Mixed Market For US Satellite Radio

XM has a target of 1.7 million to 2.1 million net additional subscribers for the year, which means that it needs an additional 515,000 to 915,000 in Q4 in order to achieve this figure. Thomas Eagan, an analyst at Oppenheimer, said that it is possible that the low end of the target could be achieved by the station.

In contrast to the XM subscriber figures, Sirius announced an additional 441,000 subscribers in Q3, beating predictions from both Wall Street and Oppenheimer. Eagan said that if Sirius continues to attract subscribers at its current rate, the company will carry on gaining retail market share from XM. It now has 5.12 million subscribers.

The second half of the year is forecast to show good growth for Sirius, with the confirmation of its new Catholic channel and the forthcoming start of NASCAR contributing to positive subscriber growth.

However, David Rehr, president and chief executive officer of the American National Association of Broadcasters (NAB) said that satellite radio’s figure of 12 million subscribers is dwarfed by the 260 million listeners tuning in to local radio each week.

Perhaps more controversially, Rehr also said that Sirius counts as customers some 500,000 “subscribers” derived from “empty cars that sit in dealer parking lots.”

The number of satellite radio subscribers in the US is expected to increase from a predicted 14.1 million in 2006 to 35.6 million in 2010, according to research from industry analyst Frost & Sullivan (see In-Car Media And Satellite Radio To Take Off In US).

In February, XM signed TV talk show superstar Oprah Winfrey in a 3-year, $55 million deal, following on from the signing of controversial DJ Howard Stern by Sirius in a five year deal worth an estimated $500 million. Data released at the end of September put the number of listeners to the Howard Stern show at around 5 million.

As well as Oprah, XM has also signed musical legend Bob Dylan as a DJ, and his weekly hour-long music show began broadcasting in March.

Advertisers are starting to move more of their budgets over to satellite and internet radio, although it is not expected to overtake traditional network buys anytime soon.

It is estimated that a third of national radio advertisers have doubled their spending on internet and satellite radio over the past year, with the medium now receiving 10% of the radio budget.

Thanks to new programming such as Oprah & Friends, XM advertising sales are reported to have exceeded $30 million, up from $20 million for all of 2005. Sirius meanwhile had booked $22 million in advertising by the end of July 2006, compared to $6 million for the full year 2005.

“We’ll never replace network radio, but we’ve reached a critical mass that has great appeal to national advertisers,” said D. Scott Karnedy, senior vp of sales and marketing solutions at XM.