If XM Satellite Radio (NASDAQ:XMSR) is supposed to be the top dog in the next broadcasting revolution, why does it always seem to be chasing the tail of Sirius Satellite Radio (NASDAQ:SIRI)? This week's announced subscription hike by XM -- in essence matching Sirius at $12.95 -- is not the first time that XM has copied Sirius' dance moves.
When Sirius countered XM's sponsor-friendly music channels with a batch of commercial-free options, XM eventually followed suit. Sirius has been letting subscribers tune into the company's online musical programming for free, and come April, XM will too. Sirius has always insisted that when Howard Stern moves to its digital airwaves in January the show will be part of its basic subscription service, and now XM is making its shock jock High Voltage premium offering part of its basic package.
While Sirius has also been caught peeking at XM's playbook -- it matched XM's offer of $6.99 a month for additional receiver subscriptions -- the real point here is that these two companies have to stop dolling themselves up as identical twins.
When did differentiation get dissed? While each company has aligned itself with a fleet of car companies such as Ford (NYSE:F) and General Motors (NYSE:GM) -- creating a situation where your new car decision will likely dictate the satellite radio service you ultimately roll with -- there is an aftermarket war worth fighting, and it's not going to be much of a battle if both sides are wearing the same uniform colors.
XM was smart to allow existing subscribers -- including those who sign up this month -- to lock into lower prepaid rates. That will clearly help keep the provider's churn rate low by giving current subscribers a good reason to stick around. Yet what will XM do to attract new users come April?
It doesn't have Viacom's (NYSE:VIA) former golden child Mel Karmazin programming for it. It won't have Stern's loyal minions come 2006. It won't even have NASCAR come 2007 as Sirius found a way to pry that away from XM.
Yes, Sirius had just 1.1 million subscribers when the year began. That's a far cry when compared to the audience of 3.2 million that XM is commanding. Yet that is also why it is disappointing to see XM aping a competitor that has not been as successful in winning over new listeners. In fact, by pricing itself into an apples-to-apples comparison, XM is setting itself up for a humbling experience. Sirius may be smaller, but it has acquired a more prolific core of content offerings in recent months, especially in sports.
XM has more than a few selling points of its own, and that's why dressing up as Sirius is such a stupid thing to do. Both companies already have too much overlap in their programming. Differentiation will be the key to not only set themselves apart but also to eventually encourage radio fans to subscribe to both services.
So XM, do us all a favor and be original next time. You can't be a Rule Breaker rock star -- as many have come to believe -- if you're playing in cover bands your whole life.
Turn the knob to check out some of these other related stories:
- Ask yourself if Sirius is a Rule Breaker.
- XM was coming off such a strong quarter, too.
- 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.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.
