Shareholders had to wait a long time for the urge to merge at Sirius XM Radio (Nasdaq: SIRI) to be fulfilled. Is there now an urge to MiRGE?
Sirius XM is introducing MiRGE this morning, the first interoperable satellite radio receiver. When it officially rolls out in a few months, owners will be able to easily switch between XM and Sirius services.
Don't be fooled by existing subscription plans that offer select content from both services for $4 more than the regular $12.99 monthly offering. The old receivers will never get all of Sirius and XM, as the tightened compression would degrade the audio quality.
If consumers want all of Sirius and all of XM, this is the $250 receiver they will need to get. $19.99 is what they will have to pay a month. Do the math and you can see how important the MiRGE will be for Sirius XM, especially given its model of high fixed overhead costs but low variable expenses.
One can always argue that Sirius should have unleashed MiRGE before axing over a dozen music channels in November. Since so many of the music channels are now redundant on both services, the $20 monthly price point may be a bit steep. However, that's about the only drawback to the MiRGE.
Ideally, the new receiver will get satellite radio selling again at the retail level. Sirius XM is a staple at consumer electronics and discount department stores. Its own press release points out that the receivers are sold through Best Buy (NYSE: BBY), RadioShack (NYSE: RSH), Target (NYSE: TGT), and Wal-Mart (NYSE: WMT). However, it's been a couple of years since they were actively promoted in the aftermarket realm. When is the last time you picked up a Sunday circular and saw any of these chains pitching a Sirius or XM receiver on the front page? MiRGE can change things, because the retailer no longer needs to educate the consumer on the thinning differences between Sirius and XM. Shoppers can pick up MiRGE receivers and come to their own conclusions about keeping one or both services active.
Interoperable radios will also be a refreshing option down the line for car manufacturers. Sirius XM has deals in place with all of the major car manufacturers, but only about half of new car buyers keep paying for Sirius or XM after their free trials run out. Most automakers are tethered to just one brand. Ford (NYSE: F) is Sirius, for instance. General Motors (NYSE: GM) is XM. Presented with a choice of two services from the same receiver, I can definitely see conversion rates improving.
Satellite radio needs this, now more than ever with its shares trading for Chiclets.
Copyright © 2008 Universal Press Syndicate.
Merger and Rates at Sirius XM
In response to Scott P who has 4 subscriptions and is complaining about the new service at $19.99....
Existing customers have not seen their rates increase as agreed in the merger conditions. The Mirage subscription is new, not an increase to new subscribers. The Mirage subscription is to go with the new product. Current owners of either XM or Sirius radio hardware are asked when subscribing, which overall content they prefer (XM? or Sirius?) and no matter which radio you have, your subscription will receive your preferred content.
So, no foul done here my little friend. Your rate does not change. I also suspect that should you purchase this new hardware, you may still be able to keep your current programming subscription rate; unless of course you choose to have the combined content of Mirage.
Of course you can always opt to fix your subscription costs with a lifetime membership. With that, you will benefit from enhancements in program changes w/o paying any additional costs. Your rate will never change as you've paid only once and will never pay again.
So please stop whining and have some cheese!