Sirius Satellite Radio, Inc.

SITUATION ANALYSIS
COMPANY BACKGROUND
SIRIUS Satellite Radio was incorporated on May 17, 1990 as Satellite CD Radio Inc. On November 18th 1999 the company changed their name to SIRIUS Satellite Radio Inc, which is the name under which the FCC license to distribute satellite radio was given to. SIRIUS Satellite radio currently offers over 100 of music, news, sports, talk, entertainment, traffic, weather, and children’s programming to subscribers throughout the United States.
Their primary source of revenue is through subscription fees, with most of their customers subscribing to SIRIUS Satellite Radio on either a monthly or a yearly basis. They also derive revenue from activation fees, advertising sales on non-music channels and the direct sale of SIRIUS radios, which are currently sold in over 6,500 retail locations around the nation. As of December 31, 2004, SIRIUS has had over 1.2 million subscribers and 375 employees.

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MARKETS
The overall market for Sirius is any consumer that listens to the radio. The target market that Sirius is aiming for is the 100 million automobiles currently on the road today. Sirius only has to gain a small portion of this market to become a profitable company.

COMPETITION
Sirius faces competition for both listeners and advertising dollars. In addition to pre-recorded entertainment purchased or paying in cars, homes and using portable players, Sirius competes most directly with the following providers of radio or other audio services:
XM Radio. Sirius’s direct competitor in satellite radio service is XM Radio, the only other FCC licensee for satellite radio service in the United States. XM Radio broadcasts certain programming that we do not offer. XM Radio service is also offered as an option on various car model brands, certain of which do not also offer SIRIUS radios.
Traditional AM/FM Radio. Sirius’s competition also includes traditional AM/FM radio. Unlike SIRIUS radio, traditional AM/FM radio has had a well established market for its services for many years and generally offers free broadcast reception paid for by commercial advertising rather than by a subscription fee. Also, many radio stations offer information programming of a local nature, such as local news and sports, which Sirius does not offer as effectively as local radio. Some radio stations also have begun reducing the number of commercials per hour, expanding the range of music played on the air and experimenting with new formats in order to compete more directly with satellite radio services.
Internet Radio and Downloading Devices. Internet radio broadcasts have no geographic limitations and can provide listeners with radio programming from around the country and the world. Although Sirius believes that the current sound quality of Internet radio is below standard and may vary depending on factors that can distort or interrupt the broadcast, such as network traffic, Sirius expects that improvements from higher bandwidths, faster modems and wider programming selections may make Internet radio a more significant competitor in the future.
Direct Broadcast Satellite and Cable Audio. A number of companies provide specialized audio services through either direct broadcast satellite or cable audio systems. These services are targeted to fixed locations, mostly in-home. The radio service offered by direct broadcast satellite and cable audio is often included as part of a package of digital services with video service, and video customers therefore generally do not pay an additional monthly charge for the audio service.

PRODUCTS
Sirius’s music channels offer nearly every genre in music from heavy metal and hip-hop to country, dance, jazz, Latin and classical. Each of their 65 music channels is programmed and hosted by a team of experts in their field, including musical performers and other unique personalities. Sirius’s programming is dynamic, fluid and changes from time to time.
In addition to their music channels, Sirius currently offers over 55 channels of news, sports, talk, entertainment, traffic and weather programming, most of which includes commercial advertising. Sirius continuously evaluates their news, sports, talk, entertainment, traffic and weather programming, and regularly implements changes designed to improve and enhance their service. Live play-by-play sports is an important part of Their programming strategy. Sirius is the Official Satellite Radio Partner of the NFL, with exclusive rights to use the NFL shield logo and collective NFL team trademarks.

CHANNELS
Sirius’s primary emphasis is on the retail channel, specifically electronics, car and home audio, specialty, and department stores. The company sells plug-n-play receivers which are portable units that have the capability of being used in a house, car, boat, pretty much anywhere you have access to a base unit for it whether it be an FM modulated in car base or a home stereo unit base or even a standalone boom box. Sirius also sells standalone home audio receivers and in dash car receivers.

