David and Tom Gardner recently interviewed XM Satellite Radio(Nasdaq: XMSR) President and CEO Hugh Panero on The Motley Fool Radio Show  on NPR. XM reached 1 million subscribers last month, and its stock has gone from $2 to $22 in the past year. This is the first of three parts.

TMF: Hugh, your company just announced third-quarter earnings. You reported a loss of about $130 million despite increasing revenue fivefold year over year to $27 million. You are spending a lot of money. Obviously it is an expensive business to get started. When do you break even, or could you ever run out of money?

Panero: Well, right now our guidance is that we break even at the end of 2004. Obviously with a business like this, which is similar to an EchoStar Communications(Nasdaq: DISH) where you have large capital outlays and building infrastructure, then what you do is you grow the business and you build the subscribers rapidly, which is what we have demonstrated we can do. And we drive down the cost of adding the next subscriber.

TMF: Sounds good to me. Hugh, let me ask you, obviously some Motley Fool Radio Show listeners are satellite radio fans and have it, but many people are still learning about this technology. So what am I looking at in terms of the total cost to me to become an XM customer? That means the subscription, equipment, installation, and any fees. How much to get XM installed in my 1978 Ford(NYSE: F) LTD?

Panero: 1978 Ford LTD; OK, let me think about that. (Laughter.) The Blue Book value on that car is... Basically what it would cost is that we have products that range in price now from $49 to $300. The $49 device is a PC adapter. So let's just focus on your car. You could get a Roady for $120, which works in your car. You could get a SKYFi for $169 that would work in your car, in your home and in your boom box. Figuring installation, with the Roady you could basically do the installation yourself. With the SKYFi it really just depends on how much of the installation you want to be hidden away. So let's say it is $75 or $50. The price of the service is $10 a month. There you are. You are happy, you drive away, you get activated and you are now in the new world of satellite radio.

TMF: How is XM most effectively acquiring new customers? This is a new technology; these are new brand names that you are introducing to a lot of listeners. Is it the technology that is being embedded in new cars that people are buying or is there an effective way that you are direct marketing or reaching new potential clients?

Panero: Well, it is a combination of both. One thing about the satellite television business is it spearheaded the use of consumer electronics retailers like Best Buy(NYSE: BBY) and Circuit City(NYSE: CC) to sell these kinds of services... cell phones and other devices. So we basically have a large portion of our retail subscribers generated from these major retailers. Wal-Mart(NYSE: WMT) is also selling the devices. Then we have another say 40% or 50% of our base that comes from sales where people are going into GM(NYSE: GM) or Honda(NYSE: HMC) dealers and buying a car and getting exposed to the device there, and then signing up.

TMF: When do you believe this technology will be installed in all new cars?

Panero: I think it is a couple of years out. Right now we are represented on 75% of the General Motors model line. It is in about 43 different models. Not every car that comes out of the factory has it installed but we believe that over the next four or five years you could see this as part of the audio system in a car like you see a CD player or a cassette deck or anything like that.

Tomorrow: Why pay a monthly fee for radio?