Growing consumer interest, low churn, new programming and exclusive automotive agreements are projected to boost satellite radio subscriptions to 46.8 mil. and revenue to $7.6 bil. by 2014, according to a new report from Kagan Research.
Satellite Radio Outlook 2005 projects continued success for the two major players, but expects they will soon face increased competitive pressure from emerging technologies.
According to Michael Buckley, Kagan analyst, “As wireless technology expands and access to free music Web sites and on-demand services increases, satellite radio will lose potential customers to alternative sources in the battle for consumers’ attention.”
Strong automotive partnerships offer some protection from competitive challenges, and Kagan estimates that by 2014, approximately 75% of new subscribers will come from the OEM connection. Commitments by GM, Ford and Chrysler suggest a favorable long-term outlook, and Satellite Radio Outlook 2005 offers a detailed look at these partnerships. Industry statistics and projections related to automotive OEMs provide insights on:
Ford’s renewed commitment to Sirius and its effect on Sirius’ competitive position;
The impact of Hyundai’s decision to factory-install XM radios in 100% of its new vehicles; and
Toyota’s split of the post-production market between XM and Sirius and its effect on new subscriptions.
Kagan also reports on last year’s blockbuster programming deals, analyzing their economics and their impact on expected cash flow breakeven points. The study identifies certain unique underlying features of the industry’s business model that enables it to absorb these rich content agreements and benefit quickly once cash flow breakeven is achieved.
Kagan estimates XM will achieve positive cash flow by Q3 2007.
Sirius, with its second-mover disadvantage and higher programming expenses, is not expected to generate positive cash flow until 2008.
Once positive cash flow is achieved, Kagan forecasts a steady increase in EBITDA for both companies, with XM topping $2 bil. and Sirius reaching $1.4 bil. in 2014.
In addition to 10-year industry forecasts for subscriber growth and profitability, Satellite Radio Outlook 2005 provides an in-depth analysis of future advertising revenues, estimating $27.9 mil. in total net ad revenue in 2005, rising to $854.4 mil. by 2014.
Satellite Radio Outlook 2005 analyzes the industry’s two competitors, their subscriber growth rates, ad revenues, profitability projections, programming strategies, automotive and retail partnerships, future product developments and competition.
