The Bridge Ratings Consumer Trend Report: Satellite Radio Q4 Subscriber Trending - Year End


Updated Wednesday December 27, 2006

Satellite Retail Not Keeping Pace with Holiday Shopping Trends

Bridge Ratings' trending of Satellite Radio subscribers continues through 2006. The purpose of this on-going study is to analyze consumer preferences related to satellite service brand and satellite radio in general. This report represents an overall view of the sector based on our year-long interviews.

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.

Year-end Update:

1. All retail, including satellite radio, did not live up to expecations going into the Christmas holiday weekend. Retail sales overall were up 6.6% compared to an 8.7% increase during the same period in 2005.

2. Satellite radio sales for the quarter are down 40% compared to the same period last year. However, these comparisons to the phenomenal growth spurt during Q4 of 2005 put into perspective the impact of Sirus satellite radio's Howard Stern push. 2005 fourth quarter subscriptions for Sirius hit 1,142,000 and XM brought in 898,315 new subscribers for a total sector Q4 205 tally of 2,040,315. Q4 2006 projections now estimated to be 1,224,189.

3. Full-year satellite radio retail subscriptions should end up at 13,528,880 up 4,428,880 or a 46.5% increase over full-year 2005, an eye-opening growth rate no matter how one slices it.

4. The 13.6 million subscriber count for the sector by year-end will be off pace 1.4 million subscribers with the industry's original estimates of 15 million floated at the beginning of 2006.

5. Brand stimulation continues to be a stumbling block for the industry based on mass market interviews conducted by Bridge Ratings at retail locations* around the country each week during 2006. Overall interest by the mass market was extremely high during the months of January/February 2006 and fell off sharply in March and never recovered. Sector interest remained higher longer for satellite radio with the "innovators" life group where interest increased to 25% of the group this year from 20% in 2005 and "early adopters" interest improved to 19% from 16% year over year.

The "early majority" life group showed less growth overall this year (3.1% from 1.5%).

Bridge Ratings' 4th Quarter Estimates vs. Reality

Based on preliminary results, XM Satellite Radio reported on (Jan. 5) that it added 1.7 million new subscribers for calendar year 2006 -- 442,000 coming in Q4 -- giving them a total subscriber base of 7.6 million. Earlier that week, competitor Sirius Satellite Radio said it ended 2006 by meeting its latest Q4 guidance with about 6,024,000 subscribers, which is an 82% increase over its 2005 year-end finish of 3,300,000 subscribers.
XM also reported in its preliminary results that it achieved positive cash flow from operations during Q4 `06.

Bridge Ratings' adjusted year-end estimates for XM was on target at 7.6 million.

Sirius adjusted its forecast down to between 5.9 and 6.1 million users by year end. We estimated the end-of-year sector total to be closer to a 13.5 million subscriber count, shy 100,000 from actual reported numbers.

When viewing the conversion of retail foot traffic to actual purchase over time, the satellite radio industry's challenges are placed into perspective. The following graph represents sales as a percentage of consumer shopping visits to satellite radio departments at the 40 retail locations across the U.S. which Bridge Ratings uses as a source for our weekly tracking.



Brand Awareness Tracking

Full year averages

"Can You Name a Satellite Radio Service?"
Wk Ending:


"Which Satellite Radio Service Did You Purchase Today?"
Wk Ending:


Full Year Satellite Radio Consumer Index: Branding vs. Purchase

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 has been tracking the impact Sirius satellite radio's Howard Stern has been having on the company's subscription rate since the fall of 2005. Between October and December 2005, Stern influenced 52% of Sirius subscription decisions on average. This was prior to his first satellite radio show which promised fewer commercials and non-censored Stern show content. Through 2006 this number has fallen.

November's Internet offer by Sirius for a free sample of the Howard Stern's satellite program does not appear to have impacted retail subscriptions, but it may have increased subscription sales on the Internet. Our latest estimate which includes the partial month of December 2006 is that a total of 1.6 million (14%) of Stern's total terrestrial fan base has migrated with him to Sirius. This number includes our projections of internet-based subscribers. Despite the full-year shortfall Sirius will experience, we still estimate that Stern is responsible for 29% of the company's total subscription base to date, or $22 million dollars per month in subscription revenue.

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. The following chart represents Bridge Ratings' Stern-motivated subscriptions since October 2005. Bridge Ratings estimates that 32,810 additional Sirius retail subscriptions were activated due to Howard Stern during the month of November 2006 bringing his total subscriber level to just under 1.6 million.

Consumer purchase motive for each service: Sirius Preferred Programming

The following chart has proven to be an indicator of the future behavior that we see in Brand & Retail Strength chart above.

Q: "As a subscriber to ______satellite radio service, please rate your satisfaction with the following on a scale of 1 to 10 where
"1" represents "Not satisfied at all" and "10" represents "satisfied completely"


2006 Average Score
Music Programming - XM
Music Programming - Sirius
Programming Variety - XM
Programming Variety - Sirius
No Commercials - XM
No Commercials - Sirius
Sports Package - XM
Sports Package - Sirius
Personalities - XM
Personalities - Sirius






Based on this week's interviews with non-subscribers to satellite radio, but who have told us in the past they intend to subscribe at some time in the future, the following represents previous retail estimates and actuals for the fourth quarter:

*Based on interviews conducted at retail outlets between January 1 and December 31, 2006. 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.


Back to Press Releases