Business Proposal for Sirius Satellite Radio Inc

Business Proposal for Sirius Satellite Radio Inc.

Joseph Gipson

March 1, 2008

Abstract

The following is a proposal for Sirius Satellite Radio to gain exclusive rights to Division 1 college football. It examines Sirius' current business model and how this new line of programming could be incorporated in to the existing model.

Sirius Satellite Radio offers advertisement free, subscription based, satellite radio service in the United States and Canada. Sirius was founded in 1990 as Satellite CD Radio Inc., but, according to Radio Ink, officially changed it's name, to the current designation, in 1999. According to Yahoo Finance, they are listed on the Nasdaq 100 under the service industry and have the designation SIRI. The company is run by CEO Mel Karmazin. The CFO and Executive Vice President is David J Frear. Jame E Meyer is the President of Operations and sales. Scott A. Greenstein is the current President of Entertainment and Sports Operations. Finally, Patrick L. Donnelly is acting Executive Vice President, Secretary, and General Counsel. (Yahoo)

According to their website, Sirius's business model is to provide pay-for-service radio, analogous to the business model for premium cable television, in which music channels are free of commercials. Subscriptions are prepaid, with at least three months purchased at a time, and range in price from $12.95 monthly ($6.99 for each additional receiver) to $499.99 for lifetime subscription. There is a $15 activation fee for every radio activated. According to Yahoo Finance, Sirius offers commercial-free music channels that provide a selection of music genres, such as rock, pop, hip-hop, country, dance, jazz, Latin, and classical; and channels of sports, news, talk, entertainment, traffic, and weather content. As of December 31, 2006, Sirius offered a programming lineup of 69 channels of commercial-free music; 54 channels of sports, news, talk, and entertainment; and 11 channels of traffic and weather. Also as of December 31, 2006 Sirius also had a reported 6,024,555 subscribers. (Sirius) According to Yahoo, Sirius is headquartered in New York, New York, and employs 772 full time employees. According to NASA, Sirius broadcasts its content from three satellites that fly in geosynchronous, highly elliptical orbit with a 24-hour orbital period. The elliptical path of its satellite constellation ensures that each satellite spends about 16 hours a day over the continental United States, with at least one satellite over the country at all times (NASA). The orbit allows the satellites to broadcast from directly overhead the continental United States allowing for less interference from tall buildings and trees. This does not, however, protect Sirius from competition.

According to Yahoo Sirius's direct competitors include Clear Channel Communications Inc., Cumulus Broadcasting Inc., and XM Satellite Radio Holdings Inc. with XM being the only satellite radio provider. The others are traditional frequency modulation (FM) and amplitude modulation (AM) over-the-air broadcasters. Sirius relies on a better understanding of current market trends to stay ahead of it competitors.

The current market trends seem to favor the trend of having exclusive content and giving well know personalities their own show or channel. As a result, according to Sirius, the major component of the Sirius business strategy has been to execute far-reaching and exclusive deals with big-name entertainers and personalities to create and build broadcast streams, from the ground up. Sirius has reached exclusive deals with personalities like Martha Stewart and artists like Stephen Van Zandt, Jimmy Buffett and Eminem to produce streams or entire channels on Sirius. Stephen Van Zandt was the first major musician recruited by Sirius to create branded music channels and he has created two distinct stations for Sirius, the Underground Garage, dedicated to a style of music known as garage rock and Outlaw Country with its focus on alternative country music. (Sirius) According to Radio Ink, the largest deal so far was announced on October 6, 2004 when Sirius announced that it signed a five-year, $100 million agreement with Howard Stern to move his radio show, The Howard Stern Show, to Sirius starting January 9, 2006. This deal gave Sirius exclusive rights to Stern’s radio show but also gave Stern the right to build three full-time programming channels. (Radio Ink) According to Sirius, one cornerstone of their business strategy has been to pursue exclusive sports content. Currently, Sirius has exclusive satellite radio broadcasting rights to all National Football