A secondary channel of sales for Sirius is through car manufacturers. This is expected to become one of Sirius’s largest channels in the coming years. Sirius has contracts with many auto manufacturers including Ford, Daimler-Chrysler, and BMW among others who have elected to off Sirius as a dealer installed option in some models or as a stander feature in others which is coupled with a trial subscription pack that varies from one manufacturer to another.

Sirius also currently uses the internet as another secondary sales channel. Sirius offers direct sales from their website at http://www.sirius.com/ where you can buy a receiver and subscription directly from Sirius and have it shipped to your doorstep.


ENVIRONMENT
Economic Considerations. Sirius service is still young and growing. Currently sales are on the rise and subscriber numbers look good. The company is vulnerable to economic change though. Since Sirius’s income is based on a subscription model and satellite radio is seen as a convince rather than a necessity in a time of economic hardship Sirius could suffer greatly.

Demographic Considerations. Sirius’s target audience is any average consumer, specifically any consumer with a motor vehicle. There are around 100 Million motor vehicles on the road today. The satellite radio industry has only been able to infiltrate around 4.5 Million of them so far. With this huge target market and the word about this new technology spreading there is still room for huge growth.

Social and Cultural Considerations. The amount of social and cultural diversification within Sirius’s target market is huge. To take advantage of this, Sirius offers programming across the board to appeal to any listener. From rap and top 40 hits genre’s to the all Elvis channel and easy listening Sirius has covered everyone’s musical wants and needs. Also with talk radio you can find anything from Sirius Left and Sirius Right political talk stations to Maxim radio for the guys and even Disney Radio for the kids.

Political and Legal Consideration. As an operator of a privately owned satellite system, Sirius is regulated by the FCC under the Communications Act of 1934. The FCC is the government agency with primary authority in the United States over satellite radio communications. Any assignment or transfer of control of our FCC license must be approved by the FCC. Sirius currently must comply with regulation by the FCC principally with respect to: the licensing of their satellite system; preventing interference with or to other users of radio frequencies; and compliance with FCC rules established specifically for U.S. satellites and satellite radio services.

PREVIOUS RESULTS
Sales of Sirius Satellite Radio service are rising. Sirius has not seen a peak in subscriber additions and does not expect to peak until 2010 expecting large growth until that time.

Subscribers:
Metrics:
SWOT and Issue Analysis
Strengths. SIRIUS offers its subscribers exclusive privileges to NHL, NBA and since last year, NFL events. Besides regular season games, this includes pre and post season games, playoff games, and both home and visiting team broadcasts. SIRIUS has contracts with the National Football Association naming them the Official Satellite Radio of the NFL. Similarly, SIRIUS is also the Official Satellite Radio of the NHL’s Stanley Cup Playoffs. Sirius also has contracts with NASCAR taking it from rival XM in 2007 and with Howard Stern who will leave Viacom to start with Sirius January 1, 2006.

Weaknesses. Currently, SIRIUS’ insurance policy covers the company for $110 million per satellite. If a satellite should fail, this payout only covers the launch of their fourth back up satellite, buying another satellite would come out of the company’s pocket. In addition, SIRIUS mentioned decreasing their insurance policy over the next few years. In my opinion, the satellites are SIRIUS’ is the axis of their entire business. They should at least cover the launch of their backup satellite as well as the cost of a new satellite. They may even want to go as far as covering themselves for the 6 months it would take to launch their backup satellite when their system’s performance would be under 100%.

Opportunities. SIRIUS is currently beginning to offer service to Canada and has started to add program content to begin service to Mexico eventually as well. As the base platform has already been put into place, the nature of SIRIUS’ satellite systems allows it to be expanded fairly easily. This gives the company the opportunity to go into virtually any country in the world and set up shop. This will open up the customer base significantly.

