SIRIUS Has Long Road Ahead in 2005

PERSPECTIVE After beginning the year with a little over 1.6 million listeners, satellite radio saw explosive growth in 2004 ending the year with over 4 million subscribers. Thanks to the signing of shock jock Howard Stern, satellite radio will come into the mainstream during 2005.

At CES 2005, I found the differences among providers SIRIUS and XM to be somewhat stunning.

SIRIUS' announcement of a video service mirrored a similar announcement at last year's CES, and showed a new "portable" unit to be released this spring (although, SIRIUS uses the term "portable" quite loosely for its device). It almost seemed as if the service wasn't well prepared for the show. It is also unfortunate that the tech media failed to report the fact that news of the video service was simply rehashed.

XM, on the other hand, not only announced a similar video service, but also unveiled two new portable players that are actually wearable and a plug-and-play unit, which can essentially turn any compatible audio system into a satellite radio. The advantage here clearly went to XM.

SIRIUS did quite well boosting its subscriber numbers in the fourth quarter, but that's not the point of CES. The Consumer Electronics Show is about showing off the latest consumer eletronics gadgets and technology - not financials.

However, not everything was all roses at the Las Vegas show for either company. I was bothered by some of the sophomoric actions from people on both sides of the table. Tech blog Engadget, clearly biased in favor of SIRIUS, took the opportunity at XM's press conference to ridicule XM CEO Hugh Panero.

I am not sure where Engadget's motives lay, but at least to myself and many others who were at the show, it was a lousy attempt to garner publicity and embarrass the XM CEO publicly. And in the end, Engadget only hurt themselves, while also managing to make SIRIUS look bad.

Then, the next day at a SIRIUS press conference, a group of XM supporters stood at the back of the room and heckled company officials, actually interrupting the conference at one point. I understand that Engadget's actions the day before were a low blow, but to lower the bar even further instead of taking the high road was the wrong thing to do.

In any case, the pressure is on SIRIUS and new CEO Mel Karmazin to show results in 2005; XM's subscriber numbers are currently triple that of its competitor.

Howard Stern will also likely play a major role in whether SIRIUS can remain viable. There is a lot of disagreement among industry analysts if Stern will be able to offset his huge cost by bringing in new members to the service. We will know by the fall if XM made the right -- or wrong -- move by passing on Stern.

When all is said and done, both XM and SIRIUS have a lot of opportunity this year, as satellite radio continues to expand. My bet: Satellite radio will close out 2005 nearing 8 or 9 million subscribers.