8 Million Ears Ago

What do you make of XM Satellite Radio's (Nasdaq: XMSR  ) announcement yesterday that it landed its 4 millionth subscriber last week? That places the popular satellite radio service on track to close out the year with 5.5 million accounts. In a recent Motley Fool interview, CEO Hugh Panero projected that "XM could have well over 20 million subscribers by 2010," and the favorable trends don't seem to suggest that this optimism is misguided.

For those who may have wondered if the company could continue to gain new listeners after last month's 30% price hike to $12.95 a month, XM has signed up just over 200,000 new listeners since the end of March.

The battle with Sirius (Nasdaq: SIRI  ) will no doubt continue to intensify now that both services are offered at the same price point and the war has moved away from exclusive deals with car manufacturers to the retail battleground. This past quarter, XM revealed that 60% of the quarter's new customers were aftermarket subscribers.

With XM and Sirius each offering more than 60 commercial-free digital channels and the country's growing fascination with digital music sparked by Apple Computer's (Nasdaq: AAPL  ) iPod, we're falling in love with music again. Not necessarily the music that terrestrial radio is pumping out these days but our music. Satellite radio's ability to dedicate entire channels to niche genres and the even more customized streaming experience available online are starting to redefine the music industry.

But if you think that would also be music to the ears of the major record labels, think again. When Warner Music Group (NYSE: WMG  ) went public earlier this month, hoping to be priced as high as $24 a share, it was ultimately marked down to an offering price of just $17 a stub. That was apparently still too high; the stock closed yesterday at a rather downbeat $15.23.

So what's the problem? If we are starting to rekindle our crush on music, shouldn't Warner be flying as high as one of XM's satellites? Not really. The major labels rely on hit CDs that sell millions, not the niche artists who carve out a cozy living by touring and selling a small number of discs. That's the way music seems to be heading in the digital age. If you're XM, Sirius, Apple, or any of the unlimited music subscription service providers like Napster (Nasdaq: NAPS  ) or RealNetworks (Nasdaq: RNWK  ) , this is your time to sing. If not, well, there's always American Idol.

Tune into some of these other related stories:

• David Gardner recently interviewed XM CEO Hugh Panero.
• Maybe traditional radio won't die without a fight.
• Talk shop with sharp Fools who know the sector well in the XM discussion board.

Longtime Fool contributor Rick Munarriz thinks it's cool that Sirius broadcasts The Motley Fool Radio Show four times over the weekend. He does not own shares in any of the companies mentioned in this story. He is a satellite radio subscriber.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.