Thursday, April 7, 2016

Sirius XM versus Pandora

If you can stream music ad-free and DJ-free in any car or at home, why would you sign up for Sirius XM?

I wrote before about Sirius XM and their horrific business model based on the "negative option" billing system.  They offer you a come-on price of $5 a month for six months, and after that, it goes up to $17.99 a month, automatically billed to your credit card, unless you disconnect from the service.   And this is service for one device only - one car, or a device in your home (which would require installing an external antenna).

The service has its drawbacks.  Go into a tunnel or even under a tree, and the music stops.   And between songs on many channels, an obnoxious "DJ" talks and talks and even talks over the songs.  Gee, AM radio, circa 1970.  Fun stuff.

Pandora offers music with no DJ's, anywhere you have cell service or WiFi.   If you use the service for free, there are occasional advertisements (about 15 seconds in length, every 2-3 songs).  If you are willing to watch a 30-second video, you can "earn" an hour of commercial-free music.  If you are willing to pay $5 a month, you can listen commercial-free.  Ironically, this is about what Sirius XM charges per month with their "promotional" pricing.

But wait, it gets better.  You can select channels and even create your own channel.  By liking or disliking a song or artist, the system uses an algorithm to "learn" your preferences.   In contrast, XM radio will play "Brown-Eyed Girl" on the oldies channel until your ears bleed.   The "same old oldies" again and again.  What's not to like?
1.  Shitty billing practices.

2.  Limited number of channels.

3.  Annoying DJ's who think you want to hear them talk over the music.

4.  Ads, on some channels.

5.  Lost signal, whenever there is a tree, overpass, or tunnel.

6.  Limited to one car or device.
 The latter is the real deal-killer.   With Sirius XM, you have to pay for each car or radio you own.   With Pandora, you can link to your car via bluetooth or even a simple 1/8" photo jack, and play music in any vehicle, stereo, radio, or device (including a bluetooth speaker).

So the question remains, how long can Sirius XM stay in business?   Once you have a smart phone, the need for XM radio evaporates pretty quickly.   And that, in a nutshell, is why they are relying on "negative option" billing - the hallmark of a failing industry.  AOL used it when they were going down the tubes.  Other companies with monthly fees also rely on this to generate income.  A lot of people, it seems, fail to check their credit card statements, and just let bills go on and on for months.
Hell, when we closed out my Mother-In-Law's estate, we were shocked to find she was still paying AOL for monthly Internet service, even though she was on DSL from the local phone company.

Eventually, Sirius XM will run out of subscribers as more and more people move to Internet streaming of music.   Already, the market has shaken out with the two competing Satellite radio companies merging in near-bankruptcy.   Eventually, car companies will find it less compelling to install Satellite radios in their cars (and Sirius will run out of money to subsidize this installation).  Satellites run out of fuel and crash back into the atmosphere.  Launching new ones costs millions.  They need to find a "next big thing" for their service, or die.

And you know what?  I for one won't be sorry to see them go.  They really screwed the pooch with negative option billing and come-on pricing.  When you antagonize your own customer base from the get-go, all you end up doing is forcing them to search for "what's next".

And what's next comes through your cell phone, not from some satellite.

So who else will be edged out through wireless?   It may take a while, but I think DSL, Cable Modem, and even fiber-to-home will become obsolete in short order.  If you can stream video through your phone and play it on your television by mirroring - or tether your laptop or PC to your phone, using it as a "WiFi hotspot" the need for a modem and router becomes, well, superfluous.

That $60 a month spent on fiber-to-pole can buy unlimited data on your phone.   

Wires, it seems, are a thing of the past.

UPDATE:  A reader writes:

But what XM has that Pandora doesn't is the MLB, NFL, NBA contracts for radio,  Howard Stern (if you're into him, I'm not),  as well as a ton of other radio personalities, sports personalities, etc that don't have a home on terrestrial radio... as well as news outlets like CNBC radio....     that's what keeps a lot of people subscribed in my opinion..    there's no other way for me to listen to my local Royals MLB team or Chiefs in the car if i'm out of the area without my xm.

This is all true.  Sports fans are what keeps XM going, as well as Cable television, at least for now.

But once sports events are available to stream online?

Oh, wait, they already are....

There is no compelling content on XM that can't be had by streaming, I think - or will be available to stream in the near future.   There is no technical reason why such content can't be streamed.

The cost of maintaining the satellite network is the deal-killer.  It is like Iridium satellite phone.  The cost of launching all those low-earth orbit satellites was bad enough, but by the time the system was up and running, you could make a cell call from nearly anywhere on the earth.   They went bankrupt and the satellites nearly fell from the sky before the government stepped in and found a bidder.  Turns out, the government is the biggest customer for Iridium.  (it is how all those weather buoys send their data these days, among other things).

So, short-term, yes sports will help them.  Maybe Howard Stern, although there was talk they were going to let his contract expire as it was so expensive.   And of course, you can stream Howard Stern on Soundcloud:

XM is going to die, I think - at least as we know it.   Sirius does have an "app" for the smart phone, so you can stream XM on your phone.   I think they realize that saying "get a horse!" isn't going to stop people from buying automobiles, so they are getting on the streaming bandwagon as well.

It could be the company survives - as an online streaming service.

Every new cell tower built is a nail in the coffin of Sirius XM radio.