The Bridge Ratings Consumer Trend Report: Satellite Radio Q1 Subscriber Trending

 

Updated Wednesday January 31, 2007

Satellite Retail Off Pace with Q3 2006 - The Year's Softest Quarter

Bridge Ratings' trending of Satellite Radio subscribers continues through 2007. The purpose of this on-going study is to analyze consumer preferences related to satellite service brand and satellite radio in general.

Bridge Ratings interviews consumers at retail outlets who have purchased Satellite radio. Consumers are interviewed when entering audio departments to determine their purchase intent and then again post-purchase. By matching pre-purchase interest against actual purchase, we are able to determine: a) brand potency and b) brand awareness-to-purchase effectiveness, i.e. the brand's ability to convert awareness to purchase.

This Week's Update:

2006 ended with the satellite radio sector delivering an additional 4.5 million new subscribers for a composite total of 13.6 million for both companies. Though this was down from their original sector estimates of 15 million, the number marks a quite respectable 48% increase year over year. With Sirius off 200,000 and XM off an additional 1.4 million the year of growth for the satellite radio sector belonged to Sirius - at least from a numbers perspective.

The kick-start for Sirius was Howard Stern who officially joined the company on January 1, 2006, but nevertheless promoted Sirius for a full 12 months once Stern announced his deal on his terrestrial radio show in October 2004. Bridge Ratings' tracking of Sirius subscriptions from that moment on clearly reflected a turbo-injection of interest and awareness that was helped by Stern.

In January of 2005 Sirius reported 1 million subscribers. Stern announced his move to satellite in October of 2004. By January of 2006, Sirius subscribers had climbed to 3.3 million and to 6 million by January of 2007. Bridge Ratings estimates that between Stern's announced departure from terrestrial radio in October, 2004 and January 2007, Sirius added 5 million subscribers. however Stern was only directly responsible for 1.6 million or 32% of the increase.

Bridge Ratings estimates that 2.5 million of Howard Stern's terrestrial audience (20%) were Stern's most loyal listeners and that Stern has converted 52% of them (1.3 million) to join him. Bridge Ratings views the unconverted 48% of Howard Stern's core fan base as the prime group to pursue as they will be less costly to acquire than the 80% of Stern's terrestrial audience who were categorized as those who "listened occasionally" or "listened frequently".

Stern as a marketing pillar solidified the Sirius market position during 2006 and was instrumental in reversing both brand awareness and market share for the company.

We don't believe that retail sales ever equaled expectations for Q4 of 2006 despite the holiday season. The soft fourth quarter of 2006 has not only carried over into 2007, but January 2007 retail activity and interest is below that of Q3 2006 which Bridge Ratings noted in our year-end report was the softest quarter of the year for the sector. Again, it is worth noting that 83%-87% of the sector's shortfall in 2006 was due to XM's shortfall in additional subscriptions and this percentage held true in Q3 2006.

Some revised industry estimates put 2007 subscription gains for the two companies at between 5.3-5.6 million more subscribers bringing the industry total by year-end to approximately 19 million with first quarter gains coming in at around 1.1 million new subscribers. Based on Bridge Ratings January retail interviews and measurement of retail activity, Q1 2007 increases are projected at this time to be: Sirius: 440,000, XM 280,000 or 720,000 new subscribers for the first quarter of 2007. This compares to a sector total of 726,101 during Q3 of 2006.

Estimates of added subscribers are based on Bridge Ratings consumer interviews and projections. This chart will be updated on a monthly basis or as data is received.

 

"Brand Stimulation" Flattening - Part of the Problem

In September 2006 Bridge Ratings began conducting "brand stimulation" studies with potential satellite radio consumers. In initial results from this study, consumer interest in satellite radio had cooled considerably from earlier in 2006. A primary reason for softer 2006 sales can be attributed to the softening interest in the technology. From our interviews with consumers this slowing interest is due to three factors the mass radio audience considers important:

1. "What's in it for me?" - A clear and unique benefit - why do I need it?
2. How strong are the negative attributes of the current 'brand preference' - In the case of satellite radio, 'brand preference' refers to the emotional use attachment to and the comfort the consumer has with traditional radio.
3. The "level of demand" created by the degree of attractiveness of the brand's product line.

Bridge Ratings measures each of these first two attributes which generates a "level of demand" quotient that we can track over time. For satellite radio as an industry, brand and product interest has seen a significant downtrend in brand stimulation since April 2006. After a slight upsurge in interest during the last quarter of 2006, interest in satellite radio among all consumers is at its lowest point (see chart). This slowing "brand stimulation" is at the heart of the sector's marketing challenge which we don't see improving anytime soon unless new marketing strategies are introduced.

The Satellite Radio Consumer

Discover satellite radio consumer sample profiles. Click here.

 

Brand Awareness Tracking

2006 Year-end summaries:

"Can You Name a Satellite Radio Service?"
Wk Ending:
Jan 07
2006
2005
XM
39%
45%
50%
Sirius
61%
55%
50%

 

"Which Satellite Radio Service Did You Purchase Today?"
Wk Ending:
Jan 07
2006
2005
XM
35%
40%
52%
Sirius
65%
60%
48%

 

Full Year Satellite Radio Consumer Index: Branding vs. Purchase
 
Jan 07
2006
2005
XM
.90
.89
1.04
Sirius
1.07
1.09
.96

 

The above table measures strength of brand against actual retail purchase. An index above 1.00 indicates positive retail strength compared to brand awareness.


The Stern Effect

Bridge Ratings estimates that 2.5 million of Howard Stern's terrestrial audience (20%) were Stern's most loyal listeners and that Stern has converted 56% of them (1.3 million) to join him. Bridge Ratings views the unconverted 44% of Howard Stern's core fan base as the prime group to pursue as they will be less costly to acquire than the 80% of Stern's terrestrial audience who were categorized as those who "listened occasionally" or "listened frequently".

During interviews this month we have also discovered for the first time that a small percentage of former Stern-on-Sirius subscribers had reduced or ceased their listening of Stern's satellite radio program. While those Stern fans that are subscribing outnumber those who are listening less often or no longer at a 3 to 1 ratio, this is the first time we have seen this behavior. Results from our February interviews will indicate whether this is a sustained behavior.

Stern as a marketing pillar solidified the Sirius market position during 2006 and regardless of fewer Stern fans migrating to satellite, he has certainly stimulated market awareness of Sirius. The following chart represents Bridge Ratings' Stern-motivated subscriptions since October 2005. Bridge Ratings estimates that 43,200 additional Sirius retail subscriptions were activated due to Howard Stern during the month of January 2007 bringing his total subscriber level to 1.64 million.

 

Bridge Ratings will continue to release updates on our retail interviews through 2007.

*Based on interviews conducted at retail outlets between January 1 and January 28, 2007. Retail outlets vary by week but may include Best Buy, Circuit City, Sears, CompUSA, Target, Staples and Sam's Clubs stores.

Markets surveyed: Los Angeles, San Diego, Phoenix, Boston, Detroit, New York, Boston, Chicago, Dallas. 4000 listeners 18+ were surveyed during this week.

 


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