Descending on the Dial: Radio Competition Comes to the Car

July 30, 2007 — -- Satellite radio rules the road, but competition is coming to the car.

Sirius Satellite Radio may soon be adding video to its service before the end of the year, but the satellite radio retail market wasn't a pretty picture in May, the most recent month for which sales numbers were available.

Aftermarket units, as tracked by NPD's retail tracking service, were down annually nearly 22 percent after nearly a 6 percent annual gain in May 2006, and the continually falling prices of dedicated XM and Sirius receivers translated into an even bigger annual revenue drop of 36 percent.

The decline has been part of a trend for the satellite radio aftermarket, which soared during the 2005 holiday season as Howard Stern prepared to go to Sirius and gave away receivers in New York's Union Square, but which has cooled significantly since the middle of 2006.

It's hardly all doom and gloom for moving tunes and talk through the troposphere, though. The numbers for June, to be released later this week, could show improvement. June has historically been a strong month for the product as satellite radio has shown strong Father's Day gift appeal and freshly graduated male teenagers look to pimp their rides with mobile media.

And it's important to note the receiver aftermarket does not tell the whole story of satellite radio, which is relying more than ever on subscriptions from factory-installed units. More aftermarket in-dash CD and DVD players also come satellite-ready, although these have been slow markets as well.

Still, the receiver recession would support XM and Sirius' argument that the two companies should be allowed to merge, as steady decreases in the cost of receivers don't seem to be spurring consumers to sign up at retail. The companies have argued that competition is coming from HD Radio as well as MP3 players.

HD Radio, which provides better audio quality and more stations to today's radio broadcasters, is free and ad supported. However, it is usually only included on very expensive car radios, in part because there are no competitors that can subsidize the cost of receivers with a subscription like cell phone carriers do.