy don't have two hours to sort through a lot of music. They want someone to be their concierge service, which is what XM does.
Q: Technology is always changing. Are you concerned that others might duplicate what you do and transmit it via cellphone networks or digital radio signals?
A: Other technologies will be out there trying to figure out how to make it work. And we will participate in some of those other platforms. We've been talking to all the cellphone providers about having a place there. We have a place on the Internet now.
And we have non-traditional ways of marketing our product. Starbucks is selling the first in a series of compilation CDs (this one features Tracy Chapman, Jewel and Jason Mraz) that are a joint production of XM and Starbucks' Hear Music label. And our joint Hear Music channel is playing in the stores. We're in AirTran Airways, JetBlue, Avis and Hyatt hotels. We're building a premiere entertainment company.
Q: Still, your stock has been relatively flat this year. Moody's said in a recent report that satellite radio "has yet to prove that it can sustain its business model." Is Wall Street missing something?
A: That cynical view is offset by the 30 or 40 other analysts who say that this service is here to stay. And that's reflected in our stock price.
Q: So you're satisfied?
A: Yes. Clearly there's a lot of growth ahead for the stock, but this is about execution, and we have executed on our business plan.
Q: Where are you in developing radios that consumers could use for either XM or Sirius?
A: The companies have worked together on an interoperable platform based on the government's desire to explore that technology. But it's several years away. It depends on manufacturers deciding whether this is a product they want to support and consumers deciding what price are they willing to pay for it.
Q: About half of your subscribers get XM when they buy a car, and the rest get it when they buy a radio from a consumer electronics store. Do you expect that mix to change?
A: The trend will be to have it become ubiquitous in cars. Right now General Motors and Honda make up a majority of our (automobile) business. Soon we'll have Toyota ramping up. And Hyundai will include it as standard in all their cars. So if you look at the growth of the automobile industry and the portion associated with XM, you can see it blossoming over time.
Q: Have you thought about lowering your subscription price in order to grow faster?
A: We actually increased the subscription price in February from $10 to $12.95 because we had made certain purchases of content and wanted to invest in content going forward. The real roadblock hasn't been the subscription price. It's been the hardware price. So we've been working hard to drive the price of the radios down. Our first radios in 2001 cost $300, and today we have them available for $49.
Q: How have consumers surprised you most?
A: What was surprising were the things that work on the talk and entertainment platforms. For example, our comedy channel is one of our most popular channels. And you say, "How come nobody ever thought of that before?"
Q: What keeps you up at night?
A: Everything keeps me up at night. Arrogance is the demise of any business, and you have to be very careful not to fall into that trap.
Q: You've been an outspoken advocate of corporate responsibility. When did that become so important to you?
A: It has always been part of my personality. Then also from my personal experience: When I was starting the company in 2001, my wife was diagnosed with leukemia. She eventually needed a stem cell transplant. And when you go through those moments — when you see someone like my wife show enormous courage, never complained and get through it — it tends to put some of the theater of life into context. What's really important is your family and health.
Q: What do you think about President Bush's views on stem cell research?
A: Clearly I have a disagreement with the president on that issue. My wife was saved because she needed an anonymous donor to have a stem cell transplant, and she found one in the National Marrow Donor Program. And if somebody had the same attitudes 10 years ago about stem cell research that some people have today, my wife would not be alive. People need to be more open-minded about it and talk to people about it rather than be ideologues.
http://www.usatoday.com/tech/products/services/2005-09-27-xm-chief-panero_x.htm
By David Lieberman, USA TODAY
If you doubt that entertainment can be a volatile business, consider what's happening at XM Satellite Radio. The company is sky-high now. On Tuesday — just four years after it introduced its satellite radio service — XM announced it has signed up its 5-millionth customer.
That's a substantial lead over rival Sirius Satellite Radio, which has 2.1 million. But this holiday season, which accounts for about 40% of the year's new satellite radio customers, Sirius will try to close that gap with a marketing blitz promoting popular radio shock jock Howard Stern. He'll join the Sirius roster on Jan. 2.
Meanwhile, Apple poses a potential threat to XM sales among car buyers, who account for about half of new satellite radio subscribers. Apple projects that nearly a third of next year's new cars will have connections into the car audio system for its iPods.
XM and Sirius are fighting back with portable satellite radios — including soon-to-be-released models that also can store music MP3 files.
At the center of these battles is XM Chief Executive Hugh Panero, 49. He sat with USA TODAY media reporter David Lieberman to discuss prospects for his company and satellite radio.
Among his thoughts:
Q: You have 5 million customers and expect 6 million by year's end. How high can you go?
2010 — some analysts say that satellite radio could be at 40 to 50 million by then — is really just a matter of us executing and expanding the places where satellite radio can go. We want to be everywhere.
