XM Radio Case Analysis
Value Proposition Seamless radio coverage throughout the continental United States. A wide variety of radio programming to suit listeners from different backgrounds and with different listening interests. Target Market Both male and female tech friendly, frequent radio listeners. Age 25-40 years of age. Depending on payment options income may become important but more than likely it is not very relevant as to who the early adopters will be.
To initially gain a large market share it would be wise to price low initially for basic services. The option of offering cheap ($5/Month) or Free service and only charging for the initial receiver could help gain a large customer base. Although this is a problem because revenue would be based majorly on advertising. Charging customers for premium services ex: more channels or for certain programming is a way of retaining a large initial market share while creating more revenue generating channels.
Allowing advertising on XM channels creates advertising revenue but also creates a new problem. By allowing advertising, XM is not as distinguishable from FM radio which may give customers the (why am I paying for this attitude). This also addresses a competitive advantage that SIRUS may have over XM and may force customers away. The one advantage of allowing advertising is that it can lower subscription costs for XM users and allow XM to offer service cheaper than SIRUS. Basically it divides the customer base into those who don't care about price and only about programming (SIRUS) and those who prefer satellite radio over traditional radio but don't want to spend a lot of money for it (XM).
SIRUS appears to be ahead of XM in capital generated and is looking to gain a first to market advantage. SIRUS is implementing a business plan that will not allow advertising on its channels and will base its revenues mainly on consumer...
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