Xm Radio Case Study

SWOT Analysis:

The bad news is XM radio has not decided on a business model, a marketing strategy, pricing, how to approach radio manufacturers, their customer base, or whether or not to allow advertising….and needs $1 Billion in up front capital. In addition, XM’s main competitor, SIRIUS, is ahead of XM in planning, financing, technology, and brand awareness. That is also part of the good news as well; XM has the opportunity to pick holes in SIRIUS model and programming mix, and tailor their business model/marketing campaign accordingly to maximize profitability. Also good news is that the satellite air space was being restricted to these 2 players, 160 million listeners were potentially interested in the new XM service, yearly advertising revenues were estimated at $13 Billion for 1997, and the programming, quality, and availability were clearly advantages over FM/AM radio stations.

Company Strategy:

Knowing that we need a $1 Billion in up front capital, we would recommend that XM, like SIRIUS, also issue an IPO to raise funds. As indicated in our XM template, monthly revenues through subscriptions are estimated in the $100’s of millions of dollars, $100’s million more can be obtained through the sell of hardware and advertising ($23.55 average revenue per customer.) This leads to a strong business case to help cultivate faith from the investment community and also allow us to have access to approximately half of the $1 Billion we need (based on the $446 Million SIRIUS raised through their IPO).

Phase I and immediate attention and discussions should occur with the manufacture’s Pioneer, Sony, and Alpine to produce the radios and distribute through retailers. We understand that 3 manufactures may be hard to manage but feel that it is more important to accelerate the speed of adoption to that of SIRIUS, help offset some of the design and manufacturing costs, generate healthy competition, help with brand familiarity, and most...