Q: How willHoward Stern's move to Sirius affect XM?
A: He is a half-billion-dollar gamble on the part of my competitor. His announcement gets headlines, and what we're about is getting subscribers. Since the announcement that he's moving to our competitor, we have added 2 million subscribers. They come on because we offer the best sports, the best music and the best talk.
Q: Couldn't all the attention he'll get lead potential subscribers to focus on Sirius?
A: Our service is identified with Major League Baseball. Between 16% and 20% of people who have subscribed, when asked what piece of content made them choose XM, said "baseball." And we're going to find the same attributes when we introduce hockey in October.
But what people really love is music. We have 125 music directors dedicated to putting passion into our music channels. That's different than our competitor, who treats it more like FM. And advertising is not part of our music lineup.
Q: Lots of people get ad-free music on their iPods. What happens to satellite radio as automakers roll out models with plugs for iPods?
A: What the iPod offers is an individual, somewhat isolating, music experience. With XM you can listen to four or five channels covering the John Roberts hearings, or Fox News or a hurricane-relief concert. That is the kind of shared community experience that used to be a hallmark of radio and clearly of television — and that is unique to our service. And now we've added MP3 capabilities to our devices.
People who are very busy don't have two hours to sort through a lot of music. They want someone to be their concierge service, which is what XM does.
Q: Technology is always changing. Are you concerned that others might duplicate what you do and transmit it via cellphone networks or digital radio signals?
A: Other technologies will be out there trying to figure out how to make it work. And we will participate in some of those other platforms. We've been talking to all the cellphone providers about having a place there. We have a place on the Internet now.
And we have non-traditional ways of marketing our product. Starbucks is selling the first in a series of compilation CDs (this one features Tracy Chapman, Jewel and Jason Mraz) that are a joint production of XM and Starbucks' Hear Music label. And our joint Hear Music channel is playing in the stores. We're in AirTran Airways, JetBlue, Avis and Hyatt hotels. We're building a premiere entertainment company.
Q: Still, your stock has been relatively flat this year. Moody's said in a recent report that satellite radio "has yet to prove that it can sustain its business model." Is Wall Street missing something?
A: That cynical view is offset by the 30 or 40 other analysts who say that this service is here to stay. And that's reflected in our stock price.
Q: So you're satisfied?
A: Yes. Clearly there's a lot of growth ahead for the stock, but this is about execution, and we have executed on our business plan.
Q: Where are you in developing radios that consumers could use for either XM or Sirius?
A: The companies have worked together on an interoperable platform based on the government's desire to explore that technology. But it's several years away. It depends on manufacturers deciding whether this is a product they want to support and consumers deciding what price are they willing to pay for it.
Q: About half of your subscribers get XM when they buy a car, and the rest get it when they buy a radio from a consumer electronics store. Do you expect that mix to change?
A: The trend will be to have it become ubiquitous in cars. Right now General Motors and Honda make up a majority of our (automobile) business. Soon we'll have Toyota ramping up. And Hyundai will include it as standard in all their cars. So if you look at the growth of the automobile industry and the portion associated with XM, you can see it blossoming over time.
Q: Have you thought about lowering your subscription price in order to grow faster?
A: We actually increased the subscription price in February from $10 to $12.95 because we had made certain purchases of content and wanted to invest in content going forward. The real roadblock hasn't been the subscription price. It's been the hardware price. So we've been working hard to drive the price of the radios down. Our first radios in 2001 cost $300, and today we have them available for $49.
Q: How have consumers surprised you most?
A: What was surprising were the things that work on the talk and entertainment platforms. For example, our comedy channel is one of our most popular channels. And you say, "How come nobody ever thought of that before?"
Q: What keeps you up at night?
A: Everything keeps me up at night. Arrogance is the demise of any business, and you have to be very careful not to fall into that trap.
Q: You've been an outspoken advocate of corporate responsibility. When did that become so important to you?
A: It has always been part of my personality. Then also from my personal experience: When I was starting the company in 2001, my wife was diagnosed with leukemia. She eventually needed a stem cell transplant. And when you go through those moments — when you see someone like my wife show enormous courage, never complained and get through it — it tends to put some of the theater of life into context. What's really important is your family and health.
Q: What do you think about President Bush's views on stem cell research?
A: Clearly I have a disagreement with the president on that issue. My wife was saved because she needed an anonymous donor to have a stem cell transplant, and she found one in the National Marrow Donor Program. And if somebody had the same attitudes 10 years ago about stem cell research that some people have today, my wife would not be alive. People need to be more open-minded about it and talk to people about it rather than be ideologues.
http://www.usatoday.com/tech/products/services/2005-09-27-xm-chief-panero_x.htm
