Satellite Radio's New Ride

While more and more carmakers are offering up either XM Satellite Radio (NASDAQ:XMSR) or Sirius Satellite Radio (NASDAQ:SIRI) receivers on new cars as factory-installed upgrades, South Korea's Hyundai will be rolling out its 2006 models later this year with XM as a standard feature. Like a lighter or a pair of wiper blades, satellite radio has become as permanent a fixture as a hood ornament.

Auto manufacturers have been the primary marketing source in landing many of the 4 million-plus satellite radio subscribers. Because adults tend to listen to radio mostly during their commutes, XM and Sirius naturally devoted a lot of energy early in their life cycles to carve out exclusive deals with the car companies.

Their reach has expanded since then, from auto-rental agencies to JetBlue (NASDAQ:JBLU) in-flight entertainment to hotel suites, but the brilliance of satellite radio has come not so much from its distribution efforts as for its content acquisition.

XM and Sirius each offer more than 60 channels of commercial-free digital-quality music, and although that's often enough to win over subscribers paying $12.95 a month, the emphasis has been on exclusive content to wean the public off traditional AM and FM radio.

Hyundai's equipping its stateside cars with XM is an interesting move. It should bring XM 500,000 new listeners every year if they all stick around. But although a car buyer won't be forced to activate the account (or continue it after a free trial), it poses a potentially lucrative quandary. What if you want a Hyundai Sonata but you're a fan of Howard Stern (who will come to Sirius next year), NPR, or the NFL? Do you bite the bullet, activate XM in your car, and buy a portable Sirius model as well?

Satellite radio is still cheap enough that subscribing to both offerings will cost a fraction of what your cable or satellite television bill ran you last month. As analysts carve up a pie in allocating market share -- like XM with General Motors (NYSE:GM) and Sirius with Ford (NYSE:F) -- are they missing out on the possibility that there may be some overlap in those slices?

You can see why XM and Sirius are often pitted against one another. They're the country's only two licensed satellite radio providers, and for now, deciding on one often means forgoing the other. Yet as each service begins to differentiate itself in the same way that premium movie channels like HBO and Showtime did when they took to original programming, isn't it just a matter of time before it will become desirable to roll with both XM and Sirius, in the same way it makes sense to pay for more than one movie channel? In a few years, the most popular satellite radio receivers may very well be universal models that can tune into both XM and Sirius. Yes, XM scored a great deal with Hyundai, but it may be an even greater catalyst to the eventual duality of the satellite radio subscriber.

Tune into some of these other revved-up yet related stories:

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• 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.