Saturday, January 10, 2015

Is Sirius XM in a death spiral?

I recently had the experience of being at a diner for an extended period, during which time the satellite radio provider Sirius XM was playing. What struck me was the surprising quantity of advertisements that played in between songs--advertisements for Sirius XM subscription services and various highlighted stations.

The concept of satellite radio is simple: businesses (and to a lesser extent individual customers) pay Sirius to provide ad-free radio. Needless to say, the more advertisements Sirius interjects into its stream, the less valuable the subscription service becomes relative to the free + advertising radio models out there. If Sirius XM is introducing ads hoping to lure new customers, they run the risk of alienating existing customers on the margin.

In the worst-case scenario, this process edges into a 'death spiral', where the loss of existing customers forces Sirius to include more ads to cover the revenue losses.

No comments:

Post a Comment