Sirius is still No. 2 to XM Satellite radio, but the lead is getting narrower. With Howard Stern now on board, working with his old boss Mel Karmazin and a renewed business plan, it is getting very interesting. Sirius has amassed over 3 million subscribers, 500K more than they projected, due mostly to the so-called “Stern Effect”.

Howard Stern, the self-proclaimed “King of All Media” debuts on Sirius on Jan. 9, on his own 24 hour station, Howard 100. Now let’s not forget Martha Stewart. The Martha Stewart Living Radio is Howard Stern’s new neighbor on Siruis radio channel 112, a 24 hour station of her own. Apparently, Karmazin knows more than a little about demographics.

Mr Karmazin ran Infinity Broadcasting that included Stern and K-ROCK back in the 1980’s. He later became the President and Chief Operating Officer of Viacom, the media conglomerate that includes CBS, UPN, MTV, BET, Comedy Central, Paramount and Showtime. He has a long track record of success as a radio and TV executive, also serving on the board of directors of Westwood One and Blockbuster. Karmazin left Viacom allegedly due to disagreements with CEO Sumner Redstone and is now the CEO of Sirius Satellite Radio, joining at the end of 2004. He has been busy re-organizing the Sirius lineup of on-air talent and making more deals with automakers.

This new found momentum has helped Sirius eat into XM’s market-leading position. In October, XM said it was on track to break 6 million-subscribers. XM will announce their latest subscriber numbers on January 4, 2006.

Neither XM nor Sirius is yet profitable, and an all-out marketing battle could cut into both companies’ plans for profitability. Satellite radio hardware is sold today for as little as $30, it might not be long before it’s made free with a subscription, as a possible strategy to attract listeners. If that happens, it would change the satellite’s business model and potential for profits. The talent they are signing like Stern, is already costing them millions and millions.

How long will satellite be able to be commercial-free? I am old enough to remember the cable TV promise to be commercial-free and now they not only have commercials in between programs but even having “pop-ups” taking up a good portion of the screen during programs!

There has been rumors of Sirius partnering with Apple’s iPod but nothing has been announced or really expected. XM is expected to announce a satellite radio player that, with collaboration with Napster music service, will allow users to bookmark songs they hear on the radio to buy later. XM already has a MyFi Portable XM radio receiver with recording features. Sirius offers the Xact rego that also records.

Telematics Research Group (TRG) estimate that 73 million cars worldwide will have iPod integration, including 28 million cars in the US. Making Apple’s iPod and iTunes Music Store a force that satellite radio will have to deal with.

Auxiliary inputs in cars (such as DVD) will expand even further with 150 million cars being so equipped by 2011. Of these, 60 million will be cars in the US. Bluetooth is another technology that is making its way onto cars rapidly. It is estimated that 8.5 million US cars will be Bluetooth-capable within 5 years. TRG also state that some 39 models from the major automobile companies now have some form of iPod integration, with BMW being the first. Apple has announced deals with Audi, Nissan, Volvo, Infiniti, Acura, Mercedes-Benz, Volkswagon, Mini-Cooper, Honda, Scion, and Ferrari. In Japan, Nissan, Mazda, Daihatsu, BMW, MINI, smart and Alfa Romeo deliver iPod integration with their car stereos for 2006 model lines making iPod car integration international. Something satellite radio lacks.

One reason the iPod has so far clobbered satellite, is satellite radio receiver’s dismal playback as a portable. Satellite radio is not a proven “take it anywhere” service. Even in many homes, satellite radio would need an outside antenna to operate decently. The MyFi Portable XM radio receiver and Sirius Xact rego with recording features helps so you can listen when you can not get a live broadcast. Which you will not get in many places indoors.

Neither XM or Sirius has CD quality sound. Both offer decent sounding MP3 type quality services. But it is the content that matters as always. With competition in the home from CDs, broadcast radio, cable TV, satellite TV, computers, and Internet radio, the auto is an important battleground. This is the place were satellite radio “shines”, allowing you to listen to one station coast to coast without commercials (at least for now). It is to be seen though if consumers will “pay” for radio in large numbers. So far, satellite radio is now heating up and off to a decent start.

I personally tested Sirius and XM side by side for three months in my home and in my car. I was given a three months subscription and a free Sirius radio at CES 2005 from Xact, so I could test the service and write about it. I borrowed an XM radio from a co-worker and listened to them on and off for three months during January 2005 into March. I found the reception in my home to be terrible (I live in the suburbs of NY). It was worst that using “rabbit-ears” on an old TV in the 50’s. Remember Ralph Kramden and Ed Norton? To have a good user experience, an antenna mounted on my roof would be needed.

