If satellite radio is going to be the next big subscriber model winner, that movement is going to have to come from those sitting behind the wheel. Just as couch potatoes have fueled the cable networks and satellite dish industries, satellite radio will succeed or fail on the whims of the driver's seat potato.
So, cool. Sirius (NASDAQ:SIRI) announced that 10 different Ford (NYSE:F) 2004 models are rolling out of the assembly line ready for some Sirius business. Earlier this month rival, XM Satellite Radio (NASDAQ:XMSR) announced that its service would be available on a few new Honda (NYSE:HMC) models.
While this isn't exactly news -- the two satellite radio upstarts had established these relationships with auto makers years ago -- the fact that this is the time of year that the 2004 models start hitting the showrooms is significant.
But this isn't going to be the lay-up that many once envisioned. While a satellite television provider will practically give away its hardware and subsidize installation because it knows that the real money is made on monthly subscriptions, the satellite radio companies can't afford those kinds of markups. Charging between $10 and $13 a month for roughly 100 different channels of radio-broadcasted content, the two players aren't in a financial position where absorbing the costly component expenses is feasible.
Sure, you can get that new Sirius radio in your Ford Mustang or Mercury Mountaineer, but it's going to cost you. While the dealer-installed model will come with certain operating functionalities built into the car itself, its suggested retail price of $329 plus installation won't win over too many converts who are used to deep hardware discounts on most subscription products like cell phones and satellite television.
So, yes, it's great that auto makers pitching new car smells and attractive financing terms will be marketing these satellite services, but it's not going to be substantially cheaper or different than just hooking one up in the aftermarket through such retailers as Best Buy (NYSE:BBY) or Circuit City (NYSE:CC).
Poor Sirius. Not only is it well behind market leader XM (with nearly seven times as many paying users) and in a sector ripe with cash flow concerns, but, like a Ford Expedition on a hilly dirt road trek, it's apparently going to be a bumpy, uphill ride for Sirius.
Are you a subscriber to Sirius or XM? When do you think the companies will turn a profit? How big can the potential market be? All this and more -- in the XM Satellite Radio discussion board . Only on Fool.com.
