November 22, 2005 10:48 AM PST

Study: 55 million satellite radios by 2010

The U.S. market for digital satellite radio will increase at a compound annual growth rate of 35 percent, pushing up the installed base of receiving devices to 55 million units in 2010, from the current 12 million, according to a Jupiter Research study released Tuesday.

Twenty-three percent of the online consumers Jupiter Research interviewed expressed interest in the service, but only a quarter of them presently have a satellite radio. XM leads the nascent market for nationwide pay radio, with more than double the number of subscribers at rival Sirius Satellite Radio.

But the satellite radio companies may also face stiff competition from other forms of portable music. "The primary challenges for Sirius and XM are price and competition with other portable media players and music services, such as iPods and iTunes, respectively," David Schatsky, senior vice president of research at Jupiter Research, said in a statement.

The growth will also depend on how the satellite radio service providers transform themselves. To spur the growth, they'll have to move beyond the automobile segment and integrate satellite radio into other devices such as cell phones.

Integration with these other devices could also provide the opportunity to offer Internet streaming service to both current and new customers, using fast wireless networks, the study said.

At present, approximately two-thirds of satellite receivers sold by XM and Sirius are transportable devices such as plug and play and handheld units. The rest are in-car units. By 2010, the share of transportable devices will be 60 percent. In-car radios, on the other hand, will grow at a slower rate, and their numbers will go up to only 6.9 million units from 2.5 million in 2005.

"The signing of big deals such as Howard Stern and Major League Baseball, has raised the stakes for XM Satellite and Sirius, even beyond the initial capital outlays for satellites and subsidized hardware," Schatsky said.

But such high-profile deals are not without downsides. XM, for instance, had to suffer a wider net loss in the third quarter of 2005 due to escalating programming costs.

 

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