Threats. XM Radio: XM Radio is SIRIUS’ largest competitor in all aspects of their business, including retail and automotive distribution arrangements, programming acquisitions and technology. Also, every subscriber that XM signs on is a potential customer lost for SIRIUS. As of September 30, 2004, XM Satellite Radio’s customer base two times larger than SIRIUS’. Because of this added subscriber-given revenue, XM Satellite Radio is in a better financial position to deal with any financial difficulties (i.e. satellite failure, high programming content costs). XM also offers their service for $9.99/month compared to SIRIUS’ $12.95/month.
Satellite Failure: Should a satellite fail, it would take at least 6 months to get the backup satellite launched into orbit. If two satellites should fail, it could take the company up to 24 months to get another satellite, and get both the back up and the new satellite into orbit and have the network running again. In this 6 month to 2-year period, SIRIUS would face a severe loss of customers, decreased customer confidence in their dependability, and hundreds of millions of dollars worth of costs to get their system back into order. Something of this magnitude could very much run the company into bankruptcy.

Obsolete Service: Both the satellite industry and the audio entertainment industry are characterized by rapid technological changes and frequent new product innovation. If SIRIUS is unable to evolve with these changes in a way that customers require and expect, the business could very well fail. Satellite radio is a very new service. Who knows how long it will be the latest in audio technology, and how long customers demand it before the next best thing comes on the market?
Mission and Objectives
Sirius is changing the way America listens to music, sports, news, and entertainment. Sirius wants to provide quality, premium entertainment to everyone.

MARKETING OBJECTIVES
To increase the number of outlet where Sirius is being sold by 50% over the next 2 years.

To introduce a new product, streaming video, through its satellite radio service within the next 12 months.

To gain approval to and begin to sell Sirius satellite radio in Canada under the Brand name Sirius Canada.

SALES OBJECTIVES
To increase total number of subscribers to 15 million by 2010.

To maintain sales growth over the next year regardless of the world economy.

To reach the breakeven point and begin to make a profit.

TARGET MARKETS AND POSITIONING
Sirius is using a target market strategy to focus on selected consumer and auto maker segments. Sirius has segmented the consumer market based on lifestyle, hobbies, interests, and beliefs.

Consumer Segments. Sirius is marketing to everyone. Sirius has gained exclusive contracts with most major sporting organizations. Sirius also has the only national gay and lesbian talk channel available on radio. To top it all off Sirius offers a music selection that anyone would enjoy and in 2006 will have the top radio entertainer joining their lineup, shock jock Howard Stern.

Organizational Segments. To reach targeted consumers Sirius uses retail outlets across the country and has contracts with many major auto manufacturers to factory install Sirius into new autos. Sirius’s plans to get maximum exposure through this segment increasing brand awareness and subscriber numbers.

PRODUCT STRATEGIES
Sirius has realized that not all consumers are alike there for they offer a diverse selection of receivers. Currently there are four different types of SIRIUS radios: Plug and Play Radios, FM Modulated Radios, Three Band Radios and Home and commercial units. The radios are manufactured by several well known names including Kenwood, JVC, Clarion, Audiovox and the Brix Streamer (for Trucks). At the moment, SIRIUS radios can be bought at RadioShack and through EchoStar’s Dish Network. From 2004 onward, the radios will be available at more than 20,000 retail locations nationwide in order to offer maximum exposure.

PRICING STRATEGIES
Sirius offers pricing structures for everyone. Sirius offers monthly service plans at a flat rate of 12.95 per month and cheaper rates on additional receivers on the same account. Also Sirius offers cheaper rates for a 1 year subscription and on a lifetime of the receiver.

CONTROLS
Sirius will use several tools to evaluate and control activities implemented under this marketing plan. First Sirius will use monthly trend analyses to examine sales by channel, type of reseller, and by geographical area. This information will be used to make changes in advertising revenue where needed.

Second, Sirius will use consumer feedback as a means of quality control. Customer feedback will be monitored for any potential problem areas, If any are discovered this information will be used for future changes.

Third, Sirius will conduct a marketing audit in midyear and again at year’s end to evaluate the effectiveness and efficiency of the marketing programs. In this way, Sirius will be able to pinpoint areas for improvement and prepare a contingency plan for emerging problems.

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