Old fashioned “rabbit-ears” next to the new modern satellite radio ones.

Both XM and Sirius worked much better in my mini-van by just placing the magnetic antenna on my roof of my auto. The sound quality did not sound as good as my factory FM radio or my iPod which is connected with the Neo from MP3YourCar.com. But if you want the content and spend a lot of time driving, it is a good product and many have subscribed. I did not.

After my three month trial, I decided to depend on my iPod alone and not subscribe. Mostly due to the terrible reception satellite has as a portable and in my home. Moving the “so-called” portable was not as easy as the iPod. The business model of satellite radio allows you to subscribe per radio. If you want more than one radio, like one in your car and one in your home, you need to pay per radio (discounted rate after the first one at full price, up to four). They do offer streaming the content on the Internet for their subscribers. But with all the free Internet radio, without commercials, that exists this was not that important to me.

The content offered by XM and Sirius, when I tested them side by side, earlier in the year was similar and compelling. XM boasts over 150 stations and Sirius offers over 125. Both offered diverse music choices, sports, news, talk, comedy, entertainment, and traffic (for major cities). Both also offer exclusive content and special events. With Sirius now bringing in a power-house like Stern along with his big paycheck it will get interesting.

Sirius has announced plans for video broadcasts in mid 2006. Sirius has entered into a partnership with Microsoft to develop video programming based on Windows Media Video (WMV) 9.0 technology. The satellite radio company says it plans two or three channels, mostly devoted to children’s video programming. But imagine uncensored Stern on video? I can’t. But watching video on Sirius may put them on a collision course with services like Verizon VCAST, Sprint PCS, and Apple’s iPod that now plays videos.

Car integrations may soon have the rear entertainment system as a moving TV service for passengers. I imagine music videos instead of just audio in coming years. With EVDO eventually being incorporated in autos (Toyota has been playing with this for some time already) it will be a fun ride in years to come.

Both Siruis and XM charge $12.95 on a month to month basis, allowing up to four additional XM Radios to your account for only $6.99/month per radio for basic service. Both offers discounts for multiple year packages. You must buy the satellite radio hardware (some selling as little as $30) that are offered by several manufacturers. There are many different models to choose from for both XM and Sirius. There is no hardware that is compatible for both XM and Sirius at this time. You must buy the hardware to match the service you want. Maybe in the future that may change, but right now the business models seems to want the hardware “lock-in”.

With Napster, RealNetworks, and YahooMusic’s subscription model, I think they may be bigger competitors to satellite radio than the iPod is right now. Apple still does not offer a subscription service as there has not yet been sufficient evidence to suggest that the masses are more interested in “renting” music and seem to prefer to “own” their music with Apple dominating the marketplace. I am sure if that changes Apple will offer a subscription service. I recommend using Griffin’s iFill $19.99 Mac/Windows, or StreamRipperX freeware OS X only, if you have an iPod. This will record your favorite Internet radio stations for use on your iPod. This is nice way to fill our iPod with great content without paying for subscriptions.

If you are looking for a way to record XM and SIRIUS satellite broadcasts including music, talk, news, sports, comedy and more. Check out TimeTrax. Content is stored on your hard drive as individual MP3s and can be easily synced to your iPod or other MP3 player.

New Digital Broadcast AM/FM radios are arriving offering many features that satellite radio offers and the “free” digital broadcast AM/FM is adapting to the new threats from satellite radio. Satellite radio may have some real competition to worry about as analog FM already sounds better than satellite radio. HD will only make FM sound even better. HD created by iBiquity, is the digital system that the U.S. government has approved for broadcasts of local AM and FM radio stations — no subscription fee is required. You may not be aware of it, but a number of your local stations have already begun to broadcast a HD signal, in addition to the analog signal you’ve been listening to for years. HD Radioâ„¢ technology is transforming today’s analog AM/FM radio to digital, enabling radically upgraded sound and new wireless data services. Along with better quality sound it offers, LCD screens with song titles, artists, news, weather, sports scores, and traffic reports.

New HD car radio

It may be high mountain to climb for satellite radio to get mass appeal and mass profits. But do not discount innovation and great content. The marketplace, as always will vote with their wallets.

See: How Satellite Radio Works

See: HD Radio Technology

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