SHIFT: Sirius XM — what went wrong?

In the interest of full disclosure, let me start off by stating that I was a fan of satellite radio from Day One. After seeing what both had to offer, I even bought stock. Lots of stock. In both companies. That was back in 2002. I knew in my gut that within just a few years I'd be able to retire as a wealthy stockholder, sipping martinis in Martinique.

Guess what? I'm still here, working. Here's why. I won't even begin to tell you how much I lost on my investment. How did something that seemed like a slam-dunk success go so wrong? Follow the Continue link for my explanation.

Why Satellite Radio Failed
As of last month, Sirius and XM are now one: Sirius XM. What God has joined together, let no man tear asunder. Whatever. Why did the business get to the stage that merging was the only way to save both companies? Seems like a matter of lousy timing. Had the two services launched just a few years earlier than that — say, 1996 — they would have been epic. When terrestrial radio and CD were the only options, satellite radio would have had real appeal. Driving through the middle of Monument Valley listening to the latest music, beamed straight to your car — no static, no commercials and no dead-zones. Brilliant.

In reality, Sirius and XM launched in the middle of the MP3 revolution. Why listen to what someone else is playing when you can dump thousands of your own songs into a player or burn them to a disc that will play in the car. No monthly fees, no costly installation. Today, most car stereos have an AUX input for portable players, and the label of "iPod ready" is almost cliché. Even Bluetooth has hit the cars, so the playlist on your phone becomes the playlist in your car. But very few have built-in satellite radio receivers (while many are "satellite-radio-ready," that means you have to add a tuner with the hassle of installing it behind the dash).

The average consumer understands an iPod. They take it to the gym, they listen in the office, and they plug it into the car. Satellite radio tried to get into the portable market, but never quite got a foot in the door. The iPhone didn't help. Almost immediately after Apple introduced the iPhone 3G, 400,000 users downloaded the Pandora Internet Radio app, which does pretty much the same thing as a portable satellite radio, just for free. Merge or no, if something doesn't change, there are going to be five obsolete satellites floating around in space.

Sirius and XM, Post-Merger
Now that all the infighting between Sirius and XM is over ("We have NFL," "Well, we have MLB." "We have Howard," "We have Oprah"), what can be done to save satellite radio? Instead of concentrating on stealing customers away from each other, now they can concentrate on getting customers, period. Sirius XM is still advertising on radio and TV, but sporadically. It's the holiday buying season — they should be blitzing the airwaves right now.

Sirius XM now offers a lifetime subscription, but there are strings. First, it's expensive: $399 for the basic package. And the "Best of" packages cost $100 more. What's a "Best of" package? When the two companies merged, they blended their channel lineup for the most part. They share pop stations and rock stations, for example, but they kept some of their headliners separate. XM radios can add on "The Best of Sirius" to get Howard Stern, Martha Stewart, NASCAR and the NFL, and Sirius subscribers can add "The Best of XM" to get stations such as Oprah, NBA, NHL, and the PGA.

Also, these lifetime subscriptions are for the life of the radio, not your lifetime. Upgrade to a new radio, and you have to pay a $75 fee, and you can only swap three times. So folks who lease cars can forget it, and that's just off the top of my head. The lifetime subscriptions aren't a good strategy for saving the business. They need more subscribers, and they should do everything possible not to alienate the ones they have, which the messy merger has done.

Go to either the Sirius or XM website. They're confusing as hell. And their channel lineups are even more confusing. Sirius has a nice little chart on the bottom of their lineup, pointing you where to find similar music if your favorite Sirius station doesn't exist anymore. The combination does bring more of the exclusive channels to the mix — Bruce Springsteen, Jimmy Buffett, The Grateful Dead. But, ABBA radio? Really? All ABBA, all the time?

Memo to Sirius XM: Abandon Your Business Model
It's time to do something bold, and that means dropping the current subscriber-based business model. People have enough monthly fees, and the $13 per month always seemed steep for something that you can (technically) get free over the airwaves, especially as so many other avenues are available. The subscription model also makes satellite radio an awkward gift: Buy it for someone, and you've basically committed them to paying a monthly fee for an indefinite amount of time.

So what do you subscribers think? Would it kill you to hear a few well-chosen ads, maybe just at the top of the hour, to keep the channels that some of us really do love? How about a sponsored hour or two? The stations that have DJs can just say who's sponsoring it. The Spa channel, brought to you by Kashi. The Coffee House, sponsored by Dunkin' Donuts. "This hour of Hair Nation is brought to you by AquaNet." Would it kill off listeners? How about just flashing ad information on the display? Don't even play audio. Just flash "Drink More Ovaltine" on the display every few minutes.

A Satellite Radio Bailout?
Why is the government considering a bailout of the Big Three when they could be helping out a promising new industry? Ask anyone who does have satellite radio how they feel about it. Once you go extraterrestrial, you never go back. But apparently, love's not enough. They need money. Cold, heartless cash.