Just a month ago when XM and Sirius were ready to ink a deal, they knew there would be problems with the FCC approving what could potentially become a monopoly. They’re still fighting that battle, but so far what has come out of it is a promise of lower prices.
They’ve promised lawmakers who are fighting the deal that prices would be lowered and that no monopoly would come of it should a merge take place. Currently the monthly price for service is $12.95. After the merge, customers would be offered a lower monthly price, but with fewer channels. They’d also offer a more expensive option that would include more channels. Essentially there would be different tiers of service and pricing.
XM and Sirius really haven’t come across smooth water yet, especially with the recent lawsuit they are both facing for patent infringement. Keystone Autonics filed the lawsuit saying that both XM and Sirius are using technology that is protected under a patent that they filed just this year in January of 2007.
For now, XM and Sirius are left to battle it out with lawmakers over the merger that would save them an estimated $7 billion per year, as well as a judge over patent infringement. Not a good start to 2007 for satellite radio!
Source: Rueters via [Yahoo]
If you charge less but give a lesser service in return, did you really “lower prices”? Not in my opinion.
That are playing the same game the cable companies did in the late 1990’s. The cable companies told congress that they were going to lower prices so there was no need for government regulations. What they did was lower the price by a couple of dollars the first year but they removed about a dozen of channels from the lineup. If you wanted the those channels then you had to pay around $5.00 additional each month. Effectively, consumer were change more money for the same service.
I hope what Sirius/XM is proposing is multiple price points which would make sense. One-size-fits-all isn’t exactly the best marketing strategy.
I wonder if they are planning on removing sport programming from the “lowered” price tier. That would put them on par with satellite television and cable providers. I would like satellite radio but I’m not willing to pay $13/month for it. If removing sports programming would lower the price to somewhere around $8.00 /month I might subscribe.
I was going to leave a comment, but CoryC said it all. OK, I will say a little something. If the cheaper price removes access to the most popular channels, then in the end, this will end up costing subscribers even more. But I guess we will have to wait and see what these new channel lineups include. Ditto on the cable company comment.
I am a huge fan of Satellite radio and have a Sirius subscription in each of my vehicles…I would hate for a merger of this sort to become a negative impact and cause me to return to crappy old terrestrial radio.
Just thinking over it again, fewer channels could also mean that they’ll just eliminate the duplicate types of channels between the two different services. For example, there are several “pop” channels for both Sirius and XM– and I’d imagine they’ll cut back some of the same types of channels?? Hopefully this would be the case. If they remove popular channels, they’ll definitely run into problems.
I think they will only have two packages, one with the music stations and one with the sports. After all, by combining the two services they will essentially have every sport covered and such a premium selection like that will definitely cost more money. Since some users don’t want to pay for the sports XM will likely lower the cost a little, probably to $9 or so, and then charge something like $9 for sports. That way they will make money off of people who only want sports, who only want music, or they’ll make even more money off of people who want both. Then if you get both they’ll probably take a few bucks off so that the whole package is only $15, so people will feel like they are getting a deal but they are really paying more.
Ashley did make a good point about them just eliminating the duplicate channels which is something I could also see them doing. I think my first guess will be pretty accurate though because it sounds reasonable.