Don't tell me that Howard Stern and vacation clubs that specialize in multimillion-dollar homes have nothing in common.
Just as XM Satellite Radio
Ultimate Resort and Private Escapes, the two biggest operators behind Steve Case's Exclusive Resorts, are working toward completing their own merger. The companies were hoping to seal the deal by the end of last year, but a recent Halogen Guides report has the close slated for next month.
Industry-altering mergers take time, but there is a big difference between what is happening in satellite radio and what is taking place in the high-end vacation club industry. Just as XM and Sirius appear to be asleep at the wheel in landing new retail customers, Ultimate Resort and Private Escapes have been pulling out all the stops to make sure they make it to the altar with as many respective members as possible.
Destination clubs aren't cheap. Membership deposits start in tens -- and typically hundreds -- of thousands of dollars. They make conventional timeshare fees look like petty change. The difference is that destination clubs feature ample availability in lavish multimillion-dollar properties at beaches, ski resorts, golf courses, and metropolitan hotspots. Destination club members typically get most -- if not all -- of their initial deposits back if they rescind their memberships.
No time for a brain freeze
Are Ultimate Resort and Private Escapes sitting still until they are officially wed? No way. They are promoting their respective clubs aggressively. They are sweetening the pot. Ultimate Resort recently offered seven free nights during the first year to new signups, while Private Escapes offered a private Caribbean yacht getaway.
Those are some big carrots, especially compared to how XM and Sirius appear to be neglecting the retail channels that seemed so important a couple of years ago. XM and Sirius are growing nicely, but mostly as a result of automaker installation deals that were inked ages ago. XM and Sirius are slashing their marketing budgets, much to the market's delight, but wouldn't it be better to spend more to grow quicker?
Your gut instinct is to say nay. I even see you shaking your head. This past year found companies like XM, Sirius, and TiVo
It's a sober strategy. It's even a smart strategy in some cases. However, it's not the winning approach in a highly competitive industry.
Remember Netflix
It has apparently worked, with Netflix closing in on new highs as Blockbuster hits new lows.
The fallacy of prudence
XM and Sirius are now presiding over 17.3 million subscribers, but the majority are tethered to whatever service is provided by the maker of their car. There aren't too many portable satellite receivers being snapped up at the consumer electronics superstore these days.
That's a problem because automakers are being pressured to add hard drives, iPod jacks, and HD radios in future models. The better market would be retail, where consumers are making a more conscious commitment.
Either way, both XM and Sirius should be growing their bases as quickly as possible, regardless of whether regulators ultimately approve or nix the deal. If the merger goes through, the company with the most momentum will likely have the most clout in the boardroom.
More importantly, if the deal falls apart, XM and Sirius will be back at each other's jugulars. The companies will regret not being more aggressive over the past year, given the challenging future that awaits them both.
I'm not watching these deals from afar. As a radio junkie I've been a subscriber to both XM and Sirius for years. I am also a giddy member of the Private Escapes destination club. I welcome the consolidation on both fronts, but I'm shocked to see one merger bending over backward to load up its subscriber rolls as it heads to the finish line while XM and Sirius appear to be backward over bending.
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