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Old 10-25-2004, 06:06 AM   #1
testforecho
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Default WSJ: Liftoff for Satellite Radio

The WSJ is reporting the following in their 'Eyes on the Road' section:

"Liftoff for Satellite Radio
Auto Makers Look to Offer Technology
As a Way to Stand Out in the Market
October 25, 2004

Last week I faced a dilemma. I had to drive most of the way from Detroit to New York City -- but I also had to listen to the seventh game of the American League Championship series between the Boston Red Sox and the New York Yankees. Fortunately, I had arranged to borrow a 2005 Jeep Grand Cherokee from DaimlerChrysler for a review. The Jeep was equipped with the Sirius Satellite Radio service, and one of the dozens of channels was ESPN's broadcast of the game. For nearly four hours, I drove across the wilds of western and central Pennsylvania, and I heard it all -- from Johnny Damon's first home run to the Yankee Stadium crowd taunting Pedro Martinez with the "Who's Your Daddy?" chant to the final out.

Somewhere around Clarion, Pa., it hit me that the play by play had not faded into static during a crucial at-bat. I hadn't had to stab frantically at a tuner button to scour the airwaves for an AM sports station. I began to think, "Maybe this satellite radio isn't such a crazy idea." In fact, after a slow and uncertain start, satellite radio appears ready to take off -- and the auto industry is a big reason why.


Howard Stern's announcement3 that he plans to move his act to Sirius starting in 2006 got a lot of attention, as did, in different circles, XM Satellite Radio's hiring of former National Public Radio morning host Bob Edwards. Major League Baseball last week announced a deal to give XM the rights to broadcast games during the 2005 season.

These are significant steps for the nascent satellite radio services. But the big driver behind satellite radio's robust growth forecasts is the growing enthusiasm for it among car makers, which see the technology as a fresh way to stand out from the crowd. Steve Black at SkyWaves Research, an independent research firm, says that by the end of the decade, his company projects the number of satellite radio service subscribers will reach 40 million, a ten-fold increase from the 4 million subscribers seen by the end of this year. Of those roughly 4 million, about 3.2 million are with XM Radio, and just over 900,000 are with rival Sirius. "It's arrived right now," Mr. Black says of satellite radio.

General Motors and Honda have led the way in using factory-installed satellite radio as a way to stand out from competition. GM, which owns an 8% stake in XM, was the first auto maker to offer satellite radio as a factory option in 2001 and now plans to offer XM on more than 50 of its 2005 models.

Honda, which is much smaller than GM, owns a 9% stake in XM and has also been increasingly bold about using satellite radio to set its new models apart. Honda's 2005 Acura RL model features XM Radio and a real-time traffic-information service that feeds information about traffic delays from an XM satellite into the map displayed on the car's navigation system. Satellite radio can potentially be "a pipe to every car in the U.S.," says XM Radio spokesman Chance Patterson. Radio programming, he says, is just the beginning. Traffic is the next frontier, with other information or entertainment services possibly following.

Now, Chrysler and Ford, which had moved more slowly to push Sirius radio receivers into their vehicles, are accelerating plans to offer the service as a factory-installed option. Some other brands are offering consumers a choice between XM and Sirius.



Satellite radio operates on a different business model than AM or FM radio -- this is radio you pay for as you would cable television. Currently XM charges $9.95 a month and Sirius charges $12.95 a month. In return, you get more than 100 channels of programming, much of it commercial-free. With either service, for example, a country-music fan can dial in a channel that features classic country -- Johnny Cash and Hank Williams -- or a different channel for modern country stars like Toby Keith. Don't ask why, but I have come to enjoy the all-comedy channels on satellite-radio-equipped cars I have test-driven lately. I would never buy a comedy CD, but listening to Bill Cosby or Jeff Foxworthy on the radio can be just the medicine required after a long day.

Mr. Black at SkyWaves says satellite radio has moved out of its early-adopter phase and reached the point where it's about to be fully accepted in the mass market. A major push to tip satellite radio into the mainstream could come from Toyota, the No. 4 manufacturer in the U.S. car market. Toyota currently offers XM Radio as a dealer-installed option. If Toyota decides to follow its rivals and push satellite radio as a factory feature -- the way to generate real volume -- it probably won't be very long before satellite radio becomes a commonplace feature.

Of course, not everyone wants to pay $10 or $12 a month for a service that used to be free. But they said that about cable television at one point, too. The satellite-radio companies are pushing hard to broaden demand for their services, rolling out new receivers designed for home use or to be carried from home to car and back. On Tuesday, XM plans a major new-product announcement in conjunction with Delphi, the big automotive-radio maker. Speculation is that product will be a portable satellite-radio device comparable to a Walkman or iPod. (Mr. Patterson wouldn't comment in advance of the event.)

Still, satellite radio is a reminder that few industries can reach as many consumers as rapidly as the car business. Car makers have a history of missing market trends and coming late to parties that others have started. But when auto makers finally move, they can have enormous influence over the growth and acceptance of new technology.

"Without GM," says XM's Mr. Patterson, "satellite radio probably doesn't exist today.""
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Old 10-25-2004, 06:10 AM   #2
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