It feels like a critical time for music listening right now. Free streaming services like Pandora and Last.fm are poised to take off, but they're hampered by slow rollout, customer confusion, and the fact that labels like Warner are totally freaked out by free streaming and yanking their music from them.
On the other hand, terrestrial radio is virtually unlistenable, due to its crowd-pleasing format of two songs, then a 30-minute commercial block that's cleverly timed with every other station's 30-minute commercial block. Add to that the constant repetition of the same five songs and radio becomes, as a tool for music discovery, a mind-numbing exercise in tuning out (if you'll pardon the pun).
Enter satellite radio.
The Sirius/XM upstart has been on its deathbed for a few years now, but it's starting to creep out of near bankruptcy and its shares are into the $1 range. (Don't laugh, a year ago it was something like 12 cents.) It's hanging on by a thread and I think that, with a few key moves and a shift in strategy, now's the perfect time for satellite to sneak in and make a splash.
But let's be clear: there's not a lot of time. Pandora, delivered wirelessly via Bluetooth, is rocketing into car stereos and will be an integral part of the upcoming Ford MyTouch system and the next generation of Ford Sync. And millions of us are streaming Pandora online at work and on our phones either in the car or at the gym or walking down the street. If satellite is going to make a move, it's got to be now.
The biggest obstacle right now? Price. I just finished a 6-month trial of satellite radio in my car. At the end of the trial, I was totally hooked on several stations and absolutely devoted to the idea of commercial-free listening. I'd purchased a ton of music that I discovered on various stations. Now, sure, I use an auxiliary jack in the car to plug in my phone or music player, but it's annoying and dangerous to, say, switch playlists on the phone interface, or plug it in while driving if I forget to before I leave. And I like looking at the radio dash to see what song is playing. My Sirius trial was, for me, a total winner. But when the time came to re-up and become a paying subscriber, I didn't do it. Why not? Like I said, price.
Subscription prices went up dramatically after the Sirius/XM merger, and they are now at deal-breaking levels. Period. The standard package Sirius pitched me is $12 a month, preferably payable annually, and that does not include Internet streaming. There's an a la carte package that starts at $6.99 that requires a new stereo and also doesn't include Internet streaming. The various packages are ridiculously complex and the whole thing just feels like a confusing, overpriced mess--because it is.
Recently on Buzz Out Loud, we talked about streaming radio versus satellite, and here's an example of the e-mail we got about satellite's pricing.
"I'm a current Sirius subscriber and I absolutely hate the rates. Last year, I signed up for a year of service for about 90 dollars. My subscription renewed on Monday, at a rate of about 110 for the year. This includes a $12 charge for US Music Royalty Fee, a fee that satellite and internet based radio stations are forced to pay by the FCC yet terrestrial radio stations aren't required to pay yet. (They are currently fighting this fee). On top of finding this fee extremely obnoxious, I am essentially paying $12 per year for music that I have no physical copy of, ugh!
On top of this, Sirius/XM is the biggest nickel-and-dime company I can imagine. If i wanted to listen to streaming online, that's an extra $3 a month. O, you want to be able to listen to Sirius on your Blackberry or iPhone, well that's another $3 a month on top of the $110 fee. And then on top of that; if you want to listen to Sirius and XM you have to make sure you purchase not only the special plan but a dual receiver. And the worst thing about it is; when you purchase your subscription online, you have to use a credit card. Unless you call them, as there is no option online, you will be automatically renewed and charged for another year membership."
Guys. That's just ridiculous. Here's another, similar complaint about XM Radio.
"Out of the blue, XM Radio no longer allows subscribers to stream stations on a computer without paying for a premium account. First they cut the 64 bit audio to 32 bit and added a premium subscription of 128 bit audio for $3.00 a month. I called and canceled my subscription for two radios today over this. I imagine there won't be satellite radio at all for much longer."
Ok, so, start with price cuts, but don't end there. First, make the a la carte option the only option, and include Internet and mobile streaming. I'm sure it sounds terrifyingly low, but trust me, guys: for the convenience, the discovery, and the streaming, I'd happily pay seven bucks a month. Or, ok, I'll allow two plans -- a basic and a premium, and the premium includes ... nah, never mind. One plan. Seven bucks.
Next, you've got to change the way you try to get your customers. Get off the hardware crack and start selling satellite as an embedded service. Right now, when I go to the XM Radio or Sirius home page, I see devices. When I click the shop link on either site, I see an array of portable devices and car stereos. That's got to stop. No one's looking for another thing to carry right now.
First step: flip the script and start selling commercial-free radio stations and Internet and mobile streaming. Once you've got them paying for those subscriptions, people might buy receivers and new car stereos, but sell them the subscriptions first on the devices they already have. Almost every new car has satellite capability built in, and if you've got universal apps for mobile streaming, you're done, you're selling subs like hotcakes.
Next up, start using the Netflix model--don't try to sell extra devices, just be in every device. Netflix streaming is in Blu-ray players, TVs, game consoles, TiVo, heck, even the Sony Dash. Satellite should be, too, whether it's an actual receiver or just satellite radio streaming. Be everywhere with a trial that can turn into a subscription and, above all, make sure those subscriptions are cheap enough to be easily justifiable. Under $10 a month, I can swallow. Over $10? I'm out, and I'm not the only one.
Oh, and also, can't you build in some kind of broadcast buffer to stop the service from cutting out when I go under an underpass? Because that is annoying.
Look, satellite radio is a good product, Stern notwithstanding. (The terrestrials can have him.) The music discovery, the lack of commercials, the integration with existing car stereos: all of that is killer. And the opportunity for Internet and mobile streaming is satellite's totally unexploited and potentially game-changing opportunity. Innovate or die, Sirius/XM. I think you've still got a chance to innovate. And I hope you do, because I really like that Coffeehouse station.