XM Satellite Radio Streams into Online Music

Adding the latest competitive twist to the online music space, XM Satellite Radio said it would launch an Internet version of its commercial-free radio service next month.

XM said it would offer a Web-only subscription to its satellite service for US$7.99 per month. Subscribers to its radio service, who pay $9.95 per month to get the programming beamed to their car or home radios, can add on the online version for an additional $3.99 per month.

To help draw interest to the launch, XM said it had struck a deal to give customers who buy certain Dell computers this fall a free 30-day trial offer to the service.

The service is hardly novel. XM’s main satellite competitor, Sirius Radio, already offers an online service as part of its basic $12.95 per month fee. Yahoo offers premium streaming radio content and there are scores of other streaming services, including offerings from RealNetworks and Live365 radio.

Investors welcomed the news, sending XM shares up by more than $1.50, or 5 percent, to $31 in morning trading Thursday.

Two Growing Fields

Analysts said XM is likely hoping its established programming base and base of some 2.1 million customers will help it stand out in the crowd. It broadcasts 68 commercial-free music stations and about a dozen news and talk-related streams.

In fact, some analysts believe the service will most likely the appeal, especially at first, to existing XM users who have grown accustomed to the range of commercial-free music channels as well as talk and news shows, some of which do include commercials.

Even if the online service only attracted satellite radio subscribers, it could become an important market player. Analyst firm InStat/MDR predicts the number of satellite radio subscribers will balloon from 4 million this year — almost evenly split between XM and Sirius — to 14 million by 2010.

Online Music Landscape

Where exactly streaming offerings will fit into the online music picture is not clear. Some analysts say it could bring a new breed of consumers into the fold by appealing to people who want the convenience of listening online but are not necessarily interested in finding, downloading and sorting out their own music choices.

One big potential competitor is RealNetworks’ RadioPass, which offers subscription access to scores of radio stations. RealNetworks counts about 550,000 subscribers to both RadioPass and Rhapsody, its unlimited-download service, according to Inside Digital Media senior analyst Phil Leigh.

Leigh said the real potential for music services to make money is when vendors develop technology that allows listeners immediately to buy a song they’re hearing on a radio broadcast, be it on CD or as a download. That would greatly streamline the download process by eliminating the need to search — or even to know a song or artist name from the outset.

“I don’t think XM has a lot to offer,” Leigh said. “They might bring some brand recognition, but there’s already a lot of choices for people who want this kind of service.”

Leigh said XM doens’t appear to have the same “granularity” that others, such as Musicmatch, already offer, such as the ability to select a favorite artist and hear random selections played.

“What people really want is to control what they’re listening to,” Leigh said. “This will be fine for background music, but there’s already a lot of choices for that.”

Try, Try Again

The launch comes a month after XM pulled its XM PCR, which enabled subscribers to use their PCs to tune into satellite broadcasts, from the market. That move reportedly came after it became widely known that the PCR, which was on the market for slightly more than a year, could become part of a setup that recorded the live music streams.

Jupiter analyst David Card noted that Yahoo’s purchase of Musicmatch this week also gives it access to that company’s online radio offerings. Jupiter predicts that, over time, subscription services, including streaming broadcasts, will become much more important to online music companies as revenue and profit generators than pay-per-song download offerings.

“The subscription model for online music is where the money will be made and the companies that get there first have a better chance of being winners,” Card told the E-Commerce Times.

In a recent interview with the E-Commerce Times, Musicmatch CEO Dennis Mudd said that company streams about 10 million hours of radio every month. “It’s a mistake to forget about radio,” he said at the time. “Streaming services will be important for the future; it will be one of the revenue streams that sustain the music industry.”

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